<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report
Filed pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) November 14, 1996
BRANDYWINE REALTY TRUST
-----------------------
(Exact name of registrant as specified in its charter)
MARYLAND 1-9106 23-2413352
(State or Other Jurisdiction (Commission (I.R.S. Employer
of Incorporation) file number) Identification Number)
16 CAMPUS BOULEVARD, NEWTOWN SQUARE, PENNSYLVANIA 19073
(Address of principal executive offices)
(610) 325-5600
(Registrant's telephone number, including area code)
Page 1 of 5 pages
<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On November 14, 1996, the Company consummated a previously
disclosed transaction (the "SERS Transaction") with a voting trust (the "SERS
Voting Trust") established for the benefit of the Commonwealth of Pennsylvania
State Employes' Retirement System ("SERS") pursuant to which it acquired nine
commercial properties (the "SERS Properties") in suburban Philadelphia
aggregating approximately 418,000 net rentable square feet and that have an
average age of approximately 12 years.
As of September 30, 1996, the SERS Properties were
approximately 92.4% leased to 62 tenants. The SERS Properties were acquired by
the Company for an aggregate purchase price of $30.3 million, payable as
follows: (i) by issuing 481,818 preferred shares of beneficial interest, par
value $.01 per share ("Preferred Shares") that, subject to certain conditions,
are convertible into 4,818,180 common shares of beneficial interest, par value
at $.01 per share ("Common Shares") (1,606,060 Common Shares after giving effect
to the Company's previously disclosed reverse one for three share split
effective November 25, 1996 ("Reverse Share Split")); (ii) by agreeing to make
deferred payments aggregating $3.8 million (as described below); and (iii) by
issuing two-year warrants to purchase 400,000 Common Shares at an exercise
price of $8.50 per share (133,333 Common Shares at an exercise price of
$25.50 per share after giving effect to the Company's Reverse Share Split). The
purchase price was determined through negotiation in an arm's-length
transaction.
Each Preferred Share will entitle the holder to: (i) receive
distributions equal to the distributions payable in respect of a number of
Common Shares equal to the Conversion Number (defined below); (ii) vote,
together with holders of Common Shares, as a class, and to cast the number of
votes equal to the Conversion Number; and (iii) a liquidation preference equal
to the greater of (a) the amount that would have been payable with respect to
the Common Shares into which such Preferred Shares would have been convertible
immediately prior to the liquidation had the condition to convertibility been
satisfied and (b) the product of $5.50 ($16.50 after giving effect to the
Company's Reverse Share Split) multiplied by the Conversion Number plus all
declared but unpaid dividends. The Company will be required to pay $2.5
million of the deferred purchase price on June 30, 1998 and $1.3 million on
December 31, 1999 in cash or, at the Company's option, through the issuance of
additional Preferred Shares that will be convertible, subject to certain
conditions, into a number of Common Shares equal to the applicable amount of
the deferred purchase price divided by the greater of the Market Value Per
Share or the Book Value Per Share (as such terms are defined below).
The term "Conversion number" means, initially, ten and such
number is subject to adjustment for share splits, reverse share splits, share
dividends and the like.
The term "Book Value Per Share" means, as of any date: (i)
the total beneficiaries' equity as shown on the Company's consolidated balance
sheet as of the fiscal quarter end immediately prior to the applicable date
(with appropriate adjustments for any material events subsequent thereto)
prepared in accordance with rules and regulations of the Securities and
Exchange Commission and generally accepted accounting principles applied on a
consistent basis (as adjusted to reflect the consideration received by the
Company upon the Exercise (defined below) of any Convertible Securities
(defined below) which are included in
-2-
<PAGE> 3
the computation in (ii) below), divided by (ii) the sum of the number of Common
Shares outstanding on such date plus the number of Common Shares issuable upon
the exercise, conversion or exchange (collectively, "Exercise") of outstanding
options, warrants, Preferred Shares and other convertible securities or similar
rights (collectively, "Convertible Securities") to the extent that the
consideration payable upon the exercise of such Convertible Securities is less
than the Market Value Per Share of the Common Shares issuable upon such
Exercise.
The term "Market Value Per Share" means, as of any date (the
"Valuation Date"), the average of the closing per share sale price(s) of the
Common Shares for the period of 20 consecutive trading days ending on the
trading date immediately preceding the Valuation Date as such prices are
reported by the principal United States securities exchange on which the Common
Shares are then traded or, if the Common Share are not then traded on any such
exchange, the closing per share sale price (or the average of the quoted per
share closing bid and asked prices if no sale is reported) as reported by the
National Association of Securities Dealers, Inc. ("NASD"), Automated Quotation
System ("NASDAQ") or any comparable system or, if the Common Shares are not
then quoted on NASDAQ or any comparable system, the average of the closing per
share bid and asked prices as furnished by any member of the NASD selected by
the Board of Trustees.
Prior to approval (a "Conversion Approval") of the unlimited
conversion of Preferred Shares into Common Shares by a majority of the votes
cast by holders of Common Shares at a meeting of shareholders in which holders
of Preferred Shares have no right to vote such Preferred Shares, Preferred
Shares will be convertible into up to 543,975 Common Shares (181,325 Common
Shares after giving effect to the Company's Reverse Share Split). In the event
that a Conversion Approval has not occurred by July 1, 1997, holders of
Preferred Shares will become entitled to receive distributions equal to 120% of
the distributions payable in respect of a number of Common Shares equal to the
Conversion Number. In the event that a Conversion Approval has not occurred by
July 1, 1998, holders of Preferred Shares will have the right to require the
Company to redeem their Preferred Shares at the Redemption Price (defined
below). Safeguard Scientifics, Inc., The Nichols Company and Richard M.
Osborne have agreed to vote Common Shares beneficially owned by them in favor
of the unlimited conversion. The term "Redemption Price" means, in respect of
a Preferred Share, the greater of: (i) the product of (a) $5.50 ($16.50 after
giving effect to the Company's Reverse Share Split) plus an amount (the "Return
Amount") equal to 8.0% of $5.50 ($16.50 after giving effect to the Company's
Reverse Share Split) per annum from the date of issuance of such Preferred
Share to the redemption date thereof less an amount (not to exceed the Return
Amount) equal to distributions actually received by the holder of account of
such Share and (b) the Conversion Number and (ii) the product of the market
price of a Common Share and the Conversion Number.
For information concerning the SERS Properties, reference is
made to the information under the heading "Business and Properties" in the
Registration Statement on Form S-11 (Registration No. 333-13969), as amended,
filed by the Company with the Securities and Exchange Commission and such
information is hereby incorporated herein by reference.
-3-
<PAGE> 4
ITEM 7. FINANCIAL STATEMENT, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
<TABLE>
<S> <C>
(a) Financial Statements of Businesses Acquired. [to come]
The audited statement of revenues and certain operating
expenses of the SERS Properties for the year ended December 31,
1995 is incorporated by reference from pages F-51 and
F-52 of the Company's Registration Statement in Form S-11,
File No. 333-13969, as amended, declared effective November
25, 1996.
The unaudited interim statements of revenues and certain
expenses of the SERS Properties included therein include all
adjustments consisting only of normal recurring accruals,
which the Company considers necessary for a fair presentation
of the SERS Properties revenues and certain expenses for the
nine months ended September 30, 1995 and 1996, as presented in
the unaudited interim financial statements.
(b) Pro Forma Financial Information.
Pro forma financial information which reflects the Company's
acquisitions of the SERS Properties as of September 30,
1996 and for the year ended December 31, 1995 and the 9 months
ended September 30, 1996 is incorporated by reference from
pages F-3 to F-13 of the Company's Registration Statement on
Form S-11, File No. 333-13969, as amended, declared effective
November 25, 1996.
(c) Exhibits.
10.1 Contribution Agreement among the Company, Greenwood
Square Corporation, BCBC Holding Company, 500 North
Gulph Road and RAI Real Estate Advisers, Inc.
("RAI"), as voting trustee.
10.2 Securities Purchase Agreement between the Company
and RAI, as voting trustee.
10.3 Warrant to purchase Common Shares in favor of RAI,
as voting trustee.
10.4 Standstill Agreement between the Company and RAI, as
voting trustee.
10.5 Registration Rights Agreement between the Company
and RAI, as voting trustee.
10.6 Pledge Agreement between the Company and RAI, as
voting trustee.
10.7 Voting Agreement between the Company, RAI as voting
trustee, and certain other parties.
10.8 Excerpt from Registration Statement on Form S-11
(No. 333-13969), as amended, consisting of the
discussion under the heading "Business and
Properties."
</TABLE>
-4-
<PAGE> 5
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
BRANDYWINE REALTY TRUST
Date: November 27, 1996 By: /s/ Gerard H. Sweeney
------------------------
Title: President and Chief
Executive Officer
-5-
<PAGE> 1
EXHIBIT 10.1
CONTRIBUTION AGREEMENT
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Section 1. Sale and Purchase of Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2-
1.1 Sale and Purchase of Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2-
1.2 Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2-
1.3 Capital Escrow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -3-
1.4 Deposit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -3-
1.5 Included Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -4-
1.6 Assumption of Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -5-
Section 2. Additional Investment; Warrant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -5-
2.1 Additional Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -5-
2.2 Warrant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -5-
Section 3. Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -5-
3.1 By BRT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -6-
3.2 By Sellers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -12-
3.3 By The Voting Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -17-
3.4 Survival of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . -18-
Section 4. Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -18-
4.1 Conditions Precedent to BRT Obligations on the Closing Date . . . . . . . . . . . . . . . . . . . -18-
4.2 Conditions Precedent To Sellers and the Voting Trust Obligations on the Closing Date . . . . . . . -19-
4.3 Mutual Conditions Precedent of the Parties on the Closing Date . . . . . . . . . . . . . . . . . . -20-
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C>
Section 5. Operations Prior to Transfer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -21-
5.1 Property Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -21-
5.2 Casualty or Condemnation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -21-
Section 6. Closing; Closing Deliveries; Adjustments; Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . -22-
6.1 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -22-
6.2 Closing Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -22-
6.3 Adjustments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -24-
6.4 Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -25-
6.5 Indemnification for Seller's Tax Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . -26-
Section 7. Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -26-
7.1 BRT Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -26-
7.2 Mutual Covenant - Best Efforts To Close . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -26-
7.3 Morgan Stanley Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -26-
Section 8. Matters to be Completed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -26-
8.1. Matters to be Completed. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -26-
Section 9. Sellers' Or Voting Trust's Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -27-
9.1 Sellers' or Voting Trust's Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -26-
Section 10. General Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -27-
10.1 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -27-
10.2 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -28-
10.3 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -28-
10.4 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -28-
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<S> <C> <C>
10.5 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -28-
10.6 Section Headings, Captions and Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . -28-
10.7 Amendments. Modifications and Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -29-
10.8 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -29-
10.9 Liability of Trustees, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -29-
10.10 Non-Recourse. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -29-
10.11 Exhibits Incorporated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -29-
</TABLE>
-iii-
<PAGE> 5
CONTRIBUTION AGREEMENT
THIS AGREEMENT is made as of the 6th day of November, 1996 by
and among BRANDYWINE REALTY TRUST, a Maryland real estate investment trust
("BRT"), GREENWOOD SQUARE CORPORATION, a Delaware corporation ("Greenwood"),
BCBC HOLDING COMPANY, a Delaware corporation ("BCBC"), 500 NORTH GULPH ROAD
HOLDINGS, INC., a Pennsylvania corporation ("North Gulph") (Greenwood, BCBC and
North Gulph are herein sometimes collectively called "Sellers" and individually,
a "Seller") and, RAI REAL ESTATE ADVISERS, INC., ("RAI") as the voting trustee
of a voting trust dated as of November 6, 1996 executed by the Commonwealth of
Pennsylvania State Employes' Retirement System ("SERS") as shareholder and by
RAI as voting trustee (the "Voting Trust")
RECITALS
A. Greenwood is the owner of the fee estate in property
known as Greenwood Square, located in Bensalem Township, Bucks County,
Pennsylvania, more fully described in EXHIBIT "A" attached hereto (the
"Greenwood Property").
B. BCBC is the owner of the fee estate in property known
as Bucks County Business Park, located partly in Middletown Township and partly
in Falls Township, Bucks County, Pennsylvania, more fully described in "EXHIBIT
"B" attached hereto (the "BCBC Property").
C. North Gulph is the owner of the fee estate in property
known as 500 North Gulph Road, located in Upper Merion Township, Montgomery
County, Pennsylvania, more fully described in EXHIBIT "C" attached hereto (the
"North Gulph Property"). The Greenwood Property, the BCBC Property and the North
Gulph Property are herein collectively called the "Properties" and individually
a "Property."
D. SERS is directly or indirectly the beneficial owner of
all of the capital stock of Sellers and has the sole economic interest in the
Voting Trust.
E. BRT is a real estate investment trust and general
partner of Brandywine Operating Partnership, L.P., a Delaware limited
partnership ("BRT OP"), which owns certain office and other properties.
F. The parties wish to enter into this Agreement to
provide for the sale by Sellers for the account of the Voting Trust of the
Properties, the purchase of the Properties
<PAGE> 6
by BRT or its designated affiliate, the investment of funds by Voting Trust in
BRT and certain other matters as herein set forth.
TERMS AND CONDITIONS
NOW THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants and agreements contained herein, the
parties hereto, intending to be legally bound, agree as follows:
SECTION 1. SALE AND PURCHASE OF PROPERTIES
1.1 Sale and Purchase of Properties. On the Closing Date,
each Seller will sell and convey to BRT OP (or any subsidiary of BRT OP) the
Property of such Seller and BRT will purchase the Properties from Sellers, for
the consideration, on the terms and subject to the conditions of this
Agreement.
1.2 Consideration. The purchase price ("Purchase Price")
for the Properties shall be THIRTY MILLION THREE HUNDRED THOUSAND DOLLARS
($30,300,000), payable as follows:
(a) At Closing, BRT shall pay to Sellers
$26,500,000 by issuing to Voting Trust (or to its designee) preferred shares
with the terms set forth in the Articles Supplementary attached hereto as
EXHIBIT "D-1" ( the "Property Shares") that are convertible into 4,818,182
common shares of beneficial interest (par value $.01) of BRT, as adjusted for
any share splits, reverse share splits, share dividends or similar transactions
(the "Common Shares"). The Property Shares shall be subject to a Standstill
Agreement in the form attached as EXHIBIT "D-2". References in this Agreement
to designees of the Voting Trust or Sellers shall be limited to designees that
are not prohibited by the Standstill Agreement.
(b) On June 30, 1998, BRT will pay to Sellers (or
to their designee) $2,500,000.
(c) On December 31, 1999, BRT will pay to Sellers
(or to their designee) $1,300,000. The sums payable pursuant to this clause (c)
and the preceding clause (b) in the total amount of $3,800,000 are herein
jointly called the "Deferred Purchase Price." Each installment of the Deferred
Purchase Price shall be paid by BRT in cash, or, at the option of BRT, by BRT
issuing to the Voting Trust (or to its designee) either Common Shares (if a
Secondary Offering as defined in Section 1.2 of the Securities Purchase
Agreement (defined below) shall have occurred) or Property Shares that are
convertible into
-2-
<PAGE> 7
a number of Common Shares, equal to the applicable portion of the Deferred
Purchase Price divided by the greater of the Market Value or Book Value Per
Share.
The term "Book Value Per Share" as used herein
means, as of any date, (i) the total beneficiaries' equity as shown on BRT's
consolidated balance sheets as of the fiscal quarter end immediately prior to
the applicable date (with appropriate adjustment for any material events
subsequent thereto) prepared in accordance with the published rules and
regulations of the Securities and Exchange Commission (the "SEC") and generally
accepted accounting principles applied on a consistent basis (as adjusted to
reflect the consideration received by BRT upon the Exercise (defined below) of
any Convertible Securities (defined below) which are included in the computation
in (ii) below), divided by (ii) the sum of the number of Common Shares
outstanding on such date plus the number of Common Shares issuable upon the
exercise, conversion or exchange (collectively, "Exercise") of outstanding
options, warrants, preferred shares and other convertible securities or similar
rights (collectively, "Convertible Securities") to the extent that the
consideration payable upon the exercise of such Convertible Securities is less
than the Market Value of the Common Shares issuable upon such Exercise.
The term "Market Value" as used herein means,
as of any date, (the "Valuation Date") the average of the closing per share sale
price(s) of the Common Shares for the period of twenty consecutive trading days
ending on the trading day immediately preceding the Valuation Date as such
prices are reported by the principal United States securities exchange on which
the Common Shares are then traded or, if the Common Shares are not then traded
on any such exchange, the closing per share sale price (or the average of the
quoted per share closing bid and asked prices if no sale is reported) as
reported by the National Association of Securities Dealers, Inc. ("NASD")
Automated Quotation System ("NASDAQ") or any comparable system or, if the Common
Shares are not then quoted on NASDAQ or any comparable system, the average of
the closing per share bid and asked prices as furnished by any member of the
NASD selected by the Board of Trustees of BRT.
1.3 Capital Escrow. At Closing, North Gulph will deposit
into escrow the sum of $315,000 (the "North Gulph Capital Escrow"), BCBC will
deposit into escrow the sum of $90,000 (the "BCBC Capital Escrow") and Greenwood
will deposit into escrow the sum of $950,000 (the "Greenwood Capital Escrow"),
each on the terms and conditions of the Capital Escrow Agreement attached hereto
as EXHIBIT "E".
1.4 Deposit. Upon the execution of this Agreement, BRT
will deposit in escrow with Commonwealth Land Title Insurance Company ("Deposit
Escrowee")the sum of $100,000,(such sum and all earnings thereon are herein
called the "Deposit"). The Deposit will be held by Deposit Escrowee in an
interest bearing account of a bank, savings bank or savings and loan association
the accounts of which are insured by an agency of the United States government,
pursuant to an Escrow Agreement in the form attached as EXHIBIT "T" (the
"Deposit Escrow Agreement"). If BRT shall fail to consummate Closing in
accordance with this Agreement or shall fail to observe or perform its covenants
or obligations hereunder
-3-
<PAGE> 8
to be observed or performed at or prior to Closing, the Deposit will be paid to
Sellers and Voting Trust on account of the purchase price or as liquidated
damages for such failure at the option of Sellers, provided, however, that
unless such failure to consummate Closing constitutes a breach of BRT's covenant
under subsection 7.2 hereof, Sellers and the Voting Trust will retain the
Deposit as Sellers' and the Voting Trust's sole and exclusive remedy hereunder.
If Closing occurs, the Deposit will be returned to BRT. If Closing does not
occur by reason of the failure of one or more conditions to Closing (which
failure does not result from the default of BRT hereunder) or if either party is
permitted to and shall terminate this Agreement as provided in Section 8, then
the Deposit will be returned to BRT.
1.5 Included Assets. References in this Agreement to a
Property shall include:
(a) Real Property. Fee simple interest in such
Property, and all of the easements, licenses, rights of way, (including, without
limitation, easements, licenses and rights of way for signage), privileges,
hereditaments, appurtenances, and rights to any land lying in the beds of any
street, road or avenue, open or proposed, adjoining there to, and inuring to the
benefit of said land (hereinafter collectively referred to as the "Premises");
and
(b) Personal Property. All equipment, fixtures,
machinery and personalty of every description attached to or used in connection
with the Premises, including, without limitation, furniture, fixtures, fittings,
supplies, apparatus, equipment, machinery, and all other items of tangible and
intangible personal property and replacements thereof, if any, affixed or
attached to or located on or about the Premises (including, without limitation,
all heating, lighting, plumbing, water, sewer, ventilating, exhaust, electrical,
gas, refrigeration, air-conditioning, communication, fire protection, security,
disability and life/safety fixtures, equipment and systems; all hot water
heaters, furnaces, heating controls, motors and boiler pressure systems and
equipment; all incinerating, disposal, cleaning, maintenance, janitorial, snow
removal and landscaping equipment; all fuels; all appliances; (limited, in the
case of personal property to the right, title and interest of Seller's therein,
and excluding property of tenants of the Properties but including all right,
title and interest of Sellers in such property of tenants); and all assignable
intangible personal property owned by Sellers and used in connection with the
ownership, operation and maintenance of the Premises, including without
limitation, all contract rights, guaranties and warranties of any nature,
architects, engineers, surveyors' or other real estate professionals' plans,
specifications, certifications, contracts, reports, data or other technical
descriptions, reports or audits, and all marketing materials ("Contract
Documents"), all governmental permits, licenses, certificates, and approvals in
connection with the ownership of the Premises ("Licenses"), all escrow accounts,
deposits, instruments, documents of title, general intangibles, and business
records pertaining to the Premises, and all of Seller's rights, claims, and
causes of action if any, to the extent they are assignable, under any warranties
and/or guarantees of manufacturers, contractors or installers, rights against
others relating to the Premises or the operation or maintenance thereof,
including to the extent applicable, any warranties from any previous owners of
the Premises (hereinafter collectively referred to as "Personal Property"); and
-4-
<PAGE> 9
(c) Leases. All leases, licenses (to the extent
transferable) and other occupancy agreements for any part of the Premises, if
any, and all prepaid rent and unapplied security deposits (the "Leases"):
(d) Right to Names. Any right, title and interest
of Seller in and to the trade names printing styles, trademarks and logos
("Names").
1.6 Assumption of Liabilities.
(a) At the Closing, BRT shall assume and agree to
pay, perform and discharge, when due, each of the following obligations and
liabilities of Sellers and/or their affiliates relating to the Properties (the
"Assumed Liabilities"):
(i) the liabilities and obligations of
Sellers to be performed or discharged after the Closing pursuant to the Leases;
(ii) payment of real estate taxes and
utility bills accruing prior to Closing with respect to the Properties as to
which BRT receives a credit at Closing, to the extent of such credit.
(b) Excluded Liabilities. Except as expressly
provided in this Agreement, BRT shall not assume or be responsible for any
liabilities or obligations of Sellers or their respective affiliates of any
nature whatsoever, whether or not relating to the Properties. Sellers and their
respective affiliates, as applicable, shall remain responsible for such
excluded liabilities and obligations.
SECTION 2. ADDITIONAL INVESTMENT; WARRANT
2.1 Additional Investment. The Voting Trust and BRT are
contemporaneously herewith entering into a Securities Purchase Agreement (the
"Securities Purchase Agreement") providing for the investment by Voting Trust
of $10.5 million in shares of BRT, at the times and on the terms and conditions
set forth in the Securities Purchase Agreement.
2.2 Warrant. At Closing as additional consideration for
the Properties, BRT will issue to the Voting Trust a warrant for the purchase
of 400,000 Common Shares, as adjusted for any share splits, reverse share
splits, share dividends or similar transactions (the "Warrant"), on the terms
and subject to the conditions of the form of Warrant attached hereto as EXHIBIT
"F". The value of the Warrant is $56,000.00.
-5-
<PAGE> 10
SECTION 3. REPRESENTATIONS AND WARRANTIES
3.1 By BRT. BRT hereby represents and warrants that,
except as disclosed in the Disclosure Letter (as defined in the Securities
Purchase Agreement) or the Company SEC Reports (defined below) or in any exhibit
or schedule hereto:
(a) Organization: Authority. BRT is a real estate
investment trust duly formed, validly existing and in good standing under the
laws of the state of Maryland with all the necessary trust power and authority
to own, lease or operate its properties and assets and to carry on its business
as now conducted, BRT is duly qualified to do business and is in good standing
as a foreign business trust or partnership in each jurisdiction where the
character of its properties or assets and the nature of its business requires it
to be so qualified. BRT has the requisite trust authority to enter into and
perform this Agreement and all other documents and agreements to be executed by
it in connection with the transactions contemplated by this Agreement.
(b) Due Authorization; Binding Agreement. The
execution, delivery and performance of this Agreement and all other documents
and agreements to be executed by BRT in connection with the transactions
contemplated by this Agreement have been duly and validly authorized by all
necessary action of BRT. This Agreement and all other documents and agreements
to be executed by BRT in connection with the transactions contemplated by this
Agreement have been and will be duly executed and delivered by BRT and
constitute the legal, valid and binding obligations of BRT enforceable against
BRT in accordance with their respective terms, except as such enforcement may be
limited by bankruptcy, insolvency, moratorium, reorganization and other similar
laws relating to or affecting the enforcement of creditor's rights generally,
and except that the availability of specific performance, injunctive relief or
other equitable remedies is subject to the discretion of the court before which
any such proceeding may be brought.
(c) Consents and Approvals. No consent, waiver,
approval, license or authorization of, or filing, registration or qualification
with, or notice to, any governmental unit or any other person is required to be
made, obtained or given by BRT in connection with the execution, delivery and
performance of this Agreement or any other documents and agreements to be
executed by BRT in connection with the transactions contemplated by this
Agreement that has not been heretofore obtained, other than the filing with and
approval of the American Stock Exchange of a listing application with respect
to the Common Shares and the filing of the Articles Supplementary with the
State Department of Assessments and Taxation of Maryland.
(d) No Violation. None of the execution, delivery
or performance of this Agreement or any other document or agreement to be
executed by BRT in connection with the transactions contemplated by this
Agreement does or will, with or without the giving of notice, lapse of time or
both, violate, conflict with or constitute a default under any term or
provision of the organizational documents of BRT or any other agreement to
which BRT is a party or by which it is bound or any term or provision of any
judgment, decree, order, statute, injunction, rule or regulation of a
governmental unit applicable to BRT, or by which it or its
-6-
<PAGE> 11
assets or properties are bound or result in the creation of any lien or other
encumbrance upon the assets or properties of BRT.
(e) Compliance with Laws and Recorded
Declarations. To the best of BRT's knowledge, BRT and each of its subsidiaries
has complied with all laws (including, without limitation, the Americans with
Disabilities Act of 1990) and requirements of insurance bodies applicable to the
ownership, leasing, use and operation of its or their real properties
(collectively, the "BRT Properties"), including, without limitation, parking and
building setback requirements, and has performed all work and secured all
required material consents and approvals and obtained and fully paid for all
material licenses, permits, certificates, entitlements, grants of right and any
other items and documents required by applicable law, by contract, or as a
condition of any approval granted by the applicable municipal authority,
required of BRT or its subsidiaries for the completion, ownership, leasing, use
and occupancy of its or their properties, including but not limited to final
certificates of occupancy for each of the current tenancies at such properties
(other than where construction of tenant improvements for new tenancies is not
yet completed or applications remain pending), except where the failure to so
comply or obtain would not have a material adverse effect on BRT and its
subsidiaries taken as a whole. Such licenses, permits, certificates,
entitlement, grants of right and other items and documents are in full force and
effect. Neither BRT or any of its subsidiaries have taken any action that would
(or failed to take any action, the omission of which would) result in the
revocation or suspension of such licenses, permits, certificates, entitlements,
grants of right and other items and documents, and neither BRT nor any of its
subsidiaries have received any notice of any violation from any federal, state
or municipal entity or notice of an intention by any such governmental entity to
revoke any certificate of occupancy or other certificate, license, permit,
entitlement or grant of right issued by it in connection with the ownership, use
and occupancy of any of its or their properties that in each case has not been
cured or otherwise resolved to the satisfaction of such governmental entity. To
the best of BRT's knowledge, (i) any and all charges (including condominium
fees, to the extent applicable) and other assessments under declarations and
like agreements to which any of the BRT Properties are subject have been paid
and no special assessments thereunder against any of the BRT Properties are
pending, and (ii) all consents and approvals required to be obtained under such
declarations and like agreements with respect to the BRT Properties have been
obtained.
(f) Litigation. The SEC Reports(defined below),
the Registration Statements (defined below) and/or the Disclosure Letter (as
defined in the Securities Purchase Agreement) list all material pending or, to
BRT's knowledge, threatened litigation involving BRT and its subsidiaries.
Except as so disclosed, there is no pending or, to the knowledge of BRT,
threatened suit, action or litigation, or administrative, arbitration or other
proceeding or governmental inquiry or investigation questioning the validity of
this Agreement or the transactions contemplated hereby, or affecting in any
material adverse respect BRT or any subsidiary or the business, properties,
assets, operations, prospects or condition (financial or otherwise) of BRT and
its subsidiaries taken as a whole, nor is there, to the knowledge of BRT, any
basis for any such suit, action, litigation, proceeding, inquiry or
investigation.
-7-
<PAGE> 12
(g) Brokers. No brokers or finders have been
employed or engaged by BRT or any of its subsidiaries with respect to the
transactions contemplated by this Agreement or any other document or agreement
to be executed in connection with the transactions contemplated by this
Agreement.
(h) SEC Reports. Since January 1, 1995, BRT and
its subsidiaries have timely filed all forms, reports, schedules, statements and
other documents required to be filed with the Securities and Exchange Commission
pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange Act")
or the Securities Act of 1933, as amended (the "1933 Act"), including without
limitation (i) all Annual Reports on Form 10-K, (ii) all Quarterly Reports on
Form 10-Q, (iii) all reports on Form 8-K and (iv) all proxy statements relating
to meetings of stockholders (whether annual or special) and (v) all information
incorporated by reference into any of the foregoing (collectively, as amended to
date, together with the Registration Statements (defined below) referred to
herein as the "Company SEC Reports"). The Company SEC Reports were prepared in
all material respects in accordance with and complied in all material respects
with the requirements of applicable law, including the Exchange Act and the 1933
Act and the applicable rules and regulations of the SEC thereunder, and the
Company SEC Reports did not at the time they were filed and do not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading. BRT has
not filed any registration statements with the SEC at any time within the last
three years other than (i) Registration Statement on Form S-8 dated October 16,
1996 and (ii) Registration Statement on Form S-11 dated October 11, 1996
(collectively the "Registration Statements"). BRT has delivered to Voting Trust
prior to the date hereof true and correct copies of all Company SEC Reports and
any other reports and documents filed with the SEC since January 1, 1995.
(i) Financial Statements. Each of the
consolidated financial statements (including, in each case, any related notes
thereto) contained in the Company SEC Reports (i) have been prepared in all
material respects in accordance with the published rules and regulations of the
SEC and generally accepted accounting principles applied on a consistent basis
throughout the periods involved (except in the case of the unaudited financial
statements, as permitted by Form 10-Q of the SEC), (ii) comply as to form in
all material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto and (iii) fairly present
in all material respects the consolidated financial position of BRT and its
subsidiaries as of the respective dates thereof and the consolidated results of
operations and cash flows for the periods indicated (subject, in the case of
unaudited consolidated financial statements for interim periods, to year-end
adjustments (consisting only of normal recurring accruals)), except that any
pro forma financial statements contained in such consolidated financial
statements are not necessarily indicative of the consolidated financial
position of BRT and its subsidiaries as of the respective dates thereof and the
consolidated results of operations and cash flows for the periods indicated.
Since December 31, 1995, the
-8-
<PAGE> 13
Company has not made any material change in the accounting practices or
policies applied in the preparation of its financial statements.
(j) Environmental Matters. Neither BRT nor its
subsidiaries have (a) caused any substance or waste that is listed or defined
as hazardous or toxic under applicable environmental laws or petroleum products
(collectively, "Hazardous Materials") to be improperly maintained or disposed
of on, under or at any of its or their properties, or any part thereof in a
manner which violates, or could give rise to liability under, applicable
environmental laws, or (b) failed to remediate, alter, mitigate or abate any
condition required to be remediated, altered, mitigated or abated under such
environmental laws, to the extent BRT or its subsidiaries have been notified of
the existence of a condition required to be remediated, altered, mitigated or
abated. Except as set forth in the environmental site assessments provided by
BRT to Sellers or disclosed in the Company SEC Reports: (1) to the best of
BRT's knowledge, each of its properties, and the properties of its
subsidiaries, is in compliance, and has heretofore complied, with all
environmental laws in all material respects, (2) to the best of BRT's
knowledge, there has been no discharge of Hazardous Materials by any tenant of
any property of BRT or its subsidiaries, or by any other person or property in,
to or under any property of BRT or its subsidiaries, in either case in
quantities requiring response, remediation or removal, and (3) BRT has not
received any written notice from any governmental unit or other person that it
or its subsidiaries, or any of its or their properties or operations conducted
thereon, are not or have not been in compliance with the environmental laws.
(k) Absence of Undisclosed Liabilities and
Contractual Obligations. Except for (i) liabilities disclosed in the financial
statements referred to in subsection 3.1 (i) or in the SEC Reports, (ii)
liabilities arising in the ordinary course of business which, if material
(individually or in the aggregate), are disclosed in EXHIBIT "G" attached hereto
(the "BRT Disclosure Schedule"), (iii) liabilities at the date hereof which are
specifically disclosed or otherwise reflected in the Exhibits attached to this
Agreement and (iv) current liabilities incurred in the ordinary course of
business after the date hereof, no BRT Property is subject to liabilities of any
nature, whether matured or unmatured, fixed or contingent, which could
reasonably be expected to have, individually or in the aggregate, a material
adverse effect upon such property. There are no Significant Agreements relating
to the BRT Properties, or their operations other than as set forth in the BRT
Disclosure Schedule. No indebtedness secured by a lien upon any of the BRT
Properties is cross-defaulted and/or cross-collateralized with any other
properties other than among the BRT Properties. For purposes hereof,
"Significant Agreement" means and includes any of the following by which any of
the BRT Properties may otherwise be subject or bound, in each such case as
amended and currently in effect, inclusive of any waivers relating thereto:
(A) all agreements, instruments and
documents (excluding tenant leases referred to in subsection 3.1(l) of this
Agreement and easements and documents providing for the assessment of common
charges or related fees that are included in the Permitted Exceptions)
evidencing, securing or pertaining to contractual obligations that relate to
the ownership or operation of any of the BRT Properties; and
-9-
<PAGE> 14
(B) all mortgages.
(l) Tenant Leases. The rent rolls attached hereto
as EXHIBIT "H" (the "BRT Rent Rolls") list each of the leases currently in
effect with respect to the BRT Properties as the same have been amended or
modified (the "BRT Leases"); there are no leases, licenses or other rights of
occupancy affecting any of the BRT Properties except for the BRT Leases. BRT
has made available to the Voting Trust complete copies of all of the documents
that constitute the BRT Leases. The BRT Leases are in full force and effect
and, except as set forth on the applicable BRT Rent Roll, (A) to the best of
BRT's knowledge, no uncured Event of Default (as defined in such Leases), has
occurred and is continuing under any such Lease, no tenant has asserted a
defense to, offset or claim against its rent or the performance of its
obligations under its Lease and no tenant has asserted a default on the part of
the landlord which would give it the right to terminate its Lease or set off
against rent, (B) there are no rights of first refusal on, or options to
purchase, any of the BRT Properties, or any right to a participation interest
(whether of profits, sale or refinancing proceeds, or calculated based on fair
market value) with respect to any such property, in favor of any tenant, (C) no
proposed modifications to any BRT Lease that would reduce (i) the space leased
to any tenant, (ii) the amount of any tenant's rent or (iii) the term of any
lease, (D) no free rent or other rent concession is due any tenant under the
BRT Leases for periods after the Closing Date, (E) no landlord under a BRT
Lease is required to provide tenant improvements or refurbishments with respect
thereto after the Closing Date (other than any tenant improvements that the
landlord may be required to construct if an expansion option provided in a BRT
Lease is exercised), and (F) no tenant under a BRT Lease has the option to
terminate its lease prior to the stated expiration date. Except for (i)
security deposits or (ii) the first full month's rent, whether or not the term
of a Lease has commenced, no prepayments of rent more than thirty (30) days in
advance have been made under the BRT Leases. All decorating, repairs,
alterations or other work performed by the landlord under each of the BRT
Leases prior to the date hereof, or the cost of any such work performed by the
tenant and to be reimbursed by the landlord prior to the date hereof, has been
performed or reimbursed, as applicable. No rent or security deposits under the
BRT Leases have been assigned or encumbered, except as security for the
mortgages noted in the BRT Disclosure Schedule, and there are no agreements or
understandings, written or oral, with any of the tenants other than as set
forth in the BRT Leases or otherwise set forth on the BRT Rent Rolls. All
brokerage commissions and other compensation and fees payable by reason of the
BRT Leases have been paid in full, except as set forth in the BRT Disclosure
Schedule.
(m) Reassessments. Each of the BRT Properties has
been fully assessed and is not subject to abatement. To the best of BRT's
knowledge, there are no proposed reassessments of any of the BRT Properties by
any taxing authority and there are no threatened or pending special assessments
or other actions or proceedings (other than county-wide reassessments and/or
the usual increases in millage rates that may be under consideration by the
taxing authorities in the jurisdictions where the BRT Properties are located)
that could reasonably be expected to give rise to an increase in real property
taxes or assessments against any of the BRT Properties.
-10-
<PAGE> 15
(n) Property Improvements. To the best of BRT's
knowledge, except as disclosed in any engineering studies or reports obtained
by or delivered to Sellers in connection with this transaction prior to the
date hereof, the improvements at the BRT Properties are in good condition and
repair, ordinary wear and tear excepted, and have not suffered any casualty or
other material damage which has not been repaired in all material respects. To
the best of BRT's knowledge, there is no material latent or patent structural,
mechanical or other significant defect, soil condition or deficiency in the
improvements included in the BRT Properties, or any other defects, soil
conditions or deficiencies which, in the aggregate, would materially adversely
affect the value of such properties taken as a whole.
(o) Condemnation or Governmental Proceedings. No
eminent domain, condemnation, incorporation, annexation or moratorium or
similar proceeding has been commenced or, to the best of BRT's knowledge,
threatened by an authority having the power of eminent domain to condemn any
part of the BRT Properties. To the best of BRT's knowledge, there are no
pending or threatened governmental rules, regulations, plans, studies or
efforts, or court orders or decisions, which do or could adversely effect the
use or value of the BRT Properties for their present use.
(p) Insurance. EXHIBIT "I" attached hereto lists
the insurance policies relating to the BRT Properties or any part thereof
carried by BRT; all such policies are in full force and effect, and will be
continued or renewed with the existing coverages and policy limits until the
Closing Date, and all premiums thereunder have been paid to the extent due, and
will be paid until the Closing Date; and no notice of cancellation has been
received with respect thereto and, to the best knowledge of BRT, no
cancellation is threatened.
(q) FIRPTA. BRT is neither a "foreign person"
within the meaning of Section 1445(f) of the Code nor a "foreign partner"
within the meaning of Section 1446 of the Code.
(r) Taxes. BRT (i) has filed or has had filed on
its behalf all Tax Returns (as defined below) on a timely basis which are
required to be filed as of the date hereof, and such Tax Returns are correct
and complete, (ii) has paid or has had paid on its behalf on a timely basis all
Taxes (as defined below) shown to be due on such Tax Returns and (iii) with
respect to any period for which Tax Returns have not yet been filed, or for
which Taxes are not yet due or owing, has made due and sufficient current
accruals for such Taxes in its books and records in accordance with generally
accepted accounting principles. For purposes of this subsection, "Tax" shall
mean any Federal, state or local tax of any kind whatsoever, including any
interest or penalty, and "Tax Return" shall mean any return, declaration,
report, claim for refund, information return, statement or other similar
document relating to Taxes.
(s) No Defaults. All payments of principal and
interest on all mortgage indebtedness respecting the BRT Properties are current
as of the date hereof. Neither BRT nor BRT OP is in default of any loan secured
by any of the BRT Properties or any other Significant Agreement and, to the
best of BRT's knowledge, no event has occurred which with
-11-
<PAGE> 16
the giving of notice or passage of time would become a default under any such
loan or under any such Significant Agreement.
(t) Ownership of BRT Properties. The properties
constituting the BRT Properties are listed on EXHIBIT "J" attached hereto. BRT
and BRT OP each owns the interest in each of the BRT Properties indicated on
EXHIBIT "J".
3.2 By Sellers. Sellers hereby represent and warrant
that, except as disclosed in any exhibit or schedule to this Agreement:
(a) Organization: Authority. Each of the Sellers
is duly incorporated, validly existing and in good standing under the laws of
its jurisdiction of incorporation and has full corporate power and authority to
own, lease and operate its properties and to carry on its business as presently
conducted. Each of the Sellers is duly qualified to do business and is in good
standing in each jurisdiction where the character of its properties or assets
and the nature of its business requires it to be so qualified. Each Seller has
the requisite authority to enter into and perform this Agreement.
(b) Due Authorization; Binding Agreement. The
execution, delivery and performance of this Agreement and all other documents
and agreements to be executed by Sellers in connection with the transactions
contemplated by this Agreement have been duly and validly authorized by all
necessary action of each Seller. This Agreement and all other documents and
agreements to be executed by Sellers in connection with the transactions
contemplated by this Agreement have been and will be duly executed and delivered
by Sellers and constitute the legal, valid and binding obligations of Sellers
enforceable against Sellers in accordance with their respective terms, except as
such enforcement may be limited by bankruptcy, insolvency, moratorium,
reorganization and other similar laws relating to or affecting the enforcement
of creditor's rights generally, and except that the availability of specific
performance, injunctive relief or other equitable remedies is subject to the
discretion of the court before which any such proceeding may be brought.
(c) Consents and Approvals. Except for the consent
of CoreStates Bank N.A. with respect to the sale of the North Gulph Property
(which consent Sellers shall obtain, by a pay down of related debt, if
required), no consent, waiver, approval, license or authorization of, or filing,
registration or qualification with, or notice to, any governmental unit or any
other person is required to be made, obtained or given by any Seller in
connection with the execution, delivery and performance of this Agreement or any
other documents and agreements to be executed by Sellers in connection with the
transactions contemplated by this Agreement that has not been heretofore
obtained.
(d) No Violation. None of the execution, delivery
or performance of this Agreement or any other document or agreement to be
executed by any Seller in connection with the transactions contemplated by this
Agreement does or will, with or without the giving of notice, lapse of time or
both, (i) violate, conflict with or constitute a default under any term or
-12-
<PAGE> 17
provision of (a) the organizational documents of any Seller or any other
agreement to which any Seller is a party or by which it is bound or (b) any
term or provision of any judgment, decree, order, statute, injunction, rule or
regulation of a governmental unit applicable to any Seller, or by which it or
they or its or their assets or properties are bound or (ii) result in the
creation of any lien or other encumbrance upon the assets or properties of any
Seller, other than in favor of BRT.
(e) Ownership of the Properties. The Properties
are owned by their respective Seller in fee simple and, to the best of Sellers'
knowledge, title thereto is subject only to the Permitted Exceptions (defined
below).
(f) Compliance with Laws and Recorded
Declarations. To the best of Sellers' knowledge, each of the Sellers has
complied with all laws (including, without limitation, the Americans with
Disabilities Act of 1990) and requirements of insurance bodies applicable to the
ownership, leasing, use and operation of the Properties, including, without
limitation, parking and building setback requirements, and has performed all
work and secured all required consents and approvals and obtained and fully paid
for all material licenses, permits certificates, entitlements, grants of right
and any other items and documents required by applicable law, by contract, or as
a condition of any approval granted by the applicable municipal authority,
required of any of the Sellers for the completion, ownership, leasing, use and
occupancy of the Properties, including but not limited to final certificates of
occupancy for each of the current tenancies at such Properties (other than where
construction of tenant improvements for new tenancies is not yet completed or
applications remain pending), except where the failure to so comply or obtain
would not have a material adverse effect on the applicable Property. Such
licenses, permits, certificates, entitlement, grants of right and other items
and documents are in full force and effect. The Sellers have not taken any
action that would (or failed to take any action, the omission of which would)
result in the revocation or suspension of such licenses, permits, certificates,
entitlements, grants of right and other items and documents, and none of the
Sellers, the Voting Trust or SERS have received any notice of any violation from
any federal, state or municipal entity or notice of an intention by any such
governmental entity to revoke any certificate of occupancy or other certificate,
license, permit, entitlement or grant of right issued by it in connection with
the ownership, use and occupancy of any of the Sellers Properties that in each
case has not been cured or otherwise resolved to the satisfaction of such
governmental entity. To the best of Sellers' knowledge, (i) any and all charges
(including condominium fees, to the extent applicable) and other assessments
under declarations and like agreements to which any of the Properties are
subject have been paid and no special assessments thereunder against any of the
Properties are pending, and (ii) all consents and approvals required to be
obtained under such declarations and like agreements with respect to the
Properties have been obtained.
(g) Environmental Matters. None of the Sellers
have (a) caused any Hazardous Materials to be improperly maintained or disposed
of on, under or at the Properties or any part thereof in a manner which
violates, or could give rise to liability under, applicable environmental laws,
or (b) failed to remediate, alter, mitigate or abate any condition required to
be remediated, altered, mitigated or abated under such environmental laws, to
the extent Sellers
-13-
<PAGE> 18
has been notified of existence of a condition required to be remediated,
altered, mitigated or abated. Except as set forth in the environmental site
assessments provided by Sellers to BRT pursuant to their due diligence
investigation (including, without limitation, those described in EXHIBIT "K-1"
attached hereto or as described in EXHIBIT "K-2" attached hereto (the "Sellers'
Disclosure Schedule"): (1) to the best of Sellers' knowledge, each Property is
in compliance, and has heretofore complied, with all environmental laws in all
material respects, (2) to the best of Sellers' knowledge, there has been no
discharge of Hazardous Materials by any tenant of the Properties or by any
other person in, to or under any of the Properties, in either case in
quantities requiring response, remediation or removal, and (3) No Seller has
received any written notice from any governmental unit or other person that it
or any of the Properties or operations conducted thereon are not or have not
been in compliance with the environmental laws.
(h) Tenant Leases. The rent rolls attached hereto
as EXHIBIT "L" (the "Sellers' Rent Rolls") list each of the leases currently in
effect with respect to the Properties as the same have been amended or modified
(the "Leases"); there are no leases, licenses or other rights of occupancy
affecting any of the Properties except for the Leases. Sellers have made
available to BRT complete copies of all of the documents that constitute the
Leases. The Leases are in full force and effect and, except as set forth on the
applicable Sellers' Rent Roll, (A) to the best of Sellers' knowledge, no
material uncured Event of Default (as defined in such Leases), has occurred and
is continuing under any such Lease, no tenant has asserted a defense to, offset
or claim against its rent or the performance of its obligations under its Lease
and no tenant has asserted a default on the part of the landlord which would
give it the right to terminate its Lease or set off against rent, (B) there are
no rights of first refusal on, or options to purchase, any of the Properties or
any right to a participation interest (whether of profits, sale or refinancing
proceeds, or calculated based on fair market value) with respect to any such
Property, in favor of any tenant, (C) there are no proposed modifications to
any Lease that would reduce (i) the space leased to any tenant, (ii) the amount
of any tenant's rent or (iii) the term of any lease, (D) no free rent or other
rent concession is due any tenant under the Leases for periods after the
Closing Date, (E) no landlord under a Lease is required to provide tenant
improvements or refurbishments with respect thereto after the Closing Date
(other than any tenant improvements that the landlord may be required to
construct if an expansion option provided in a Lease is exercised), and (F) no
tenant under a Lease has the option to terminate its lease prior to the stated
expiration date. Except for (i) security deposits or (ii) the first full
month's rent, whether or not the term of a Lease has commenced, no prepayments
of rent more than thirty (30) days in advance have been made under the Leases.
All decorating, repairs, alterations or other work required to be performed by
the landlord under each of the Leases prior to the date hereof, or the cost of
any such work performed by the tenant and to be reimbursed by the landlord
prior to the date hereof, has been performed or reimbursed, as applicable. No
rent or security deposits under the Leases have been assigned or encumbered,
and there are no agreements or understandings, written or oral, with any of the
tenants other than as set forth in the Leases or otherwise set forth on the
Sellers' Rent Roll. All brokerage commissions and other compensation and fees
payable by season of the Leases have been paid in full, except as set forth in
the Sellers' Disclosure Schedule (and other than any commissions that may be
due if a tenant takes expansion space or renews its lease).
-14-
<PAGE> 19
(i) Litigation. There are no claims, actions,
suits, proceedings or investigations pending or, to the best of Sellers'
knowledge, threatened before any court, governmental unit or any mediator or
arbitrator with respect to the Properties, except for litigation listed on
EXHIBIT "M" hereto, which litigation and any projected liability resulting
therefrom is covered by insurance.
(j) Reassessments. Each of the Properties has
been fully assessed and is not subject to abatement. To the best of Sellers'
knowledge, there are no proposed reassessments of any of the Properties by any
taxing authority and there are no threatened or pending special assessments or
other actions or proceedings (other than county-wide reassessments and/or the
usual increases in millage rates that may be under consideration by the taxing
authorities in the jurisdictions where the Properties are located) that could
reasonably be expected to give rise to an increase in real property taxes or
assessments against any of the Properties.
(k) Sellers' Employees. There are no employees of
any Seller.
(l) Property Improvements. To the best of
Sellers' knowledge, except as disclosed in any engineering studies or reports
obtained by or delivered to BRT in connection with this transaction prior to
the date hereof (including, without limitation, those described on Exhibit
"K-3" attached hereto), the improvements at the Properties are in good
condition and repair, ordinary wear and tear excepted, and have not suffered
any casualty or other material damage which has not been repaired in all
material respects. To the best of Sellers' knowledge, there is no material
latent or patent structural, mechanical or other significant defect, soil
condition or deficiency in the improvements included in the Properties, or any
other defects, soil conditions or deficiencies which, in the aggregate, would
materially adversely affect the value of such Properties taken as a whole.
(m) Condemnation or Governmental Proceedings. No
eminent domain, condemnation, incorporation, annexation or moratorium or
similar proceeding has been commenced or, to the best of Sellers' knowledge,
threatened by an authority having the power of eminent domain to condemn any
part of the Properties. To the best of Sellers' knowledge, there are no pending
or threatened governmental rules, regulations, plans, studies or efforts, or
court orders or decisions, which do or could adversely affect the use or value
of the Properties for their present use.
(n) Insurance. EXHIBIT "N" attached hereto lists
the insurance policies relating to the Properties or any part thereof carried
by Sellers. All such policies are in full force and effect, and will be
continued or renewed with the existing coverages and policy limits until the
Closing Date, and all premiums thereunder have been paid to the extent due, and
will be paid until the Closing Date; and no notice of cancellation has been
received with respect thereto and, to the best knowledge of Sellers, no
cancellation is threatened.
-15-
<PAGE> 20
(o) FIRPTA. No Seller is a "foreign person"
within the meaning of Section 1445(f) of the Code or a "foreign partner" within
the meaning of Section 1446 of the Code.
(p) Brokers. No brokers or finders have been
employed or engaged by Sellers with respect to the transactions contemplated by
this Agreement or any other document or agreement to be executed in connection
with the transactions contemplated by this Agreement.
(q) Taxes. Each of the Sellers (i) has filed or
has had filed on its behalf all Tax Returns (as defined below) on a timely
basis which are required to be filed as of the date hereof, and such Tax
Returns are correct and complete, (ii) has paid or has had paid on its behalf
on a timely basis all Taxes (as defined below) shown to be due on such Tax
Returns and (iii) with respect to any period for which Tax Returns have not yet
been filed, or for which Taxes are not yet due or owing, has made due and
sufficient current accruals for such Taxes in its books and records in
accordance with generally accepted accounting principles. For purposes of this
subsection, "Tax" shall mean any Federal, state or local tax of any kind
whatsoever, including any interest or penalty, and "Tax Return" shall mean any
return, declaration, report, claim for refund, information return, statement or
other similar document relating to Taxes.
(r) Business of Seller. None of the Sellers has
engaged in any business other than owning the properties that are being
transferred hereunder.
(s) Service Contracts. EXHIBIT "S" attached
hereto is a complete list of all existing service, equipment, supply and
maintenance contracts with respect to or affecting the Properties (the "Service
Contracts"), and each of such Service Contracts is terminable at will without
penalty or cancellation fee upon no more than thirty (30) days notice. Unless
otherwise directed by BRT, none of the Service Contracts shall be terminated by
Sellers as of Closing, except such of the Service Contracts as constitute
management agreements for a Property or Properties, which shall be terminated
by Sellers as of Closing. Except as set forth on EXHIBIT "S", no written notice
of default or breach by Sellers in the terms of any of such Service Contracts
have been received by Sellers. Sellers have performed, and at Closing shall
have performed, all obligations which it or they have under said Service
Contracts.
(t) No Tax Assessments. There are no public
improvements in the nature of off-site improvements, or otherwise, which have
been ordered to be made and/or which have not heretofore been assessed, and, to
Seller's knowledge, there are no general or special assessments currently
affecting or pending against the Properties.
(u) Utilities. All utilities required for the
operation of the Properties either enter each of the Properties through
adjoining public streets, or, if they pass through adjoining private lands, do
so in accordance with valid public easements or private easements which will
inure to the benefit of BRT as assignee or nominee at no cost to the owner of
the Properties.
-16-
<PAGE> 21
(v) Zoning Classification. The zoning
classification of: (i) the Greenwood Property is PCD Planned Commerce Park
District; (ii) the BCBL Property is M-1 as to Middletown Township and PIP
Planned Industrial Park District as to Falls Township; and (iii) the North
Gulph Property is SM Suburban Metropolitan.
3.3 By The Voting Trust. The Voting Trust hereby
represents and warrants that, except as disclosed in any exhibit to this
Agreement:
(a) Organization: Authority. The Voting Trust is
duly organized, validly existing and in good standing under the laws of its
jurisdiction of formation and has full power and authority to own, lease and
operate its properties and to carry on its business as presently conducted. The
Voting Trust is duly qualified to do business and is in good standing in each
jurisdiction where the character of its properties or assets and the nature of
its business requires it to be so qualified. The Voting Trust has the requisite
authority to enter into and perform this Agreement.
(b) Due Authorization; Binding Agreement. The
execution, delivery and performance of this Agreement and all other documents
and agreements to be executed by the Voting Trust in connection with the
transactions contemplated by this Agreement have been duly and validly
authorized by all necessary action of the Voting Trust. This Agreement and all
other documents and agreements to be executed by the Voting Trust in connection
with the transactions contemplated by this Agreement have been and will be duly
executed and delivered by the Voting Trust and constitute the legal, valid and
binding obligations of the Voting Trust enforceable against the Voting Trust in
accordance with their respective terms, except as such enforcement may be
limited by bankruptcy, insolvency, moratorium, reorganization and other similar
laws relating to or affecting the enforcement of creditor's rights generally,
and except that the availability of specific performance, injunctive relief or
other equitable remedies is subject to the discretion of the court before which
any such proceeding may be brought.
(c) Consents and Approvals. No consent, waiver,
approval, license or authorization of, or filing, registration or qualification
with, or notice to, any governmental unit or any other person is required to be
made, obtained or given by the Voting Trust in connection with the execution,
delivery and performance of this Agreement or any other documents and agreements
to be executed by the Voting Trust in connection with the transactions
contemplated by this Agreement that has not been heretofore obtained.
(d) No Violation. None of the execution, delivery
or performance of this Agreement or any other document or agreement to be
executed by the Voting Trust in connection with the transactions contemplated
by this Agreement does or will, with or without the giving of notice, lapse of
time or both, (i) violate, conflict with or constitute a default under any term
or provision of (a) the organizational documents of the Voting Trust or any
other agreement to which the Voting Trust is a party or by which it is bound or
(b) any term or provision of any judgment, decree, order, statute, injunction,
rule or regulation of a governmental unit applicable to the Voting Trust, or by
which it or they or its or their assets or properties are
-17-
<PAGE> 22
bound or (ii) result in the creation of any lien or other encumbrance upon the
assets or properties of the Voting Trust, other than in favor of BRT.
(e) Status of SERS. No individual has an actuarial
interest of more than 9.8% in SERS.
3.4 Survival of Representations and Warranties. All
representations and warranties made by the parties in this Agreement shall
survive Closing for a period of two years; provided that no party shall be
liable for the breach of any representation or warranty hereunder unless the
total amount recoverable from such breaching party with respect to all breaches
of representations and warranties hereunder exceeds, an aggregate of $225,000.
Any and all liability of Sellers and the Voting Trust hereunder after Closing
shall be limited to and enforceable only against the Collateral (as defined in
the Pledge Agreement), and by offset against the Deferred Purchase Price, and
the Collateral shall be pledged to BRT to secure the payment of any such
liability, pursuant to a Pledge Agreement in the form attached hereto as EXHIBIT
"V".
SECTION 4. CONDITIONS
4.1 Conditions Precedent to BRT Obligations on the Closing
Date. The obligations of BRT to effect the transactions contemplated under this
Agreement at the Closing are subject to the fulfillment on or prior to the
Closing of the following conditions, any one or more of which may be waived in
whole or in part by BRT in writing:
(a) Title Insurance. Title to the Properties shall
be good and marketable and insurable as such by Commonwealth Land Title
Insurance Company free and clear of all liens, restrictions, easements,
encroachments, exceptions and other encumbrances other than Permitted Exceptions
at regular rates under an ALTA 1970 Form B (revised 10/17/70 and 10/17/84) title
insurance policy, with such title endorsements as BRT shall reasonably specify.
For purposes of this Agreement "Permitted Exceptions" means (i) for each of the
Properties, the existing leases with respect thereto as listed on EXHIBIT "L"
and the mortgages, liens, restrictions, easements, encroachments, exceptions and
other encumbrances listed on EXHIBIT "O" hereto with respect to such Property,
and (ii) for each Property, the lien of taxes not yet due and payable and
applicable laws and ordinances.
(b) No Material Adverse Change. There shall not
have occurred any material adverse change to the Properties, taken as a whole.
(c) Tenant Estoppels. Estoppel Certificates with
respect to the Properties in form and substance satisfactory to BRT shall have
been executed by the tenants of the Properties listed on EXHIBIT "P" hereto.
-18-
<PAGE> 23
(d) Securities Purchase Agreement. The
representations and warranties of the Voting Trust under the Securities Purchase
Agreement shall be true and correct as of Closing.
(e) No SEC Integration Challenge. The SEC shall
not have asserted that the issuance of Shares pursuant to (and as defined in)
the Securities Purchase Agreement must be integrated with the sale of Common
Shares (as defined in the Securities Purchase Agreement) pursuant to the
Registration Statements, which assertion, if made, has not been resolved to the
reasonable satisfaction of the Company after the Company has used its best
efforts to accomplish such resolution.
4.2 Conditions Precedent To Sellers and the Voting Trust
Obligations on the Closing Date. The obligations of Sellers and the Voting
Trust to effect the transactions contemplated under this Agreement at the
Closing are subject to the fulfillment on or prior to the Closing Date of the
following conditions, which may be waived by Sellers and the Voting Trust in
writing:
(a) No Material Adverse Change. There shall not
have occurred any material adverse change to BRT or the properties owned by BRT
and its subsidiaries, taken as a whole.
(b) Exemption From Ownership Requirements. BRT,
by action of its Board of Trustees, shall have confirmed the Voting Trust is
exempt from the ownership requirements of BRT's Declaration of Trust pursuant
to Section 6.6(k) thereof, in the form attached hereto as EXHIBIT "P".
(c) Securities Purchase Agreement. The
representations and warranties of BRT under the Securities Purchase Agreement
shall be true and correct as of Closing. The conditions set forth in Section
4.11 of the Securities Purchase Agreement shall have been satisfied as of
Closing.
(d) Amendment to Partnership Agreement. The
Partnership Agreement of BRT OP shall have been amended in accordance with the
form of amendment attached as EXHIBIT "X".
(e) Certain Shareholders Approve Conversion.
Safeguard Scientifics, Inc. and Richard M. Osborne, Sr., and all entities
holding shares of BRT beneficially owned by Richard M. Osborne, Sr. shall have
entered into an agreement with the Voting Trust in the form of EXHIBIT "U".
(f) Blue Sky Compliance. BRT shall have complied
with all applicable requirements of federal and state securities or "blue sky"
laws with respect to the issuance of the Property Shares at the Closing.
-19-
<PAGE> 24
(g) Registration Rights. The Registration Rights
Agreement in the form of EXHIBIT "W" attached hereto shall have been executed
and delivered by all the parties thereto and shall be in full force and effect.
(h) Opinions. Counsel for BRT shall have
delivered to the Voting Trust, as appropriate, written opinions, dated the
Closing Date, in form and substance satisfactory to the Voting Trust and its
counsel, as appropriate, substantially in the form attached hereto as EXHIBIT
"Q".
4.3 Mutual Conditions Precedent of the Parties on the
Closing Date. The obligations of BRT, Sellers and the Voting Trust to effect
the transactions contemplated under this Agreement at the Closing are subject
to the fulfillment on or prior to the Closing Date of the following conditions,
any one or more of which may be waived in whole or in part by BRT, Sellers and
the Voting Trust in writing:
(a) Concurrent Closings and Deliveries. All of
the closing documents to be delivered at the Closing shall have been executed
and be available for concurrent delivery.
(b) Representations and Warranties True as of
Closing Date. The representations and warranties of each of the parties
contained in this Agreement shall be true at and as of the Closing Date in all
material respects, with the same effect as though such representations and
warranties were made as of such date, provided that the representations and
warranties of each of the parties shall be modified at Closing as provided in
their respective Closing Certificates to reflect, as necessary, the operation
of the Properties from the date hereof through the Closing Date in accordance
with Section 5 hereof.
(c) Closing Certificates. Each party to this
Agreement shall have executed and delivered a certificate dated as of the
Closing Date (the "Closing Certificate"), and signed by the President or other
authorized officer, as the case may be, certifying that its representations and
warranties set forth in this Agreement (and, as to BRT and the Voting Trust in
the Securities Purchase Agreement) remain true and correct in all material
respects, as may be modified by information relating to events after the date
hereof set forth in the Closing Certificate. The ability of the parties to
modify their representations and warranties in a Closing Certificate to reflect
events occurring after the date hereof shall not affect the other conditions
set forth in this Section 4.
(d) Confirmations. BRT shall have received
confirmation that the transactions contemplated hereby will not require
approval of BRT's shareholders under the rules of the American Stock Exchange.
(e) American Stock Exchange Listing. On or prior
to the Closing Date, the Common Shares into which the Property Shares are
convertible and the Common Shares for which the Warrant is exercisable or
exchangeable shall have been approved for listing on the American Stock
Exchange.
-20-
<PAGE> 25
SECTION 5. OPERATIONS PRIOR TO TRANSFER
5.1 Property Operations.
(a) Except as otherwise expressly provided
herein, between the date hereof and the Closing Date, Sellers shall operate
their respective Properties in the ordinary course in a manner consistent with
past practice, maintaining the Properties in the same state of repair, order
and condition as they are on the date hereof, reasonable wear and tear, damage
by fire or other casualty excepted. Without limiting the foregoing, the
applicable owner shall not defer any required maintenance or repair unless such
maintenance or repair would otherwise be deferred in the ordinary course of
business. Sellers shall maintain or have maintained, their books and records in
accordance with past practice and use diligent efforts to maintain in full
force and effect all authorizations and all insurance policies with respect to
their respective Properties.
(b) Without in each case obtaining the prior
written consent of BRT, which shall not be unreasonably withheld, no Seller
shall enter into new Leases or modify, cancel, waive any material default
under, accept any rental more than thirty (30) days in advance of its accrual
date or accept early surrender of any of the Leases; provided that Sellers may
enter into Leases for 5,000 square feet of space or less provided that such
Leases are on terms and conditions consistent with the leasing pro forma
provided by Sellers for the applicable Property.
(c) Sellers shall notify BRT of any material
change in any of the information set forth in Section 3 hereof or any of the
Exhibits attached hereto with respect to their respective Properties, promptly
after such party has knowledge of such material change. Sellers shall promptly
deliver to BRT copies of all default notices and other material written
communications sent or received by them with respect to their respective
Properties.
5.2 Casualty or Condemnation.
(a) If prior to the Closing Date there shall be
any damage or destruction to a Property by fire or other casualty, Sellers
shall give prompt notice thereof to BRT. Unless such damage or destruction
results in a material adverse change to the Properties taken as a whole, such
damage or destruction shall in no way void or impair this Agreement or reduce
the number of Property Shares to be issued with respect to such Property. In
such event, subject to BRT's right to participate in the adjustment of the loss
with the applicable insurance companies involved and approve the manner of
repair and restoration, Sellers shall settle with the insurance companies and
apply the insurance proceeds to promptly and diligently repair and restore, or
commence to repair and restore, the affected Property to its condition and
character immediately prior to the damage or destruction. If such repair and
restoration is not completed by the Closing Date, then on the Closing Date the
owner of the affected Property shall pay over to BRT the amount of the
insurance proceeds collected to the extent such proceeds have not yet been
applied to the repair and restoration of the affected Property, (and if any
such proceeds
-21-
<PAGE> 26
have not been collected, the owner of the affected Property shall assign to BRT
all its right, title and interest in and to the same).
(b) If prior to the Closing Date condemnation or
eminent domain proceedings are commenced against any Property, the Seller in
question shall give prompt notice thereof to BRT. Unless the taking contemplated
by such condemnation or eminent domain proceeding would result in a material
adverse change to the Properties taken as a whole, no such condemnation or
eminent domain proceeding shall void or impair this Agreement, or reduce the
number of Property Shares to be issued with respect to such Property, provided
that the owner of the affected Property shall be relieved from any obligation
hereunder to convey title to the portion of any such Property so taken. BRT
shall have the right to participate in the negotiation of the award to be made
for such taking, and the owner of the affected Property shall not agree to any
proposed award or execute a deed in lieu of foreclosure without BRT's prior
written consent. Any condemnation award payable with respect to the taking of a
Property shall be assigned to BRT.
SECTION 6. CLOSING; CLOSING DELIVERIES; ADJUSTMENTS; EXPENSES
6.1 Closing. The closing for the transfer of all of the
Properties (the "Closing"), shall take place at the offices of Wolf, Block,
Schorr and Solis-Cohen, 12th Floor Packard Building, 15th & Chestnut Streets,
Philadelphia, PA at 10:00 a.m., on November 14, 1996, or on such other date or
at such other time or place as may be agreed upon in writing by the parties
hereto (the "Closing Date").
6.2 Closing Documents. In addition to the opinions,
certificates and other documents and instruments referred to in Section 4 of
this Agreement, at the Closing, the parties shall also execute and deliver, or
cause to be executed and delivered, the following documents:
(a) Deeds and Assignments. Deeds and Assignment
Agreements in respect of each of the Properties in substantially the forms
attached hereto as EXHIBITS "R-1" and "R-2".
(b) Mechanics' Liens. Sellers will furnish such
affidavits, indemnities and collateral as Commonwealth Land Title Insurance
Company may require to insure title to the Properties in BRT OP (or its
subsidiaries) free and clear of the possibility of mechanic's liens.
(c) Bill of Sale. A bill of sale prepared by
BRT's counsel in form acceptable to Sellers, assigning, conveying and
transferring to Buyer, all of the Personal Property and the Names.
(d) Original Leases. All Leases, tenant files,
tenant correspondence and repair records.
-22-
<PAGE> 27
(e) Original Licenses, Service Contracts. All
licenses with respect to the Properties, and such of the Service Contracts as
BRT shall request.
(f) Assignment of Leases. An assignment agreement
prepared by BRT's counsel in form acceptable to Sellers (the "Assignment"),
duly exercised by Sellers and BRT, assigning, conveying and transferring to BRT
the Leases, and BRT shall assume the obligations and liabilities of Seller
arising after the Closing Date under them.
(g) FIRPTA Certificates. All certificate(s)
required under Section 1445 of the Code.
(h) Tenant Letter. Letters to each tenant advising
of the change in ownership and directing payment of rent to such party as the
BRT shall designate, said letter to be in form acceptable to BRT.
(i) Corporate Clearance. Such evidence,
indemnification and other undertaking as Commonwealth Land Title Insurance
Company may require to insure title in BRT OP (or its subsidiary) free and
clear of any liability for taxes owing by any Seller to the Commonwealth of
Pennsylvania.
(j) Title Insurance Certificates. Such reasonable
and customary affidavits of title or other certifications as shall be required
by Commonwealth Land Title Insurance Company to insure BRT's title to the
Properties as set forth in Section 4.1(a), and to provide affirmative
endorsements for (a) no violation of existing covenants, conditions and
restrictions, and future violation not to result in forfeiture of title, (b)
removal of any exceptions for matters which an accurate survey would disclose,
(c) "Fairways" endorsements, and such other endorsements as BRT shall reasonably
request.
(k) Updated Rent Roll. An updated schedule of
Leases, containing all information required to be set forth in EXHIBIT "L which
schedule is correct and complete as of the date of closing.
(l) Organization Certifications. Confirmation of
the good standing and existence of each Seller and the due authority of those
executing for them, including, without limitation, the following documents
issued no earlier than 30 days prior to Closing: (a) good standing certificate
in state or organization and in the State in which the Properties are located,
(b) articles of incorporation, certified by the secretary of state of the state
of incorporation, (c) a certificate from the secretary of the corporation
confirming the incumbency of the signatories and the current force and effect
of the resolution authorizing their execution of the documents required under
this Agreement.
(m) Keys. All keys and combinations to all locks to
the Properties.
-23-
<PAGE> 28
(n) Tax Bills. Current tax bills and, if
available, tax bills for each of the years of Sellers' ownership of the
Properties.
(o) Tax Reduction Rights. An instrument assigning
to BRT any claims for the reduction of real or personal property taxes assessed
against any portion of the Property for the fiscal year in which the Closing
takes place; any refund for such year shall be prorated when received.
(p) Contract Documents. All Contract Documents in
possession of Sellers.
6.3 Adjustments. The following terms shall be prorated on
a per diem basis at Closing, as of the close of business of the day immediately
preceding Closing except as otherwise set forth below:
(a) Rent Under Leases. Delinquent rents under
Leases will not be prorated, but after Closing, BRT will pay promptly to the
Seller in question (i) the first money collected from any tenant which as of
Closing was delinquent only for the month in which Closing occurred, up to the
amount of such delinquency and (ii) sums collected within ninety (90) days
following Closing in excess of all sums owing after Closing, from any tenant
which, as of Closing, was delinquent for more than the month in which Closing
occurred, up to the amount of such delinquency. Except as herein expressly
provided, BRT shall be under no obligation to collect rents in arrears for the
benefit of Sellers. Except for the adjustment of escalation payments as
provided below, Sellers shall have no claim to any rent collected more than
ninety (90) days following the Closing Date.
(b) All security deposits under Leases and all
interest required to be paid thereon pursuant to the terms of such Leases shall
be paid over to BRT on the Closing Date; and
(c) Sellers shall have paid prior to Closing all
taxes and assessments and water and sewer charges, including assessments
payable in installments, which are to become due and payable and/or a lien
against any Property, provided the first installment of such assessment has
become due and payable as of Closing. Real estate taxes, assessments and
municipal water and sewer charges for the current tax years will be prorated.
(d) Sellers will use reasonable efforts to cause
all utility meters to be read as of the end of the day preceding Closing, or as
close thereto (whether before or after) as practicable, and the parties will
adjust utility charges on the basis of such readings and reasonable estimates
to approximate the result that Sellers shall bear all utility charges through
the day preceding Closing and BRT shall bear utility charges thereafter.
Utility deposits, if any, will be assigned to BRT and reimbursed to Sellers.
-24-
<PAGE> 29
(e) If BRT shall elect to take assignment of any
insurance policy or contract, the premiums or sums payable (or receivable)
thereunder will be prorated on a per diem basis such that Sellers will bear all
expenses through the day preceding the Closing and BRT will bear all expenses
thereafter.
(f) Amounts paid or payable in respect of any
Service Contracts assigned and assumed by BRT in accordance herewith.
(g) At least five (5) days prior to Closing,
Sellers shall deliver to BRT a reasonably detailed statement setting forth, as
of the date of Closing (a) the sums collected from tenants under Leases on
account of or in reimbursement of landlord's operating expenses and/or any
other payments made by tenant to landlord on account of sums which are
attributable to expenses paid or incurred by the landlord ("escalation
payments") for the current fiscal year under each such Lease (whether a lease
year or calendar or other year); and (b) the amounts paid or incurred by
Sellers during the appropriate fiscal year as aforesaid which Sellers expects
will be paid or reimbursed by escalation payments made by tenants.
If Sellers shall have collected escalation
payments for period prior to Closing in excess of the amount to which Sellers
are entitled, whether pursuant to estimates which were in excess of the amounts
actually required to be paid, or otherwise, there shall be an adjustment and
payment to BRT at Closing for such excess. If the charges were not billed or
have not been collected as of the date of Closing, then, when the amount of
such escalation payments is determined and collected by BRT from tenants, BRT
will, upon collection, remit to Sellers the portion thereof to which Sellers is
entitled to the date of Closing. BRT shall have the right, in good faith, to
settle or adjust any amount of such escalation payments due from any tenant
without Sellers' prior consent, provided that such settlement or adjustment
applies ratably to all amounts of escalation payments due from such tenant.
Escalation payments will ultimately be prorated between the parties on the
basis of the proportions in which each party bore the expense in question.
(h) The parties shall endeavor to jointly prepare
a schedule of prorations for the Properties no less than five (5) days prior to
closing. As to any matter to be prorated hereunder which cannot be determined
with certainty as of Closing, the parties will estimate such matter as of
Closing and will thereafter adjust such estimated proration promptly after such
matter can be determined with certainty. The parties shall correct any errors
in prorations as soon after the Closing as amounts are finally determined.
6.4 Expenses. Transfer taxes payable with respect to the
conveyance of the Properties shall be divided equally between the Sellers and
BRT; provided, however, that if Closing shall occur under the Securities
Purchase Agreement, and if in connection with such Closing thereunder Common
Shares are issued, then at such Closing BRT will pay to the Voting Trust the
sum of Two Hundred Ten Thousand Dollars ($210,000) in partial reimbursement of
the realty transfer taxes paid by Sellers at Closing hereunder. BRT shall pay
the cost of title insurance and recording costs of the deeds. BRT will pay its
own due diligence expenses. Other closing expenses will be allocated to the
party who would customarily pay such expense under local practice. Each party
will pay the fees and expenses of its own counsel, except that if Closing
occurs, BRT will reimburse the Voting Trust at Closing for the reasonable costs
incurred
-25-
<PAGE> 30
by Sellers and Voting Trust for the fees and expenses of counsel in connection
with the transactions described hereby. Otherwise each party shall be
responsible for all expenses incurred by it in connection with this Agreement
and the transactions contemplated hereby, including without limitation the fees
and expenses of such party's accountants, attorneys and other advisors;
provided, however, that if Closing occurs, BRT will reimburse the Voting Trust
the sum of $242,500 paid or payable by SERS to consultants.
6.5 Indemnification for Seller's Tax Obligations. Sellers
shall indemnify, defend and save and hold harmless BRT from any loss, cost,
liability or expense (including, without limitation, reasonable counsel fees
and court costs) incurred, paid or suffered by BRT arising out of or by reason
of any claim made by the Pennsylvania Department of Revenue or by any other
state taxing or employment authorities asserting or indicating any claims or
possible claims for unpaid taxes, penalties, interest or court costs related
thereto of Sellers, the Voting Trust, SERS or any related party, due the
Commonwealth of Pennsylvania or its political subdivisions. The provisions of
this Section 6.5 shall specifically survive Closing hereunder.
SECTION 7. COVENANTS
7.1 BRT Covenants. BRT hereby makes the following
covenant to Sellers and the Voting Trust: during the Due Diligence Period, BRT
will diligently endeavor to obtain the confirmation from the American Stock
Exchange described in subsection 4.3(e) hereof.
7.2 Mutual Covenant - Best Efforts To Close. Each party
to this Agreement hereby covenants to use its best efforts (i) to cause to be
fulfilled any condition to Closing which is under the control or influence of
such party and (ii) to consummate Closing hereunder so long as the conditions
to such party's obligation are fulfilled.
7.3 Morgan Stanley Transactions. RAI specifically
acknowledges and agrees that the Voting Trust and RAI as voting trustee of the
Voting Trust are aware of and have no right to consent to or otherwise approve
the investment transactions with the Morgan Stanley Funds referred to in the
Registration Statements.
SECTION 8. MATTERS TO BE COMPLETED
8.1. Matters to be Completed. Prior to Closing, BRT will
review the documents and materials described on EXHIBIT "Z" hereto and will
promptly notify Sellers' if any information contained in any such documents
materially adversely affects the value of the Properties (other than any
impairment of future development potential). Sellers may, but need not, remedy
the matter in question or compensate BRT therefor, and if Sellers shall not so
remedy or so compensate BRT in a manner reasonably satisfactory to BRT, then
BRT may terminate this Agreement by notice to Sellers and thereupon the Deposit
shall be returned to BRT.
-26-
<PAGE> 31
SECTION 9. SELLERS' OR VOTING TRUST'S DEFAULT
9.1 Sellers' or Voting Trust's Default. If Sellers or the
Voting Trust shall fail to consummate Closing in accordance with this Agreement
or shall fail to observe or perform any of their covenants or obligations under
this Agreement to be observed or performed at or prior to Closing, BRT as its
sole and exclusive remedies may (i) seek specific performance of this Agreement,
or (ii) enforce any other remedy available at law or in equity, provided,
however, that unless such failure to consummate Closing constitutes a breach of
Sellers' or the Voting Trust's covenant under subsection 7.2 hereof, the
remedies of BRT under this clause (ii) will be limited to the return of the
Deposit to BRT and payment to BRT of the additional sum of $100,000 as
liquidated damages for such default.
SECTION 10. GENERAL PROVISIONS
10.1 Notices. Any notice, request, demand, waiver, consent,
approval or other communication which is required or permitted hereunder shall
be in writing and shall be deemed given only if delivered personally, sent by
reputable next business day delivery service or by telegram or by registered or
certified mail, postage prepaid, as follows:
If to BRT, to:
Brandywine Realty Trust
16 Campus Boulevard
Suite 150
Newtown Square, PA 19073
Attn: Gerard H. Sweeney,
President and Chief Executive Officer
With a required copy to:
Pepper, Hamilton & Scheetz
3000 Two Logan Square
18th & Arch Streets
Philadelphia, PA 19103-2799
Attn: Michael H. Friedman, Esq.
If to the Sellers or Voting Trust, to:
RAI Real Estate Advisers, Inc.
259 Radnor-Chester Road
Suite 200
Radnor, PA 19087
Attn: Richard K. Layman
-27-
<PAGE> 32
With a required copy to:
Wolf, Block, Schorr, and Solis-Cohen
12th Floor Packard Building
S.E. Corner 15th and Chestnut Streets
Philadelphia, PA 19102
Attn: Jason M. Shargel, Esq.
10.2 Confidentiality. The parties to this Agreement
acknowledge that certain of the information that may be made available to them
in connection with their due diligence investigation or otherwise is
proprietary and includes confidential information. The parties shall hold all
such information in confidence and shall not disclose it to any person before
the Closing without the approval of the other parties, as applicable; provided,
however, that the foregoing restriction shall not apply to (i) any information
that is or becomes publicly known or that is lawfully obtained from a third
party, (ii) to any disclosure required by law or in connection with the
enforcement of any party's rights under this Agreement or (iii) any information
required, in the reasonable judgment of BRT's counsel, to be included in the
Registration Statement on Form S-11, as amended or in any Preliminary or Final
Prospectus pertaining thereto. Prior to the Closing, none of the parties (or
any of their respective affiliates) shall make any public announcement or
disclosure relating to the transactions contemplated herein without the prior
agreement of each other party hereto, except as required by law, provided that
each other party shall use its best efforts to consult with the other in
advance of any disclosure required by law.
10.3 Entire Agreement. This Agreement, together with the
Exhibits and certificates referred to herein or delivered pursuant hereto,
constitute the entire agreement between the parties hereto with respect to its
subject matter and supersede all prior and contemporaneous agreements and
understandings with respect to the subject matter thereof.
10.4 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.
10.5 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. Nothing contained herein or in any
other document contemplated hereunder shall prevent or delay any party from
seeking, in any court of competent jurisdiction, specific performance or other
equitable remedies in the event of any breach or intended breach by any party
of any of their respective obligations hereunder.
10.6 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
masculine pronouns include the feminine and neuter. Except as otherwise
indicated, all
-28-
<PAGE> 33
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.
10.7 Amendments. Modifications and Waiver. The parties may
amend or modify this Agreement in any respect. No such amendment or modification
shall be effective unless in writing and signed by the party against which such
amendment or modification is to be enforced. 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.
10.8 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.
10.9 Liability of Trustees, etc. No recourse shall be had
for any obligation of BRT hereunder, or for any claim based thereon or otherwise
in respect thereof, against any past, present or future trustee, shareholder,
officer or employee of BRT, 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.
10.10 Non-Recourse. No recourse shall be had for any
obligation of the Sellers or the Voting Trust hereunder, or for any claim based
thereon or in respect thereof, against RAI, SERS, or any past, present or
future trustee, stockholder, officer or employee of either or against any other
person or entity, except for the payment by Sellers or the Voting Trust of any
amounts due under clause (ii) of Section 9.1 hereof or as provided in the
following sentence, whether by virtue of any statute or rule of law, or by the
enforcement of any assessment or penalty or otherwise, all such other liability
being expressly waived and released by each other party hereto. After Closing,
recourse for any obligation or liability of the Sellers or the Voting Trust
hereunder shall be enforceable only against the collateral (as defined in the
Pledge Agreement), and by offset against the Deferred Purchase Price.
10.11 Exhibits Incorporated. All exhibits attached hereto
are hereby incorporated into and made a part of this Agreement.
-29-
<PAGE> 34
IN WITNESS WHEREOF, each of the parties hereto has executed
this Agreement, all as of the date first written above.
BRANDYWINE REALTY TRUST
By: /s/ Gerard H. Sweeney
------------------------------
Title: President/CEO
---------------------------
GREENWOOD SQUARE CORPORATION
By: /s/ Kathleen M. Hands
------------------------------
Title: Vice President
---------------------------
BCBC HOLDING COMPANY
By: /s/ Kathleen M. Hands
------------------------------
Title: Vice President
---------------------------
500 NORTH GULPH ROAD HOLDINGS, INC.
By: /s/ Kathleen M. Hands
------------------------------
Title: Vice President
---------------------------
RAI REAL ESTATE ADVISERS, INC.
By: /s/ Richard K. Layman
------------------------------
Title: President
---------------------------
-30-
<PAGE> 35
EXHIBIT LIST
<TABLE>
<S> <C>
Exhibit A: Legal Description - Greenwood Property
Exhibit B: Legal Description - BCBC Property
Exhibit C: Legal Description - North Gulph Property
Exhibit D-1: Articles Supplementary (Property Shares)
Exhibit D-2: Standstill Agreement
Exhibit E: Form of Capital Escrow Agreement
Exhibit F: Form of Warrant
Exhibit G: BRT Disclosure Schedule
Exhibit H: BRT Rent Rolls
Exhibit I: Insurance Policies Relating to BRT Properties
Exhibit J: BRT Properties
Exhibit K-1: List of Environmental Site Assessments of the Properties
Exhibit K-2: Sellers' Disclosure Schedule
Exhibit K-3: List of Engineering Studies and Reports of the Properties
Exhibit L: Sellers' Rent Rolls
Exhibit M: Sellers' Litigation
Exhibit N: Insurance Policies Relating to Properties
Exhibit O: Permitted Exceptions on Properties
Exhibit P: Required Tenant Estoppels
Exhibit Q: Form of Opinion
Exhibit R-1: Form of Deed
Exhibit R-2: Form of Assignment and Assumption Agreement
Exhibit S: Sellers' Service Contracts
</TABLE>
-31-
<PAGE> 36
<TABLE>
<S> <C>
Exhibit T: Deposit Escrow Agreement
Exhibit U: Form of Agreement of Safeguard Scientifics, Inc. and Richard M. Osborne
Exhibit V: Form of Pledge Agreement
Exhibit W: Form of Registration Rights Agreement
Exhibit X: Form of Amendment to Partnership Agreement of BRT OP
Exhibit Y: Form of Confirmation of Voting Trust Exemption from Ownership Requirements
Exhibit Z: Remaining Due Diligence Items
</TABLE>
-32-
<PAGE> 1
EXHIBIT 10.2
BRANDYWINE REALTY TRUST
SECURITIES PURCHASE AGREEMENT
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
SECTION 1. SALE AND PURCHASE OF SHARES; CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1-
1.1 Authorization of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1-
1.2 Sale and Purchase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1-
1.3 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2-
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . -2-
2.1 Organization and Good Standing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2-
2.2 Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -3-
2.3 No Conflict with Law or Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -3-
2.4 Beneficial Interest of Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -3-
2.5 Reservation of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -4-
2.6 Consents and Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -4-
2.7 Private Offering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -4-
2.8 Declaration of Trust and Bylaws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -5-
2.9 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -5-
2.10 SEC Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -5-
2.11 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -5-
2.12 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -6-
2.13 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -6-
2.14 Real Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -7-
2.15 Tenant Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -9-
2.16 Dividends and Other Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -9-
2.17 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -9-
2.18 Agreements Affecting the Company's Securities . . . . . . . . . . . . . . . . . . . . . . . . . -10-
2.19 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -10-
2.20 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -10-
2.21 Contracts and Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -12-
2.22 Absence of Certain Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -12-
2.23 Contracts with Insiders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -13-
2.24 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -13-
2.25 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -13-
2.26 Certain Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -13-
2.27 Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -14-
2.28 Certain Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -14-
2.29 Labor Agreements and Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -14-
2.30 Entire Business; Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -15-
2.31 Registration Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -15-
2.32 Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -15-
2.33 Standstill Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -15-
2.34 Matters Relating to Partnership Agreement and Warrants. . . . . . . . . . . . . . . . . . . . . -16-
2.35 Investment Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -16-
2.36 Commodity Exchange Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -16-
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C> <C>
SECTION 3. PURCHASER'S REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . -16-
3.1 Pre-Existing Entity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -16-
3.2 Beneficial Ownership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -16-
3.3 Principal Place of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -17-
3.4 Purchase Without View to Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -17-
3.5 Restrictions on Transfer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -17-
3.6 Access to Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -17-
3.7 Additional Representations of the Purchaser . . . . . . . . . . . . . . . . . . . . . . . . . . -17-
3.8 Legends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -18-
3.9 Due Authorization, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -18-
SECTION 4. CONDITIONS PRECEDENT TO THE PURCHASER'S OBLIGATIONS . . . . . . . . . . . . . . . . . . . . . . -18-
4.1 Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -18-
4.2 Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -19-
4.3 Opinion of Counsel to the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -19-
4.4 Proceedings; Certified Copies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -19-
4.5 No Proceeding or Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -19-
4.6 No Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -19-
4.7 ASE Listing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -19-
4.8 Blue Sky Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -19-
4.9 Registration Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -19-
4.10 Contribution Closing; Transaction Documents . . . . . . . . . . . . . . . . . . . . . . . . . . -19-
4.11 Maryland Anti-Takeover Statutes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -19-
4.12 Environmental Representation Letter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -20-
4.13 Tax Opinion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -20-
SECTION 5. CONDITIONS PRECEDENT TO THE COMPANY'S OBLIGATIONS . . . . . . . . . . . . . . . . . . . . . . . -20-
5.1 Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -20-
5.2 Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -20-
5.3 No Proceeding or Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -20-
5.4 ASE Listing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -20-
5.5 Contribution Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -20-
5.6 Additional Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -21-
5.7 Proceedings; Certified Copies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -21-
5.8 No SEC Integration Challenge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -21-
SECTION 6. COVENANTS OF THE COMPANY AND THE PURCHASER PRIOR TO CLOSING . . . . . . . . . . . . . . . . . . -21-
6.1 Payment of Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -21-
6.2 Operation of Business in Ordinary Course . . . . . . . . . . . . . . . . . . . . . . . . . . . . -21-
6.3 Access to Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -21-
6.4 Notification of Certain Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -22-
6.5 Conditions Precedent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -23-
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<S> <C> <C>
SECTION 7. COVENANTS OF THE COMPANY AND THE PURCHASER AFTER CLOSING . . . . . . . . . . . . . . . . . . . . -23-
7.1 Rule 144 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -23-
7.2 Delivery of Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -23-
7.3 Reservation of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -23-
7.4 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -23-
7.5 Waivers, Consents, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -24-
7.6 Press Releases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -24-
7.7 Shareholders' Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -24-
7.8 Purchaser's Covenant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -24-
7.9 REIT Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -25-
SECTION 8. COMPLIANCE WITH 1933 ACT; RESTRICTIONS ON TRANSFERABILITY OF SHARES, PROPERTY
SHARES WARRANT AND CONVERSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -25-
8.1 Compliance with 1933 Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -25-
8.2 Restrictive Legend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -25-
8.3 Restrictions on Transferability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -25-
8.4 Termination of Restrictions on Transferability . . . . . . . . . . . . . . . . . . . . . . . . . -26-
SECTION 9. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS . . . . . . . . . . . . . . . . . . . . . -26-
SECTION 10. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -26-
10.1 Owner of Shares, Property Shares, Warrant and Conversion Shares . . . . . . . . . . . . . . . . -26-
10.2 Successors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -26-
10.3 Broker or Finder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -27-
10.4 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -27-
10.5 Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -27-
10.6 Full Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -28-
10.7 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -28-
10.8 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -28-
10.9 Survival of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . -28-
10.10 Settlement of Disputes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -28-
10.11 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -29-
10.12 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -29-
10.13 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -30-
10.14 Non-Recourse . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -30-
</TABLE>
-iii-
<PAGE> 5
SCHEDULE OF EXHIBITS
Exhibit A -- Form of Amendment No. 1 to Registration Statement
Exhibit B -- Amendments or Waivers of Warrant Holders
Exhibit C -- Form of Opinion of Counsel to the Company
Exhibit D -- Form of Opinion of Special Maryland Counsel to the Company
-iv-
<PAGE> 6
SECURITIES PURCHASE AGREEMENT (this "Agreement") made as of
the 6th day of November, 1996 between BRANDYWINE REALTY TRUST, a Maryland real
estate investment trust (the "Company"), and RAI REAL ESTATE ADVISERS, INC.
("RAI") as the voting trustee of a voting trust dated as of November 6, 1996
executed by the Commonwealth of Pennsylvania State Employes' Retirement System
("SERS") as shareholder and by RAI as voting trustee (the "Purchaser").
BACKGROUND
The Company desires to issue and sell to the Purchaser, and the
Purchaser desires to purchase Common Shares (as defined in Section 1.1), or, if
so provided in Section 1.2, Series A Preferred Shares (as defined in Section
1.1), for an aggregate purchase price of $10,500,000 (the "Purchase Price") on
the terms and conditions set forth herein.
Intending to be legally bound hereby, the parties hereto agree as
follows:
SECTION 1. SALE AND PURCHASE OF SHARES; CLOSING
1.1 AUTHORIZATION OF SECURITIES. The Board of
Trustees of the Company has authorized the issuance of a number of its
authorized but unissued common shares of beneficial interest (the "Common
Shares") as provided in Section 1.2. The term "Shares" as used herein means the
number of Common Shares issuable to the Purchaser hereunder or, if shares of the
Company's Series A Convertible Preferred Shares (the "Series A Preferred
Shares") are to be issued as provided in Section 1.2, the number of Series A
Preferred Shares issuable to Purchaser hereunder. The term "Securities" as used
herein means the Shares, the Conversion Shares, the Series A Preferred Shares
(the "Property Shares") issuable pursuant to the Contribution Agreement of even
date herewith among, inter alia, the Company and the Purchaser (the
"Contribution Agreement"), and the Warrant to Purchase Common Shares (the
"Warrant") issuable pursuant to the Contribution Agreement. The term "Conversion
Shares" as used herein means the Common Shares issuable upon conversion of the
Series A Preferred Shares and Property Shares and upon exercise or exchange of
the Warrant.
1.2 SALE AND PURCHASE. Subject to the terms and
conditions herein set forth, on the Closing Date (as defined in Section 1.3),
the Company shall sell, issue and deliver Shares to the Purchaser as follows:
If the Secondary Offering occurs on or prior to December 27, 1996, the Company
shall issue to the Purchaser a number of Common Shares equal to the Purchase
Price divided by a number equal to the price to the public in the Secondary
Offering. If the Secondary Offering is not consummated on or before December
27, 1996, the Company shall issue to the Purchaser Preferred Shares convertible
into a number of Common Shares equal to the Purchase Price divided by $5.50.
The term "Secondary Offering" as used herein means an underwritten primary
public offering of Common Shares pursuant to a Registration Statement on Form
S-11 declared effective by the
<PAGE> 7
SEC (as defined in Section 2.10) which results in gross proceeds to the Company
(prior to reduction for the underwriters' discount) of at least $50,000,000.
All share amounts and prices shall be appropriately adjusted for any share
splits, reverse share splits, share dividends or similar transactions.
1.3 CLOSING.
(a) The closing of the issuance and sale of the
Shares to the Purchaser hereunder shall take place on the earlier of (i) as
promptly as practicable after the closing of the Secondary Offering, or (ii)
December 30, 1996, subject to the satisfaction or, if permissible, waiver of
the conditions set forth in Sections 4 and 5, at 10:00 A.M. at the offices of
Wolf, Block, Schorr and Solis-Cohen, Packard Building, 15th and Chestnut
Streets, Philadelphia, PA 19102, unless another date, time or place is agreed
to in writing by the parties hereto. As used herein "Closing" shall mean the
closing of the issuance and sale of the Shares to the Purchaser hereunder and
the "Closing Date" shall mean the date on which such Closing takes place.
(b) Subject to the terms and conditions herein
set forth, at the Closing, the Company shall deliver to the Purchaser
certificates for the Shares duly executed by the Company and registered in the
Purchaser's name or the name of its nominee and, in exchange for the delivery
of the Shares, the Purchaser shall deliver to the Company the Purchase Price by
wire transfer of immediately available funds to an account designated by the
Company at least two business days prior to the Closing Date.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Other than as set forth on the disclosure letter previously
provided to the Purchaser by the Company (the "Disclosure Letter") or as
described in the Registration Statement (as defined in Section 2.31) or in the
SEC Reports (as defined in Section 2.10), the Company represents and warrants
to the Purchaser as follows:
2.1 ORGANIZATION AND GOOD STANDING. The Company is a real
estate investment trust duly formed and existing under and by virtue of the
laws of the State of Maryland and is in good standing with the State Department
of Assessments and Taxation of Maryland and has all requisite power and trust
authority, and all necessary licenses and permits, to own and lease its
properties and assets and to conduct its business as now conducted. Each
Subsidiary (as defined in Section 2.9) is an entity duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization and has all requisite power and authority, and all necessary
licenses and permits, to own and lease its properties and assets and to conduct
its business as now conducted. The Company and its Subsidiaries are each
qualified to do business and are in good standing in all states where the
conduct of their respective businesses or their ownership or leasing of
property requires such qualification.
-2-
<PAGE> 8
2.2 AUTHORIZATION. The Company has all requisite power
and trust authority to execute and deliver this Agreement and each Transaction
Document (as defined in Section 4.10) required to be executed and delivered by
it prior to or at the Closing and to carry out the transactions contemplated
hereby and thereby. The execution, delivery and performance by the Company of
this Agreement and each Transaction Document to which it is a party have been
duly authorized by all requisite corporate action. This Agreement has been duly
executed and delivered by the Company and constitutes (and, when executed and
delivered as contemplated herein each such Transaction Document will
constitute) the valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms, except as such enforcement
may be limited by bankruptcy, insolvency, moratorium, reorganization and other
similar laws relating to or affecting the enforcement of creditors' rights
generally, and except that the availability of specific performance, injunctive
relief or other equitable remedies is subject to the discretion of the court
before which any such proceeding may be brought.
2.3 NO CONFLICT WITH LAW OR DOCUMENTS. The execution,
delivery and performance by the Company of this Agreement and each Transaction
Document to which it is a party will not violate any provision of law, any rule
or regulation of any governmental authority, or any judgment, decree or order
of any court binding on the Company, and will not conflict with or result in
any breach of any of the terms, conditions or provisions of, or constitute a
default under, or result in the creation of any lien, security interest, charge
or encumbrance upon any of the properties, assets or outstanding shares of the
Company under its the Declaration of Trust of the Company as amended to the
date of this Agreement (the "Declaration of Trust") or the Bylaws of the
Company as amended to the date of this Agreement (the "Bylaws"), or any
indenture, mortgage, lease, agreement or other instrument to which the Company
is a party or by which it or any of its properties is bound.
2.4 BENEFICIAL INTEREST OF COMPANY. The authorized
beneficial interest of the Company consists of: (a) 75,000,000 Common Shares,
2,733,554 shares of which are presently issued and outstanding, and (b)
5,000,000 undesignated preferred shares, par value $.01 per share, none of
which is presently issued and outstanding. All issued and outstanding Common
Shares have been duly and validly issued and are fully paid and nonassessable.
There are no outstanding subscriptions, warrants, options or other rights or
commitments of any character to subscribe for or purchase from the Company, or
obligating the Company to issue, any shares of beneficial interest of the
Company or any securities convertible into or exchangeable for such shares, and
there are no Common Shares reserved for issuance. The number of Common Shares
issuable upon the exercise, conversion or exchange of any outstanding
securities of the Company is not subject to adjustment by reason of the
issuance and sale of the Securities. There are no (i) preemptive, first refusal
or similar rights to purchase or otherwise acquire securities of the Company or
any Subsidiary pursuant to any provision of law, the Declaration of Trust, the
Bylaws, the Partnership Agreement (as defined in Section 2.21), other agreement
or otherwise; or (ii) rights to adjust the number, type or pricing of
securities issuable upon conversion, exercise or exchange of other securities
or rights issued by the Company.
-3-
<PAGE> 9
2.5 RESERVATION OF SHARES. The requisite number of duly
authorized and unissued Common Shares of the Company have been duly authorized
and reserved for issuance upon conversion of the Preferred Shares and Property
Shares and exercise of the Warrant and no further trust action is required for
the valid issuance of Common Shares upon conversion of the Preferred Shares and
Property Shares and exercise of the Warrant. The Conversion Shares will, at the
time of the Closing and thereafter, not be subject to preemptive or similar
rights of any person or entity, and when issued against payment therefor in
accordance with the terms of the Preferred Shares, Property Shares and Warrant,
as applicable, will be duly and validly issued, fully paid and nonassessable.
2.6 CONSENTS AND APPROVALS. No permit, consent, approval
or authorization of, or declaration to or filing with, any federal, state,
local or foreign governmental or regulatory authority or other person or
entity, not made or obtained, is required in connection with the execution or
delivery of this Agreement or any Transaction Document by the Company, the
offer, issuance, sale or delivery of the Securities, or the carrying out by the
Company of the other transactions contemplated hereby, other than (a) the
filing with, and approval of, the American Stock Exchange, Inc. ("ASE") with
respect to the listing of the Shares (to the extent they are Common Shares) and
the Conversion Shares, (b) any filings required under federal and applicable
state securities laws and (c) the filing of Articles Supplementary in the form
of Exhibit D-1 to the Contribution Agreement with the State Department of
Assessments and Taxation of Maryland. The issuance and sale by the Company of
the Securities as contemplated hereby or by the Contribution Agreement will not
require compliance with the notification or other requirements of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules
and regulations promulgated thereunder. Prior to the closing under the
Contribution Agreement (the "Contribution Closing"), the Board of Trustees of
the Company shall have taken all action necessary so that the transactions
contemplated by the Contribution Agreement and this Agreement including,
without limitation, the issuance of the Securities, shall be irrevocably exempt
from the operation of Section 3-601 et seq. (the "business combination"
statute) and Section 3-701 et seq. (the "control share acquisition" statute) of
the Maryland General Corporation Law (collectively, the "Maryland Anti-Takeover
Statutes") and from any provisions of the Declaration of Trust and Bylaws that
may have the effect of limiting the acquisition of securities of the Company,
including without limitation Sections 6.6 and 11.5 of the Declaration of Trust.
2.7 PRIVATE OFFERING. Assuming the accuracy of the
Purchaser's representations and warranties contained in Section 3, the offer,
issuance and delivery to the Purchaser pursuant to the terms of this Agreement
and the Contribution Agreement of the Shares, Property Shares and Warrant and,
assuming compliance by the Purchaser with the terms of the Series A Preferred
Shares, the Warrant and applicable law, the Conversion Shares, are exempt from
registration under the Securities Act of 1933, as amended (the "1933 Act").
Based on the representations of the Purchaser contained in Section 3, it is not
necessary, under the circumstances contemplated by this Agreement and the
Contribution Agreement, to register issuance of the Securities under the 1933
Act or the Pennsylvania Securities Act of 1972.
-4-
<PAGE> 10
2.8 DECLARATION OF TRUST AND BYLAWS. The Company has
filed as exhibits to the SEC Reports the Declaration of Trust and Bylaws, true
and correct copies of which have been delivered to the Purchaser.
2.9 SUBSIDIARIES. The SEC Reports or the Disclosure
Letter disclose the name of each entity in which the Company owns any equity
interest, other than such entities that neither own any assets nor have ever
conducted any business (collectively, the "Subsidiaries," which term includes
without limitation Brandywine Operating Partnership, L.P., a Delaware limited
partnership). The SEC Reports or the Disclosure Letter accurately describe (a)
each Subsidiary's jurisdiction of organization and the percentage of its equity
interests owned by the Company and (b) the name of each of the Company's
corporate or joint venture affiliates (other than Subsidiaries) and the nature
of the affiliation. Except as described in the SEC Reports or the Disclosure
Letter, the Company has good and marketable title to all of the equity
interests it purports to own of each Subsidiary, free and clear in each case of
any mortgage, lien, security interest, charge or other encumbrance, and all
such interests have been duly issued and are fully paid and nonassessable.
There are no outstanding warrants, options or other rights or commitments of
any character to subscribe for or purchase from the Company or a Subsidiary, or
obligating such Subsidiary to issue, any additional equity interests or any
securities convertible into or exchangeable for such equity interests.
2.10 SEC REPORTS. Since January 1, 1995, the Company and
its Subsidiaries have timely filed all forms, reports, schedules, statements
and other documents required to be filed with the Securities and Exchange
Commission (the "SEC") pursuant to the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), or the 1933 Act, including without limitation,
(a) all Annual Reports on Form 10-K, (b) all Quarterly Reports on Form 10-Q,
(c) all reports on Form 8-K, (d) all proxy statements relating to meetings of
stockholders (whether annual or special) and (e) all information incorporated
by reference into any of the foregoing. As used herein the term "SEC Reports"
means any of the foregoing, as amended to the date of this Agreement, filed on
or after January 1, 1995. The SEC Reports were prepared in all material
respects in accordance with and complied in all material respects with the
requirements of applicable law, including the Exchange Act and the 1933 Act and
the applicable rules and regulations of the SEC thereunder, and the SEC Reports
did not at the time they were filed and do not contain any untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. Except for the
Registration Statement and the Registration Statement on Form S-8 filed on
October 16, 1996, the Company has not filed any registration statements with
the SEC at any time within the last three years. The Company has delivered to
the Purchaser prior to the date hereof true and correct copies of all SEC
Reports and any other reports and documents filed with the SEC since January 1,
1995.
2.11 LITIGATION. The SEC Reports, the Registration
Statement and/or the Disclosure Letter list all material pending or, to the
Company's knowledge, threatened
-5-
<PAGE> 11
litigation involving the Company and its Subsidiaries. Except as so disclosed,
there is no pending or, to the knowledge of the Company, threatened suit,
action or litigation, or administrative, arbitration or other proceeding or
governmental inquiry or investigation questioning the validity of this
Agreement or the transactions contemplated hereby, or affecting in any material
adverse respect the Company or any Subsidiary or the business, properties,
assets, operations, prospects or condition (financial or otherwise) of the
Company and its Subsidiaries taken as a whole, nor is there, to the knowledge
of the Company, any basis for any such suit, action, litigation, proceeding,
inquiry or investigation.
2.12 COMPLIANCE WITH LAWS. The Company and each Subsidiary
is in compliance in all material respects with all laws, ordinances, rules and
regulations of governmental authorities (including, without limitation, the
Americans with Disabilities Act of 1990) and requirements of insurance bodies
applicable to ownership, leasing, use and operation of its or their properties
and has obtained and fully paid for all material licenses, permits,
certificates, entitlements, grants of right and any other items and documents
required by applicable law to be obtained by the Company or its Subsidiaries
for the completion, ownership, leasing, use and occupancy of its or their
properties, except where the failure to so comply or obtain would not have a
material adverse effect on the Company and its Subsidiaries taken as a whole.
Such licenses, permits, certificates, entitlements, grants of right and other
items and documents are in full force and effect. Neither the Company nor any
of its Subsidiaries have taken any action that would (or failed to take any
action, the omission of which would) result in the revocation or suspension of
such licenses, permits, certificates, entitlements, grants of right and other
items and documents, and neither the Company nor any of its Subsidiaries have
received any notice of any material violation from any federal, state or
municipal entity or notice of an intent by any such governmental entity to
revoke any material certificate of occupancy or other certificate, license,
permit, entitlement or grant of right issued by it in connection with the
ownership, use and occupancy of any of its or their properties, that in each
case has not been cured or otherwise resolved to the satisfaction of such
governmental entity.
2.13 FINANCIAL STATEMENTS.
(a) Each of the consolidated financial statements
(including, in each case, any related notes thereto) contained in the SEC
Reports and the Registration Statement (i) have been prepared in all material
respects in accordance with the published rules and regulations of the SEC and
generally accepted accounting principles ("GAAP") applied on a consistent basis
throughout the periods involved (except in the case of the unaudited financial
statements, as permitted by Form 10-Q of the SEC), (ii) comply as to form in
all material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto and (iii) fairly present
in all material respects the consolidated financial position of the Company and
its Subsidiaries as of the respective dates thereof and the consolidated
results of operations and cash flows for the periods indicated (subject, in the
case of unaudited consolidated financial statements for interim periods, to
year-end adjustments consisting only of normal recurring accruals), except that
any pro forma
-6-
<PAGE> 12
financial statements contained in such consolidated financial statements are
not necessarily indicative of the consolidated financial position of the
Company and its Subsidiaries as of the respective dates thereof and the
consolidated results of operations and cash flows for the periods indicated.
Since December 31, 1995, the Company has not made any material change in the
accounting practices or policies applied in the preparation of its financial
statements.
(b) Since June 30, 1996 (the "Balance Sheet
Date") there has been no material adverse change in the business, properties,
assets, operations or condition (financial or otherwise) of the Company and its
Subsidiaries, taken as a whole.
(c) The consolidated balance sheet of the Company
and its Subsidiaries at the Balance Sheet Date (the "Balance Sheet") reflects
all liabilities and obligations of the Company and of each Subsidiary, whether
accrued, contingent or otherwise as of the date thereof, that are of a nature
required to be set forth as a liability on a consolidated balance sheet under
GAAP. Neither the Company nor any of its Subsidiaries have any liabilities or
obligations of any nature (whether or not of the nature required to be
reflected on the balance sheet prepared in accordance with GAAP) that are not
reflected on the Balance Sheet, except for current liabilities (within the
meaning of GAAP) which (i) have been incurred in the ordinary course of
business consistent in nature and amount with past practice, and (ii) are
neither material to the Company and its Subsidiaries taken as a whole nor
inconsistent with any of the representations and warranties contained herein.
The Balance Sheet reflects reserves or other appropriate provisions at least
equal to reasonably anticipated liabilities, losses and expenses of the Company
and its Subsidiaries as of the date thereof which are required to be disclosed
by GAAP.
(d) At the respective times of the issuance and
sale of the Shares, Property Shares and Warrant to the Purchaser, neither the
Company nor any of its Subsidiaries will have any liabilities or obligations,
whether absolute, accrued, contingent, or otherwise, other than (i) current
liabilities reflected on the Balance Sheet not paid since the Balance Sheet
Date, (ii) current liabilities incurred in the ordinary course of business or
in connection with the transactions contemplated hereby or by the Contribution
Agreement or the Disclosure Letter and (iii) the other indebtedness and
liabilities of the Company or of its Subsidiaries described in the Disclosure
Letter, the Registration Statement or SEC Reports.
2.14 REAL PROPERTY.
(a) The SEC Reports or the Registration Statement
describe all real properties owned by the Company and each Subsidiary. To the
Company's knowledge, the Company and each Subsidiary has good, valid and
marketable title to all such real and personal properties and assets reflected
therein as being owned by the Company or such Subsidiary, except for properties
and assets sold or otherwise disposed of in the ordinary course of business
since the Balance Sheet Date or that are not material to its business taken as
a whole, subject to no liens, mortgages, security interests, pledges,
encumbrances, or
-7-
<PAGE> 13
charges of any kind except: (i) liens for taxes or assessments or other
government charges or levies not yet due and payable, (ii) liens imposed by
law, such as mechanic's, materialmen's, warehousemen's and carrier's liens, and
other similar liens, securing obligations incurred in the ordinary course of
business which are not past due for more than 30 days, (iii) liens under
workmen's compensation, unemployment insurance, social security or similar
legislation securing obligations which are not past due and (iv) the liens
securing other indebtedness not past due of the Company or its Subsidiaries
described in the SEC Reports, the Registration Statement or the Disclosure
Letter (the "Permitted Liens").
(b) No eminent domain, condemnation,
incorporation, annexation or moratorium or similar proceeding has been commenced
or, to the best of the Company's knowledge, threatened by an authority having
the power of eminent domain to condemn any part of the properties owned by the
Company and its Subsidiaries. To the best of the Company's knowledge, there are
no pending or threatened governmental rules, regulations, plans, studies or
efforts, or court orders or decisions, which do or could adversely affect the
use or value of such properties for their present use.
(c) The improvements at all properties owned by
the Company and its Subsidiaries are in good condition and repair, ordinary
wear and tear excepted, and have not suffered any casualty or other material
damage which has not been repaired in all material respects. To the best of the
Company's knowledge, there is no material latent or patent structural,
mechanical or other significant defect, soil condition or deficiency in the
improvements included in such properties.
(d) Each of the properties owned by the Company
and its Subsidiaries has been fully assessed and is not subject to abatement.
To the best of the Company's knowledge, there are no proposed reassessments of
any of such properties by any taxing authority and there are no threatened or
pending special assessments or other actions or proceedings (other than
county-wide reassessments and/or the usual increases in millage rates that may
be under consideration by the taxing authorities in the jurisdictions where
such properties are located) that could give rise to an increase in real
property taxes or assessments against any of such properties.
(e) There are no "Significant Agreements"
relating to the properties owned by the Company and its Subsidiaries, or their
operations, other than as set forth in the Disclosure Letter, the Registration
Statement or the SEC Reports. For purposes hereof, "Significant Agreement"
means and includes any of the following by which any of such properties may
otherwise be subject or bound, in each such case as amended and currently in
effect, inclusive of any waivers relating thereto:
(i) all agreements, instruments and documents
(excluding tenant leases referred to in Section 2.15 and easements included in
the Permitted Liens) evidencing, securing or pertaining to contractual
obligations that (A) are not cancelable upon 60 days
-8-
<PAGE> 14
notice or less and (B) have payments or receipts, as applicable, in excess of
$15,000 per year or $25,000 over its life; and
(ii) all mortgages and ground leases.
2.15 TENANT LEASES.
(a) The Disclosure Letter lists each of the leases
currently in effect with respect to the properties owned by the Company and its
Subsidiaries as the same have been amended or modified to date (the "Leases").
The Leases are in full force and effect and, except as set forth in the
Disclosure Letter, a. no material uncured Event of Default (as defined in any
such Lease), has occurred and is continuing under any such Lease, no tenant has
asserted a defense to, offset or claim against its rent or the performance of
its obligations under its Lease and no tenant has asserted a default on the
part of the landlord which would give it the right to terminate its Lease and
b. there are no rights of first refusal on, or options to purchase, any of such
leased properties in favor of any tenant, and no proposed modifications to any
Lease that would reduce (A) the space leased to any tenant, (B) the amount of
any tenant's rent or (C) the term of any Lease.
(b) Except for (i) security deposits or (ii) the
first full month's rent, whether or not the term of a Lease has commenced, no
prepayments of rent more than thirty (30) days in advance have been made under
the Leases. No rent or security deposits under the Leases have been assigned or
encumbered, except as security for the mortgages noted in the Disclosure Letter
or the SEC Reports, and there are no agreements or understandings, written or
oral, with any of the tenants other than as set forth in the Leases. All
brokerage commissions and other compensation and fees payable by reason of the
Leases have been paid in full.
2.16 DIVIDENDS AND OTHER DISTRIBUTIONS. Since the Balance
Sheet Date, except for the Company's regular quarterly cash dividend (not in
excess of $.07 per share per quarter between the Balance Sheet Date and the
Closing Date) neither the Company nor any Subsidiary has declared, set aside,
or made any payment of a dividend or made any other distribution in respect of
the Company's beneficial interest, repurchased or redeemed any of the Company's
beneficial interest, or made any other payments to any holder of 5% or more of
the Company's outstanding Common Stock other than salary paid to such
stockholder for bona fide services to the Company or a Subsidiary as an officer
or employee or reimbursement of reasonable expenses incurred in the ordinary
course of business.
2.17 TAX MATTERS. Beginning with the first taxable year of
the Company, its taxable year ended December 31, 1986, the Company properly
elected to be taxed as a real estate investment trust within the meaning of
Sections 856-860 of the Internal Revenue Code of 1986, as amended (the "Code"),
and has satisfied, and continues to satisfy, all of the requirements set forth
in those provisions and the regulations thereunder to be taxed as a real estate
investment trust within the meaning of those provisions. Without limiting the
-9-
<PAGE> 15
generality of the foregoing, the Company, for each taxable year of the Company
beginning with the first taxable year for which it made an election to be
classified as a real estate investment trust: (i) has timely made all of the
distributions required under Section 857(a)(1) of the Code; (ii) has timely
demanded the statements from its shareholders required under Section 1.857-8(d)
of the Treasury Regulations promulgated under the Code and maintained the
records required under Treasury Regulations Section 1.857-8(e); (iii) has not
sought to apply the provisions of Section 856(c)(7) of the Code in any taxable
year of the Company; and (iv) has not revoked its election to be taxed as a
real estate investment trust for federal income tax purposes nor has it
received any notice that its classification as a real estate investment trust
has been challenged by any taxing authority. The Company and each Subsidiary
has filed all U.S. Federal, state, local, foreign and other tax returns which
were required to be filed on or before the date hereof and has paid all taxes
which have become due and payable. All such reports and returns were materially
accurate and complete when filed and reflect all taxes required to be paid by
the Company and its Subsidiaries for the periods reported therein. The
provision for taxes made in the Balance Sheet at the Balance Sheet Date was
sufficient for the payment of all accrued and unpaid taxes of the Company and
its Subsidiaries with respect to the periods then ended. No additional material
assessments, deficiencies or penalties in respect of taxes have been made or
claimed against the Company or any Subsidiary which remain unpaid. No tax
returns or reports of the Company or any Subsidiary are or ever have been under
audit.
2.18 AGREEMENTS AFFECTING THE COMPANY'S SECURITIES. There
are no agreements, written or oral, between the Company and any holder of its
securities or, to the knowledge of the Company, among any holders of its
securities, relating to the acquisition, disposition or voting of the securities
of the Company. Except for the provisions of the Registration Rights Agreement
attached as Exhibit W to the Contribution Agreement (the "Registration Rights
Agreement"), there are no agreements, either written or oral, which obligate the
Company to effect the registration of any of its securities under the 1933 Act.
2.19 INSURANCE. The Disclosure Letter lists all insurance
policies carried by the Company or any Subsidiary relating to its or their real
property and assets. All such policies are in full force and effect and all
premiums thereunder have been paid to the extent due, and no notice of
cancellation has been received with respect thereto and, to the best knowledge
of Company, no cancellation is threatened.
2.20 EMPLOYEE BENEFIT PLANS. Schedule 2.20 to the
Disclosure Letter lists all deferred compensation, pension, profit sharing,
stock option, stock purchase, savings, group insurance and retirement plans,
and all vacation pay, severance pay, incentive compensation, consulting, bonus
and other material employee benefit or fringe benefit plans or arrangements
maintained by the Company and its Subsidiaries with respect to which
contributions are made by the Company (including health, life insurance and
other benefit plans or arrangements maintained for the retirees which are
specifically identified as such on Schedule 2.20). Such plans, including but
not limited to all plans or programs that constitute "employee benefit plans"
as defined in Section 3(3) of the Employee Retirement Income
-10-
<PAGE> 16
Security Act of 1974, as amended ("ERISA"), are sometimes collectively referred
to in this section as "Benefit Plans." Neither the Company nor any ERISA
Affiliate (as hereinafter defined) maintains, contributes or sponsors, and have
not maintained, contributed to or sponsored any "employee benefit plan" (as
defined in section 3(3) of ERISA) that is subject to Title IV of ERISA or
Section 412 of the Internal Revenue Code of 1986, as amended ("Code") or any
"Multiemployer Plan" (as defined in Section 4001(a)(3) of ERISA). ERISA
Affiliate means all persons which are treated as being under common control or
as a single employer with the Company or any of its Subsidiaries under Section
414(b), (c), (m) or (o) of the Code. Each Benefit Plan is and has been
maintained in compliance in all material respects with applicable law,
including but not limited to ERISA, the Code and with any applicable collective
bargaining agreements or other contractual obligations. Each Benefit Plan that
provides medical benefits has been operated in compliance with all applicable
requirements of Sections 601 through 608 of ERISA and either (i) Section
162(i)(2) and (k) of the Code and regulations thereunder (prior to 1989) or
(ii) Section 4980B of the Code and regulations thereunder (after 1988),
relating to the continuation of coverage under certain circumstances in which
coverage would otherwise cease. Company is not required to make any payment to
any current or former employee of the Company in the form of wages or other
consideration pursuant to any employment agreement or Benefit Plan that will
constitute in the aggregate an "excess parachute payment" (within the meaning
of Section 280G(b) of the Code as a consequence in whole or in part of the
transactions contemplated by this Agreement.
There have been no written statements or communications made or
materials provided to any employee or former employee of the Company or its
Subsidiaries by any person which provide for or could reasonably be construed
as a contract or promise by the Company or any subsidiary to provide for any
pension, welfare, or other insurance-type benefits to any such employee or
former employee, whether before or after retirement, other than benefits
specifically identified on Schedule 2.20 or under the form of employment
contracts. All of the Benefit Plans which are pension benefit plans are the
subject of favorable determination or opinion letters from the IRS such that
the employers maintaining such Benefit Plans, are entitled to rely on the
compliance of such Benefit Plans as to the form of the Plan with the applicable
requirements of Sections 401(a) and 501(a) of the Code; and no determination
letter with respect to any Benefit Plan has been revoked nor, to the best
knowledge of the Company, has revocation been threatened, nor has any Benefit
Plan been amended since the date of its most recent determination letter or
application therefore in any request which would adversely affect its
qualification or materially increase its cost. Neither the Company nor any
ERISA Affiliate maintains or sponsors any nonqualified deferred compensation
plan or arrangements. There are no pending or, to the best knowledge of the
Company, threatened claims, actions or lawsuits, other than routine claims for
benefits in the ordinary course, asserted or instituted against (i) any Benefit
Plan or its assets, (ii) any ERISA Affiliate with respect to any Benefit Plan,
or (iii) any fiduciary with respect to any Benefit Plan for which the Company,
or its Subsidiaries may be directly or indirectly liable, through
indemnification obligations or otherwise. Neither the Company, nor any of its
Subsidiaries
-11-
<PAGE> 17
has engaged, directly or indirectly, in a non-exempt prohibited transaction (as
defined in Section 4975 of the Code or Section 406 of ERISA) in connection with
any Benefit Plan.
As of the date of this Agreement, none of the assets of the Company or
its Subsidiaries are required to be treated as "plan assets," within the
meaning of Title I of ERISA ("Plan Assets").
2.21 CONTRACTS AND AGREEMENTS.
(a) The Company has filed as exhibits to its SEC
Reports and the Registration Statement all of the contracts and agreements
required to be so filed by the 1933 Act, the Exchange Act and the rules and
regulations of the SEC. True and correct copies of all such agreements have
been provided to the Purchaser prior to the date hereof. Neither the Company
nor any Subsidiary is a party to any contract or agreement which is material to
the business, properties, assets, prospects, operations or condition (financial
or otherwise) of the Company and its Subsidiaries taken as a whole which have
not been filed as an exhibit to, or otherwise described in, the Registration
Statement or the SEC Reports.
(b) Neither the Company nor any Subsidiary is (i)
in default under any agreement, contract or instrument to which it is a party
or by which it is bound, which default is reasonably likely to have a material
adverse effect on the business, properties, assets, prospects, operations or
condition (financial or otherwise) of the Company and its Subsidiaries taken as
a whole, (ii) in violation of the Declaration of Trust, Bylaws or the Agreement
of Limited Partnership of Brandywine Operating Partnership, L.P. (the
"Partnership Agreement") dated August 22, 1996, as amended, by the amendment
attached as Exhibit X to the Contribution Agreement (or other organizational
documents), or (iii) in default with respect to any order, writ, injunction or
decree of any court or governmental agency binding on it, and no event has
occurred which with notice or lapse of time, or both, would create any default
or violation described in clauses (i) through (iii).
2.22 ABSENCE OF CERTAIN DEVELOPMENTS. Since the Balance
Sheet Date, neither the Company nor any Subsidiary has (a) mortgaged, pledged
or subjected to lien, charge or any other encumbrance any of its assets,
tangible or intangible, except Permitted Liens, (b) sold, assigned or
transferred any of its tangible assets or canceled any debts or obligations
except in the ordinary course of business, (c) suffered any extraordinary
losses, or waived any rights of substantial value (whether or not in the
ordinary course of business), (d) made any changes in officer compensation, (e)
entered into any material transaction other than in the ordinary course of
business, (f) made any change in any of its material contracts, the Declaration
of Trust, Bylaws or Partnership Agreement (or other organizational documents),
or in any arrangements or agreements of any nature relating to its officers and
directors, (g) sold any equity interests or (h) established any record dates
for dividends or other distributions on other than customary quarterly record
dates in accordance with past practice.
-12-
<PAGE> 18
2.23 CONTRACTS WITH INSIDERS. Excluding any agreements or
transactions that would not be required to be disclosed pursuant to Items 402
or 404 of Regulation S-K, no officer or trustee of the Company, or, to the
Company's knowledge, holder of more than 5% of the Company's outstanding Common
Shares, is a party to any contract, agreement, or arrangement providing for the
Company's or a Subsidiary's employment of, furnishing of services to the
Company or a Subsidiary by, the rental of real or personal property by the
Company or a Subsidiary from, or otherwise requiring payments by the Company or
a Subsidiary to, any such person or entity, or, to the Company's knowledge, any
member of such person's family, or any corporation, partnership or other entity
in which such person or entity, or, to the Company's knowledge, any member of
such person's family, has an interest or of which such person, or, to the
Company's knowledge, any member of such person's family, is an officer,
director, trustee, or beneficiary.
2.24 USE OF PROCEEDS. The Company shall use the Purchase
Price solely to pay fees and expenses relating to the transactions contemplated
by the Transaction Documents and to repay mortgage indebtedness to one or more
entities that are not affiliated with the Company or with any entity that owns
or has the right to obtain more than five percent of the outstanding Common
Shares as of the date of this Agreement in substantially the amounts and to the
lenders identified in the Disclosure Letter.
2.25 ENVIRONMENTAL MATTERS. Neither the Company nor its
Subsidiaries have (a) caused any substance or waste that is listed or defined
as hazardous or toxic under applicable environmental laws or petroleum products
(collectively "Hazardous Materials") to be improperly maintained or disposed of
on, under or at any of its or their properties, or any part thereof, in a
manner which violates, or could give rise to liability under, applicable
environmental laws, or (b) failed to remediate, alter, mitigate or abate any
condition required to be remediated, altered, mitigated or abated under such
environmental laws, to the extent the Company and its Subsidiaries have been
notified of the existence of a condition required to be remediated, altered,
mitigated or abated. Except as set forth in the environmental site assessments
provided by the Company to the Purchaser, (i) to the Company's knowledge, each
of its properties, and the properties of its Subsidiaries, is in compliance,
and has heretofore complied, with all environmental laws in all material
respects, (ii) to the Company's knowledge, there has been no discharge of
Hazardous Materials by any tenant of any property of the Company or its
subsidiaries in quantities requiring response, remediation or removal, and
(iii) the Company has not received any written notice from any governmental
unit or other person or entity that it or its Subsidiaries, or any of its or
their properties or operations conducted thereon, are not or have not been in
compliance with all environmental laws.
2.26 CERTAIN AGREEMENTS. The SEC Reports, the Registration
Statement or the Disclosure Letter list all employment and severance agreements
that the Company and each Subsidiary has entered into with its officers and
employees. The issuance and sale of the Shares to the Purchaser hereunder, the
issuance of the Property Shares and Warrant pursuant to the Contribution
Agreement, the issuance of the Conversion Shares and the
-13-
<PAGE> 19
completion of the other transactions provided for herein or in the other
Transaction Documents will not give any employee the right to terminate his or
her employment and receive severance or other payments from the Company or any
Subsidiary, or result in the acceleration of vesting of any outstanding option
issued by the Company.
2.27 BOOKS AND RECORDS. The books and records of the
Company and its Subsidiaries accurately and fairly reflect their respective
income, expenses, assets and liabilities, and the Company and its Subsidiaries
maintain internal accounting controls which provide reasonable assurance that:
(a) transactions are executed in accordance with management's authorization;
(b) transactions are recorded as necessary to permit preparation of reliable
financial statements and to maintain accountability for earnings and assets;
(c) access to assets is permitted only in accordance with management's
authorization; (d) the recorded accountability of all assets is compared with
existing assets at reasonable intervals; and (e) all intercompany transactions,
charges and expenses among or between the Company, any Subsidiary, or any other
affiliate of the Company are accurately reflected in all financial statements.
2.28 CERTAIN PAYMENTS. Neither the Company nor any of its
Subsidiaries, nor, to the Company's knowledge, any trustee, officer, agent or
employee of any such entity, or any other person or entity associated with or
acting for or on behalf of the Company or any of its Subsidiaries has directly
or indirectly (a) made any unlawful contribution, gift, bribe, rebate, payoff,
influence payment, kickback, or other payment to any person or entity, private
or public, regardless of form, whether in money, property or services, (i) to
obtain favorable treatment in securing business, (ii) to pay for favorable
treatment for business secured, or (iii) to obtain special concessions or
special concessions already obtained, for or in respect of the Company or any
of its Subsidiaries, or (b) established or maintained any fund or asset that
has not been recorded in the books and records of the Company and its
Subsidiaries, or (c) taken any other action in violation of any provision of
the Foreign Corrupt Practices Act of 1977, as amended.
2.29 LABOR AGREEMENTS AND ACTIONS. Neither the Company nor
any Subsidiary is bound by or subject to, any written or oral, express or
implied, contract, commitment or arrangement with any labor union, and no labor
union has requested or, to the knowledge of the Company, has sought to
represent any of the employees, representatives or agents of the Company or any
Subsidiary. There is no strike or other labor dispute involving the Company or
any Subsidiary pending, or to the knowledge of the Company threatened, nor is
the Company aware of any labor organization activity involving any of the
employees of the Company or any Subsidiary. The Company is not aware that any
officer or key employee, or that any group of key employees, intends to
terminate his, her or their employment with the Company or any Subsidiary, nor
does the Company or any Subsidiary have a present intention to terminate the
employment of any of the foregoing. The employment of each employee of the
Company or any Subsidiary is terminable at the will of the applicable employer
without further liability of such employer to such employee
-14-
<PAGE> 20
except for the payment of such employee's normal salary accrued but not paid
through the date of such termination.
2.30 ENTIRE BUSINESS; ETC. All of the assets (including
the Company's and its Subsidiaries' interests under franchises, licenses,
leases and permits) necessary for the conduct of the business of the Company
and its Subsidiaries as presently conducted are held exclusively by the Company
or a Subsidiary.
2.31 REGISTRATION STATEMENT. The Registration Statement on
Form S-11 (SEC File No. 333-13969) initially filed by the Company with the SEC
on October 11, 1996 (the "Registration Statement"), as it shall be amended from
time to time, will comply at all times in all material respects with the
provisions of the 1933 Act and the rules and regulations thereunder, as
applicable, except that no representation is made by the Company with respect
to information supplied in writing by the Purchaser specifically for inclusion
in the Registration Statement ("Purchaser Information") and, at the date
hereof, at the date of the Contribution Closing, at the Closing Date, at the
date that the Registration Statement is declared effective by the SEC and at
each date that sales of Common Shares are made pursuant to the Registration
Statement, except for Purchaser Information, the Registration Statement, as it
shall be amended from time to time, will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. Unless the otherwise
specifically provided, references to the Registration Statement are to the
Registration Statement as originally filed, as modified by the form of
Amendment No. 1 thereto attached hereto as Exhibit A.
2.32 INFORMATION. Neither this Agreement nor any document
delivered to the Purchaser pursuant hereto, including the SEC Reports (except
to the extent modified by the Disclosure Letter) and the Registration
Statement, contains an untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements made therein, in light
of the circumstances under which they were made, not misleading. There is no
fact, development or threatened development known to the Company which could
reasonably be expected to materially adversely effect the business, assets,
properties, operations, prospects or condition (financial or otherwise) of the
Company and its Subsidiaries taken as a whole which has not been set forth in
this Agreement, the Disclosure Letter, the SEC Reports or the Registration
Statement.
2.33 STANDSTILL AGREEMENTS. The Agreement, dated March 20,
1996, by and among the Company, the Richard M. Osborne Trust (the "RMO Trust")
and Richard M. Osborne, and the Agreement dated August 22, 1996, by and among
the Company, Safeguard Scientifics, Inc. and Safeguard Scientifics (Delaware),
Inc., copies of which have been delivered to the Purchaser, have been executed
and delivered by all the parties thereto and are in full force and effect as of
the date hereof.
-15-
<PAGE> 21
2.34 MATTERS RELATING TO PARTNERSHIP AGREEMENT AND
WARRANTS. The Company has caused the Partnership Agreement to be amended in the
form of Exhibit X to the Contribution Agreement and the terms of all outstanding
options and warrants (the "Outstanding Warrants") to be amended or waived in the
form of Exhibit B hereto, to the effect that:
(a) All rights of first refusal relating to the
securities of the Company have been eliminated.
(b) No adjustments in the number of shares to be
received upon redemption or exchange of the Units (as defined in the
Partnership Agreement) or upon exercise or exchange of the Outstanding Warrants
shall be made as a result of any issuance of securities by the Company other
than as a result of the transactions described in Section 15.4(a) of the
Partnership Agreement.
2.35 INVESTMENT COMPANY. Each of the Company and its
Subsidiaries is not, and upon the issuance and sale of the Common Shares as
herein contemplated and the application of the net proceeds therefrom, will not
be, an "investment company" within the meaning of the Investment Company Act of
1940, as amended.
2.36 COMMODITY EXCHANGE ACT. The Common Shares, upon
issuance, will be excluded or exempted under, or beyond the purview of, the
Commodity Exchange Act, as amended (the "Commodity Exchange Act"), and the
rules and regulations of the Commodity Futures Trading Commission under the
Commodity Exchange Act.
SECTION 3. PURCHASER'S REPRESENTATIONS AND WARRANTIES
The Purchaser understands that the Shares, Property Shares,
Warrant and Conversion Shares will not be registered under the 1933 Act, on the
grounds that the sales provided for in this Agreement and the Contribution
Agreement are exempt pursuant to Section 4(2) of the 1933 Act and/or Regulation
D promulgated under Section 4(2) of the 1933 Act, and that the reliance of the
Company on such exemptions is predicated in part on the Purchaser's
representations, warranties, covenants and acknowledgments set forth in this
Section 3.
3.1 PRE-EXISTING ENTITY. The Purchaser represents and
warrants to the Company that SERS is the sole owner of the economic interest in
the Securities to be issued to the Purchaser pursuant to the Transaction
Documents and that SERS was not organized for the specific purpose of purchasing
the Securities to be purchased by it hereunder and pursuant to the Contribution
Agreement.
3.2 BENEFICIAL OWNERSHIP. The Purchaser represents and
warrants to the Company that, as of the date hereof and prior to the purchase
of the Shares, Property Shares and Warrant, (a) it is not the "beneficial
owner" of any securities of the Company, as such
-16-
<PAGE> 22
term is defined in Rule 13d-3 promulgated under the Exchange Act, except for
ten Common Shares acquired immediately prior to the execution of this Agreement
and the Contribution Agreement, and (b) it is not a member of a group which has
acquired beneficial ownership of securities of the Company for purposes of
Sections 13(d) and 13(g) of the Exchange Act.
3.3 PRINCIPAL PLACE OF BUSINESS. The Purchaser represents
and warrants to the Company that the address of its principal place of business
or residence is as set forth in Section 10.5 herein.
3.4 PURCHASE WITHOUT VIEW TO DISTRIBUTION. The Purchaser
represents and warrants to the Company that the Shares, Property Shares and
Warrant to be purchased by it are being, and any Conversion Shares acquired by
it will be, acquired by the Purchaser for its own account for investment
purposes, not as a nominee or agent, and not with a view to resale or
distribution within the meaning of the 1933 Act, and the rules and regulations
thereunder, and the Purchaser will not distribute the Shares, Property Shares,
Warrant or Conversion Shares in violation of the 1933 Act or in a way that will
cause the Company to lose its exemption from the registration requirements
under the 1933 Act with respect to the offer and sale of any of the Securities.
3.5 RESTRICTIONS ON TRANSFER. The Purchaser (a)
acknowledges that the Securities are not registered under the 1933 Act or under
any state securities laws and that the Securities to be acquired by it must be
held indefinitely by it unless they are subsequently registered under the 1933
Act and under any applicable state securities laws or an exemption from
registration is available, (b) is aware that any routine sales pursuant to Rule
144 promulgated under the 1933 Act of the Securities may be made only in
limited amounts and in accordance with the terms and conditions of that Rule
and that in such cases where the Rule is not applicable, compliance with some
other registration exemption will be required, (c) is aware that Rule 144 is
not presently available for use by the Purchaser for resale of the Securities
and (d) is aware that, except as provided in the Registration Rights Agreement,
the Company is not obligated to register under the 1933 Act any sale, transfer
or other disposition of the Securities.
3.6 ACCESS TO INFORMATION. The Purchaser confirms that
the Company has made available to it the opportunity to ask questions of and
receive answers from the Company's officers and trustees concerning the terms
and conditions of this transaction and the business and financial condition of
the Company and its Subsidiaries, and to acquire, and the Purchaser has
received to its satisfaction, such additional information, in addition to that
set forth herein, about the business and financial condition of the Company and
its Subsidiaries and the terms and conditions of this transaction as it has
requested.
3.7 ADDITIONAL REPRESENTATIONS OF THE PURCHASER. The
Purchaser, on behalf of itself and SERS, represents that (a) it is an
"accredited investor" as such term is defined in Rule 501 promulgated under the
1933 Act, and an "institutional investor" within the meaning of Section 203(c)
of the Pennsylvania Securities Act of 1972 and the regulations
-17-
<PAGE> 23
promulgated thereunder, (b) its financial situation is such that it can afford
to bear the economic risk of holding the Securities for an indefinite period of
time and suffer complete loss of its investment in the Securities (c) its
knowledge and experience in financial and business matters are such that it is
capable of evaluating the merits and risks of its purchase of the Securities as
contemplated by this Agreement and (d) the purchase of the Shares, Property
Shares and Warrant by it has been duly and properly authorized and this
Agreement has been duly executed by it or on its behalf.
3.8 LEGENDS. The Purchaser understands that the
certificates evidencing the Securities shall bear the legend set forth in
Section 8.2 herein.
3.9 DUE AUTHORIZATION, ETC. The Purchaser represents that
it has all requisite power and authority to execute and deliver this Agreement
and each Transaction Document required to be excuted and delivered by it prior
to or at the Closing and to carry out the transactions contemplated hereby and
thereby. The execution, delivery and performance by the Purchaser of this
Agreement and each Transaction Document to which is a party have been duly
authorized. This Agreement has been duly executed and delivered by the
Purchaser and constitutes (and, when executed and delivered as contemplated
herein, each Transaction Document will constitute) the valid and binding
obligation of the Purchaser, enforceable against it in accordance with its
terms, except as such enforcement may be limited by bankruptcy, insolvency,
moratorium, reorganization and other similar laws relating to or affecting the
enforcement of creditors' rights generally, except that the availability of
specific performance, injunctive relief or other equitable relief or other
equitable remedies is subject to the discretion of the court before which any
such proceeding may be brought. The execution, delivery and performance by the
Purchaser of this Agreement and each Transaction Document to which it is a
party will not violate any provision of law, or any rule or regulation of any
governmental authority, or any judgment, decree or order of any court binding
on the Purchaser, and will not conflict with or result in any breach of any of
the terms, conditions or provisions of, or constitute a default under, or
result in the creation of any lien, security interest, charge or encumbrance
upon any of the assets of the Purchaser, any Agreement or other instrument to
which it is a party or by which it or any of its assets is bound. SERS is the
sole owner of the economic interest in the Purchaser. No individual has an
actuarial interest of more than 9.8% in SERS.
SECTION 4. CONDITIONS PRECEDENT TO THE PURCHASER'S OBLIGATIONS
The Purchaser's obligation to purchase and make payment for
the Shares subscribed for hereunder by it on the Closing Date is subject, at
its option, to the satisfaction of each of the following conditions:
4.1 REPRESENTATIONS AND WARRANTIES. On the Closing Date,
the representations and warranties contained in Section 2 shall be true and
correct in all material
-18-
<PAGE> 24
respects with the same effect as though made on and as of the Closing Date, and
the Company shall have so certified to the Purchaser in writing.
4.2 PERFORMANCE. All the covenants, agreements and
conditions contained in this Agreement to be performed or complied with by the
Company on or prior to the Closing Date shall have been performed or complied
with in all material respects, and the Company shall have so certified to the
Purchaser in writing.
4.3 OPINION OF COUNSEL TO THE COMPANY. On the Closing
Date, the Purchaser shall have received an opinion from counsel for the Company
and special Maryland Counsel to the Company, each dated the Closing Date,
addressed to the Purchaser in the forms of Exhibits C and D hereto,
respectively.
4.4 PROCEEDINGS; CERTIFIED COPIES. All proceedings to be
taken in connection with the transactions contemplated by this Agreement to be
consummated on or prior to the Closing Date, and all documents incident
thereto, shall be satisfactory in form and substance to the Purchaser. The
Purchaser shall have received such certified copies or other copies of such
documents as it may reasonably request.
4.5 NO PROCEEDING OR LITIGATION. No suit, action, or
other proceeding seeking to restrain, prevent or change the transactions
contemplated hereby or otherwise questioning the validity or legality of such
transactions shall have been instituted and be pending.
4.6 NO MATERIAL ADVERSE CHANGE. There shall have been no
material adverse change since the Balance Sheet Date in the business,
properties, assets, operations, or condition (financial or otherwise) of the
Company and its Subsidiaries taken as a whole.
4.7 ASE LISTING. On or prior to the Closing Date, the
Shares (to the extent that they are Common Shares) and the Conversion Shares
shall have been approved for listing on the ASE.
4.8 BLUE SKY COMPLIANCE. The Company shall have complied
with all applicable requirements of federal and state securities or "blue sky"
laws with respect to the issuance of the Shares sold at the Closing.
4.9 REGISTRATION RIGHTS. The Registration Rights
Agreement shall have been executed and delivered by all the parties thereto and
shall be in full force and effect.
4.10 CONTRIBUTION CLOSING; TRANSACTION DOCUMENTS. The
Contribution Closing shall have occurred. This Agreement, the Warrant,
Registration Rights Agreement, Standstill Agreement (as defined in Section
5.4), Contribution Agreement, and each document or agreement required to be
delivered at the closing hereunder and at the Contribution Closing shall be
referred to herein collectively as the "Transaction Documents."
-19-
<PAGE> 25
4.11 MARYLAND ANTI-TAKEOVER STATUTES, ETC. The Company and
its counsel shall have confirmed to the Purchaser's satisfaction that (a) this
Agreement, the other Transaction Documents and the transactions contemplated
hereby and thereby are exempt from the operation of the Maryland Anti-Takeover
Statutes and Section 11.5 of the Declaration of Trust; and (b) the Purchaser is
not subject to the restrictions set forth in Section 6.6 of the Declaration of
Trust, including without limitation from the Ownership Limit and the
Permissible Ownership Threshold.
4.12 ENVIRONMENTAL REPRESENTATION LETTER. The Company
shall have delivered to Purchaser a representation letter dated the Closing
Date concerning environmental matters in form and substance similar to that
which is contained in the underwriting agreement for the Secondary Offering.
4.13 TAX OPINION. On the Closing Date the Company shall
have received from Arthur Andersen LLP an opinion with respect to certain tax
matters in form and substance reasonably satisfactory to Purchaser.
SECTION 5. CONDITIONS PRECEDENT TO THE COMPANY'S OBLIGATIONS
The Company's obligation to sell the Shares subscribed for by
the Purchaser on the Closing Date is subject, at the Company's option, to the
satisfaction of each of the following conditions:
5.1 REPRESENTATIONS AND WARRANTIES. On the Closing Date,
the representations and warranties contained in Section 3 shall be true and
correct in all material respects with the same effect as though made on and as
of the Closing Date and the Purchaser shall have so certified to the Company in
writing.
5.2 PERFORMANCE. All the covenants, agreements and
conditions contained in this Agreement to be performed or complied with by the
Purchaser on or prior to the Closing Date shall have been performed or complied
with in all material respects, and the Purchaser shall have so certified to the
Company in writing.
5.3 NO PROCEEDING OR LITIGATION. No suit, action, or
other proceeding seeking to restrain, prevent or change the transactions
contemplated hereby or otherwise questioning the validity or legality of such
transactions shall have been instituted and be pending.
5.4 ASE LISTING. On or prior to the Closing Date, the
Shares (to the extent that they are Common Shares) and the Conversion Shares
shall have been approved for listing on the ASE.
5.5 CONTRIBUTION CLOSING. The Contribution Closing shall
have occurred.
-20-
<PAGE> 26
5.6 ADDITIONAL DOCUMENTS. The Purchaser shall have
delivered such other documents necessary to effect the transactions
contemplated hereby as the Company may reasonably request.
5.7 PROCEEDINGS; CERTIFIED COPIES. All proceedings to be
taken in connection with the transactions contemplated by this Agreement to be
consummated on or prior to the Closing Date, and all documents incident
thereto, shall be satisfactory in form and substance to the Company. The
Company shall have received such certified copies or other copies of such
documents as it may reasonably request.
5.8 NO SEC INTEGRATION CHALLENGE. The SEC shall not have
commented that the issuance of Shares pursuant to this Agreement should or may
be required to be integrated with the sale of Common Shares pursuant to the
Registration Statement, which comment, if made, has not been resolved to the
reasonable satisfaction of the Company after the Company has used its best
efforts to accomplish such resolution.
SECTION 6. COVENANTS OF THE COMPANY AND THE PURCHASER PRIOR TO CLOSING
6.1 PAYMENT OF EXPENSES.
(a) If the Closing occurs hereunder, each party
shall bear its own expenses, except that the Company shall pay all reasonable
legal fees and expenses incurred by the Purchaser in connection with this
Agreement and the transactions contemplated hereby.
(b) If the Closing hereunder does not occur, each
party shall bear its own expenses.
6.2 OPERATION OF BUSINESS IN ORDINARY COURSE. Prior to
the Closing, the Company and each Subsidiary will operate its business and the
business of each of its Subsidiaries only in the usual and normal course, and
will not, except as contemplated by the Registration Statement, as amended
through the date of this Agreement, including Amendment No. 1, without the
consent of the Purchaser, engage in any of the transactions described in
paragraphs (a), (b), (d), (e), (f), (except for the amendment in the form of
Exhibit C hereto), (g) or (h) of Section 2.22 hereof.
6.3 ACCESS TO INFORMATION.
(a) Between the date hereof and the Closing Date, the
Company will give the Purchaser and its authorized representatives reasonable
access to all officers, employees, agents, properties, offices and other
facilities and to all books and records of the Company and its Subsidiaries,
and will permit the Purchaser to make such inspections as the Purchaser may
reasonably request and will cause the Company's officers and those of its
-21-
<PAGE> 27
Subsidiaries to furnish the Purchaser promptly (i) a copy of each report,
schedule, registration statement and other document filed by it pursuant to the
requirements of federal securities laws and (ii) all other financial and
operating data and other information with respect to the business and
properties of the Company and any of its Subsidiaries as the Purchaser may from
time to time reasonably request.
(b) The Purchaser will hold and will cause its
authorized representatives, consultants and advisors to hold in confidence,
unless compelled to disclose by judicial or administrative process or, in the
written opinion of its legal counsel, by other requirements of law, all
documents and information concerning the Company and its Subsidiaries furnished
to the Purchaser in connection with the transactions contemplated by this
Agreement (except to the extent that such information can be shown to have been
(i) previously known by the Purchaser from sources other than the Company, its
trustees, officers, representatives or affiliates, (ii) in the public domain
through no fault of the Purchaser or (iii) later lawfully acquired by the
Purchaser on a non-confidential basis from other sources who are not known by
the Purchaser to be bound by a confidentiality agreement or otherwise
prohibited from transmitting the information to the Purchaser by a contractual,
legal or fiduciary obligation) and will not release or disclose such
information to any other person or entity, except its auditors, attorneys,
financial advisors and other consultants, agents and representatives in
connection with this Agreement who need to know such information. If the
transactions contemplated by this Agreement are not consummated, such
confidence shall be maintained and, if requested by or on behalf of the
Company, the Purchaser will, and will use all reasonable efforts to cause its
auditors, attorneys, financial advisors and other consultants, agents and
representatives to, return to the Company or destroy all copies of written
information furnished by the Company to the Purchaser or its agents,
representatives or advisors. It is understood that the Purchaser shall be
deemed to have satisfied its obligation to hold such information confidential
if it exercises the same care as it takes to preserve confidentiality for its
own similar information.
(c) No inquiry or investigation pursuant to Section
3.6 or this Section 6.3 shall affect any representation or warranty in this
Agreement or any other Transaction Document made by the Company or its
Subsidiaries or any condition to the Purchaser's obligations set forth herein
or in any other Transaction Document.
6.4 NOTIFICATION OF CERTAIN MATTERS. The Company shall
give prompt notice to the Purchaser, and the Purchaser shall give prompt notice
to the Company, of (a) the occurrence or nonoccurrence of any event the
occurrence or nonoccurrence of which would be likely to cause (i) any
representation or warranty contained in this Agreement to be untrue or
inaccurate or (ii) any covenant, condition or agreement contained in this
Agreement not to be complied with or satisfied and (b) any failure of the
Company or the Purchaser, as the case may be, to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder; provided, however, that the delivery of any notice pursuant to this
Section 6.4 shall not cure such breach or noncompliance or limit or otherwise
affect the remedies available hereunder to the party receiving such notice.
-22-
<PAGE> 28
6.5 CONDITIONS PRECEDENT. The Company and the Purchaser
shall use their reasonable best efforts to cause the conditions specified in
Sections 4 and 5 to be satisfied by the Closing Date.
SECTION 7. COVENANTS OF THE COMPANY AND THE PURCHASER AFTER CLOSING
7.1 RULE 144.
(a) The Company covenants that (i) the Company will
use its best efforts to comply with the current public information requirements
of Rule 144(c)(1) under the 1933 Act; and (ii) at all such times as Rule 144 is
available for use by the holders of the Securities, the Company will furnish
each such holder upon request with all information within the possession of the
Company required for the preparation and filing of Form 144.
(b) At all times during which the Company is neither
subject to the reporting requirements of Section 13 or 15(d) of the Exchange
Act, nor exempt from reporting pursuant to Rule 12g3-2(b) under the Exchange
Act, it will provide as promptly as practicable (in any event not later than 15
days after initial request) in written form, upon the written request of the
Purchaser or any prospective buyer of the Shares or Conversion Shares from the
Purchaser, all information required by Rule 144A(d)(4)(i) of the General
Regulations promulgated by the Commission under the Securities Act ("Rule 144A
Information"). The Company's obligations under this Section 7.1 shall at all
times be contingent upon such seller's obtaining from a prospective buyer an
agreement to take all reasonable precautions to safeguard any non-public Rule
144A Information from disclosure to anyone other than a person or entity who
will assist such buyer in evaluating the purchase of the Conversion Shares.
7.2 DELIVERY OF FINANCIAL STATEMENTS. From and after the
Contribution Closing, the Company shall deliver to the Purchaser, until such
time as the Purchaser no longer owns any Securities, a copy of each and every
report on Form 10-K, Form 8-K, Form 10-Q and all other reports and proxy
statements filed by the Company or any Subsidiary with the SEC within 15 days
of such filing.
7.3 RESERVATION OF SHARES. From and after the Closing,
the Company shall at all times reserve and keep available, free from
pre-emptive rights, out of its authorized but unissued shares of beneficial
interest, a sufficient number of of Common Shares for issuance upon the
exercise of the Warrant and conversion of the Shares (if applicable) and
Property Shares.
7.4 COMPLIANCE WITH LAWS. The Company will, and will
cause each Subsidiary to, comply in all material respects with all laws and
regulations applicable to the conduct of its business, including without
limitation ERISA, environmental laws, and
-23-
<PAGE> 29
employee safety laws. The Company shall use its best efforts to insure that
none of the assets of the Company or its Subsidiaries are required to be
treated as Plan Assets (as defined in Section 2.20) by any "benefit plan
investor" (as defined in Title I of ERISA). The Company shall take such actions
as are necessary, on an ongoing basis, to determine whether assets of the
Company or its Subsidiaries are required to be treated by a Benefit Plan
Investor as including Plan Assets and shall promptly notify the Purchaser in
writing if, at any time, it has reason to believe that any Benefit Plan
Investor is likely to be required to treat the assets of the Company or its
Subsidiaries as Plan Assets.
7.5 WAIVERS, CONSENTS, ETC. Compliance with any of the
covenants in this Section 7 may be waived, either generally or in the
particular instance, and any consent required thereunder may be given, by the
Purchaser in writing.
7.6 PRESS RELEASES. The Purchaser shall have the right
reasonably to approve any press release with respect to the transactions
contemplated by this Agreement and the Contribution Agreement. In addition, at
no time may the Company use or otherwise refer to the name of the Purchaser or
any of its affiliates in any press release, publication or other report without
the prior consent of the Purchaser not to be unreasonably withheld or delayed.
7.7 SHAREHOLDERS' MEETING. The Company shall duly call
and hold an annual meeting of its shareholders as soon as practicable after the
end of its curent fiscal year, but in no event later than June 30, 1997, for
the purpose of voting upon the approval of the Stockholder Approval Matter;
and, if approval of the Stockholder Approval Matter is not obtained at such
meeting, the Company shall duly call and hold another meeting of its
shareholders by June 30, 1998 for such purpose. In this regard, the Company
will (i) subject to the fiduciary duties of the Board of Trustees, include in
the proxy statement (the "Proxy Statement") relating to the annual meeting
(and, if necessary, such other meeting) the unanimous recommendation of the
Board that shareholders of the Company vote in favor of the Stockholder
Approval Matter, and (ii) use its best efforts (A) to obtain and furnish the
information required to be included by it in the Proxy Statement in compliance
with the Exchange Act and, after consultation with the Purchaser, respond
promptly to any comments made by the SEC with respect to the Proxy Statement
and cause the Proxy Statement to be mailed to its shareholders in a timely
fashion and (B) to obtain the necessary approvals by its shareholders of the
Stockholder Approval Matter subject to its Board's fiduciary duties. The term
"Stockholder Approval Matter" as used herein means any and all matters that
must be approved by shareholders in order to permit the unlimited conversion
and exchange of all the Conversion Shares by the Purchaser in compliance with
all ASE rules, regulations and requirements.
7.8 PURCHASER'S COVENANT. To the extent permitted by
applicable law Purchaser hereby (i) waives any right of rescission it might
have arising out of the integration of the offer and sale of the Securities
made hereby or in the Contribution
-24-
<PAGE> 30
Agreement with the public offering under the Registration Statement and (ii)
covenants that it will not make any rescission claim on that basis.
7.9 REIT STATUS. The Company will continue to elect to be
taxed as a real estate investment trust within the meaning of Sections 856-860
of the Code, and will continue to satisfy all of the requirements set forth in
those provisions and the regulations thereunder to be taxed as a real estate
investment trust within the meaning of those provisions and the regulations
thereunder.
SECTION 8. COMPLIANCE WITH 1933 ACT; RESTRICTIONS ON TRANSFERABILITY
OF SHARES, PROPERTY SHARES WARRANT AND CONVERSION SHARES
8.1 COMPLIANCE WITH 1933 ACT. The Shares, Property
Shares, Warrant, Property Shares and Conversion Shares shall not be
transferable, except upon the conditions specified in this Section 8, which
conditions are intended to insure compliance with the provisions of the 1933
Act and applicable state securities laws in respect of any such transfer.
8.2 RESTRICTIVE LEGEND. The Warrant, and each certificate
evidencing the Shares and Conversion Shares and any Common Shares or other
securities issued in respect of such Shares and Conversion Shares upon any
share split, share dividend, recapitalization, merger, consolidation, similar
event, shall (unless otherwise permitted by the provisions of Section 8.4) be
stamped or otherwise imprinted with the following legend:
"[THIS WARRANT HAS] OR [THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE] NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE
STATE SECURITIES LAW AND THE TRANSFERABILITY [T]HEREOF IS SUBJECT TO THE
PROVISIONS OF A SECURITIES PURCHASE AGREEMENT BETWEEN BRANDYWINE REALTY TRUST
AND THE ORIGINAL HOLDER OF THE SECURITIES EVIDENCED HEREBY."
8.3 RESTRICTIONS ON TRANSFERABILITY. The Company shall
not be required to register the transfer of the Shares, Property Shares or
Warrant or any Conversion Shares on the books of the Company unless the Company
shall have been provided with an opinion of counsel reasonably satisfactory to
it prior to such transfer to the effect that registration under the 1933 Act or
any applicable state securities law is not required in connection with the
transaction resulting in such transfer; provided, however, that no such opinion
of counsel shall be necessary in order to effectuate a transfer in accordance
with the provisions of Rule 144(k) or Rule 144A promulgated under the 1933 Act.
Each Warrant or certificate for Shares, Property Shares or Conversion Shares
issued upon any transfer as above provided shall bear the restrictive legend
set forth in Section 8.2 above, except that such restrictive legend shall not
be required if the opinion of counsel reasonably satisfactory to the Company
referred to above is to the further effect that such legend is not required in
order to establish
-25-
<PAGE> 31
compliance with the provisions of the 1933 Act and any applicable state
securities law, or if the transfer is made in accordance with the provisions of
Rule 144(k) under the 1933 Act. Nothing herein shall restrict a transfer of any
or all of the Securities to a Permitted Transferee (as defined in Section
10.2).
8.4 TERMINATION OF RESTRICTIONS ON TRANSFERABILITY. The
conditions precedent imposed by this Section 8 upon the transferability of the
Shares, Property Shares, Warrant and Conversion Shares shall cease and
terminate as to any of the Shares, Property Shares, Warrant or Conversion
Shares when (i) such securities shall have been registered under the 1933 Act
and sold or otherwise disposed of in accordance with the intended method of
disposition by the seller or sellers thereof set forth in the registration
statement covering such securities, (ii) at such time as an opinion of counsel
satisfactory to the Company shall have been rendered as required pursuant to
the second sentence of Section 8.3 to the effect that the restrictive legend on
such securities is no longer required, or (iii) when such securities are
transferable in accordance with the provisions of Rule 144(k) promulgated under
the 1933 Act. Whenever the conditions imposed by this Section 8 shall terminate
as hereinabove provided with respect to any of the Shares, Property Shares,
Warrant or Conversion Shares, the holder of any such securities bearing the
legend set forth in this Section 8 as to which such conditions shall have
terminated shall be entitled to receive from the Company, without expense
(except for the payment of any applicable transfer tax) and as expeditiously as
possible, a new Warrant or new shares certificates not bearing such legend.
SECTION 9. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS
All covenants, agreements, representations and warranties made
herein and in the certificates delivered pursuant hereto shall survive the
execution and delivery of this Agreement and the issuance and sale of the
Shares hereunder in accordance with Section 10.9.
SECTION 10. MISCELLANEOUS
10.1 OWNER OF SHARES, PROPERTY SHARES, WARRANT AND
CONVERSION SHARES. The Company may deem and treat the person or entity in whose
name the Shares, Property Shares, Warrant and Conversion Shares, as the case
may be, are registered as the absolute owner thereof for all purposes
whatsoever, and the Company shall not be affected by any notice to the
contrary.
10.2 SUCCESSORS. This Agreement shall be binding upon and
except as provided herein, shall inure to the benefit of the respective
successors and permitted assigns of each of the parties hereto. The rights and
obligations of either party hereunder shall not be assignable without the prior
written consent of the other party, except that, subject to
-26-
<PAGE> 32
compliance with applicable state and federal securities laws, the Purchaser
shall be entitled to assign its rights and obligations in whole or in part to
one or more entities in which the majority of the economic interests are held
by SERS ("Permitted Transferees") to the extent that any of the Securities are
transferred to any such entity and any such entity agrees to be bound by the
restrictions set forth in this Agreement.
10.3 BROKER OR FINDER. Each party to this Agreement
represents and warrants that, to the best of its knowledge, no broker or finder
has acted for such party in connection with this Agreement or the transactions
contemplated by this Agreement and that no broker or finder is entitled to any
broker's or finder's fee or other commission in respect thereof based in any
way on agreements, arrangements or understandings made by such party. The
Company shall indemnify the Purchaser against, and hold it harmless from, any
liability, cost or expense (including reasonable attorneys' fees and expenses)
resulting from any agreement, arrangement, or understanding made by the
Company, and the Purchaser shall indemnify the Company against, and hold the
Company harmless from, any liability, cost or expense (including reasonable
attorneys' fees and expenses) resulting from any agreement, arrangement, or
understanding made by the Purchaser with any third party, for brokerage or
finder's fees or other commissions in connection with this Agreement or any of
the transactions contemplated hereby.
10.4 GOVERNING LAW. This Agreement shall be governed by
and construed and enforced in accordance with the laws of the Commonwealth of
Pennsylvania.
10.5 NOTICE. Any notice or other communication required or
permitted hereunder shall be deemed given when delivered personally, or upon
receipt by the party entitled to receive the notice when sent by registered or
certified mail, postage prepaid, addressed as follows or to such other address
or addresses as may hereafter be furnished in writing by notice similarly given
by one party to the other:
To the Company: Brandywine Realty Trust
16 Campus Boulevard
Suite 150
Newtown Square, PA 19073
Attention: Gerard H. Sweeney, President
With a copy to: Pepper, Hamilton & Scheetz
3000 Two Logan Square
18th and Arch Streets
Philadelphia, Pennsylvania 19103-2799
Attention: Michael H. Friedman, Esq.
-27-
<PAGE> 33
To the Purchaser: RAI Real Estate Advisers, Inc.
259 Radnor-Chester Road
Suite 200
Radnor, Pennsylvania 19087
Attention: Richard K. Layman, President
With a copy to: Wolf, Block, Schorr and Solis-Cohen
Packard Building, 15th and Chestnut Streets
Philadelphia, Pennsylvania 19102
Attention: Jason M. Shargel, Esq.
Notice to any holder of Shares, Property Shares, Warrant, or Conversion Shares
other than the Purchaser shall be given in a like manner to such holder at the
address reflected in the Company's records.
10.6 FULL AGREEMENT. This Agreement,
together with all Exhibits attached hereto or delivered herewith, the other
Transaction Documents and any other documents delivered herewith, sets forth
the entire understanding of the parties with respect to the transactions
contemplated hereby.
10.7 HEADINGS. The headings of the
sections of this Agreement are inserted for convenience of reference only and
shall not be considered a part hereof.
10.8 AMENDMENT. This Agreement may not be
amended except by an instrument in writing signed on behalf of each of the
parties hereto.
10.9 SURVIVAL OF REPRESENTATIONS AND
WARRANTIES. All representations and warranties made by the parties in this
Agreement shall survive the execution of this Agreement for a period of two
years after the Closing Date.
10.10 SETTLEMENT OF DISPUTES. The parties
will attempt in good faith to resolve any and all controversies of every kind
and nature between the parties to this Agreement and the other Transaction
Documents arising out of or in connection with the existence, construction,
validity, interpretation or meaning, performance, non- performance,
enforcement, operation, breach, continuance or termination of this Agreement or
the other Transaction Documents (each, a "Dispute") promptly by negotiations
between senior executives of the parties who have authority to settle the
Dispute (and who do not have direct responsibility for administration of this
Agreement or the other Transaction Documents). The disputing party shall give
the other party written notice of the Dispute. Within 20 days after receipt of
said notice, the receiving party shall submit to the other a written response.
The notice and response shall include (a) a statement of each party's position
and a summary of the evidence and arguments supporting its position, and (b)
the name and title of the executive who will represent that party. The
executives shall meet at a
-28-
<PAGE> 34
mutually acceptable time and place within 30 days of the date of the disputing
party's notice and thereafter as often as they reasonably deem necessary to
exchange relevant information and to attempt to resolve the Dispute. If the
matter has not been resolved within 60 days of the disputing party's notice, or
if the party receiving said notice will not meet within 30 days, either party
may initiate mediation of the controversy or claim in accordance with the
Center for Public Resources Model Procedure for Mediation of Business Disputes.
If the Dispute has not been resolved pursuant to the aforesaid mediation
procedure within 60 days of the initiation of such procedure, or if either
party will not participate in a mediation, the Dispute shall be submitted to
arbitration in accordance with the rules of the American Arbitration
Association. The parties further agree that all matters shall be governed by
the laws of the Commonwealth of Pennsylvania. The parties further agree that
any arbitration conducted pursuant to this Section 10.10 shall be held in
Philadelphia, Pennsylvania before a panel of three arbitrators, one selected by
the Purchaser and one selected by the Company and the third selected by the
arbitrators selected by the parties. All deadlines specified in this Section
10.10 may be extended by mutual agreement. The prevailing party in any Dispute
shall be entitled to reimbursement for its costs, including without limitation
attorneys' fees and expenses.
10.11 COUNTERPARTS. This Agreement may be
executed in two or more counterparts each of which shall be deemed an original,
and all of which shall be considered one and the same agreement and shall
become effective when two or more counterparts have been signed by each of the
parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
10.12 TERMINATION. This Agreement may be terminated prior to the Closing:
(a) by mutual written consent of the
Purchaser and the Company;
(b) by either the Purchaser or the
Company if the Closing shall not have been consummated before January 31, 1997
(unless the failure to so close by such date shall be due to the action or
failure to act of the party seeking to terminate this Agreement);
(c) by either the Purchaser or the
Company if any court of competent jurisdiction or other governmental entity
shall have issued a final permanent order, decree or ruling or taken any other
final action restraining, enjoining or otherwise prohibiting the transactions
contemplated by this Agreement and such order, decree, ruling or other action
is or shall have become nonappealable;
(d) by the Purchaser if (i) there shall
have been a material breach on the part of the Company or any of its
Subsidiaries of any representation or warranty of the Company or its
Subsidiaries set forth herein, (ii) there shall have been any
-29-
<PAGE> 35
failure of the Company or any of its Subsidiaries to perform or comply with its
covenants or agreements hereunder and, in either case, the aggregate effect of
all such breaches or failures, as the case may be, would be material to the
Company and the Subsidiaries taken as a whole, or (iii) any person (as that
term is used in Sections 13(d) and 14(d)(2) of the Exchange Act) acquires
beneficial ownership of at least 20% of the outstanding Common Shares; or
(e) by the Company if (i) there shall
have been a material breach of any representation or warranty on the part of
the Purchaser or (ii) there shall have been a failure of the Purchaser to
perform or comply with its covenants or agreements hereunder which failure has
not been cured within ten days after written notice thereof from the Company to
the Purchaser and, in either case, the aggregate effect of all such breaches
and failures, as the case may be, would be material.
10.13 EFFECT OF TERMINATION. In the event
of the termination and abandonment of this Agreement pursuant to Section 10.12,
this Agreement shall forthwith become void and have no effect, without any
liability on the part of any party hereto or its affiliates, trustees,
directors, officers or stockholders; provided, however, that nothing contained
in this Section 10.13 shall relieve any party from liability for any breach of
this Agreement; provided further that Sections 6.1(b), 6.3(b), 7 (if the
Contribution Closing occurs), 8 and 10 shall survive any such termination.
10.14 NON-RECOURSE. No recourse shall be
had for any obligation of the Company hereunder, or for any claim based thereon
or otherwise in respect thereof, against any past, present or future trustee,
stockholder, officer or employee of the Company, whether by virtue of any
statute or rule of law, or by the enforcement of any assessment or penalty or
otherwise, all such other liability being expressly waived and released by each
other party hereto. No recourse shall be had for any obligation of the
Purchaser hereunder, or for any claim based thereon or in respect thereof,
against RAI Real Estate Advisers, Inc., SERS, or any past, present or future
trustee, stockholder, officer or employee of either or against any other person
or entity, except as provided in the following sentence, whether by virtue of
any statute or rule of law, or by the enforcement of any assessment or penalty
or otherwise, all such other liability being expressly waived and released by
each other party hereto. Recourse for any obligation or liability of the
Purchaser hereunder shall be limited to the Collateral (as defined in the
Pledge Agreement attached as Exhibit V to the Contribution Agreement) on the
terms set forth in such Pledge Agreement.
[THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK.]
-30-
<PAGE> 36
IN WITNESS WHEREOF, each of the parties
hereto has fully executed this Agreement as of the date first set forth above.
BRANDYWINE REALTY TRUST
By: /s/ Gerard H. Sweeney
---------------------------------
Gerard H. Sweeney, President
RAI REAL ESTATE ADVISERS, INC.,
as voting trustee of a voting trust
dated November 6, 1996
By: /s/ Richard K. Layman
---------------------------------
Richard K. Layman, President
-31-
<PAGE> 1
THE SECURITIES REPRESENTED HEREBY AND ISSUABLE UPON EXERCISE HEREOF HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR
UNDER THE SECURITIES LAWS OF ANY STATE. ALL SUCH SECURITIES ARE SUBJECT TO
RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD
EXCEPT AS PERMITTED UNDER THE ACT AND THE APPLICABLE STATE SECURITIES LAWS,
PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. THE ISSUER OF SUCH SECURITIES
MAY REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE REASONABLY SATISFACTORY
TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS IN
COMPLIANCE WITH THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS.
Void after 5:00 p.m. New York Time, on November 14, 1998.
BRANDYWINE REALTY TRUST
Warrant Agreement for the Purchase of Shares of Common Stock
No. 1 400,000 Shares
FOR VALUE RECEIVED, BRANDYWINE REALTY TRUST, a Maryland real
estate investment trust (the "Company"), with its principal office at 16 Campus
Boulevard, Suite 150, Newtown Square, Pennsylvania 19073, hereby certifies that
RAI Real Estate Advisers, Inc. as voting trustee of a voting trust dated as of
November 6 ,1996 or its assigns (the "Holder") is entitled, subject to the
provisions of this Warrant, to purchase from the Company, at any time before
5:00 p.m. (Eastern Time) on November 14, 1998 (the "Expiration Date"), the
number of fully paid and nonassessable common shares of beneficial interest of
the Company (the "Common Stock") set forth above, subject to adjustment as
hereinafter provided.
The Holder may purchase such number of shares of Common Stock
at a purchase price per share (as appropriately adjusted pursuant to Section 6,
Section 8 or Section 9 hereof) of Eight Dollars and 50/100 Cents ($8.50) (the
"Exercise Price"). As provided in Section 6(j), the term "Common Stock" shall
mean the aforementioned Common Stock of the Company, together with any other
equity securities that may be issued by the Company in addition thereto or in
substitution therefor as provided herein.
The number of shares of Common Stock to be received upon the
exercise of this Warrant and the price to be paid for a share of Common Stock
are subject to adjustment from time to time as hereinafter set forth. The
shares of Common Stock deliverable upon such exercise, as adjusted from time to
time, are hereinafter sometimes referred to as "Warrant Shares."
-1-
<PAGE> 2
Section 1. Exercise of Warrant. (a) This Warrant may be
exercised in whole or in part on any business day (the "Exercise Date")
occurring from and after the date hereof and on or before the Expiration Date
by presentation and surrender hereof to the Company at its principal office at
the address set forth in the initial paragraph hereof or at the office of its
stock transfer or warrant agent, if any, (or at such other address as the
Company may hereafter notify the Holder in writing) with the Purchase Form
annexed hereto duly executed and accompanied by proper payment of the Exercise
Price in lawful money of the United States of America in the form of a check,
subject to collection, for the number of Warrant Shares specified in the
Purchase Form. If this Warrant should be exercised in part only, the Company
shall, upon surrender of this Warrant, execute and deliver a new Warrant
evidencing the rights of the Holder thereof to purchase the balance of the
Warrant Shares purchasable hereunder. Upon receipt by the Company of this
Warrant and such Purchase Form, together with proper payment of the Exercise
Price, at such office, the Holder shall be deemed to be the holder of record of
such Warrant Shares, notwithstanding that the stock transfer books of the
Company shall then be closed or that certificates representing such Warrant
Shares shall not then be actually delivered to the Holder, which certificates
shall be delivered to the Holder within two (2) business days following the
Company's receipt of the Warrant together with the aforesaid Purchase Form and
payment. The Company shall pay any and all documentary stamp or similar issue
or transfer taxes payable in respect of the issue or delivery of the Warrant
Shares.
(b) In addition to and without limiting the rights of the
Holder under any other terms set forth herein, the Holder shall have, upon
written request by the Holder delivered or transmitted to the Company together
with this Warrant, the right (the "Conversion Right") to require the Company to
convert this Warrant into shares of Common Stock as follows: upon exercise of
the Conversion Right, the Company shall deliver to the Holder (without payment
by the Holder of any Exercise Price) that number of shares of Common Stock that
is equal to the quotient obtained by dividing (x) the value of this Warrant at
the time the Conversion Right is exercised (determined by subtracting the
aggregate Exercise Price in effect immediately prior to the exercise of the
Conversion Right from the aggregate current market price (determined as
provided in Section 11 below) of the shares of Common Stock issuable upon
exercise of this Warrant immediately prior to the exercise of the Conversion
Right) by (y) the current market price of one share of Common Stock (determined
as provided in Section 11 below) immediately prior to the exercise of the
Conversion Right.
The Conversion Right referred to above may be exercised by the
Holder by surrender of this Warrant at the principal office of the Company or
at the offices of its stock transfer or warrant agent, if any, together with a
written statement specifying that the Holder thereby intends to exercise the
Conversion Right. Certificates representing shares of Common Stock issuable
upon exercise of the Conversion Right shall be delivered to the Holder within
two (2) business days following the Company's receipt of this Warrant together
with the aforesaid written statement.
Section 2. Reservation of Shares. The Company shall
reserve at all times for issuance and delivery upon exercise of this Warrant
all shares of its Common Stock or other
-2-
<PAGE> 3
shares of beneficial interest of the Company from time to time issuable upon
exercise of this Warrant. All such shares shall be duly authorized and, when
issued upon the exercise of the Warrant in accordance with the terms hereof,
shall be validly issued, fully paid and nonassessable, free and clear of all
taxes, liens, security interests, charges and other encumbrances or
restrictions (other than restrictions pursuant to applicable federal and state
securities laws) and free and clear of all preemptive rights. If the Common
Stock is listed on any national securities exchange or The Nasdaq Stock Market,
the Company shall also list the shares issuable upon exercise of the Warrant on
such exchange, subject to notice of issuance, or include the shares issuable
upon exercise of this Warrant in the listing of its Common Stock on The Nasdaq
Stock Market, as the case may be.
Section 3. Fractional Interest. The Company will not
issue a fractional share of Common Stock or scrip upon any exercise or
conversion of this Warrant. Instead, the Company shall issue the next highest
number of whole shares of Common Stock.
Section 4. Exchange, Transfer, Assignment or Loss of
Warrant.
(a) The Holder of this Warrant may not transfer or assign
its interest in this Warrant, or any of the Warrant Shares, in whole or in
part, unless, prior to any such transfer, the transferee agrees in writing, in
form and substance satisfactory to the Company, to be bound by the terms of
this Agreement and provides the Company with an opinion of counsel in such form
reasonably acceptable to the Company, that such transfer would not be in
violation of the Act or any applicable state securities laws.
(b) Subject to the provisions of subsection (a) above and
Section 10, upon surrender of this Warrant to the Company or its stock transfer
agent or warrant agent, accompanied by the Assignment Form annexed hereto duly
executed and funds sufficient to pay any transfer tax, the Company shall,
without charge, execute and deliver a new Warrant or Warrants in the name of
the assignee or assignees named in such instrument of assignment and, if the
Holder's entire interest is not being assigned, in the name of the Holder, and
this Warrant shall promptly be canceled.
(c) This Warrant may be divided by or combined with other
Warrants which carry the same rights upon presentation hereof at the principal
office of the Company or at the office of its stock transfer or warrant agent,
if any, together with a written notice specifying the names and denominations
in which new Warrants are to be issued and signed by the Holder hereof. The
term "Warrant" as used herein includes any warrants into which this Warrant may
be divided or exchanged.
(d) Upon receipt of evidence satisfactory to the Company
of the loss, theft, destruction or mutilation of this Warrant, and (in the case
of loss, theft or destruction) of indemnification reasonably satisfactory to
the Company, and upon surrender and cancellation of this Warrant, if mutilated,
the Company shall execute and deliver a new Warrant of like tenor and date
registered in the Holder's name representing the number of shares purchasable
under
-3-
<PAGE> 4
the original Warrant. Any such new Warrant executed and delivered shall
constitute an additional contractual obligation of the Company, whether or not
the original Warrant shall be at any time enforceable by anyone.
Section 5. Rights of the Holder. The Holder shall not,
by virtue hereof, be entitled to any rights of a shareholder in the Company,
either at law or equity, and the rights of the Holder are limited to those set
forth in this Warrant.
Section 6. Adjustment of Exercise Price and Number of
Shares. The number and kind of securities purchasable upon the exercise of
this Warrant and the Exercise Price shall be subject to adjustment from time to
time upon the occurrence of certain events, as follows:
(a) Adjustment for Change in Beneficial Interest. If at
any time after November 6, 1996, the Company:
(i) pays a dividend or makes a distribution on its
Common Stock in shares of its Common Stock;
(ii) subdivides its outstanding shares of Common
Stock into a greater number of shares;
(iii) combines its outstanding shares of Common Stock
into a smaller number of shares;
(iv) makes a distribution on its Common Stock in
shares of its beneficial interest other than Common
Stock; or
(v) issues by reclassification of its Common Stock
any shares of its beneficial interest;
then the Exercise Price in effect (and the number of Warrant Shares and other
securities, if any, issuable upon exercise of this Warrant) immediately prior
to such action shall be adjusted so that the Holder may receive upon exercise
of the Warrant, and payment of the same aggregate consideration, the number of
shares of beneficial interest of the Company which the Holder would have owned
immediately following such action if the Holder had exercised the Warrants
immediately prior to such action.
The adjustment shall become effective immediately after the
record date in the case of such a dividend or distribution, and immediately
after the effective date in the case of a subdivision, combination or
reclassification.
-4-
<PAGE> 5
(b) Adjustment for Other Distributions. If at any time
after November 6, 1996, the Company distributes to all holders of its Common
Stock any of its assets or debt securities, the Exercise Price following the
record date for such distribution shall be adjusted in accordance with the
following formula:
M-F
---
E' = E x M
where: E' = the adjusted Exercise Price.
E = the then current Exercise Price immediately
prior to the adjustment.
M = the current market price (determined as
provided in Section 11 below) per share of
Common Stock on the record date of the
distribution.
F = the aggregate fair market value (determined
in such reasonable manner as may be
prescribed in good faith by the Board of
Trustees of the Company) on the record date
of the distribution of the assets or debt
securities divided by the number of
outstanding shares of Common Stock.
The adjustment shall be made successively whenever any such
distribution is made and shall become effective immediately after the record
date for the determination of shareholders entitled to receive the distribution
or the effective date of such issuance, as applicable. Notwithstanding the
formula above, in no event shall the adjusted Exercise Price be less than zero.
In the event that such distribution or issuance is not actually made, the
Exercise Price shall again be adjusted to the Exercise Price as determined
without giving effect to the calculation provided hereby.
This subsection does not apply to ordinary quarterly cash
dividends or cash distributions paid out of consolidated current or retained
earnings as shown on the books of the Company and paid in the ordinary course
of business.
(c) Deferral of Issuance or Payment. In any case in
which an event covered by this Section 6 shall require that an adjustment in
the Exercise Price be made effective as of a record date, the Company may elect
to defer until the occurrence of such event (i) issuing to the Holder, if this
Warrant is exercised after such record date, the shares of Common Stock and
other beneficial interest of the Company, if any, issuable upon such exercise
over and above the shares of Common Stock or other beneficial interest of the
Company, if any, issuable upon such exercise on the basis of the Exercise Price
in effect prior to such adjustment, and (ii) paying to the Holder by check any
amount in lieu of the issuance of fractional shares pursuant to Section 11.
-5-
<PAGE> 6
(d) When No Adjustment Required. No adjustment need be
made for a change in the par value of the Common Stock.
(e) Notice of Certain Actions. In the event that:
(i) the Company shall authorize the issuance to
all holders of its Common Stock of rights, warrants, options or convertible
securities to subscribe for or purchase shares of its Common Stock, or of any
other subscription rights, warrants, options or convertible securities; or
(ii) the Company shall authorize the distribution
to all holders of its Common Stock of evidences of its indebtedness or assets
(other than dividends paid in or distributions of the Company's beneficial
interest for which the Exercise Price shall have been adjusted pursuant to
subsection (a) of this Section 6) or cash dividends or cash distributions
payable out of consolidated current or retained earnings as shown on the books
of the Company and paid in the ordinary course of business); or
(iii) the Company shall authorize any capital
reorganization or reclassification of the Common Stock (other than a
subdivision or combination of the outstanding Common Stock and other than a
change in par value of the Common Stock) or any consolidation or merger to
which the Company is a party and for which approval of any shareholders of the
Company is required (other than a consolidation or merger in which the Company
is the continuing corporation and that does not result in any reclassification
or change of the Common Stock outstanding), or the conveyance or transfer of
the properties and assets of the Company as an entirety or substantially as an
entirety; or
(iv) the Company is the subject of a voluntary or
involuntary dissolution, liquidation or winding-up procedure; or
(v) the Company proposes to take any action
(other than actions of the character described in subsection (a) of this
Section 6) that would require an adjustment of the Exercise Price pursuant to
this Section 6;
then the Company shall cause to be mailed by first-class mail to the Holder, at
least ten (10) days prior to the applicable record or effective date, a notice
stating (x) the date as of which the holders of Common Stock of record to be
entitled to receive any such rights, warrants or distributions are to be
determined, or (y) the date on which any such consolidation, merger,
conveyance, transfer, dissolution, liquidation or winding-up is expected to
become effective, and the date as of which it is expected that holders of
Common Stock of record shall be entitled to exchange their shares of Common
Stock for securities or other property, if any, deliverable upon such
reorganization, reclassification, consolidation, merger, conveyance, transfer,
dissolution, liquidation or winding-up.
-6-
<PAGE> 7
(f) No Adjustment Upon Exercise of Warrants. No
adjustments shall be made under any Section herein in connection with the
issuance of Warrant Shares upon exercise of the Warrants.
(g) Common Stock Defined. The term "Common Stock" shall
include any equity securities of any class of the Company hereinafter
authorized which shall not be limited to a fixed sum or percentage in respect
of the right of the holders thereof to participate in dividends, or to
participate in distributions of assets upon the voluntary or involuntary
liquidation, dissolution or winding up of the Company. However, subject to the
provisions of Section 8 hereof, shares issuable upon exercise hereof shall
include only shares of the class designated as Common Stock of the Company as
of the date hereof or shares of any class or classes resulting from any
reclassification or reclassifications thereof or as a result of any corporate
reorganization as provided for in Section 8 hereof.
(h) Warrants Issued After Adjustments. Irrespective of
any adjustments in the Exercise Price or the number or kind of Warrant Shares
purchasable upon exercise of this Warrant, Warrants theretofore or thereafter
issued may continue to express the same price and number and kind of shares as
are stated in the similar warrants initially issuable pursuant to this
Agreement.
Section 7. Officers' Certificate. Whenever the Exercise
Price shall be adjusted as required by the provisions of Section 6, the Company
shall forthwith file in the custody of its Secretary or an Assistant Secretary
at its principal office an officers' certificate showing the adjusted Exercise
Price determined as herein provided, setting forth in reasonable detail the
facts requiring such adjustment and the manner of computing such adjustment.
Each such officers' certificate shall be signed by the Chairman, President or
Chief Financial Officer of the Company and by the Secretary or any Assistant
Secretary of the Company. A copy of each such officers' certificate shall be
promptly mailed, by certified mail, to each holder of a Warrant and the
original shall be made available at all reasonable times for inspection by any
other holder of a Warrant executed and delivered pursuant to Section 4 hereof.
Section 8. Reclassification, Reorganization,
Consolidation or Merger. In the event of any reclassification, capital
reorganization or other change of outstanding shares of Common Stock of the
Company (other than a subdivision or combination of the outstanding Common
Stock and other than a change in the par value of the Common Stock) or in the
event of any consolidation or merger of the Company with or into another person
or entity (other than a merger in which the Company is the continuing person or
entity and that does not result in any reclassification, capital reorganization
or other change of outstanding shares of Common Stock of the class issuable
upon exercise of this Warrant) or in the event of any sale, lease, transfer or
conveyance to another person or entity of the property and assets of the
Company as an entirety or substantially as an entirety, the Company shall, as a
condition precedent to such transaction, cause effective provisions to be made
so that the Holder shall have the right thereafter, by exercising this Warrant,
to purchase the kind and amount of shares of beneficial interest and other
securities and property (including cash) receivable upon such reclassification,
-7-
<PAGE> 8
capital reorganization and other change, consolidation, merger, sale or
conveyance by a holder of the number of shares of Common Stock that might have
been received upon exercise of this Warrant immediately prior to such
reclassification, capital reorganization, change, consolidation, merger, sale
or conveyance. Any such provision shall include provisions for adjustments in
respect of such shares of beneficial interest and other securities and property
that shall be as nearly equivalent as may be practicable to the adjustments
provided for in this Warrant. The foregoing provisions of this Section 8 shall
similarly apply to successive reclassifications, capital reorganizations and
changes of shares of Common Stock and to successive consolidations, mergers,
sales or conveyances. In the event that in connection with any such capital
reorganization, or classification, consolidation, merger, sale or conveyance,
additional shares of Common Stock shall be issued in exchange, conversion,
substitution or payment, in whole or in part, for, or of, a security of the
Company other than Common Stock, any such issue shall be treated as an issue of
Common Stock covered by the provisions of Section 6 hereof.
Section 9. Duty to Make Fair Adjustments in Certain
Cases. If any event occurs as to which, in the reasonable opinion of either
the Board of Trustees of the Company or a majority of the holders of the
warrants then outstanding under this Warrant, the Warrants issued to the Turkey
Vulture Fund XIII, Ltd. on June 21, 1996, the Warrants issued to Safeguard on
August 22, 1996 and any warrants issued upon repayment of unsecured debt issued
to or held by Osborne (collectively, the "Other Warrants"), the provisions of
Section 6 and Section 8 hereof are not strictly applicable or, if strictly
applicable, would not fairly protect the purchase rights of the holders of such
warrants in accordance with the essential intent and principles of such
provisions, then the Board of Trustees of the Company and a majority of the
holders of the warrants then outstanding under this Warrant and the Other
Warrants shall mutually agree upon an adjustment in the application of such
provisions, in accordance with such essential intent and principles, so as to
protect such purchase rights as aforesaid.
Section 10. Transfer to Comply with the Securities Act of
1933; Registration Rights.
(a) No sale, transfer, assignment, hypothecation or other
disposition of this Warrant or of the Warrant Shares shall be made if such
sale, transfer, assignment, hypothecation or other disposition would result in
a violation of the Act, or any state securities laws. Upon exercise of this
Warrant, the Holder shall, if requested by the Company, confirm in writing, in
a form reasonably satisfactory to the Company, that the shares of Common Stock
so purchased are being acquired solely for the Holder's own account, and not as
a nominee thereof, for investment, and not with a view toward distribution or
resale, except as permitted by the Act, and shall provide such other
information to the Company as the Company may reasonably request. Any Warrant
and any Warrants issued upon substitution for, or upon assignment or transfer
of this Warrant, as the case may be, and all shares of Common Stock issued upon
exercise hereof or conversion thereof shall bear a legend (in addition to any
legend required by state securities laws) in substantially the form set forth
on the first page of this Warrant, unless and until such securities have been
transferred pursuant to an effective registration statement
-8-
<PAGE> 9
under the Act or may be freely sold to the public pursuant to Rule 144 (or any
successor rule thereto) or otherwise.
(b) The Holder and any transferee of the Warrant or the
Warrant Shares issuable hereunder shall have the right to require the Company
to register the Warrant Shares with the Securities and Exchange Commission for
resale as provided in the Registration Rights Agreement of even date herewith
by and between the Holder and the Company.
Section 11. Current Market Price. The "current market
price" of a share of Common Stock for purposes of this Agreement shall be
determined as follows:
(a) If the Common Stock is listed on a national
securities exchange or admitted to unlisted trading privileges on such exchange
or listed for trading on The Nasdaq Stock Market, the current market price
shall be the last reported sale price of the Common Stock on such exchange or
system on the last business day prior to the date of exercise of this Warrant,
or if no such sale is made on such day, the average of the closing bid and
asked prices of the Common Stock for such day on such exchange or system; or
(b) If the Common Stock is not so listed or admitted to
unlisted trading privileges, the current market price shall be the average of
the last reported bid and asked prices reported by the National Quotation
Bureau, Inc., on the last business day prior to the date of exercise of this
Warrant; or
(c) If the Common Stock is not so listed or admitted to
unlisted trading privileges and bid and asked prices are not so reported, the
current market price per share shall be an amount, not less than 90% of the
book value per share of the Common Stock as at the end of the most recent
fiscal year of the Company ending prior to the date of the exercise of this
Warrant, determined in such reasonable manner as may be prescribed in good
faith by the Board of Trustees of the Company.
Section 12. Modification and Waiver. Neither this
Warrant nor any term hereof may be changed, waived, discharged or terminated
other than by an instrument in writing signed by the Company and by the Holder.
Section 13. Notices. Any notice, request or other
document required or permitted to be given or delivered to the Holder or the
Company shall be delivered or shall be sent by certified mail, postage prepaid,
or by overnight courier to each such holder at its address as shown on the
books of the Company or to the Company at the address indicated therefor in the
first paragraph of this Warrant.
Section 14. Descriptive Headings and Governing Law. The
description headings of the several sections and paragraphs of this Warrant are
inserted for convenience only and do not constitute a part of this Warrant.
This Warrant shall be construed and enforced in
-9-
<PAGE> 10
accordance with, and the rights of the parties shall be governed by, the laws
of the State of Maryland.
Section 15. No Impairment. The Company will not
knowingly avoid or seek to avoid the observance or performance of any of the
terms to be observed or performed hereunder by it, but will at all times in
good faith assist in the carrying out of all of the provisions of this Warrant.
Section 16. Non-Recourse. No recourse shall be had for
any obligation of the Company hereunder, or for any claim based thereon or
otherwise in respect thereof, against any past, present or future trustee,
shareholder, officer or employee of the Company, whether by virtue of any
statute or rule of law, or by the enforcement of any assessment or penalty or
otherwise, all such other liability being expressly waived and released by each
other party hereto.
IN WITNESS WHEREOF, the Company has duly caused this Warrant
to be signed by its duly authorized officer and to be dated as of November 14,
1996.
BRANDYWINE REALTY TRUST
By: /s/ John M. Adderly, Jr.
-------------------------------------------
John M. Adderly, Jr., Vice President
-10-
<PAGE> 11
PURCHASE FORM
Dated:
------------------------
The undersigned hereby irrevocably elects to exercise the
within Warrant to purchase _____________ shares of Common Stock and hereby
makes payment of ___________________________ in payment of the exercise price
thereof.
Signature
-----------------------
-11-
<PAGE> 12
ASSIGNMENT FORM
Dated:
----------------------------------
FOR VALUE RECEIVED,__________________hereby sells, assigns and
transfers unto ________________________________ (the "Assignee"),
(please type or print in block letters)
________________________________________________________________________________
(insert address)
its right to purchase up to __________ shares of Common Stock represented by
this Warrant and does hereby irrevocably constitute and appoint
_______________________________ Attorney, to transfer the same on the books of
the Company, with full power of substitution in the premises.
Signature
-------------------------------
-12-
<PAGE> 1
STANDSTILL AGREEMENT
THIS AGREEMENT is made as of the 14th day of November, 1996 by
and between Brandywine Realty Trust, a Maryland real estate investment trust
(the "Trust") and RAI Real Estate Advisers, Inc. ("RAI"), as the voting trustee
of a voting trust dated as of November 6, 1996 between the Commonwealth of
Pennsylvania State Employes' Retirement System ("SERS") as shareholder and RAI
as voting trustee (the "Holder").
WHEREAS, as of the date hereof, pursuant to a Contribution
Agreement dated November 6, 1996 among, inter alia, the Trust and the Holder
(the "Contribution Agreement"), Holder is acquiring 481,818 Series A
Convertible Preferred Shares, par value $.01 per share (the "Convertible
Preferred Shares") and a warrant to purchase 400,000 common shares of
beneficial interest, par value $.01 per share (the "Common Shares"). The
Convertible Preferred Shares and the Common Shares issuable upon conversion
thereof are collectively referred to herein as the "Shares;"
WHEREAS, pursuant to the Contribution Agreement and a
Securities Purchase Agreement dated November 6, 1996 between the Trust and the
Holder (the "Securities Purchase Agreement"), the Holder is expected to acquire
additional Shares; and
WHEREAS, the Trust desires to obtain from the Holder, and the
Holder desires to obtain from the Trust, certain agreements, as set forth
herein.
NOW, THEREFORE, intending to be legally bound hereby, the
parties hereto agree as follows:
1. Proxy Solicitations. During the term hereof, without
the consent of a majority of the independent members of the Board of Trustees
of the Trust (the "Board of Trustees"), Holder agrees that it will not: (i)
make or participate in, directly or indirectly, any "solicitation" of "proxies"
(as such terms are defined or used in Regulation 14A promulgated pursuant to
the Exchange Act) or become a "participant" in any "election contest" (as such
terms are used in Regulation 14A) with respect to the Trust, (ii) seek to
encourage any third person to vote Common Shares in opposition to the
recommendation of a majority of the Board of Trustees, (iii) propose any
amendment to the Declaration of Trust of the Trust (the "Declaration of Trust")
or (iv) assist any attempt by any other person or entity to do any of the
foregoing.
2. Voting of Common Shares; Submission of Matters to
Vote of Shareholders; Conversion. During the term hereof, the Holder agrees to
vote all Shares beneficially owned by it in accordance with the recommendations
of a majority of the Board of Trustees on any matter submitted to a vote of
shareholders other than on any of the following matters: (i) a merger,
consolidation or liquidation of the Trust or a sale by the Trust of all or
substantially all of its assets; (ii) any amendment to the Declaration of Trust
or to the Partnership Agreement (as defined in Section 4(a) below); (iii) the
nomination of a new member to the Board of Trustees; (iv) the Trust's incurring
debt as a result of which the aggregate principal amount of its debt at the
time of incurrence would exceed the Trust's Equity Market
<PAGE> 2
Capitalization (as defined in Section 8 below); and (v) any Related Party
Transaction (as defined in Section 8 below). Without the prior written
approval of the Holder during the term hereof (and, as to clause (iv) above,
until the Deferred Purchase Price (as defined in the Contribution Agreement)
has been paid in full), the Trust shall not effect any of the preceding matters
without first obtaining approval thereof by shareholders in accordance with the
Declaration of Trust and applicable law. Upon the written request of the Trust
delivered to the Holder at least ten (10) days prior to the record date for the
applicable meeting, the Holder shall convert into Common Shares prior to such
record date the number of Convertible Preferred Shares specified by the Trust
in such request as being permissible to be so converted and shall vote such
Common Shares in favor of the right of the Holder to convert the Convertible
Preferred Shares on an unlimited basis.
3. Restrictions on Dispositions. During the term
hereof, the Holder shall not, directly or indirectly, sell, assign, transfer or
otherwise dispose of any Shares, except: (i) in transactions under Rule 144
promulgated under the Securities Act of 1933, as amended; (ii) in a private
transaction to any person who is not then a business competitor of the Trust
and who, immediately following the transaction, would own less than five
percent (5%) of the outstanding Common Shares (assuming the conversion of all
outstanding Convertible Preferred Shares and the conversion of all of the Class
A Units of the Partnership (as defined in Section 4(a) below)); (iii) in
response to a bona fide tender or exchange offer by a third party for at least
80% of the outstanding Common Shares and supported by a majority of the Board
of Trustees; (iv) in a merger or statutory share exchange pursuant to which
ownership of the Trust is acquired by a third party; or (v) pursuant to
incidental registration rights of the Holder pursuant to a Registration Rights
Agreement of even date herewith between the Trust and the Holder. During the
term hereof, the Holder agrees to enter into a customary "lock-up" letter upon
the request of the underwriters in connection with any public equity offering
by the Trust, provided that (i) the duration thereof does not extend for more
than 180 days following the effective date of the applicable registration
statement and (ii) all other holders of in excess of ten percent (10%) of the
outstanding Common Shares and all Trustees and executive officers of the Trust
execute a substantially similar letter. Notwithstanding anything to the
contrary herein, the Holder may pledge any and all of its Shares to secure up
to $15 million in borrowings.
4. Business Operations.
(a) Prior to the consummation by the Trust of a
Secondary Offering, without the prior written approval of the Holder, the Trust
may not materially deviate from the description of its business plans set forth
under the caption "Prospectus Summary" in the draft of Amendment No. 1
("Amendment No. 1") to the Trust's Registration Statement on Form S-11 attached
as Exhibit A to the Securities Purchase Agreement and may not do any of the
following: (i) engage in speculative development; (ii) acquire any individual
property with a purchase price in excess of $25 million; (iii) acquire or
dispose of any portfolio of properties with an aggregate purchase price which
exceeds 25% of the amount equal to the Trust's Equity Market Capitalization
plus the principal amount of all outstanding debt secured by mortgages on the
Trust's properties; (iv) acquire any properties outside the Trust's Primary
Market Area (as defined in Section 8 below); (v) acquire any properties other
than office, warehouse, flex or industrial properties; (vi) incur additional
indebtedness in any one transaction or in any series of
-2-
<PAGE> 3
related transactions in excess of $25 million; (vii) except as provided in
Section 4(b) below, issue any additional shares of beneficial interest (other
than issuances of Common Shares to funds managed by Morgan Stanley Asset
Management, Inc., as more fully described in Amendment No. 1) the Registration
Statement) or permit Brandywine Operating Partnership, L.P., a Delaware limited
partnership (the "Partnership"), to issue Partnership Interests (as defined in
the Partnership's Agreement of Limited Partnership dated August 22, 1996 (the
"Partnership Agreement")); (viii) amend in any material manner the Partnership
Agreement; (ix) acquire any property other than through the Partnership, unless
acquired by the Trust and contributed to the Partnership; or (x) make any
material change to the employment agreements between Brandywine Realty Services
Company, Inc. ("Brandywine") and Anthony A. Nichols, Sr. and Gerald H. Sweeney
(other than to permit such agreements to be assigned to the Trust).
(b) Section 4(a)(vii) shall not apply to (A)
Common Shares issued pursuant to options and warrants outstanding on the date
of this Agreement, (B) Common Shares issued to officers, trustees, directors or
employees of, or consultants to, the Trust and its affiliates upon the exercise
of warrants, rights or options which (x) are issued pursuant to employee
benefit plans, employment agreements or consulting agreements, in each case
approved by the Board of Trustees or an appropriate committee of the Trust's
Board of Trustees, and (y) have an exercise price not less than 85% of the
current market price of the Common Shares at the time of issuance of such
warrant, right or option, (C) Common Shares issued on redemption of Class A
units of limited partnership interest in the Partnership issued or issuable to
Safeguard Scientifics (Delaware), Inc. ("Safeguard") and The Nichols Company
("TNC") and certain other persons, or their respective affiliates, in
connection with the transactions contemplated by the Contribution Agreement
dated July 31, 1996, by and among the Trust, Safeguard and TNC, (D) Common
Shares issuable to (i) Messrs. Belcher, Gallagher, Nichols and Sweeney upon
exercise of warrants issued to them on or as of August 22, 1996 pursuant to
their employment agreements with Brandywine and (ii) certain other employees of
the Trust or Brandywine upon exercise of warrants issued to them on or as of
August 22, 1996 for the purchase of an aggregate of 40,000 Common Shares, (E)
up to 236,200 Common Shares reserved for issuance to Richard M. Osborne, Sr. or
to an entity controlled by him ("Osborne") upon the repayment of unsecured debt
issued to or held by Osborne and up to 236,200 Common Shares issuable to
Osborne upon exercise of a warrant previously issued to him or issuable upon
repayment of unsecured debt issued to or held by Osborne, (F) Common Shares
issued upon conversion of the Convertible Preferred Shares, (G) Common Shares
or Convertible Preferred Shares issued to the Holder or to or for the benefit
of SERS, (H) Common Shares issued in a Secondary Offering, or (I) Partnership
Interests issued (i) to acquire Residual Interests pursuant to Section 4.4 of
the Partnership Agreement, (ii) upon the achievement of debt discounts pursuant
to Section 4.5 of the Partnership Agreement; or (iii) to the Trust on account
of capital contributions to the Partnership in accordance with the terms of the
Partnership Agreement.
5. REIT Status. During the term hereof, the Holder
agrees not to pursue any action which may disqualify the Trust's status as a
real estate investment trust under the Internal Revenue Code of 1986.
-3-
<PAGE> 4
6. Legend. During the term hereof, the Trust may cause
any certificates evidencing Shares beneficially owned by the Holder to bear a
legend indicating the existence of this Agreement.
7. Term.
(a) Unless terminated earlier pursuant to Section
7(b) below and as otherwise provided with respect to Section 2(iv) above, the
term of this Agreement shall be for a period ending on the earlier of the (i)
second anniversary of the date of this Agreement or (ii) the date on which the
Holder owns less than twenty percent (20%) of the Common Shares assuming the
conversion of all outstanding Convertible Preferred Shares.
(b) The Holder shall have the right, upon written
notice to the Trust, to terminate this Agreement (except as to Section 2(iv) as
provided above) at any time after one year from the date of this Agreement if:
(i) for two successive calendar quarters commencing with the quarter ending
December 31, 1996, the total debt of the Trust as of the end of such quarters
exceeds the Trust's Equity Market Capitalization; (ii) for two successive
calendar quarters commencing with the quarter ending December 31, 1996, the
Holder did not receive a cash distribution at least equal to $.11 per Common
Share into which the Convertible Preferred Shares are convertible (subject to
appropriate adjustment for share splits, share dividends and similar
transactions subsequent to November 6, 1996), which distribution shall not
exceed 90% of Funds From Operations (as defined in Section 8 below) for such
quarter; (iii) the Equity Market Capitalization of the Trust is less than $100
million at any time on or after one year from the date of this Agreement; or
(iv) the Trust acquires any property other than through the Partnership, unless
acquired by the Trust and contributed to the Partnership.
(c) Upon expiration or termination of the term,
all rights and obligations of the parties hereto shall terminate, except as
provided with respect to Section 2(iv) above and except for any rights arising
out of the breach by a party hereto of its obligations hereunder.
8. Definitions. For purposes of this Agreement, the
following terms shall have the meanings specified in this Section 8 and shall
be equally applicable to both singular and plural forms.
"Current Market Price" of a Common Share shall be
determined as follows:
(i) If the Common Shares are listed on a
national securities exchange or admitted to unlisted trading privileges on such
exchange or listed for trading on The Nasdaq Stock Market, the Current Market
Price shall be the last reported sale price of the Common Shares on such
exchange or system on the last business day prior to the valuation date, or if
no such sale is made on such day, the average closing bid and asked prices of
the Common Shares for such day on such exchange or system; or
-4-
<PAGE> 5
(ii) If the Common Shares are not so
listed or admitted to unlisted trading privileges, the Current Market Price
shall be the mean of the last reported bid and asked prices reported by the
National Quotation Bureau, Inc., on the last business day prior to the
valuation date; or
(iii) If the Common Shares are not so
listed or admitted to unlisted trading privileges and bid and asked prices are
not so reported, the Current Market Price per Common Share shall be an amount,
not less than 90% of the book value per Common Share as at the end of the most
recent fiscal year of the Trust ending prior to the valuation date, determined
in such reasonable manner as may be prescribed in good faith by the Board of
Trustees.
"Equity Market Capitalization" means the product of
(A) the Current Market Price of a Common Share and (B) the number of
outstanding Common Shares assuming the conversion of all outstanding
Convertible Preferred Shares and all Class A Units of the Partnership.
"Funds From Operations" means net income (loss),
excluding extraordinary items, gains and losses from sales of property, plus
depreciation and amortization and other non-cash charges and similar
adjustments for unconsolidated subsidiaries, all as calculated in accordance
with generally accepted accounting principles applied on a consistent basis
with past periods.
"Primary Market Area" means Bucks, Chester, Delaware
and Montgomery counties in Pennsylvania; Burlington, Camden, Gloucester, Mercer
and Salem counties in New Jersey; and New Castle county in Delaware.
"Related Party Transaction" means any transaction
involving the Trust or the Partnership and any of their officers, trustees,
partners or holders of more than five percent of beneficial interests or
partnership interests, as the case may be, which would be required to be
disclosed under Items 402 or 404 of Regulation S-K.
"Secondary Offering" means an underwritten primary
public offering of Common Shares pursuant to a registration statement on Form
S-11 declared effective by the Securities and Exchange Commission which results
in gross proceeds to the Trust (prior to reduction for the underwriters'
discount) of at least $50 million.
9. Specific Performance and Remedies. The parties to
this Agreement acknowledge and agree that irreparable damage would occur to the
aggrieved party in the event that any provision of this Agreement is not
performed in accordance with its specific terms or is otherwise breached, and
acknowledge and agree that termination of this Agreement and monetary damages
would not provide adequate remedies. It is accordingly agreed that each of the
parties shall be entitled to injunctive relief to prevent breaches of the
provisions of this Agreement and to enforce specifically the terms and
provisions hereof in any court of the United States in addition to any other
remedy to which it may be entitled at law or in equity, including, without
limitation, monetary damages.
-5-
<PAGE> 6
10. Expenses. All fees and expenses incurred by any
party hereto shall be borne by the party incurring them; provided that the
Trust shall reimburse the Holder for the legal fees and expenses incurred by it
in connection with the preparation and negotiation of this Agreement; and
provided further that, if any party incurs expenses in an effort to enforce
compliance by another party of its obligations hereunder and prevails in such
effort, the prevailing party shall be entitled to recover such expenses from
such other party.
11. Entire Agreement. This Agreement constitutes the
entire agreement, and supersedes all prior agreements and understandings,
whether oral or written, among the parties hereto with respect to the subject
matter hereof. This Agreement may not be amended orally, but may be amended
only by an instrument in writing signed by each of the parties hereto.
12. Counterparts. For the convenience of the parties,
any number of counterparts of this Agreement may be executed by the parties
hereto. Each such executed counterpart shall be, and shall be deemed, an
original instrument, and all such executed counterparts shall be deemed to be
one and the same instrument.
13. Notices. All notices given hereunder shall be in
writing and delivered personally, or sent by telex, telecopier or registered
mail, postage prepaid, or by overnight delivery service, addressed as follows:
If to The Trust:
Brandywine Realty Trust
16 Campus Boulevard
Suite 150
Newtown Square, PA 19073
Attention: Gerard A. Sweeney, President
Telecopier No. (610) 325-5622
With a copy to:
Pepper, Hamilton & Scheetz
3000 Two Logan Square
18th and Arch Streets
Philadelphia, PA 19103
Attention: Michael H. Friedman, Esquire
Telecopier No. (215) 981-4750
-6-
<PAGE> 7
If to The Holder:
RAI Real Estate Advisers, Inc.
259 Radnor-Chester Road
Suite 200
Radnor, PA 19087
Attention: Richard K. Layman, President
Telecopier No. (610) 964-0830
With a copy to:
Wolf, Block, Schorr and Solis-Cohen
Twelfth Floor Packard Building
S.E. Corner 15th and Chestnut Streets
Philadelphia, PA 19102
Attention: Jason M. Shargel, Esquire
Telecopier No. (215) 977-2346
or to such other address, or such telex or telecopier number, as any party may,
from time to time, designate in a written notice given in like manner. Notice
given by overnight delivery service shall be deemed delivered on the day
following the date the same is accepted for next day delivery by said service.
Notice delivery by telecopier shall be deemed to be delivered when transmitted.
Notice delivered personally shall be deemed to be delivered when delivered to
the addressee.
14. Choice of Law. This Agreement shall be governed by,
and construed and enforced in accordance with, the laws of the State of
Maryland, without reference to the conflict of laws principles thereof.
15. Headings. The headings in this Agreement are for
convenience only and shall not be considered a part of or affect the
construction or interpretation of any provision of this Agreement.
16. No Waiver. Any waiver by any party of a breach of
any provision of this Agreement shall not operate as or be construed to be a
waiver of any other breach of such provision or of any breach of any other
provision of this Agreement. The failure of a party to insist upon strict
adherence to any term of this Agreement shall not be considered a waiver or
deprive that party of the right thereafter to insist upon strict adherence to
that term or any other term of this Agreement.
17. Severability. If any clause, provision or section of
this Agreement is held illegal or invalid by any court, the illegality or
invalidity of such clause, provision or section shall not affect any of the
remaining clauses, provisions or sections of this Agreement, and this Agreement
shall be construed and enforced as if such illegal or invalid clause, provision
or section had not been contained herein. In case any agreement or obligation
contained in this Agreement is held to be in violation of law, then such
agreement or obligation shall be deemed
-7-
<PAGE> 8
to be the agreement or obligation of the applicable party hereto only to the
full extent permitted by law.
18. Non-Recourse. No recourse shall be had for any
obligation of the Trust hereunder, or for any claim based thereon or otherwise
in respect thereof, against any past, present or future trustee, shareholder,
officer or employee of the Trust, whether by virtue of any statute or rule of
law, or by the enforcement of any assessment or penalty or otherwise, all such
other liability being expressly waived and released by each other party hereto.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
BRANDYWINE REALTY TRUST
By: /s/ John M. Adderly, Jr.
----------------------------------------
John M. Adderly, Jr., Vice President
RAI REAL ESTATE ADVISERS, INC.
as voting trustee of a voting trust dated
November 6, 1996
By: /s/ Richard K. Layman
----------------------------------------
Richard K. Layman, President
-8-
<PAGE> 1
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (the "Agreement") made and
entered into as of this 14th day of November, 1996 by and among BRANDYWINE
REALTY TRUST, a Maryland real estate investment trust (the "Company"), RAI REAL
ESTATE ADVISERS, INC. ("RAI"), as the voting trustee of a voting trust executed
by the Commonwealth of Pennsylvania State Employes' Retirement System as
shareholder and RAI as voting trustee dated as of November 6, 1996 (the "Voting
Trust").
BACKGROUND
Pursuant to a Contribution Agreement, dated November 6, 1996,
by and among, inter alia, the Company and the Voting Trust (the "Contribution
Agreement"), the Company has issued to the Voting Trust (a) 481,818 shares of
the Company's Series A Convertible Preferred Shares (the "Preferred Shares"),
par value $.01 per share, and may issue additional Preferred Shares on June 10,
1998, and December 31, 1999 (such issued and issuable Preferred Shares are
collectively referred to as the "Property Shares") and (b) a warrant (the
"Warrant") to purchase 400,000 shares of the Company's common shares of
beneficial interest par value $.01 per share (the "Common Stock").
Pursuant to a Securities Purchase Agreement dated as of
November 6, 1996 by and between the Company and the Voting Trust (the
"Securities Purchase Agreement"), the Company is obligated to issue to the
Voting Trust additional Common Stock or Preferred Shares (the "Additional
Shares").
To induce the Voting Trust to enter into the foregoing
transactions, the Company has agreed to provide it with the registration rights
set forth in this Agreement.
1. CERTAIN DEFINITIONS.
In addition to the other terms defined in this Agreement, the
following terms shall be defined as follows:
"Additional Holders" means the Persons who have registration
rights with respect to certain securities of the Company pursuant to either of
the Additional Registration Rights Agreements.
"Additional Registration Rights Agreements" means that certain
Registration Rights Agreement dated August 22, 1996 to which the Company is a
party and the Registration Rights Agreement which the Company will enter into
with Morgan Stanley Institutional Fund, Inc. - U.S. Real Estate Portfolio and
Morgan Stanley SICAV Subsidiary, SA.
<PAGE> 2
"Additional Securities" means those securities of the Company
which are or become subject to the registration provisions of either of the
Additional Registration Rights Agreements.
"Brokers Transactions" has the meaning ascribed to such term
pursuant to Rule 144 under the Securities Act.
"Business Day" means any day on which the American Stock
Exchange is open for trading.
"Closing Date" means the date of closing under the
Contribution Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the SEC thereunder, all as the same
shall be in effect at the relevant time.
"Fair Market Value" means:
(a) If the Registrable Security is listed on a
national securities exchange or admitted to unlisted trading privileges on such
exchange or listed for trading on The NASDAQ Stock Market, the fair market
value shall be the last reported sale price of the Registrable Security on such
exchange or system on the last business day prior to the date the determination
of fair market value is made, or if no such sale is made on such day, the
average closing bid and asked prices of the Registrable Security for such day
on such exchange or system; or
(b) If the Registrable Security is not so listed
or admitted to unlisted trading privileges, the fair market value shall be the
mean of the last reported bid and asked prices reported by the National
Quotation Bureau, Inc., on the last business day prior to the date the
determination of fair market value is made; or
(c) If the Registrable Security is not so listed
or admitted to unlisted trading privileges and bid and asked prices are not so
reported, the fair market value per share shall be an amount, not less than 90%
of the book value per share of the Registrable Security as at the end of the
most recent fiscal year of the Company ending prior to the date the
determination of fair market value is made, determined in such reasonable
manner as may be prescribed in good faith by the Board of Trustees of the
Company.
"Holders" means the Voting Trust for so long as (and to the
extent that) it owns any Registrable Securities, and its successors, assigns,
and direct and indirect transferees who become registered owners of Registrable
Securities or securities exercisable, exchangeable or convertible into
Registrable Securities.
"Outstanding" means with respect to any securities as of any
date, all such securities theretofore issued, except any such securities
theretofore converted, exercised or
-2-
<PAGE> 3
canceled or held by the issuer or any successor thereto (whether in its
treasury or not) or any affiliate of the issuer or any successor thereto.
"Person" means an individual, a partnership (general or
limited), corporation, limited liability company, joint venture, business
trust, cooperative, association or other form of business organization, whether
or not regarded as a legal entity under applicable law, a trust (inter vivos or
testamentary), an estate of a deceased, insane or incompetent person, a
quasi-governmental entity, a government or any agency, authority, political
subdivision or other instrumentality thereof, or any other entity.
"Registrable Security(ies)" means (i) all or any portion of
the Additional Shares (to the extent they are shares of Common Stock), (ii) all
or any portion of any shares of Common Stock that may be issued upon conversion
of, or in exchange for, the Property Shares or the Additional Shares (to the
extent they are Preferred Shares), (iii) all or any portion of any shares of
Common Stock that may be issued upon the exercise of, or in exchange for, the
Warrant, (iv) any additional shares of Common Stock or other equity securities
of the Company issued or issuable after the Closing Date in respect of any such
securities (or other equity securities issued in respect thereof) by way of a
stock dividend or stock split, in connection with a combination, exchange,
reorganization, recapitalization or reclassification of Company securities, or
pursuant to a merger, division, consolidation or other similar business
transaction or combination involving the Company, and (v) any other shares of
Common Stock obtained in open market transactions or otherwise; provided that
in the case of equity securities other than Common Stock such securities are
registered under Section 12(b) or Section 12(g) of the Exchange Act; and
further provided that: as to any particular Registrable Securities, such
securities shall cease to constitute Registrable Securities (i) when 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; or (ii) when such securities shall have ceased to be
issued and outstanding. Any time this Agreement requires the vote or consent
of the Holder of a "majority" or other stated percentage of the Registrable
Securities, the term Registrable Securities shall, solely for purposes of
calculating such vote, be deemed to include the Registrable Securities that
could be issued under the Preferred Shares and the Warrant and any other
securities exercisable or exchangeable for, or convertible into, Registrable
Securities. The term Registrable Securities shall not include the Preferred
Shares or the Warrant.
"Registration Expenses" means all expenses incident to the
Company's performance of or compliance with the registration requirements set
forth in this Agreement including, without limitation, the following: (i) the
fees, disbursements and expenses of the Company's counsel(s), accountants, and
experts in connection with the registration under the Securities Act of
Registrable Securities; (ii) all expenses in connection with the preparation,
printing and filing of the registration statement, any preliminary prospectus
or final prospectus, any other offering document and amendments and supplements
thereto, and the mailing and delivering of copies thereof to the underwriters
and dealers, if any; (iii) the cost of printing or producing any agreement(s)
among underwriters, underwriting agreement(s) and blue sky or legal investment
memoranda, any selling agreements, and any other documents in connection
-3-
<PAGE> 4
with the offering, sale or delivery of Registrable Securities to be disposed
of; (iv) any other expenses in connection with the qualification of Registrable
Securities for offer and sale under state securities laws, including the fees
and disbursements of counsel for the underwriters in connection with such
qualification and in connection with any blue sky and legal investment surveys;
(v) the filing fees incident to securing any required review by the National
Association of Securities Dealers, Inc. of the terms of the sale of Registrable
Securities to be disposed of and any blue sky registration or filing fees, and
(vi) the fees and expenses incurred in connection with the listing of
Registrable Securities on each securities exchange (or The NASDAQ Stock Market)
on which Company securities of the same class are then listed; provided,
however, that Registration Expenses with respect to any registration pursuant
to this Agreement shall not include (x) expenses incurred by any Holder in
connection with any offering, including the fees and expenses of counsel,
accountants, and experts retained by such Holder (other than the fees and
expenses of one counsel for the Holders as and to the extent provided in
Article 10), (y) any underwriting discounts or commissions attributable to
Registrable Securities, or (z) any transfer taxes applicable to Registrable
Securities.
"SEC" means the United States Securities and Exchange
Commission, or such other federal agency at the time having the principal
responsibility for administering the Securities Act.
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations of the SEC thereunder, all as the same shall be
in effect at the relevant time.
"Shelf Registration Statement" means a Shelf Registration
Statement of the Company pursuant to the provisions of Section 2(b) of this
Agreement which covers Common Stock on an appropriate form then permitted by
the SEC to be used for such registration and the sales contemplated to be made
thereby, under Rule 415 under the Securities Act, or any similar rule that may
be adopted by the SEC, and all amendments and supplements to such Registration
Statement, including pre- and post-effective amendments thereto, in each case
including the prospectus contained therein, all exhibits thereto and all
material incorporated by reference therein.
"Shelf Registration" means a registration of Common Stock
effected pursuant to Section 2(b) hereof.
"Trading Day" means a day on which the principal securities
exchange or stock market on which the applicable security is traded is open for
the transaction of business.
2. DEMAND REGISTRATION; SHELF REGISTRATION.
(a) (i) A Holder or Holders may request at any time (by
written notice delivered to the Company) that the Company register under the
Securities Act all or any portion of the Registrable Securities held by (or
then issuable to) such Holder or Holders (the "Requesting Holders"),
representing in the aggregate not less than twenty percent of the Registrable
-4-
<PAGE> 5
Securities, for sale in the manner specified in such notice (including, but not
limited to, an underwritten public offering); provided, however, that no such
request may be made when the Voting Trust would be prohibited from selling
Registrable Securities pursuant to an effective registration statement under
the Securities Act by the terms of the Standstill Agreement, dated the Closing
Date, between the Company and the Voting Trust; provided further, however, that
no such request shall be made prior to one hundred twenty (120) days after the
date that the Company's Registration Statement on Form S-11 (File No.
333-13969)(the "1996 Registration Statement") has been declared effective by
the SEC. In each such case, such notice shall specify the number of
Registrable Securities for which registration is requested, the proposed manner
of disposition of such securities, and the minimum price per share at which the
Requesting Holders would be willing to sell such securities in an underwritten
offering. The Company shall, within five (5) Business Days after its receipt
of any Requesting Holders' notice under this Section 2(a)(i), give written
notice of such request to all other Holders and all Additional Holders and
afford them the opportunity of including in the requested registration
statement such of their Registrable Securities or Additional Securities, as the
case may be, as they shall specify in a written notice given to the Company
within twenty (20) days after their receipt of the Company's notice. Within
ten (10) Business Days after the expiration of such twenty (20) day period, the
Company shall notify all Holders and all Additional Holders requesting
registration of (A) the aggregate number of Registrable Securities or
Additional Securities, as the case may be, proposed to be registered by all
Holders and all Additional Holders, (B) the proposed filing date of the
registration statement, and (C) such other information concerning the offering
as any Holder or Additional Holder may have reasonably requested. If the
Holders of a majority in aggregate amount of the Registrable Securities to be
included in such offering shall have requested that such offering be
underwritten, the managing underwriter for such offering shall be chosen by the
Holders of a majority in aggregate amount of the Registrable Securities being
registered, with the consent of the Company, which consent shall not be
unreasonably withheld, not less than thirty (30) days prior to the proposed
filing date stated in the Company's notice, and the Company shall thereupon
promptly notify such Holders, and any Additional Holders to be included in such
offering, as to the identity of the managing underwriter, if any, for the
offering. On or before the 30th day prior to such anticipated filing date, any
Holder or Additional Holder may give written notice to the Company and the
managing underwriter specifying either that (A) Registrable Securities or
Additional Securities, as the case may be, of such Holder or Additional Holder
are to be included in the underwriting, on the same terms and conditions as the
securities otherwise being sold through the underwriters under such
registration or (B) such Registrable Securities or Additional Securities, as
the case may be, are to be registered pursuant to such registration statement
and sold in the open market without any underwriting, on terms and conditions
comparable to those normally applicable to offerings in reasonably similar
circumstances, regardless of the method of disposition originally specified in
Holder's or Additional Holder's request for registration. To the extent that
any or all of the Registrable Securities to be included in any registration
pursuant to this Section 2(a)(i) or any other provision of this Agreement are
to be issued upon conversion, exercise or exchange of other securities, there
shall be no obligation for any Holder to effect any such conversion, exercise
or exchange until immediately prior to the closing of the sale of such
Registrable Securities.
-5-
<PAGE> 6
(ii) The Company shall use its commercially
reasonable best efforts to file with the SEC within eighty (80) days (thirty
(30) days if the Company may use a Registration Statement on Form S-3 to
register such Registrable Securities) after the Company's receipt of the
initial Requesting Holders' written notice pursuant to Section 2(a)(i), a
registration statement for the public offering and sale, in accordance with the
method of disposition specified by such Holders, of the number of Registrable
Securities specified in such notice, and thereafter use its commercially
reasonable best efforts to cause such registration statement to become
effective within sixty (60) days after its filing. Such registration statement
may be on Form S-1 or Form S-11 or another appropriate form (including Form
S-3) that the Company is eligible to use and that is reasonably acceptable to
the managing underwriter; provided, however, that if any Form other than Form
S-1 or Form S-11 is used in an underwritten offering, upon the request of the
managing underwriter, or the selling shareholders, the prospectus included in
the registration statement shall be amplified to include such additional
information as such persons may reasonably request regarding the Company, its
business and management (including, without limitation, the information called
for by Items 101, 102, 103, 201, 202, 301 and 303 of Regulation S-K under the
Securities Act).
(iii) The Company shall not have any obligation
hereunder (A) to permit or participate in more than two offerings pursuant to
this Section 2(a), or (B) to register any Registrable Securities under this
Section 2(a) unless it shall have received requests from Holders to register at
least 20% of the aggregate Registrable Securities issued at the date hereof.
(iv) If the Company is required to use commercially
reasonable best efforts to register Registrable Securities and Additional
Securities in a registration initiated upon the demand of any Holder pursuant
to Section 2(a) of this Agreement and the managing underwriters for such
offering advise that the inclusion of all securities sought to be registered by
the Holders and Additional Holders may interfere with an orderly sale and
distribution of or may materially adversely affect the price of such offering,
then, unless all such Holders and Additional Holders otherwise notify the
Company in writing, the aggregate number of Registrable Securities and
Additional Securities included by the Holders and Additional Holders in such
offering shall be reduced to a number which the managing underwriters advise
will not likely have such effect and the maximum number of Registrable
Securities and Additional Securities able to be included in such offering by
each Holder and Additional Holder shall be reduced giving first preference to
all Registrable Securities before any Additional Securities are included and
thereafter pro rata (in accordance with such Holder's or Additional Holder's,
as the case may be, proportionate share of all Registrable Securities and
Additional Securities duly requested to be included in such registration).
(b) At any time during the 60-day period following the
end of any fiscal year of the Company, other than the fiscal year in which a
registration statement is to be filed pursuant to Section 2(a) (except that the
registration pursuant to a Deemed Additional Share Request shall not be subject
to such limitation), any Holder or Holders may request in writing that the
Company register under the Securities Act all or any portion of the Registrable
Securities held by (or then issuable to) such Requesting Holders for sale
pursuant to a Shelf Registration Statement; provided that any distribution or
sale pursuant to any such Shelf Registration shall be limited to Brokers'
Transactions or other transactions that do not involve
-6-
<PAGE> 7
an underwritten public offering. By closing under the Securities Purchase
Agreement, the Voting Trust shall be deemed to have made (as of the date of
such closing) a request under Section 2(b) (the "Deemed Additional Share
Request") that the Company register for sale pursuant to a Shelf Registration
Statement all Additional Shares (or, if applicable, all shares of Common Stock
issuable upon conversion of the Additional Shares). The Company shall, within
five (5) Business Days after its receipt of any Requesting Holders' notice
under this Section 2(b), give written notice of such request to all other
Holders and all Additional Holders and afford them the opportunity of including
in the requested Shelf Registration Statement such of their Registrable
Securities or Additional Securities, as the case may be, as they shall specify
in a written notice given to the Company within twenty (20) days after their
receipt of the Company's notice. The Company shall thereupon use its
commercially reasonable best efforts to file the Shelf Registration Statement
with the SEC within sixty (60) days after its receipt of the initial Requesting
Holders' notice and to cause such registration statement to be declared
effective within sixty (60) days after its filing (or in the case of the Deemed
Additional Share Request, the earlier of 60 days after filing or March 31,
1997); provided, however, that the Company shall not be required (A) to effect
more than one registration pursuant to this Section 2(b) in any fiscal year for
Holders, or (B) to effect any registration pursuant to this Section 2(b) during
the fiscal year during which Registrable Securities are registered pursuant to
Section 2(a) of this Agreement, or (C) to register any Registrable Securities
under this Section 2(b) (other than pursuant to the Deemed Additional Share
Request) unless it shall receive requests from Holders to register at least 10%
of the aggregate Registrable Securities issued at the date hereof. The Company
shall use its commercially reasonable best efforts to keep such Shelf
Registration Statement (or, if required hereunder, a successor Shelf
Registration Statement filed pursuant to Section 2(d) below) continuously
effective in order to permit the prospectus forming a part thereof to be usable
by Holders and Additional Holders until all securities included in such Shelf
Registration Statement have ceased to be Registrable Securities or Additional
Securities, as the case may be, (the "Lapse Date").
(c) Notwithstanding any other provision of this
Agreement, the Company shall have the right to defer the filing or
effectiveness of a registration statement relating to any registration
requested under Section 2(a) for a reasonable period of time not to exceed 180
days if (x) the Company is, at such time, working on an underwritten, primary
public offering of its securities and is advised by its managing underwriter(s)
that such offering would in its or their opinion be materially adversely
affected by such filing; or (y) a prior registration statement of the Company
for an underwritten, primary public offering by the Company of its securities
was declared effective by the SEC less than 120 days prior to the anticipated
effective date of the requested registration.
(d) If the Company is precluded by Rule 415 or any other
applicable rule under the Securities Act from including all Registrable
Securities and Additional Securities in any Shelf Registration or from keeping
any Shelf Registration Statement continuously effective from the filing date
thereof through the Lapse Date, the Company shall file such additional or
further Shelf Registration Statements, as may be required, so that, subject to
the other provisions of this Agreement, all Registrable Securities and
Additional Securities requested to be included are included on a continuously
effective Shelf Registration Statement for substantially all of the period from
the filing date of the first Shelf Registration Statement through the Lapse
Date.
-7-
<PAGE> 8
(e) Neither the Company nor any Person other than a
Holder or an Additional Holder shall be entitled to include any securities held
by it or him in any underwritten offering pursuant to Section 2(a) of this
Agreement.
(f) No registration of Registrable Securities under this
Article 2 shall relieve the Company of its obligation (if any) to effect
registrations of Registrable Securities pursuant to Article 3.
3. INCIDENTAL REGISTRATION.
(a) Until all securities subject to this Agreement have
ceased to be Registrable Securities, if the Company proposes, other than
pursuant to Article 2 hereof and other than pursuant to the 1996 Registration
Statement, to register any of its Common Stock or other securities issued by it
having terms substantially similar to Registrable Securities or any successor
securities (collectively, "Other Securities") for public sale under the
Securities Act (whether proposed to be offered for sale by the Company or by
any other Person) on a form and in a manner which would permit registration of
Registrable Securities for sale to the public under the Securities Act, it will
give prompt written notice (which notice shall specify the intended method or
methods of disposition) to the Holders and the Additional Holders of its
intention to do so, and upon the written request of any Holder or Additional
Holder delivered to the Company within fifteen (15) Business Days after the
giving of any such notice (which request shall specify the number of
Registrable Securities or Additional Securities, as the case may be, intended
to be disposed of by such Holder or Additional Holder), the Company will use
its commercially reasonable best efforts to effect, in connection with the
registration of the Other Securities, the registration under the Securities Act
of all Registrable Securities and Additional Securities which the Company has
been so requested to register by Holders and Additional Holders; provided,
however, that:
(i) if, at any time after giving such written notice
of its intention to register Other Securities and prior to the effective date
of the registration statement filed in connection with such registration, the
Company shall determine for any reason not to register such Other Securities,
the Company may, at its election, give written notice of such determination to
the Holders and Additional Holders requesting registration and thereupon the
Company shall be relieved of its obligation to register such Registrable
Securities and Additional Securities in connection with the registration of
such Other Securities (but not from its obligation to pay Registration Expenses
to the extent incurred in connection therewith as provided in Article 11),
without prejudice, however, to the rights (if any) of the Holders to request
that such registration be effected as a registration under Article 2; and
(ii) the Company will not be required to effect any
registration of Registrable Securities or Additional Securities pursuant to
this Article 3 in connection with a primary offering of securities by it if the
Company shall have been advised in writing (with a copy to the Holders
requesting registration) by a nationally recognized investment banking firm
(which may be the managing underwriter for the offering) selected by the
Company that, in such firm's opinion, a registration of Registrable Securities
and Additional Securities at that time may interfere with an orderly sale and
distribution of the securities being sold by the Company in such offering or
materially and adversely affect the price of such securities; provided,
however,
-8-
<PAGE> 9
that if an offering of some but not all of the Registrable Securities and
Additional Securities requested to be registered by the Holders and Additional
Holders would not adversely affect the distribution or price of the securities
to be sold by the Company in the offering in the opinion of such firm or are
included in such offering notwithstanding any such opinion, the Company shall
only include such lesser amount of Registerable Securities and Additional
Securities and the aggregate number of Registerable Securities and Additional
Securities to be included in such offering by each Holder and Additional Holder
shall be allocated pro rata among the Holders and Additional Holders requesting
such registration on the basis of the percentage of the securities held by such
Holders and Additional Holders which have requested that such securities be
included; provided further, however, that a registration under this Article 3
pursuant to demand registration rights of any Additional Holders shall be
treated as a primary offering for purposes of this clause (ii) with the result
that the applicable Additional Holders shall be entitled to the same priority
with respect to the Holders to which the Company is entitled as provided above;
and
(iii) The Company shall not be required to give
notice of, or effect any registration of Registrable Securities under this
Article 3 incidental to, the registration of any of its securities in
connection with mergers, consolidations, acquisitions, exchange offers,
subscription offers, dividend reinvestment plans or stock options or other
employee benefit or compensation plans.
(b) No registration of Registrable Securities effected
under this Article 3 shall relieve the Company of its obligations (if any) to
effect registrations of Registrable Securities pursuant to Article 2.
4. HOLDBACKS AND OTHER RESTRICTIONS.
(a) Each Holder hereby covenants and agrees with the
Company that:
(i) such Holder shall not, if requested by the
managing underwriters in an underwritten offering that includes such Holder's
Registrable Securities, effect any public sale or distribution of securities of
the Company of the same class as the securities included in such registration
statement (or convertible into such class), including a sale pursuant to Rule
144(k) under the Securities Act (except as part of such underwritten
registration): (A) during the ninety (90)-day period (or such longer period of
not more than one hundred eighty (180) days if such longer period is also
required by the managing underwriters of the Company and all other Persons
having securities included in such registration) beginning on the effective
date of such registration statement, to the extent timely notified in writing
by the Company or the managing underwriters; and (B) in the event of a primary
offering by the Company, to the extent such Holder does not elect to sell such
securities in connection with such offering, during the period of distribution
of the Company's securities in such offering and during the period in which the
underwriting syndicate, if any, participates in the aftermarket. In any such
case the Company shall require the underwriters to notify the Company and the
Company, in turn, shall notify all Holders of Registrable Securities included
in the offering promptly after such participation ceases;
-9-
<PAGE> 10
(ii) such Holder shall not, during any period in
which any of his or its Registrable Securities are included in any effective
registration statement: (A) effect any stabilization transactions or engage in
any stabilization activity in connection with the Common Stock or other equity
securities of the Company in contravention of Rule 10b-7 under the Exchange
Act; (B) permit any Affiliated Purchaser (as that term is defined in Rule 10b-6
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 of Common Stock or Registrable Securities in contravention
of Rule 10b-6 under the Exchange Act; or (C) offer or agree to pay, directly or
indirectly, to anyone any compensation for soliciting another to purchase, or
for purchasing (other than for such Holder's own account), any securities of
the Company on a national securities exchange in contravention of Rule 10b-2
under the Exchange Act; and
(iii) such Holder shall, in the case of a
registration including Registrable Securities to be offered by it for sale
through Brokers Transactions, furnish each broker through whom such Holder
offers Registrable Securities such number of copies of the prospectus as the
broker may require and otherwise comply with the prospectus delivery
requirements under the Securities Act.
(b) The Company covenants and agrees with the Holders not
to effect any public or private sale or distribution (other than distributions
pursuant to employee benefit plans) of its securities, including a sale
pursuant to Regulation D under the Securities Act (or Section 4(2) thereof),
during the ten (10) day period prior to, and during the ninety (90) day period
beginning with, the effectiveness of a Registration Statement filed under
Section 2(a) hereof, to the extent timely requested in writing by the managing
underwriters, if any, or, if there be none, by the Holders of a majority in
aggregate amount of the Registrable Securities included on such registration
statement for such registration, except pursuant to registrations on Form S-4,
Form S-8 or any successor form.
5. REGISTRATION PROCEDURES.
If and whenever the Company is required by the provisions of this
Agreement to use commercially reasonable best efforts to effect or cause a
registration as provided in this Agreement, the Company will:
(a) Use its commercially reasonable best efforts to
prepare and file with the SEC, a registration statement within the time periods
specified herein, and use its commercially reasonable best efforts to cause
such registration statement to become effective as promptly as practicable and
to remain effective under the Securities Act until (i) the Lapse Date with
respect to registrations pursuant to Section 2(b) and (ii) until the earlier of
such time as all securities covered thereby are no longer Registrable
Securities or one hundred and eighty (180) days after such registration
statement becomes effective with respect to registrations pursuant to Section
2(a), in every case as any such period may be extended pursuant to Section 5(h)
hereto.
(b) Prepare and file (and, if applicable, cause to become
effective) with the SEC, as promptly as practicable, such amendments,
post-effective amendments and supplements to such registration statement and
the prospectus used in connection therewith as may be
-10-
<PAGE> 11
necessary to keep such registration statement effective for such period of time
required by Section 5(a) above, as such period may be extended pursuant to
Section 5(h) hereto.
(c) Comply in all material respects with the provisions of
the Securities Act with respect to the disposition of all securities covered by
such registration statement during the period during which any such
registration statement is required to be effective.
(d) Furnish to any Holder and any underwriter of
Registrable Securities, (i) such number of copies (including manually executed
and conformed copies) of such registration statement and of each amendment
thereof and supplement thereto (including all annexes, appendices, schedules
and exhibits), (ii) such number of copies of the prospectus used in connection
with such registration statement (including each preliminary prospectus, any
summary prospectus and the final prospectus), and (iii) such number of copies
of other documents, in each case as such Holder or such underwriter may
reasonably request.
(e) Use its commercially reasonable best efforts to
register or qualify all Registrable Securities covered by such registration
statement under the securities or "blue sky" laws of states of the United
States as any Holder or any underwriter shall reasonably request, and do any
and all other acts and things which may be reasonably requested by such Holder
or such underwriter to consummate the offering and disposition of Registrable
Securities in such jurisdictions; provided, however, that the Company shall not
be required to qualify generally to do business as a foreign corporation or as
a dealer in securities, subject itself to taxation, or consent to general
service of process in any jurisdiction wherein it is not then so qualified or
subject.
(f) Use, as soon as practicable after the effectiveness
of the registration statement, commercially reasonable best efforts to cause
the Registrable Securities covered by such registration statement to be
registered with, or approved by, such other United States public, governmental
or regulatory authorities, if any, as may be required in connection with the
disposition of such Registrable Securities.
(g) Use its commercially reasonable best efforts to list
the Common Stock covered by such registration statement on any securities
exchange (or if applicable, The NASDAQ Stock Market) on which any securities of
the Company are then listed, if the listing of such Registrable Securities in
then permitted under the applicable rules of such exchange (or if applicable,
The NASDAQ Stock Market).
(h) Notify each Holder as promptly as practicable and, if
requested by any Holder, confirm such notification in writing, (i) when a
prospectus or any prospectus supplement has been filed with the SEC, and, with
respect to a registration statement or any post-effective amendment thereto,
when the same has been declared effective by the SEC, (ii) of the issuance by
the SEC of any stop order or the coming to the Company's attention of the
initiation of any proceedings for such or a similar purpose, (iii) of the
receipt by the Company 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, (iv) of the occurrence of any event which requires the making of any
changes to a registration statement or related prospectus so that such
documents will not contain any untrue statement of a material
-11-
<PAGE> 12
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 the Company shall promptly prepare
and furnish to each Holder a reasonable number of copies of a supplemented or
amended prospectus such that, as thereafter delivered to the purchasers of such
Registrable Securities, such prospectus shall not include an untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they are made, not misleading), and (v) of the
Company's determination that the filing of a post-effective amendment to the
Registration Statement shall be necessary or appropriate. Upon the receipt of
any notice from the Company of the occurrence of any event of the kind
described in clause (iv) or (v) of this Section 5(h), the Holders shall
forthwith discontinue any offer and disposition of Registrable Securities
pursuant to the registration statement covering such Registrable Securities
until all Holders shall have received copies of a supplemented or amended
prospectus which is no longer defective and, if so directed by the Company,
shall deliver to the Company, at the Company's expense, all copies (other than
permanent file copies) of the defective prospectus covering such Registrable
Securities which are then in the Holders' possession. If the Company shall
provide any notice of the type referred to in the preceding sentence, the
period during which the registration statements are required to be effective as
set forth under Section 5(a) shall be extended by the number of days from and
including the date such notice is provided, to and including the date when
Holders shall have received copies of the corrected prospectus.
(i) Enter into such agreements and take such other
appropriate actions as are customary and reasonably necessary to expedite or
facilitate the disposition of such Registrable Securities, and in that regard,
deliver to the Holders such documents and certificates as may be reasonably
requested by any Holder of the Registrable Securities being sold or, as
applicable, the managing underwriters, to evidence the Company's compliance
with this Agreement including, without limitation, using commercially
reasonable best efforts to cause its independent accountants to deliver to the
Company's Board of Trustees (and to the Holders of Registrable Securities being
sold in any registration) an accountants' comfort letter substantially similar
to that in scope delivered in an underwritten public offering and covering
audited and interim financial statements included in the registration statement
or, if such letter cannot be obtained through the exercise of commercially
reasonable best efforts, cause its independent accountants to deliver to the
Company's Board of Trustees (and to the Holders of Registrable Securities being
sold in any registration) a comfort letter based on negotiated procedures
providing comfort with respect to the Company's financial statements included
or incorporated by reference in the registration statement at the highest level
permitted to be given by such accountants under the then applicable standards
of the Association of Independent Certified Accountants with respect to such
registration statement. In addition, the Company shall furnish to the Holders
of Registrable Securities being included in any registration hereunder an
opinion of counsel substantially identical in substance and scope to that
customarily delivered to underwriters in public offerings.
-12-
<PAGE> 13
6. UNDERWRITING.
(a) If requested by the underwriters for any underwritten
offering of Registrable Securities pursuant to a registration hereunder, the
Company will enter into and perform its obligations under an underwriting
agreement with the underwriters for such offering, such agreement to contain
such representations and warranties by the Company and such other terms and
provisions as are customarily contained in underwriting agreements with respect
to secondary distributions, including, without limitation, customary provisions
relating to indemnities and contribution and the provision of opinions of
counsel and accountants' letters.
(b) If any registration pursuant to Article 3 hereof
shall involve, in whole or in part, an underwritten offering, the Company may
require Registrable Securities requested to be registered pursuant to Article 3
to be included in such underwriting on the same terms and conditions as shall
be applicable to the securities being sold through underwriters under such
registration. In such case, each Holder requesting registration shall be a
party to any such underwriting agreement. Such agreement shall contain such
representations and warranties by the Holders requesting registration and such
other terms and provisions as are customarily contained in underwriting
agreements with respect to secondary distributions, including, without
limitation, provisions relating to indemnities and contribution.
(c) In any offering of Registrable Securities pursuant to
a registration hereunder, each Holder requesting registration shall also enter
into such additional or other agreements as may be customary in such
transactions, which agreements may contain, among other provisions, such
representations and warranties as the Company or the underwriters of such
offering may reasonably request (including, without limitation, those
concerning such Holder, its Registrable Securities, such Holder's intended plan
of distribution and any other information supplied by it to the Company for use
in such registration statement), and customary provisions relating to
indemnities and contribution.
7. RULE 144.
The Company shall use commercially reasonable best efforts to
take all actions necessary to comply with the filing requirements described in
Rule 144(c)(1) or any successor thereto so as to enable the Holders to sell
Registrable Securities without registration under the Securities Act. Upon the
written request of any Holder, the Company will deliver to such Holder a
written statement as to whether it has complied with the filing requirements
under Rule 144(c)(1) or any successor thereto.
8. PREPARATION; REASONABLE INVESTIGATION; INFORMATION.
In connection with the preparation and filing of each
registration statement registering Registrable Securities under the Securities
Act, (a) the Company will give the Holders and the underwriters, if any, and
their respective counsel and accountants, drafts of such registration statement
for their review and comment prior to filing and (during normal business hours
and subject to such reasonable limitations as the Company may impose to prevent
disruption of its business) such reasonable and customary access to its books
and records and such opportunities to discuss the business of the Company with
its officers and the independent
-13-
<PAGE> 14
public accountants who have certified its financial statements as shall be
necessary, in the reasonable opinion of the Holders of a majority in aggregate
amount of the Registrable Securities being registered and such underwriters or
their respective counsel, to conduct a reasonable investigation within the
meaning of the Securities Act and (b) as a condition precedent to including any
Registrable Securities of any Holder in any such registration, the Company may
require such Holder to furnish the Company such information regarding such
Holder and the distribution of such securities as the Company may from time to
time reasonably request in writing or as shall be required by law or the SEC in
connection with any registration; provided, however, that, upon the reasonable
request of the supplier of any such information, the recipient thereof shall
enter into a confidentiality agreement respecting such information in customary
form for an underwritten public offering.
9. INDEMNIFICATION AND CONTRIBUTION.
(a) In the case of each offering of Registrable
Securities made pursuant to this Agreement, the Company shall indemnify and
hold harmless each Holder, its officers, directors and trustees, each
underwriter of Registrable Securities so offered and each Person, if any, who
controls any of the foregoing Persons within the meaning of the Securities Act
("Holder Indemnitees"), from and against any and all claims, liabilities,
losses, damages, expenses and judgments, joint or several, to which they or any
of them may become subject, under the Securities Act or otherwise, including
any amount paid in settlement of any litigation commenced or threatened, and
shall promptly reimburse them, as and when incurred, for any legal or other
expenses incurred by them in connection with investigating any claims and
defending any actions, insofar as such losses, claims, damages, liabilities or
actions shall arise out of, or shall be based upon, any violation or alleged
violation by the Company of the Securities Act, or relating to action taken or
action or inaction required of the Company in connection with such offering, or
shall arise out of, or shall be based upon, any untrue statement or alleged
untrue statement of a material fact contained in the registration statement (or
in any preliminary or final prospectus included therein) relating to the
offering and sale of such Registrable Securities, or any amendment thereof or
supplement thereto, or in any document incorporated by reference therein, or
any omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading;
provided, that the Company shall not be liable to any Holder Indemnitee in any
such case to the extent that any such loss, claim, damage, liability or action
arises out of, or is based upon, any untrue statement or alleged untrue
statement, or any omission, if such statement or omission shall have been made
in reliance upon and in conformity with information furnished to the Company in
writing by or on behalf of such Holder specifically for use in the preparation
of the registration statement (or in any preliminary or final prospectus
included therein), or any amendment thereof or supplement thereto. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of any Holder and shall survive the transfer of such
securities. The foregoing indemnity agreement is in addition to any liability
which the Company may otherwise have to any Holder Indemnitee.
(b) In the case of each offering of Registrable
Securities made pursuant to this Agreement, each Holder, severally and not
jointly, shall indemnify and hold harmless the Company, its officers and
trustees, and each Person, if any, who controls any of the foregoing within the
meaning of the Securities Act and (if requested by the underwriters) each
underwriter
-14-
<PAGE> 15
who participates in the offering and each Person, if any, who controls any such
underwriter within the meaning of the Securities Act (the "Company
Indemnitees"), from and against any and all claims, liabilities, losses,
damages, expenses and judgments, joint or several, to which they or any of them
may become subject, under the Securities Act or otherwise, including any amount
paid in settlement of any litigation commenced or threatened, and shall
promptly reimburse them, as and when incurred, for any legal or other expenses
incurred by them in connection with investigating any claims and defending any
actions, insofar as any such losses, claims, damages, liabilities or actions
shall arise out of, or shall be based upon, any violation or alleged violation
by such Holder of the Securities Act, any blue sky laws, securities laws or
other applicable laws of any state or country in which the Registrable
Securities are offered and relating to action taken or action or inaction
required of such Holder in connection with such offering, or shall arise out
of, or shall be based upon, any untrue statement or alleged untrue statement of
a material fact contained in the registration statement (or in any preliminary
or final prospectus included therein) relating to the offering and sale of such
Registrable Securities or any amendment thereof or supplement thereto, or any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, but
in each case only to the extent that such untrue statement is contained in, or
such fact is omitted from, information furnished in writing to the Company by
or on behalf of such Holder specifically for use in the preparation of such
registration statement (or in any preliminary or final prospectus included
therein). The liability of each Holder under such indemnity provision (and
under Section 9(d) below) shall be limited to an amount equal to the total net
proceeds received by such Holder from such offering. Such indemnity shall
remain in full force and effect regardless of any investigation made by or on
behalf of the Company and shall survive the transfer of such securities. The
foregoing indemnity is in addition to any liability which Holder may otherwise
have to any Company Indemnitee.
(c) In case any proceeding (including any governmental
investigation) shall be instituted involving any Person in respect of which
indemnity may be sought pursuant to this Article 9, such Person (the
"indemnified party") shall promptly notify the Person against whom such
indemnity may be sought (the "indemnifying party") in writing. No
indemnification provided for in Section 9(a) or (b) shall be available to any
person who shall fail to give notice as provided in this Section 9(c) if the
indemnifying party to whom notice was not given was unaware of the proceeding
to which such notice would have related and was prejudiced by the failure to
give such notice, but the failure to give such notice shall not relieve the
indemnifying party or parties from any liability which it or they may have to
the indemnified party for contribution or otherwise than on account of the
provisions of Section 9(a) or (b). In case any such proceeding shall be
brought against any indemnified party and it shall notify the indemnifying
party of the commencement thereof, the indemnifying party shall be entitled to
participate therein and, to the extent that it shall wish, jointly with any
other indemnifying party similarly notified, to assume the defense thereof,
with counsel reasonably satisfactory to such indemnified party and shall pay as
incurred the fees and disbursements of such counsel related to such proceeding.
In any such proceeding, any indemnified party shall have the right to retain
its own counsel at its own expense. Notwithstanding the foregoing, the
indemnifying party shall pay as incurred the fees and expenses of the counsel
retained by the indemnified party in the event (i) the indemnifying party and
the indemnified party shall have mutually agreed to the retention of such
counsel or (ii) the named parties to any such proceeding (including any
impleaded parties) include both the indemnifying party and the indemnified
party and
-15-
<PAGE> 16
representation of both parties by the same counsel, in the written opinion of
such counsel, would be inappropriate due to actual or potential differing
interests between them. It is understood that the indemnifying party shall
not, in connection with any proceeding or related proceedings in the same
jurisdiction, be liable for the reasonable fees and expenses of more than one
separate firm for all such indemnified parties. Such firm shall be designated
in writing by the Holders of a majority in aggregate Fair Market Value of the
then Outstanding Registrable Securities in the case of parties indemnified
pursuant to Section 9(a) and by the Company in the case of parties indemnified
pursuant to Section 9(b). The indemnifying party shall not be liable for any
settlement of any proceeding effected without its written consent but if
settled with such consent or if there be a final judgement for the plaintiff,
the indemnifying party agrees to indemnify the indemnified party from and
against any loss or liability by reason of such settlement or judgment.
(d) If the indemnification provided for in this Article 9
is unavailable to or insufficient to hold harmless an indemnified party under
Section 9(a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) referred to therein,
or if the indemnified party failed to give the notice required under Section
9(c) above, then each indemnifying party shall contribute to the amount paid or
payable by the indemnified party as a result of such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) in proportion as is
appropriate to reflect not only both the relative benefits received by such
party (as compared to the benefits received by all other parties) from the
offering in respect of which indemnity is sought, but also the relative fault
of all parties in connection with the statements or omissions which resulted in
such losses, claims, damages or liabilities (or actions or proceedings in
respect thereof), as well as any other relevant equitable considerations. The
relative benefits received by a party shall be deemed to be in the same
proportion as the total net proceeds from the offering (before deducting
expenses) received by it bear to the total amounts (including, in the case of
any underwriter, underwriting commission and discounts) received by each other
party. Relative fault shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The parties agree that it would not be just and equitable if
contributions pursuant to this Section 9(d) were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to above in this Section 9(d). The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages or liabilities (or actions or proceedings in respect thereof)
referred to above shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
subsection (d), no person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
-16-
<PAGE> 17
10. EXPENSES.
In connection with any registration under this Agreement, the
Company shall pay all Registration Expenses. In addition, in connection with
each registration, the Company shall pay the reasonable fees and expenses of
one counsel to represent the interests of the Holders selling Registrable
Securities in such registration. Notwithstanding the foregoing, in the event
that any Holder or Holders require the Company to conduct an underwritten
public offering of Registrable Securities pursuant to Section 2(a) prior to 12
months after the date hereof, each such Holder or Holders shall pay its pro
rata share of all Registration Expenses.
11. NOTICES.
Except as otherwise provided below, whenever it is provided in
this Agreement that any notice, demand, request, consent, approval, declaration
or other communication shall or may be given to or served upon any of the
parties hereto, or whenever any of the parties hereto, desires to provide to or
serve upon the other party any other communication with respect to this
Agreement, each such notice, demand, request, consent, approval, declaration or
other communication shall be in writing and shall be delivered in person,
mailed by registered or certified mail (return receipt requested) or sent by
overnight courier service or via facsimile transmission (which is confirmed),
as follows: (a) if to a Holder, at the most current address given by such
Holder to the Company by means of a notice given in accordance with the
provisions of this Article 11, which address initially is, with respect to the
Voting Trust, the address set forth in the Securities Purchase Agreement; and
(b) if to the Company, initially at the address set forth in the Securities
Purchase Agreement and thereafter at such other address, notice of which is
given in accordance with the provisions of this Article 11. The furnishing of
any notice required hereunder may be waived in writing by the party entitled to
receive such notice. Every notice, demand, request, consent, approval,
declaration or other communication hereunder shall be deemed to have been duly
furnished or served on the party to which it is addressed, in the case of
delivery in person or by facsimile, on the date when sent (with receipt
personally acknowledged in the case of telecopied notice), in the case of
overnight mail, on the day after it is sent and in all other cases, five
business days after it is sent. Failure or delay in delivering copies of any
notice, demand, request, consent, approval, declaration or other communication
to the persons designated above to receive copies shall in no way adversely
affect the effectiveness of such notice, demand, request, consent, approval,
declaration or other communication.
12. ENTIRE AGREEMENT.
This Agreement represents the entire agreement and
understanding among the parties hereto with respect to the subject matter
hereof and supersedes any and all prior oral and written agreements,
arrangements and understandings among the parties hereto with respect to such
subject matter; and this Agreement can be amended, supplemented or changed, and
any provision hereof can be waived or a departure from any provision hereof can
be consented to, only by a written instrument making specific reference to this
Agreement signed by the Company and the Holders of at least 80% of the
Registrable Securities then outstanding; provided that any amendment that
adversely affects the rights of any Holder must be signed by the adversely
-17-
<PAGE> 18
affected Holder; provided further that any waiver must be signed by the party
entitled to the benefit of the term or matter being waived.
13. ARTICLE HEADINGS.
The article headings contained in this Agreement are for
general reference purposes only and shall not affect in any manner the meaning,
interpretation or construction of the terms or other provisions of this
Agreement.
14. APPLICABLE LAW.
This Agreement shall be governed by, construed and enforced in
accordance with the laws of the Commonwealth of Pennsylvania applicable to
contracts to be made, executed, delivered and performed wholly within such
state and, in any case, without regard to the conflicts of law principles of
such state.
15. SEVERABILITY.
If at any time subsequent to the date hereof, any provision of
this Agreement shall be held by any court of competent jurisdiction to be
illegal, void or unenforceable, such provision shall be of no force and effect,
but the illegality or unenforceability of such provision shall have no effect
upon and shall not impair the enforceability of any other provision of this
Agreement.
16. EQUITABLE REMEDIES.
The parties hereto agree that irreparable harm would occur in
the event that any of the agreements and provisions of this Agreement were not
performed fully by the parties hereto in accordance with their specific terms
or conditions or were otherwise breached, and that money damages are an
inadequate remedy for breach of this Agreement because of the difficulty of
ascertaining and quantifying the amount of damage that will be suffered by the
parties hereto in the event that this Agreement is not performed in accordance
with its terms or conditions or is otherwise breached. It is accordingly
hereby agreed that the parties hereto shall be entitled to an injunction or
injunctions to restrain, enjoin and prevent breaches of this Agreement by the
other parties and to enforce specifically the terms and provisions hereof in
any court of the United States or any state having jurisdiction, such remedy
being in addition to and not in lieu of, any other rights and remedies to which
the other parties are entitled to at law or in equity.
17. NO WAIVER.
The failure of any party at any time or times to require
performance of any provision hereof shall not affect the right at a later time
to enforce the same. No waiver by any party of any condition, and no breach of
any provision, term, covenant, representation or warranty contained in this
Agreement, whether by conduct or otherwise, in any one or more instances, shall
be deemed to be construed as a further or continuing waiver of any such
condition or of the breach of any other provision, term, covenant,
representation or warranty of this Agreement.
-18-
<PAGE> 19
18. COUNTERPARTS.
This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute but one and the same original instrument.
19. THIRD PARTY BENEFICIARIES; SUCCESSORS AND ASSIGNS.
This Agreement shall inure to the benefit of and be binding
upon the successors, assigns and transferees of each of the parties hereto;
and; provided that nothing herein shall be deemed to permit any assignment,
transfer or other disposition of Registrable Securities in violation of the
terms of the Securities Purchase Agreement, the Warrant, the Standstill
Agreement of even date herewith between the Company and the Voting Trust, the
Contribution Agreement or applicable law. If any transferee of any Holder
shall acquire Registrable Securities, in any manner, whether by operation of
law or otherwise, such Registerable Securities shall be held subject to all of
the terms of this Agreement, and by taking and holding such Registrable
Securities such person shall be conclusively deemed to have agreed to be bound
by and to perform all of the terms and provisions of this Agreement.
21. NON-RECOURSE.
No recourse shall be had for any obligation of the Company
hereunder, or for any claim based thereon or otherwise in respect thereof,
against any past, present or future trustee, shareholder, officer or employee
of the Company, whether by virtue of any statute or rule of law, or by the
enforcement of any assessment or penalty or otherwise, all such other liability
being expressly waived and released by each other party hereto.
22. OTHER REGISTRATION RIGHTS AGREEMENTS.
The Company represents and warrants to the Holder that it (i)
has not granted any registration rights to any Person other than to the
Additional Holders pursuant to the Additional Registration Rights Agreements,
and (ii) has caused to be amended all agreements relating to registration
rights to which it is a party so that such agreements do not conflict with this
Agreement, including without limitation Sections 2(a)(iv) and 3(a)(ii) hereof.
The Company covenants and agrees that it will not grant any Person any
registration rights that are in conflict with this Agreement.
IN WITNESS WHEREOF, this Agreement has been executed and
delivered as of the date first above written.
BRANDYWINE REALTY TRUST
By: /s/ John M. Adderly, Jr.
-------------------------------------
John M. Adderly, Jr., Vice President
-19-
<PAGE> 20
RAI REAL ESTATE ADVISERS, INC.,
as voting trustee of a voting trust dated
November 6, 1996.
By: /s/ Richard K. Layman
------------------------------------------
Richard K. Layman, President
-20-
<PAGE> 1
PLEDGE AGREEMENT
PLEDGE AGREEMENT (the "Agreement") made as of this 14th day of
November, 1996 by and among RAI Real Estate Advisers, Inc. ("RAI"), as the
voting trustee of a voting trust dated as of November 6, 1996 between the
Commonwealth of Pennsylvania State Employes' Retirement System as shareholder
and RAI as voting trustee ("Pledgor"), Brandywine Realty Trust, a Maryland real
estate investment trust ("Pledgee") and Commonwealth Land Title Insurance
Company ("Escrow Agent").
WITNESSETH:
WHEREAS, as of the date hereof, pursuant to a Contribution Agreement
dated November 6, 1996 by and among, inter alia, the Pledgor and Pledgee (the
"Contribution Agreement"), the Pledgee has issued to the Pledgor shares of the
Pledgee's Series A Convertible Preferred Shares (the "Preferred Shares"), par
value $.01 per share;
WHEREAS, pursuant to Sections 3.3 and 10.10 of the Contribution
Agreement, any and all liability of Sellers (as defined in the Contribution
Agreement) and the Pledgor under the Contribution Agreement, after the closing
under the Contribution Agreement, is limited to and enforceable only against
the Collateral (as defined below) on the terms set forth in this Agreement; and
WHEREAS, pursuant to Section 10.14 of the Securities Purchase
Agreement dated as of November 6, 1996 by and between the Pledgor and the
Pledgee (the "Securities Purchase Agreement"), recourse for any liability or
obligation of Pledgor thereunder is limited to the Collateral on the terms set
forth in this Agreement.
NOW, THEREFORE, intending to be legally bound hereby, the parties
hereto agrees as follows:
1. Defined Terms. For purposes of this Agreement, the following
terms shall have the meanings specified below and shall be equally applicable
to both singular and plural forms.
"Collateral" means, subject to Section 12 below, the Pledged
Shares and, in the event the Pledged Shares are sold, transferred, assigned,
exchanged or otherwise disposed of pursuant to Section 8 below, all proceeds
from the sale, transfer, assignment, exchange or other disposition of the
Pledged Shares or other replacement collateral which is reasonably satisfactory
to Pledgee.
"Event of Default" means either (i) a court of competent
jurisdiction having entered a final judgment or (ii) a final resolution being
reached by mediation or
<PAGE> 2
arbitration pursuant to the dispute resolution provision in the Securities
Purchase Agreement, against Pledgor in favor of Pledgee for an obligation or
liability arising under the Contribution Agreement or the Securities Purchase
Agreement.
"Pledged Shares" means the 90,909 Preferred Shares being
delivered to the Escrow Agent pursuant to Section 4 below and the shares of the
Pledgee's common shares of beneficial interest, par value $.01 per share,
issued upon any conversion of such Preferred Shares.
"Uniform Commercial Code" means the Uniform Commercial Code
from time to time in effect in the Commonwealth of Pennsylvania and the Uniform
Commercial Code of any other state which shall be applicable to the pledge of
shares hereunder.
2. Pledge; Grant of Security Interest. The Pledgor hereby grants
and confirms to Pledgee a first pledge and security interest in the Collateral,
as collateral security for any and all liability of Sellers or Pledgor to
Pledgee arising out of the Contribution Agreement or the Securities Purchase
Agreement.
3. Appointment of Escrow Agent. Pledgor and Pledgee hereby
appoint Escrow Agent as the escrow agent under this Agreement and Escrow Agent
accepts such appointment in accordance with the provisions of this Agreement.
4. Share Transfer Powers. Pledgor hereby delivers to Escrow
Agent, and Escrow Agent acknowledges receipt of, all certificates representing
the Pledged Shares, with undated share transfer powers covering such
certificates, duly executed in blank by the Pledgor. Such certificates, share
transfer powers and any other Collateral subsequently delivered to Escrow Agent
pursuant to this Agreement shall be held in escrow by Escrow Agent pursuant to
the terms hereof.
5. Representations and Warranties. Pledgor represents and
warrants that; (a) Pledgor has the power and authority and the legal right to
grant the lien on the Collateral pursuant to this Agreement; (b) Pledgor is the
record owner of, and has good and marketable title to, the Pledged Shares, free
of any and all liens or options in favor of any other person, except the lien
granted by this Agreement; (c) the lien granted and confirmed pursuant to this
Agreement constitutes a valid, perfected priority lien on the Collateral,
enforceable as such against all creditors of the Pledgor and any persons
purporting to purchase any Collateral from the Pledgor; and (d) this Agreement
constitutes the valid and binding obligations of Pledgor, enforceable against
Pledgor in accordance with its terms, and the execution, delivery and
performance of this Agreement does not violate any agreement or understanding
to which Pledgor is a party or by which Pledgor is bound, or any applicable
law, rule or regulation.
6. Covenants. Pledgor covenants and agrees with Pledgee that
from and after the date of this Agreement and until the second anniversary of
the date of the Securities Purchase Agreement (or, if on such second
anniversary, a claim has been made by Pledgee
-2-
<PAGE> 3
pursuant to Section 16 (f) below, which, if resolved in Pledgee's favor, would
result in an Event of Default, until such later date that such claim has been
resolved) (the "Termination Date"):
(a) If Pledgor shall, as a result of its ownership of the
Pledged Shares, become entitled to receive or shall receive any share
certificate as a result of a share dividend, share split or similar
distribution on, or as a conversion of or in exchange for any of the Pledged
Shares then constituting all or a portion of the Collateral, Pledgor shall
immediately deliver the same to Escrow Agent in the exact form received, duly
endorsed by the Pledgor to Pledgee, if required, together with an undated share
transfer power covering such certificate duly executed in blank by the Pledgor
to be held as part of the Collateral.
(b) Without the prior written consent of Pledgee, the
Pledgor will not create, incur or permit to exist any lien or option in favor
of, or any claim of any person with respect to, the Collateral, or any interest
therein, except for the lien provided for by this Agreement. The Pledgor will
defend the right, title and interest of Pledgee in and to the Collateral
against the claim and demands of all persons whom so ever.
(c) At any time and from time to time upon the written
request of, and at the expense of, Pledgee, the Pledgor will promptly and duly
execute and delivery such further documents and take such further actions as
Pledgee may reasonably request for the purposes of obtaining or preserving the
full benefits of this Agreement and of the rights and powers herein granted.
If any amount payable under or in connection with any of the Collateral shall
be or become evidenced by any promissory note, other instrument or chattel
paper, such note, instrument or chattel paper shall be immediately delivered to
Pledgee, duly endorsed in a manner satisfactory to Pledgee, to be held as
Collateral pursuant to this Agreement.
(d) Pledgor agrees to pay, and to save Pledgee and Escrow
Agent harmless from, any and all liability with respect to or resulting from
any delay in paying, any and all stamp, exercise, sales or other taxes which
may be payable or determined to be payable with respect to any of the
Collateral or in connection with any of the transactions contemplated by this
Agreement.
7. Cash Dividends; Other Distributions; Voting Rights. Unless an
Event of Default shall have occurred and Pledgee shall have given notice to
Pledgor of Pledgee's intent to exercise one or more of its rights pursuant to
Sections 9 and 10 below, Pledgor shall be permitted to receive all cash
dividends and other distributions, if any, paid in respect of the Pledged
Shares (except as provided in Section 6(a) above) and to exercise all voting
and other rights with respect to the Pledged Shares.
8. Sale of Pledged Shares. Unless an Event of Default shall have
occurred and Pledgee shall have given notice to Pledgor of Pledgee's intent to
exercise one or more of its rights pursuant to Sections 9 and 10 below, Pledgor
shall have the right to sell, transfer, assign, exchange or otherwise dispose
of, or grant an option with respect to, any or all of the Pledged Shares
provided Pledgee receives a security interest in the proceeds of the Pledged
Shares or
-3-
<PAGE> 4
such other collateral as is satisfactory to Pledgee in its reasonable
discretion. Pledgor, Pledgee and Escrow Agent shall cooperate with each other
in order to accomplish any such transaction.
9. Rights of Pledgee. If an Event of Default shall occur: (i)
Pledgee shall have the right to receive any and all cash dividends paid in
respect of the Pledged Shares, and (ii) at Pledgee's option, all the Collateral
shall be transferred into the name of Pledgee or its nominee, and Pledgee or
its nominee may, at its option, thereafter exercise (A) all voting and other
rights pertaining to the Collateral and (B) any and all rights of conversion,
exchange, subscription and any other rights, privileges or options pertaining
to the Collateral as if it were the absolute owner thereof, all without
liability except to account for property actually received by it, but Pledgee
shall have no duty to the Pledgor to exercise any such right, privilege or
option and shall not be responsible for any failure to do so or delay in so
doing.
10. Remedies. If an Event of Default shall have occurred which is
then continuing, the Pledgee shall thereafter have all of the rights and
remedies set forth in this Agreement and in the Contribution Agreement and of a
Pledgee after default under the Uniform Commercial Code or other applicable law
with respect to the Collateral and shall have the right, at any time or times
thereafter to sell, resell, assign and deliver all or any part of the
Collateral in one or more parcels at public or private sale. The Pledgee shall
give Pledgee at least ten (10) days' prior written notice of the time and place
of any public sale of any Collateral or of the time after which any private
sale or any other intended disposition thereof is to be made. Any such notice
shall be deemed to meet all requirements hereof and of any applicable law
(including the Uniform Commercial Code) that reasonable notification be given
of the time and place of such sale or other disposition. All such sales shall
be at such commercially reasonable price or prices as the Pledgee shall deem
best and either for cash or on credit or for future delivery (without the
Pledgee assuming any responsibility for credit risk). At any such sale or
sales the Pledgee may purchase any or all of the Collateral to be sold thereat
upon such terms as the Pledgee may deem best. The Pledgor shall not remain
liable for any deficiency if the proceeds of any sale or other disposition of
Collateral are insufficient to pay the judgment causing the Event of Default
and the reasonable fees and disbursements of any attorneys employed by Pledgee
to collect such judgment.
11. Private Sales. The Pledgor recognizes that Pledgee may be
unable to effect a public sale of any or all the Pledged Shares, by reason of
certain prohibitions contained in the Securities Act of 1933 (the "Securities
Act") and applicable state securities laws or otherwise, and may be compelled
to resort to one or more private sales thereof to a restricted group of
purchasers which will be obliged to agree, among other things, to acquire such
securities for their own account for investment and not with a view to the
distribution or resale thereof. The Pledgor acknowledges and agrees that any
such private sale may result in prices and other terms less favorable than if
such sale were a public sale and, notwithstanding such circumstances, agrees
that any such private sale shall be deemed to have been made in a commercially
reasonable manner. Pledgee shall be under no obligation to delay a sale of any
of the Pledged Shares for the period of time necessary to permit the Pledged
Shares to be registered for public sale under the Securities Act, or under
applicable state securities laws.
-4-
<PAGE> 5
12. Return of Collateral. On the Termination Date (as defined in
Section 6 above), the Escrow Agent shall return to Pledgor any remaining
Collateral and this Agreement shall terminate.
13. Further Assurances. Pledgor agrees to cooperate with Pledgee
and to execute and deliver, or cause to be executed and delivered, all such
other instruments and to take all such actions as Pledgee may reasonably
request from time to time which shall be appropriate or necessary in Pledgee's
judgment in order to carry out the provisions and purposes of this Agreement.
14. Escrow Agent
(a) Designation. Escrow Agent is designated by Pledgee
to hold the Collateral and holds the Collateral on behalf of Pledgee for
purposes of Articles 8 and 9 of the Uniform Commercial Code.
(b) Limitation on Duties and Liability. Escrow Agent's
sole duty with respect to the custody, safekeeping and physical preservation of
the Collateral in its possession, under Section 9207 of the Uniform Commercial
Code or otherwise, shall be to take reasonable steps to carry out the terms of
this Agreement and to assure safekeeping of the Collateral while in Escrow
Agent's possession. In no event, however, shall Escrow Agent have any duty to
preserve rights in the Collateral against other parties and Escrow Agent shall
not be liable for failure to demand, collect or realize upon any of the
Collateral or for any delay in doing so. Escrow Agent shall not be liable for
any actions undertaken in good faith or in reliance upon documents which it
believes to be genuine.
(c) Indemnification. Pledgor and Pledgee each agrees to
indemnify and hold Escrow Agent harmless against any loss or liability
(including reasonable attorneys' fees) incurred by Escrow Agent as a result of
any dispute regarding the Collateral or in any way arising from the performance
of its obligations under this Agreement, except for any loss or liability
resulting from Escrow Agent's negligence or willful misconduct.
(d) Resignation; Successor. Escrow Agent may resign from
its obligations hereunder by written notice to Pledgor and Pledgee, such
resignation to become effective upon the appointment of a successor escrow
holder and the delivery to such successor escrow holder of the Collateral.
Within 10 days following notice of Escrow Agent's intent to resign, the Pledgor
and Pledgee shall jointly designate in writing a successor escrow holder. In
the absence of such a designation by Pledgor and Pledgee, Escrow Agent may
designate a successor escrow holder. The resigning Escrow Agent shall have no
responsibility for the performance of failure of performance of any successor
escrow holder hereunder, whether designated by Pledgor and Pledgee or by the
resigning Escrow Agent. When the resignation of a resigning Escrow Agent shall
become affective hereunder, such Escrow Agent shall be
-5-
<PAGE> 6
absolutely released and relieved from any and all liability arising thereafter
under this Agreement.
15. Powers Coupled with an Interest. All authorizations and
agencies herein contained with respect to the Collateral are irrevocable and
powers coupled with an interest.
16. Miscellaneous.
(a) Indulgences, Etc. Neither the failure nor any delay
on the part of any party hereto to exercise any right, remedy, power or
privilege under this Agreement shall operate as a waiver thereof, nor shall any
single or partial exercise of any right, remedy, power or privilege preclude
any other or further exercise of the same or of any other right, remedy, power
or privilege, nor shall any waiver of any right, remedy, power or privilege
with respect to any occurrence be construed as a waiver of such right, remedy,
power or privilege with respect to any other occurrence. No waiver shall be
effective unless it is in writing and signed by the party asserted to have
granted such waiver.
(b) Controlling Law. This Agreement and all questions
relating to its validity, interpretation, performance and enforcement
(including, without limitation, provisions concerning limitations of actions),
shall be governed by and construed in accordance with the laws of the
Commonwealth of Pennsylvania, notwithstanding any conflict-of-laws doctrines of
such state or other jurisdiction to the contrary, and without the aid of any
canon, custom or rule of law requiring construction against the draftsman.
(c) Notices. All notices required or permitted hereunder
shall be deemed given when delivered (personally or by recognized courier
service such as Federal Express), or upon receipt by the party entitled to
receive the notice two days after sent by registered or certified mail, postage
prepaid, addressed as follows or to such other address or addresses as may
hereafter be furnished in writing by notice similarly given by one party to the
other:
(i) If to Pledgor:
RAI Real Estate Advisers, Inc.
259 Radnor-Chester Road
Suite 200
Radnor, PA 19087
Attention: President
-6-
<PAGE> 7
With a copy to:
Wolf, Block, Schorr and Solis-Cohen
Twelfth Floor Packard Building
S.E. Corner 15th and Chestnut Streets
Philadelphia, PA 19102-2678
Attention: Jason M. Shargel, Esquire
(ii) If to Pledgee:
Brandywine Realty Trust
16 Campus Boulevard
Suite 150
Newtown Square, PA 19073
Attention: President
With a copy to:
Pepper Hamilton & Scheetz
3000 Two Logan Square
18th and Arch Streets
Philadelphia, PA 19103
Attention: Michael H. Friedman, Esquire
(iii) If to Escrow Agent:
Commonwealth Land Title Insurance Company
Two Logan Square
Suite 500
Philadelphia, PA 19103
Attention: Edward J. Rose
(d) Binding Nature of Agreement; No Assignment. This
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns, except that neither Pledgor nor
Pledgee may assign or transfer any of their obligations under this Agreement
without the consent of the other.
(e) Execution in Counterparts. This Agreement may be
executed in any number of counterparts, each of which shall be deemed to be an
original as against any party whose signature appears thereon, and all of which
shall together constitute one and the same instrument. This Agreement shall
become binding when one or more counterparts hereof, individually or taken
together, shall bear the signatures of all of the parties reflected hereon as
the signatories.
-7-
<PAGE> 8
(f) Settlement of Disputes. Any and all controversies of
every kind and nature between the parties hereto shall be resolved in
accordance with the provisions set forth in Section 10.10 of the Securities
Purchase Agreement.
(g) Fees and Expenses of Escrow Agent. Pledgee shall pay
all fees and expenses of the Escrow Agent hereunder.
(h) Provisions Separable. The provisions of this
Agreement are independent of and separable from each other, and no provision
shall be affected or rendered invalid or unenforceable by virtue of the fact
that for any reason any other or others of them may be invalid or unenforceable
in whole or in part.
(I) Entire Agreement. This Agreement contains the entire
understanding among the parties hereto with respect to the subject matter
hereof, and supersedes all prior and contemporaneous agreements and
understandings, inducements or conditions, express or implied, oral or written,
except as herein contained. The express terms hereof control and supersede any
course or performance and/or usage of the trade inconsistent with any of the
terms hereof. This Agreement may not be modified or amended other than by
agreement in writing.
(j) Section Headings. The section headings in this
Agreement are for convenience only; they form no part of this Agreement and
shall not affect its interpretation.
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
duly executed and delivered as of the date first above written.
BRANDYWINE REALTY TRUST
By: /s/ John M. Adderly, Jr.
---------------------------------------
John M. Adderly, Jr., Vice President
RAI REAL ESTATE ADVISERS, INC., as voting
trustee of a voting trust dated November 6, 1996.
By: /s/ Richard K. Layman
---------------------------------------
Richard K. Layman, President
COMMONWEALTH LAND TITLE
INSURANCE COMPANY
By: /s/ Gary Sternick
---------------------------------------
Gary Sternick
Title Officer
-8-
<PAGE> 1
VOTING AGREEMENT
VOTING AGREEMENT (the "Agreement") made as of this 14th day of
November, 1996 by and among RAI Real Estate Advisers, Inc. ("RAI") as the
voting trustee of a voting trust dated as of November 6, 1996 executed by the
Commonwealth of Pennsylvania State Employes' Retirement System as shareholder
and by RAI as voting trustee (the "Purchaser"), Safeguard Scientifics, Inc., a
Pennsylvania corporation ("Safeguard"), Safeguard Scientifics (Delaware), Inc.,
a Delaware corporation ("SSD"), The Nichols Company, a Pennsylvania corporation
("TNC"), Anthony A. Nichols, Sr. ("Nichols"), The Richard M. Osborne Trust
(the "RMO Trust") and Turkey Vulture Fund XIII, Ltd. (the "RMO Fund").
Safeguard, SSD, TNC, Nichols, the RMO Trust and the RMO Fund are sometimes
referred to herein individually as a "Holder" and collectively as the
"Holders."
WHEREAS, the Holders own common shares of beneficial interest, par
value $.01 per share (the "Shares") of the Brandywine Realty Trust, a Maryland
real estate investment trust (the "Trust") and warrants (the "Warrants")
exercisable for Shares;
WHEREAS, the Trust has entered into (i) a Contribution Agreement (the
"Contribution Agreement") dated November 6, 1996 by and among inter alia, the
Trust and the Purchaser, and (ii) a Securities Purchase Agreement (the
"Securities Purchase Agreement") dated November 6, 1996 between the Trust and
the Purchaser. The Contribution Agreement and the Securities Purchase
Agreement are together referred to herein as the "Transaction Agreements;" and
WHEREAS, the Holders desire to enter into an agreement to be
specifically enforceable against each of them, as an inducement to the
Purchaser to consummate the transactions contemplated by the Transaction
Agreements, pursuant to which the Holders, subject to the terms hereof, agree
to vote the Shares in accordance with the terms of the Transaction Agreements;
NOW, THEREFORE, intending to be legally bound hereby, the parties
hereto agree as follows:
1. Voting of Shares. Each of the Holders shall vote all of the
Shares now or hereafter registered in such Holder's name, including, but not
limited to Shares acquired upon exercise of Warrants, in all matters submitted
to the shareholders of the Trust for approval in accordance with Section 7.7 of
the Securities Purchase Agreement.
2. Representations of Holders. Each of the Holders hereby
represents and warrants to each of the other Holders and to the Purchaser that
such Holder: (a) owns and has the right to vote the number of Shares set forth
on Schedule A attached hereto, (b) has full power to enter into this Agreement
and has not, prior to the date of this Agreement, executed or delivered any
proxy or entered into any other voting agreement or similar arrangement which
has not
<PAGE> 2
expired prior to the date hereof, and (c) will not take any action inconsistent
with the purposes and provisions of this Agreement.
3. Binding Agreement; Changes in Shares. Each Holder expressly
agrees that this Agreement shall be specifically enforceable in any court of
competent jurisdiction in accordance with its terms against each of the parties
hereto. In the event that at any time after the date hereof, any Shares or
other shares of beneficial interest of the Trust are issued on, or in exchange
of any of the Shares by reason of any dividend, split, reclassification or
consolidation, such Shares or other beneficial interests shall be subject to
the terms of this Agreement.
4. Voting by the Purchaser. Purchaser shall vote all securities
of the Trust held by it at any duly called meeting of the Trust's shareholders
in favor of restoring voting rights of the RMO Trust and the RMO Fund.
5. Miscellaneous.
(a) Indulgences, Etc. Neither the failure nor any delay
on the part of any party hereto to exercise any right, remedy, power or
privilege under this Agreement shall operate as a waiver thereof, nor shall any
single or partial exercise of any right, remedy, power or privilege preclude
any other or further exercise of the same or of any other right, remedy, power
or privilege, nor shall any waiver of any right, remedy, power or privilege
with respect to any occurrence be construed as a waiver of such right, remedy,
power or privilege with respect to any other occurrence. No waiver shall be
effective unless it is in writing and signed by the party asserted to have
granted such waiver.
(b) Controlling Law. This Agreement and all questions
relating to its validity, interpretation, performance and enforcement
(including, without limitation, provisions concerning limitations of actions),
shall be governed by and construed in accordance with the laws of the state of
Maryland, notwithstanding any conflict-of-laws doctrines of such state or other
jurisdiction to the contrary, and without the aid of any canon, custom or rule
of law requiring construction against the draftsman.
(c) Schedules. All schedules attached hereto are hereby
incorporated by reference into, and made a part of, this Agreement.
(d) Binding Nature of Agreement; No Assignment. This
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns, except that no party may assign or
transfer any of their obligations under this Agreement without the consent of
the other parties.
(e) Execution in Counterparts. This Agreement may be
executed in any number of counterparts, each of which shall be deemed to be an
original as against any party whose signature appears thereon, and all of which
shall together constitute one and the same instrument. This Agreement shall
become binding when one or more counterparts hereof,
-2-
<PAGE> 3
individually or taken together, shall bear the signatures of all of the parties
reflected hereon as the signatories.
(f) Settlement of Disputes. Any and all controversies
of every kind and nature among the parties hereto shall be resolved in
accordance with the provisions set forth in Section 10.10 of the Securities
Purchase Agreement.
(g) Provisions Separable. The provisions of this
Agreement are independent of and separable from each other, and no provision
shall be affected or rendered invalid or unenforceable by virtue of the fact
that for any reason any other or others of them may be invalid or unenforceable
in whole or in part.
(h) Entire Agreement. This Agreement contains the entire
understanding among the parties hereto with respect to the subject matter
hereof, and supersedes all prior and contemporaneous agreements and
understandings, inducements or conditions, express or implied, oral or written,
except as herein contained. The express terms hereof control and supersede any
course or performance and/or usage of the trade inconsistent with any of the
terms hereof. This Agreement may not be modified or amended other than by
agreement in writing.
(i) Section Headings. The section headings in this
Agreement are for convenience only; they form no part of this Agreement and
shall not affect its interpretation.
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Agreement on the date first above written.
RAI REAL ESTATE ADVISERS, INC., as voting
trustee of a voting trust dated November 6, 1996
By: /s/ Kathleen M. Hands
---------------------------------
SAFEGUARD SCIENTIFICS, INC.
By: /s/ Gerald Wilk
---------------------------------
SAFEGUARD SCIENTIFICS (DELAWARE),
INC.
By: /s/ Gerald Wilk
---------------------------------
-3-
<PAGE> 4
THE NICHOLS COMPANY
By: /s/ John P. Gallagher
------------------------------------
Vice President Finance
/s/ Anthony A. Nichols, Sr.
---------------------------------------
ANTHONY A. NICHOLS, SR.
THE RICHARD M. OSBORNE TRUST
By: /s/ Richard M. Osborne
------------------------------------
Senior Vice President
TURKEY VULTURE FUND XIII, LTD.
By: /s/ Richard M. Osborne
------------------------------------
Vice President
-4-
<PAGE> 1
BUSINESS AND PROPERTIES
GENERAL
The Initial Properties include 23 suburban office buildings (22 of which
are Class A properties) totalling approximately 12 million net rentable square
feet and one Class A industrial facility (1510 Gehman Road) totalling
approximately 152,000 net rentable square feet. The Company developed 19 of the
Initial Properties and currently manages 23 of the Initial Properties, in
addition to managing approximately 575,000 net rentable square feet on behalf of
third parties and approximately 159,000 net rentable square feet at the four
Option Properties. In addition to owning the Initial Properties, the Company, on
November 14, 1996, acquired the SERS Properties, which consist of seven office
buildings and two industrial facilities, and has entered into agreements to
purchase the four other Acquisition Properties. The Properties are located in
the Market, with the exception of: (i) the Twin Forks Office Park located in
Raleigh, North Carolina, which was acquired by the Company in 1986 in connection
with the Company's formation; (ii) 168 Franklin Corner Road located in
Lawrenceville, New Jersey; and (iii) Delaware Corporate Center (an Acquisition
Property) located in New Castle County, Delaware. The Properties are easily
accessible from major thoroughfares and are in close proximity to numerous
amenities, including restaurants, retail shopping malls, hotels and banks. The
Properties contain an aggregate of approximately 2.0 million net rentable square
feet and, as of September 30, 1996, were approximately 94.3% leased to 222
tenants. The Company's tenants include many service sector employers, as well as
a large number of professional firms and local, national and foreign businesses.
The Company believes, based in part on recent engineering reports, that all of
its Properties are well maintained and do not require significant capital
improvements.
The Properties consist primarily of suburban and industrial buildings (36
of which are Class A properties). The Company considers Class A suburban office
and industrial properties to be those that have desirable locations, are well
maintained and professionally managed and have the potential of achieving rental
and occupancy rates that are typically at or above those prevailing in their
respective markets. The average age of the Properties is approximately 10.8
years. The Company's 10 largest tenants (based on pro forma annualized base rent
at September 30, 1996) aggregate approximately 29.8% of the Company's total base
rent and approximately 27.5% of the Company's net rentable square feet and have
a weighted average remaining lease term of approximately 7.8 years. As of
September 30, 1996, no single tenant accounted for more than approximately 8.7%
of the Company's pro forma aggregate annualized base rent and only 30 tenants
individually represented more than 1.0% of such aggregate annualized base rent.
Leases representing approximately 58.5% of the net rentable square footage
at the Properties were signed during the period January 1, 1993 through December
31, 1995, a time when management believes market rental rates were at or below
current market rental rates. This belief is supported by the fact that for the
nine months ended September 30, 1996: (i) renewal leases at the Initial
Properties were signed covering approximately 154,000 net rentable square feet
of office space at a weighted average rental rate of $13.25 per square foot,
compared to leases that expired for that space during such period with a
weighted average rental rate of $12.66 per square foot (representing a 4.7%
increase); and (ii) new leases at the Initial Properties were signed covering
approximately 264,000 net rentable square feet of office space at a weighted
average rental rate of $15.96 per square foot, compared to leases that expired
for that space during such period with a weighted average rental rate of $14.52
per square foot (representing a 9.9% increase). In all cases, weighted average
rental rates include expense recoveries, free rent and scheduled rent increases
that would be taken into account under generally accepted accounting principles.
The Company believes that the strength of its leasing department and tenant
retention capabilities should enable it to continue to capitalize on rental rate
differentials as the Company's leases expire.
The Company's leases are typically structured for terms of three, five,
seven or ten years. Due to conditions within the Market, the Company utilizes
two primary lease structures: (i) triple net leases (which represented
approximately 75.0% of the aggregate net rentable leased square footage at the
Initial Properties as of September 30, 1996 and under which tenants are required
to pay all real property taxes, insurance and expenses of maintaining the leased
space); and (ii) full service gross leases (which represented approximately
25.0% of the aggregate leased net rentable square footage as of September 30,
1996 and under which the tenants typically pay for all real estate taxes and
operating expenses above those for an established base year).
63
<PAGE> 2
Under the Company's leases at the Initial Properties, the landlord is
generally responsible for structural repairs. Most leases do not permit early
termination; however, approximately 12 leases at the Initial Properties
(covering an aggregate of approximately 184,000 net rentable square feet and
having a weighted average base rental rate of approximately $11.53) permit the
tenant to terminate the lease prior to its initial term (excluding rights
pursuant to casualty, condemnation, eminent domain and changes in zoning
classifications) (generally upon six to twelve months' notice and generally
after the end of the third year of a five year lease or the fifth year of a 10
year lease, subject to the tenant's obligation to pay a fixed termination
penalty, typically consisting of unamortized tenant improvements, leasing
commissions plus an additional negotiated payment). Approximately eight leases
at the Acquisition Properties (covering an aggregate of approximately 94,000 net
rentable square feet and having a weighted average base rental rate of
approximately $14.10) similarly permit the tenant to terminate the lease prior
to its initial term.
The Company's asset management strategy is designed to efficiently balance
the sound business and reporting fundamentals necessary for a public company
with the operating efficiency of a responsive market-oriented real estate
organization.
The Properties will be financially and operationally managed under active
central control. All financial reporting, administration (including the
formation and implementation of policies and procedures), marketing, leasing,
capital expenditure and construction decisions are administered at the Company's
corporate office. The Company employs asset managers to oversee and direct the
ongoing property operations, as well as the on-site personnel which may include
a property manager, leasing agent and other necessary staff. The asset managers
actively participate with the executive officers in the formation of the
Company's policies and procedures. In addition, the Company's financial and
property management reporting systems are designed to ensure operational
compliance with the Company's policies and procedures. On-site staffing for each
Property is determined by the Property's size, tenant profile and location
relative to other Properties. The Company has an active tenant relations program
and a maintenance staff to ensure that all of the Properties are maintained in
accordance with the Company's standard of excellence. The Company also contracts
with third parties for cleaning services, day porters, landscaping, engineering
and other service personnel necessary to operate each Property.
64
<PAGE> 3
PROPERTIES
The following table sets forth certain information with respect to the
Properties:
<TABLE>
<CAPTION>
AVERAGE TOTAL BASE
TOTAL BASE RENT RENT PLUS EXPENSE
FOR THE RECOVERIES PER
NET PERCENTAGE TWELVE MONTHS NET RENTABLE SQUARE
RENTABLE LEASED AS OF ENDED FOOT LEASED
INITIAL PROPERTIES: YEAR SQUARE SEPTEMBER 30, SEPTEMBER 30, 1996(2) SEPTEMBER 30,
SUBMARKET/PROPERTY BUILT FEET 1996(1) (000'S) 1996(3)
- --------------------------------------------- ----- --------- ------------- --------------------- -------------------
<S> <C> <C> <C> <C> <C>
HORSHAM/WILLOW GROVE/JENKINTOWN, PA
650 Dresher Road............................ 1984 30,138 100.0% $ 329 $ 15.67
1155 Business Center Drive.................. 1990 51,388 99.4% 591 16.31
500 Enterprise Road......................... 1990 67,800 98.5% 674 13.74
One Progress Avenue......................... 1986 79,204 100.0% 563 9.54
SOUTHERN ROUTE 202 CORRIDOR, PA
456 Creamery Way............................ 1987 47,604 100.0% 336 7.15
486 Thomas Jones Way........................ 1990 51,500 50.9% 416 23.26
468 Creamery Way............................ 1990 28,934 100.0% 293 14.54
110 Summit Drive............................ 1985 43,660 67.6% 262 13.51
BLUE BELL/PLYMOUTH MEETING/FORT WASHINGTON,
PA
2240/50 Butler Pike......................... 1984 52,183 99.4% 560 15.82
120 West Germantown Pike.................... 1984 30,546 100.0% 421 19.16
140 West Germantown Pike.................... 1984 25,953 98.7% 297 16.56
2260 Butler Pike............................ 1984 31,892 100.0% 377 16.84
MAIN LINE, PA
16 Campus Boulevard......................... 1990 65,463 100.0% 430 9.94
18 Campus Boulevard......................... 1990 37,700 100.0% 410 15.01
LEHIGH VALLEY, PA
7310 Tilghman Street........................ 1985 40,000 99.0% 329 11.44
7248 Tilghman Street........................ 1987 42,863 93.8% 399 15.06
6575 Snowdrift Road......................... 1988 46,250 100.0% 300 9.06
LANSDALE, PA
1510 Gehman Road............................ 1990 152,625 100.0% 773 7.70
BURLINGTON COUNTY, NJ
One Greentree Centre........................ 1982 55,838 100.0% 869 16.97
Two Greentree Centre........................ 1983 56,075 100.0% 816 14.53
Three Greentree Centre...................... 1984 69,101 96.2% 1,049 16.51
CAMDEN COUNTY, NJ
457 Haddonfield Road (LibertyView).......... 1990 121,737 82.8% 1,160 16.34
OTHER MARKETS
168 Franklin Corner Road.................... 1976 32,000 54.5% 186 13.43
Lawrenceville, NJ
Twin Forks Office Park
Raleigh, NC
5910-6090 Six Forks......................... 1982 73,339 100.0% 1,008 13.83
--------- ----- ------- ------
CONSOLIDATED TOTAL/WEIGHTED AVERAGE FOR THE
INITIAL PROPERTIES.......................... 1,333,793 93.8% 12,848 14.04(10)
========= ===== ======= ======
<CAPTION>
AVERAGE C&W RENTAL RATE TENANTS LEASING 10% OR
ANNUALIZED WEIGHTED INCREASE MORE OF RENTABLE
RENTAL AVERAGE POTENTIAL SQUARE FOOTAGE PER
RATE AS OF CLASS A UNTIL MARKET PROPERTY AS OF
INITIAL PROPERTIES: SEPTEMBER 30, RENTAL RATE IS SEPTEMBER 30, 1996
SUBMARKET/PROPERTY 1996(4) RATES(5) ACHIEVED(6) AND LEASE EXPIRATION DATE
- --------------------------------------------- ------------------ -------- ------------ -------------------------
<S> <<C> <C> <C> <C>
HORSHAM/WILLOW GROVE/JENKINTOWN, PA
650 Dresher Road............................ $16.50 $18.02 9.2% GMAC (100%) - 5/03
1155 Business Center Drive.................. 17.22 18.02 4.6% IMS (79%) - 3/06;
Motorola (14%) - 2/99
500 Enterprise Road......................... 15.03 14.50 (3.5)% Conti Mortgage
(80%) - 4/01;
Pioneer (19%) - 10/00
One Progress Avenue......................... 11.75 18.02 53.4% Reed Technologies
(100%) - 6/11
SOUTHERN ROUTE 202 CORRIDOR, PA
456 Creamery Way............................ 7.25(7) 7.89(8) 8.8% Neutronics (100%) - 1/03
486 Thomas Jones Way........................ 15.46 15.55 0.5% First American Real
Estate (20%) - 4/00
468 Creamery Way............................ 13.88 13.61 (1.9)% Franciscan Health
(82%) - 6/99;
American Day Treatment
(18%) - 6/00
110 Summit Drive............................ 7.20(8) 7.89(8) 9.6% Maris Equipment
(49%) - 4/99
BLUE BELL/PLYMOUTH MEETING/FORT WASHINGTON,
PA
2240/50 Butler Pike......................... 17.55 18.70 6.6% CoreStates (59%) - 4/06;
TWA Marketing
(33%) - 10/99
120 West Germantown Pike.................... 17.52 18.70 6.7% Clair O'Dell
(82%) - 7/01;
Kleinerts (13%) - 10/98
140 West Germantown Pike.................... 17.38 18.70 7.6% Healthcare, Inc.
(46%) - 9/99; Henkel
(29%) - 6/98; National
Health Equity
(20%) - 5/99
2260 Butler Pike............................ 17.82 18.70 4.9% Information Resources
(66%) - 12/00; Med
Resorts (26%) - 1/01
MAIN LINE, PA
16 Campus Boulevard......................... 13.58 20.27 49.3% New England Mutual
(52%) - 5/06; Atlantic
Employees C.U.
(35%) - 1/06
18 Campus Boulevard......................... 18.62 20.27 8.9% Prudential (25%) - 6/01;
Devco Mutual
(35%) - 1/01;
Scott Paper
(17%) - 11/97;
Marshall Dennehey
(18%) - 10/01
LEHIGH VALLEY, PA
7310 Tilghman Street........................ 8.89(8) 10.50(8) 18.1% AT&T (83%) - 12/96-8/98
7248 Tilghman Street........................ 14.76 15.34 3.9% IDS Financial
(29%) - 7/01;
Ohio Casualty
(46%) - 7/01;
Meridian Mortgage
(12%) - 6/99
6575 Snowdrift Road......................... 7.15(8) 10.50(8) 46.9% Corning Packaging
(100%) - 2/99
LANSDALE, PA
1510 Gehman Road............................ 4.72(8) 5.95(8) 26.1% Ford Electronics
(35%) - 6/98;
Nibco (65%) - 8/99
BURLINGTON COUNTY, NJ
One Greentree Centre........................ 16.07 19.30 20.0% American Executive
Centers (30%) - 1/06;
West Jersey (15%) - 4/01;
Temple Sports Med.
(18%) - 12/97
Two Greentree Centre........................ 16.02 19.30 20.5% Merrill Lynch
(23%) - 11/05;
ReMax Suburban
(12%) - 11/05
Three Greentree Centre...................... 16.41 19.30 17.6% Parker, McCay & Criscuolo
(39%) - 5/01;
Marshall Dennehey
(20%) - 5/97;
Olde Discounts
(12%) - 3/00;
Surety Title
(13%) - 11/03
CAMDEN COUNTY, NJ
457 Haddonfield Road (LibertyView).......... 18.63 21.81 17.1% HIP Health Plan
(31%) - 12/07
OTHER MARKETS
168 Franklin Corner Road.................... 15.55 18.00(9) 15.8% Dr. Belden (12%) - 5/01;
Lawrenceville, NJ Crawford & Co.
(14%) - 11/99
Twin Forks Office Park
Raleigh, NC
5910-6090 Six Forks......................... 14.25 15.50(9) 8.8% N/A
----- ----- -----
CONSOLIDATED TOTAL/WEIGHTED AVERAGE FOR THE
INITIAL PROPERTIES.......................... $14.63(10) $16.83(10)(11) 15.0%
===== ===== =====
</TABLE>
65
<PAGE> 4
<TABLE>
<CAPTION>
AVERAGE TOTAL BASE
TOTAL BASE RENT RENT PLUS EXPENSE
FOR THE RECOVERIES PER
NET PERCENTAGE TWELVE MONTHS NET RENTABLE SQUARE
RENTABLE LEASED AS OF ENDED FOOT LEASED
ACQUISITION PROPERTIES: YEAR SQUARE SEPTEMBER 30, SEPTEMBER 30, 1996(2) SEPTEMBER 30,
SUBMARKET/PROPERTY BUILT FEET 1996(1) (000'S) 1996(3)
- ----------------------------------------------- ----- --------- ------------- --------------------- -------------------
<S> <C> <C> <C> <C> <C>
HORSHAM/WILLOW GROVE/JENKINTOWN, PA
700 Business Center Drive(12)................. 1986
82,009 100.0% $ 793 $11.59
800 Business Center Drive(12)................. 1986
KING OF PRUSSIA, PA
500 North Gulph Road.......................... 1979 92,851 86.1% 1,387 15.02
BUCKS COUNTY, PA
2200 Cabot Boulevard.......................... 1979 55,081 100.0% 259 5.75
2250 Cabot Boulevard.......................... 1982 40,000 100.0% 170 5.22
2260 Cabot Boulevard(12)...................... 1984
29,638 100.0% 246 10.17
2270 Cabot Boulevard(12)...................... 1984
3000 Cabot Boulevard.......................... 1986 34,640 83.9% 364 12.85
3329 Street Road -- Greenwood Sq.(12)......... 1985
3331 Street Road -- Greenwood Sq.(12)......... 1986 165,929 92.1% 2,234 14.56
3333 Street Road -- Greenwood Sq.(12)......... 1988
BURLINGTON COUNTY, NJ
8000 Lincoln Drive............................ 1983 54,923 100.0% 445 8.25
NORTHERN SUBURBAN WILMINGTON
One Righter Parkway........................... 1989 104,828 100.0% 2,044 19.50
--------- ----- ------- ------
CONSOLIDATED TOTAL/WEIGHTED AVERAGE FOR THE
ACQUISITION PROPERTIES........................ 659,899 95.2% $ 7,942 $ 12.93
========= ===== ======= ======
CONSOLIDATED TOTAL/WEIGHTED AVERAGE FOR ALL
PROPERTIES.................................... 1,993,692 94.3% $20,790 $ 13.67
========= ===== ======= ======
<CAPTION>
AVERAGE C&W RENTAL RATE TENANTS LEASING 10% OR
ANNUALIZED WEIGHTED INCREASE MORE OF RENTABLE
RENTAL AVERAGE POTENTIAL SQUARE FOOTAGE PER
RATE AS OF CLASS A UNTIL MARKET PROPERTY AS OF
ACQUISITION PROPERTIES: SEPTEMBER 30, RENTAL RATE IS SEPTEMBER 30, 1996
SUBMARKET/PROPERTY 1996(4) RATES(5) ACHIEVED(6) AND LEASE EXPIRATION DATE
- ----------------------------------------------- --------------- -------- ------------ -------------------------
<S> <C> <C> <C> <C>
HORSHAM/WILLOW GROVE/JENKINTOWN, PA
700 Business Center Drive(12)................. Metpath (35%) - 1/12;
Sprint (19%) - 3/01;
Macro (19%) - 4/01%;
800 Business Center Drive(12)................. Advanta (10%) - 6/99
KING OF PRUSSIA, PA
500 North Gulph Road.......................... 16.51 21.39 29.6% Transition Software
(16%) - 8/00, Strohl
Syst (12%) - 10/99
BUCKS COUNTY, PA
2200 Cabot Boulevard.......................... 4.40 4.50 2.3% Hussman Corp (38%), Nobel
Printing (38%) - 6/97;
McCaffrey Mgt
(24%) - 8/00
2250 Cabot Boulevard.......................... 3.50 4.50 28.6% Bucks County Nut (100%) -
7/99
2260 Cabot Boulevard(12)...................... Sager Electrical (14%) -
8.78 9.00 2.5% 10/98; Terminix Intrntnl
2270 Cabot Boulevard(12)...................... (13%) - 11/96
3000 Cabot Boulevard.......................... 17.03 18.95 11.3% Geraghty & Miller (31%) -
11/97; Prudential Insur.
(21%) - 7/98;
Luigi Bormioli Co.
(11%) - 6/98
3329 Street Road -- Greenwood Sq.(12).........
3331 Street Road -- Greenwood Sq.(12)......... 16.54 18.95 14.6% Waste Management (27%) -
3333 Street Road -- Greenwood Sq.(12)......... 3/97
BURLINGTON COUNTY, NJ
8000 Lincoln Drive............................ 17.13 19.30 $ 12.7% CSC (67%) - 11/01; Blue
Cross (33%) - 2/07
NORTHERN SUBURBAN WILMINGTON
One Righter Parkway........................... $ 19.30 20.50 6.2% Kimberly Clark (89%) -
12/05
----- ----- -----
CONSOLIDATED TOTAL/WEIGHTED AVERAGE FOR THE
ACQUISITION PROPERTIES........................ $ 16.23(13) $19.01(11)(13) 17.2%
===== ===== =====
CONSOLIDATED TOTAL/WEIGHTED AVERAGE FOR ALL
PROPERTIES.................................... $ 15.15(14) $17.54(11)(14) 15.8%
===== ===== =====
</TABLE>
- ---------------
(1) Calculated by dividing net rentable square feet included in leases dated on
or before September 30, 1996 by the aggregate net rentable square feet
included in the Property.
(2) "Total Base Rent" for the twelve months ended September 30, 1996 represents
base rents received during such period, excluding tenant reimbursements,
calculated in accordance with generally accepted accounting principles
determined on a straight-line basis. Tenant reimbursements generally
include payment of real estate taxes, operating expenses, and escalations
and common area maintenance and utility charges.
(3) Represents the Total Base Rent for the twelve months ended September 30,
1996, plus tenant reimbursements for the twelve months ended September 30,
1996, divided by the net rentable square feet leased.
(4) "Average Annualized Rental Rate" is calculated as follows: (i) for office
leases written on a triple net basis, the sum of the annualized contracted
base rental rates payable for all space leased as of September 30, 1996
(without giving effect to free rent or scheduled rent increases that would
be taken into account under generally accepted accounting principles) plus
the 1996 budgeted operating expenses excluding tenant electricity; and (ii)
for office leases written on a full service basis, the annualized
contracted base rate payable for all space leased as of September 30, 1996.
In both cases, the annualized rental rate is divided by the total square
footage leased as of September 30, 1996 without giving effect to free rent
or scheduled rent increases that would be taken into account under
generally accepted accounting principles.
(5) Represents the weighted average asking rates, as of June 30, 1996, of
directly competitive properties in the relevant submarket within the
Market, as identified by C&W.
(6) Represents the percentage by which the June 30, 1996 C&W weighted average
asking rate exceeds the September 30, 1996 average annualized rental rate
of the applicable Property.
(7) Property occupied by a single tenant under a triple net lease agreement,
pursuant to which the tenant subcontracts directly with third party
contractors for all building services.
(8) These rates represent triple net lease rates (leases under which tenants
are required to pay all real property taxes, insurance and expenses of
maintaining the leased space).
(9) Rental rates represent management's estimate of asking rental rates in
these markets for comparable properties.
(10) Excludes 1510 Gehman Road, which is an industrial Property.
(11) Represents the Class A weighted average rental rate for the submarkets in
which the Properties are located (weighted by Property net rentable square
footage) as compared to the Class A office weighted average asking rate of
$18.94 per square foot for the Market (weighted by Market net rentable
square footage)as identified in the C&W Mid-Year Report.
(12) The data reflected for these properties are presented on a consolidated
basis.
(13) Excludes 2200 Cabot Boulevard and 2250 Cabot Boulevard, which are
industrial properties.
(14) Excludes 1510 Gehman Road, 2200 Cabot Boulevard and 2250 Cabot Boulevard,
which are industrial properties.
66
<PAGE> 5
TENANTS
Initial Properties. The Initial Properties are leased to approximately 146
tenants that are engaged in a variety of businesses. The following table sets
forth information regarding the Company's leases with its 20 largest tenants
based upon annualized base rent for the Initial Properties as of September 30,
1996:
<TABLE>
<CAPTION>
PERCENTAGE OF
REMAINING AGGREGATE NET PERCENTAGE OF ANNUALIZED AGGREGATE
NUMBER OF LEASE TERM RENTABLE SQUARE AGGREGATE LEASED BASE RENT ANNUALIZED
TENANT NAME LEASES IN MONTHS FEET LEASED SQUARE FEET (000'S) BASE RENT
- ---------------------- --------- ------------- --------------- ----------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Reed Technology....... 1 178 79,204 5.9% $ 733 5.1%
Conti Mortgage........ 1 56 53,906 4.0% 596 4.2%
IMS................... 1 115 40,774 3.1% 494 3.5%
HIP Health Plan of
NJ.................. 1 136 37,515 2.8% 463 3.2%
Clair O'Dell Agency... 1 59 25,177 1.9% 441 3.1%
CoreStates............ 1 116 30,359 2.2% 410 2.9%
Nibco, Inc............ 1 36 98,725 7.4% 395 2.8%
Parker, McKay &
Criscuolo........... 1 57 25,905 1.9% 388 2.7%
GMAC.................. 1 81 30,138 2.3% 354 2.5%
Neutronics............ 1 77 47,604 3.6% 346 2.4%
Corning Packaging..... 1 30 46,250 3.5% 331 2.3%
Ford Motor Co......... 1 22 53,900 4.0% 327 2.3%
Marshall, Dennehey.... 2 (a) 19,633 1.5% 321 2.2%
New England Mutual.... 1 117 31,907 2.4% 320 2.2%
AT&T Communications... 3 (b) 32,774 2.5% 288 2.0%
Information
Resources........... 1 52 21,008 1.6% 284 2.0%
American Executive
Centers............. 1 114 16,853 1.3% 279 2.0%
Devco Mutual.......... 1 54 13,332 1.0% 230 1.6%
Ohio Casualty......... 1 59 19,877 1.5% 229 1.6%
Franciscan Health
Systems............. 1 34 23,588 1.8% 225 1.6%
--
---- ------- ---- ----- ----
Consolidated
Total/
Weighted
Average..... 23 75 748,429 56.1% $ 7,454 52.3%
== ==== ======= ==== ===== ====
</TABLE>
- ---------------
(a) Consists of two leases: a lease representing 12,971 square feet that expires
in May 1997 and a lease representing 6,662 square feet that expires in
October 2001.
(b) Consists of three leases: a lease representing 11,000 square feet that
expires in August 1998; a lease representing 13,107 square feet that expires
in December 1996 and a lease representing 8,667 square feet that expires in
November 1997.
67
<PAGE> 6
Acquisition Properties. The Acquisition Properties are leased to
approximately 76 tenants that are engaged in a variety of businesses. The
following table sets forth information regarding leases with the 20 largest
tenants at the Acquisition Properties based upon annualized base rent for the
Acquisition Properties as of September 30, 1996:
<TABLE>
<CAPTION>
PERCENTAGE OF
REMAINING AGGREGATE NET PERCENTAGE OF ANNUALIZED AGGREGATE
NUMBER OF LEASE TERM RENTABLE SQUARE AGGREGATE LEASED BASE RENT ANNUALIZED
TENANT NAME LEASES IN MONTHS FEET LEASED SQUARE FEET (000'S) BASE RENT
- ---------------------- --------- ------------- --------------- ----------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Kimberly Clark........ 1 112 93,014 14.1% $ 1,814 20.1%
Waste Management...... 1 6 45,764 6.9% 715 8.0%
CSC................... 1 63 36,830 5.6% 626 6.9%
Blue Cross............ 1 126 18,093 2.7% 315 3.5%
FPA Corporation....... 1 6 16,453 2.5% 280 3.1%
Prudential............ 2 (a) 13,945 2.1% 271 3.0%
Sprint................ 1 55 15,348 2.3% 253 2.8%
Metpath............... 1 185 28,475 4.3% 249 2.8%
Macro................. 1 56 15,425 2.3% 231 2.6%
Transition Software... 1 48 15,101 2.3% 227 2.5%
KWS&P................. 1 31 22,706 3.4% 212 2.4%
Nason Cullen Inc...... 1 59 12,566 1.9% 201 2.2%
Strohl Systems........ 1 38 11,277 1.7% 186 2.1%
Nextel
Communication....... 1 56 11,004 1.7% 182 2.0%
Geraghty & Miller..... 1 15 10,840 1.6% 173 1.9%
Outdoor World Corp.... 1 20 9,579 1.5% 153 1.7%
Bucks County Nut...... 1 35 40,000 6.1% 140 1.6%
Advanta............... 1 34 8,339 1.3% 129 1.4%
Orbital Engineer...... 1 53 7,468 1.1% 117 1.3%
First American........ 1 39 6,258 0.9% 114 1.3%
--
---- ------- ---- ----- ----
Consolidated
Total/Weighted
Average..... 21 65 438,435 65.5% $ 6,588 72.2%
== ==== ======= ==== ===== ====
</TABLE>
- ---------------
(a) Consists of two leases: a lease representing 7,445 square feet that expires
in July 1998, and a lease representing 6,500 square feet that expires in
November 1996.
68
<PAGE> 7
Properties. On a combined basis, the Properties are leased to 222 tenants
that are engaged in a variety of businesses. The following table sets forth
information, on a combined basis, regarding leases at the Properties with the 20
largest tenants based upon annualized base rent from the Properties as of
September 30, 1996:
<TABLE>
<CAPTION>
PERCENTAGE OF
REMAINING AGGREGATE NET PERCENTAGE OF ANNUALIZED AGGREGATE
NUMBER OF LEASE TERM RENTABLE SQUARE AGGREGATE LEASED BASE RENT ANNUALIZED
TENANT NAME LEASES IN MONTHS FEET LEASED SQUARE FEET $ (000'S) BASE RENT
- ---------------------- --------- ------------- --------------- ----------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Kimberly Clark........ 2 (a) 99,238 5.0% $ 2,013 8.7%
Waste Management...... 1 6 45,764 2.3% 752 3.2%
Reed Technology....... 1 178 79,204 4.0% 733 3.1%
CSC................... 1 63 36,830 1.9% 626 2.7%
Conti Mortgage........ 1 56 53,906 2.7% 596 2.6%
IMS................... 1 115 40,774 2.0% 495 2.1%
HIP Health Plan NJ.... 1 136 37,515 1.9% 463 2.0%
Clair O'Dell Agency... 1 59 25,177 1.3% 441 1.9%
CoreStates............ 1 116 30,359 1.5% 410 1.8%
Nibco, Inc............ 1 36 98,725 5.0% 395 1.7%
Parker, McKay &
Criscuolo........... 1 57 25,905 1.3% 389 1.7%
GMAC.................. 1 81 30,138 1.5% 355 1.5%
Neutronics............ 1 77 47,604 2.4% 346 1.5%
Corning Packaging..... 1 30 46,250 2.3% 331 1.4%
Ford Electronics...... 1 22 53,900 2.7% 327 1.4%
Marshall, Dennehey.... 2 (b) 19,633 1.0% 321 1.4%
New England Mutual.... 1 117 31,907 1.6% 320 1.4%
Blue Cross............ 1 126 18,093 0.9% 315 1.4%
AT&T
Communications...... 3 (c) 32,774 1.6% 288 1.2%
Information
Resources........... 1 52 21,008 1.1% 284 1.2%
--
---- ------- ---- ---------- ----
Consolidated
Total
Weighted
Average..... 24 76 874,704 43.9% $10,200 43.8%
== ======= ==== ========== ====
</TABLE>
- ---------------
(a) Consists of two leases: a lease representing 93,014 square feet that expires
in December 2005, and a lease representing 6,224 square feet that expires in
November 1997.
(b) Consists of two leases: a lease representing 12,971 square feet that expires
in May 1997 and a lease representing 6,662 square feet that expires in
October 2001.
(c) Consists of three leases: a lease representing 11,000 square feet that
expires in August 1998; a lease representing 13,107 square feet that expires
in December 1996 and a lease representing 8,667 square feet that expires in
November 1997.
69
<PAGE> 8
LEASE EXPIRATIONS
Initial Properties. The following table sets forth detailed lease
expiration information for the Initial Properties for leases in place as of
September 30, 1996, assuming that none of the tenants exercise renewal options
or termination rights, if any, at or prior to the scheduled expirations:
<TABLE>
<CAPTION>
PERCENTAGE
OF
TOTAL
RENTABLE FINAL
NUMBER OF SQUARE FINAL ANNUALIZED ANNUALIZED
LEASES FOOTAGE FINAL BASE RENT PER BASE
EXPIRING SUBJECT TO ANNUALIZED SQUARE FOOT RENT UNDER
YEAR OF LEASE EXPIRATION WITHIN THE EXPIRING BASE RENT UNDER UNDER EXPIRING CUMULATIVE
DECEMBER 31 YEAR(1) LEASES EXPIRING LEASES EXPIRING LEASES(1) LEASES TOTAL
- ----------------------------------- ---------- ---------- --------------- ------------------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
1996(2)............................ 15 54,004 $ 676,134 $12.52 4.4% 4.4%
1997............................... 42 115,886 1,701,924 14.69 11.1% 15.5%
1998............................... 20 100,621(3) 977,905(3) 9.72 6.4% 21.9%
1999............................... 28 296,212(3) 2,495,062(3) 8.42 16.3% 38.2%
2000............................... 10 62,670 874,483 13.95 5.7% 45.5%
2001............................... 20 212,726 2,970,875 13.97 19.4% 63.3%
2002............................... 1 8,912 169,328 19.00 1.1% 64.4%
2003............................... 7 109,336 1,361,239 12.45 8.9% 73.3%
2004............................... 1 9,262 185,240 20.00 1.2% 74.5%
2005............................... 2 19,387 365,564 18.86 2.4% 76.9%
2006............................... 6 145,449 1,942,732 13.36 12.7% 89.6%
2007 and thereafter................ 2 116,719 1,580,118 13.54 10.4% 100.0%
--- --------- ----------- ------ ------ ----
Consolidated Total/Weighted
Average.......................... 154 1,251,184 $15,300,604 $12.23 100.0% 100.0%
=== ========= =========== ====== ====== ====
</TABLE>
- ---------------
(1) "Final Annualized Base Rent" for each lease scheduled to expire represents
the cash rental rate of base rents, excluding tenant reimbursements, in the
final month prior to expiration multiplied by 12. Tenant reimbursements
generally include payments on account of real estate taxes, operating
expense escalations and common area utility charges.
(2) Represents lease expirations from September 30, 1996 through December 31,
1996.
(3) Includes 152,625 net rentable square feet and $780,711 of final annualized
base rent ($5.12 per net rentable square foot) associated with 1998 and 1999
lease expirations on the Company's sole industrial property included in the
Initial Properties.
70
<PAGE> 9
Acquisition Properties. The following table sets forth detailed lease
expiration information for the Acquisition Properties for leases in place as of
September 30, 1996, assuming none of the tenants exercise renewal options or
termination rights, if any, at or prior to the scheduled expirations:
<TABLE>
<CAPTION>
PERCENTAGE
OF
TOTAL
RENTABLE FINAL
NUMBER OF SQUARE FINAL ANNUALIZED ANNUALIZED
LEASES FOOTAGE FINAL BASE RENT PER BASE
EXPIRING SUBJECT TO ANNUALIZED SQUARE FOOT RENT UNDER
YEAR OF LEASE EXPIRATION WITHIN THE EXPIRING BASE RENT UNDER UNDER EXPIRING CUMULATIVE
DECEMBER 31 YEAR(1) LEASES EXPIRING LEASES EXPIRING LEASES(1) LEASES TOTAL
- ----------------------------------- ---------- ---------- --------------- ------------------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
1996(2)............................ 7 23,245 $ 334,950 $14.41 3.4% 3.4%
1997............................... 18 130,449 1,866,640 14.31 19.0% 22.4%
1998............................... 14 42,303 659,835 15.60 6.7% 29.1%
1999............................... 20 143,085 1,605,792 11.22 16.3% 45.4%
2000............................... 4 35,008 445,238 12.72 4.5% 49.9%
2001............................... 10 108,623 1,849,219 17.02 18.8% 68.7%
2002............................... 1 4,433 82,764 18.67 0.8% 69.5%
2003............................... -- -- -- -- -- 69.5%
2004............................... -- -- -- -- -- 69.5%
2005............................... 1 93,014 2,252,799 24.22 22.9% 92.4%
2006............................... -- -- -- -- -- 92.4%
2007 and thereafter................ 3 48.069 742,447 15.45 7.6% 100.0%
--- -------- - ----------- ------ ------
Consolidated Total/Weighted
Average.......................... 78 628,229 $ 9,839,684 $15.66 100.0% 100.0%
=== ========= =========== ====== ======
</TABLE>
- ---------------
(1) "Final Annualized Base Rent" for each lease scheduled to expire represents
the cash rental rate of base rents, excluding tenant reimbursements, in the
final month prior to expiration multiplied by 12. Tenant reimbursements
generally include payments on account of real estate taxes, operating
expense escalations and common area utility charges.
(2) Represents lease expirations from September 30, 1996 through December 31,
1996.
71
<PAGE> 10
Properties. The following table sets forth detailed lease expiration
information for the Properties on a combined basis for leases in place as of
September 30, 1996, assuming that none of the tenants exercise renewal options
or termination rights, if any, at or prior to the scheduled expirations:
<TABLE>
<CAPTION>
PERCENTAGE
OF
TOTAL
RENTABLE FINAL
NUMBER OF SQUARE FINAL ANNUALIZED ANNUALIZED
LEASES FOOTAGE FINAL BASE RENT PER BASE
EXPIRING SUBJECT TO ANNUALIZED SQUARE FOOT RENT UNDER
YEAR OF LEASE EXPIRATION WITHIN THE EXPIRING BASE RENT UNDER UNDER EXPIRING CUMULATIVE
DECEMBER 31 YEAR(1) LEASES EXPIRING LEASES EXPIRING LEASES(1) LEASES TOTAL
- ----------------------------------- ---------- ---------- --------------- ------------------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
1996(2)............................ 22 77,249 $ 1,011,084 $13.09 4.0% 4.0%
1997............................... 60 246,335 3,568,563 14.49 14.2% 18.2%
1998............................... 34 142,924(3) 1,637,739(3) 11.46 6.5% 24.7%
1999............................... 48 439,297(3) 4,100,854(3) 9.34 16.3% 41.0%
2000............................... 14 97,678 1,319,720 13.51 5.3% 46.3%
2001............................... 30 321,349 4,820,094 15.00 19.2% 65.5%
2002............................... 2 13,345 252,092 18.89 1.0% 66.5%
2003............................... 7 109,336 1,361,239 12.45 5.4% 71.9%
2004............................... 1 9,262 185,240 20.00 0.7% 72.6%
2005............................... 3 112,401 2,618,363 23.29 10.4% 83.0%
2006............................... 6 145,449 1,942,732 13.36 7.7% 90.7%
2007 and thereafter................ 5 164,788 2,322,565 9.24 9.3% 100.0%
--- --------- ----------- ------ ------
Consolidated Total/
Weighted Average................. 232 1,879,413 $25,140,285 $13.38 100.0% 100.0%
=== ========= =========== ====== ======
</TABLE>
- ---------------
(1) "Final Annualized Base Rent" for each lease scheduled to expire represents
the cash rental rate of base rents, excluding tenant reimbursements, in the
final month prior to expiration multiplied by 12. Tenant reimbursements
generally include payments on account of real estate taxes, operating
expense escalations and common area utility charges.
(2) Represents lease expirations from September 30, 1996 through December 31,
1996.
(3) Includes 152,625 net rentable square feet and $780,711 of final annualized
base rent ($5.12 per net rentable square foot) associated with 1998 and 1999
lease expirations on the Company's sole industrial property included in the
Initial Properties.
72
<PAGE> 11
LEASING EXPIRATIONS -- PROPERTY BY PROPERTY
The following table sets forth detailed lease expiration information for
each of the Properties for leases in place as of September 30, 1996, assuming
that none of the tenants exercise renewal options or termination rights, if any,
at or prior to the scheduled expirations.
<TABLE>
<CAPTION>
YEAR OF LEASE EXPIRATION 1996(1) 1997 1998 1999 2000 2001 2002
- -------------------------------------- -------- ---------- -------- ---------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
INITIAL PROPERTIES:
HORSHAM/WILLOW GROVE/
JENKINTOWN, PA
650 Dresher Road
Square Footage of Expiring Leases..... -- -- -- -- -- -- --
Percentage of Total Leased Square
Feet................................. -- -- -- -- -- -- --
Final Annual Base Rent Under
Expiring Leases(2)................... -- -- -- -- -- -- --
Final Annual Base Rent per Square Foot
Under Expiring Leases(3)............. -- -- -- -- -- -- --
Percentage of Total Final Annual Base
Rent Represented by Expiring
Leases............................... -- -- -- -- -- -- --
Number of Leases Expiring............. -- -- -- -- -- -- --
1155 Business Center Drive
Square Footage of Expiring Leases..... -- -- 1,023 6,988 2,298 -- --
Percentage of Total Leased Square
Feet................................. -- -- 2.0% 13.7% 4.5% -- --
Final Annual Base Rent Under
Expiring Leases(2)................... -- -- $11,253 $97,622 $29,070 -- --
Final Annual Base Rent per Square Foot
Under Expiring Leases(3)............. -- -- $11.00 $13.97 -- -- --
Percentage of Total Final Annual Base
Rent Represented by Expiring
Leases............................... -- -- 1.7% 14.4% 4.3% -- --
Number of Leases Expiring............. -- -- 1 1 1 -- --
500 Enterprise Road
Square Footage of Expiring Leases..... -- -- -- -- 12,845 53,906 --
Percentage of Total Leased Square
Feet................................. -- -- -- -- 19.2% 80.8% --
Final Annual Base Rent Under
Expiring Leases(2)................... -- -- -- -- $122,028 $595,661 --
Final Annual Base Rent per Square Foot
Under Expiring Leases(3)............. -- -- -- -- $9.50 $11.05 --
Percentage of Total Final Annual Base
Rent Represented by Expiring
Leases............................... -- -- -- -- 17.0% 83.0% --
Number of Leases Expiring............. -- -- -- -- 1 1 --
One Progress Avenue
Square Footage of Expiring Leases..... -- -- -- -- -- -- --
Percentage of Total Leased Square
Feet................................. -- -- -- -- -- -- --
Final Annual Base Rent Under
Expiring Leases(2)................... -- -- -- -- -- -- --
Final Annual Base Rent per Square Foot
Under Expiring Leases(3)............. -- -- -- -- -- -- --
Percentage of Total Final Annual Base
Rent Represented by Expiring
Leases............................... -- -- -- -- -- -- --
Number of Leases Expiring............. -- -- -- -- -- -- --
<CAPTION>
2007 AND
YEAR OF LEASE EXPIRATION 2003 2004 2005 2006 THEREAFTER TOTAL
- -------------------------------------- ---------- -------- -------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
INITIAL PROPERTIES:
HORSHAM/WILLOW GROVE/
JENKINTOWN, PA
650 Dresher Road
Square Footage of Expiring Leases..... 30,138 -- -- -- -- 30,138
Percentage of Total Leased Square
Feet................................. 100.0% -- -- -- -- 100.0%
Final Annual Base Rent Under
Expiring Leases(2)................... $403,849 -- -- -- -- $403,849
Final Annual Base Rent per Square Foot
Under Expiring Leases(3)............. $13.40 -- -- -- -- $13.40
Percentage of Total Final Annual Base
Rent Represented by Expiring
Leases............................... 100.0% -- -- -- -- 100.0%
Number of Leases Expiring............. 1 -- -- -- -- 1
1155 Business Center Drive
Square Footage of Expiring Leases..... -- -- -- 40,774 -- 51,083
Percentage of Total Leased Square
Feet................................. -- -- -- 79.8% -- 100.0%
Final Annual Base Rent Under
Expiring Leases(2)................... -- -- -- $538,217 -- $676,162
Final Annual Base Rent per Square Foot
Under Expiring Leases(3)............. -- -- -- $13.20 -- $13.24
Percentage of Total Final Annual Base
Rent Represented by Expiring
Leases............................... -- -- -- 79.6% -- 100.0%
Number of Leases Expiring............. -- -- -- 1 -- 4
500 Enterprise Road
Square Footage of Expiring Leases..... -- -- -- -- -- 66,751
Percentage of Total Leased Square
Feet................................. -- -- -- -- -- 100.0%
Final Annual Base Rent Under
Expiring Leases(2)................... -- -- -- -- -- $717,689
Final Annual Base Rent per Square Foot
Under Expiring Leases(3)............. -- -- -- -- -- $10.75
Percentage of Total Final Annual Base
Rent Represented by Expiring
Leases............................... -- -- -- -- -- 100.0%
Number of Leases Expiring............. -- -- -- -- -- 2
One Progress Avenue
Square Footage of Expiring Leases..... -- -- -- -- 79,204 79,204
Percentage of Total Leased Square
Feet................................. -- -- -- -- 100.0 % 100.0%
Final Annual Base Rent Under
Expiring Leases(2)................... -- -- -- -- $967,873 $967,873
Final Annual Base Rent per Square Foot
Under Expiring Leases(3)............. -- -- -- -- $12.22 $12.22
Percentage of Total Final Annual Base
Rent Represented by Expiring
Leases............................... -- -- -- -- 100.0 % 100.0%
Number of Leases Expiring............. -- -- -- -- 1 1
</TABLE>
- ---------------
Footnotes appear on page 81.
73
<PAGE> 12
<TABLE>
<CAPTION>
YEAR OF LEASE EXPIRATION 1996(1) 1997 1998 1999 2000 2001 2002
- -------------------------------------- -------- ---------- -------- ---------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
INITIAL PROPERTIES (CONTINUED):
SOUTHERN ROUTE
202 CORRIDOR, PA
456 Creamery Way
Square Footage of Expiring Leases..... -- -- -- -- -- -- --
Percentage of Total Leased Square
Feet................................. -- -- -- -- -- -- --
Final Annual Base Rent Under
Expiring Leases(2)................... -- -- -- -- -- -- --
Final Annual Base Rent per Square Foot
Under Expiring Leases(3)............. -- -- -- -- -- -- --
Percentage of Total Final Annual Base
Rent Represented by Expiring
Leases............................... -- -- -- -- -- -- --
Number of Leases Expiring............. -- -- -- -- -- -- --
486 Thomas Jones Way
Square Footage of Expiring Leases..... 2,676 3,895 8,612 10,086 961 -- --
Percentage of Total Leased Square
Feet................................. 10.2 % 14.9% 32.8% 38.5% 3.7%
Final Annual Base Rent Under
Expiring Leases(2)................... $30,774 $46,935 $99,944 $113,468 $11,532 -- --
Final Annual Base Rent per Square Foot
Under Expiring Leases(3)............. $11.50 $12.05 $11.61 $11.25 $12.00 -- --
Percentage of Total Final Annual Base
Rent Represented by Expiring
Leases............................... 0 0 33.0% 37.5% 3.8%
Number of Leases Expiring............. 1 1 3 1 1 -- --
468 Creamery Way
Square Footage of Expiring Leases..... -- -- -- 23,588 5,346 -- --
Percentage of Total Leased Square
Feet................................. -- -- -- 81.5% 18.5% -- --
Final Annual Base Rent Under
Expiring Leases(2)................... -- -- -- $224,086 $67,627 -- --
Final Annual Base Rent per Square Foot
Under Expiring Leases(3)............. -- -- -- $9.50 $12.65 -- --
Percentage of Total Final Annual Base
Rent Represented by Expiring
Leases............................... -- -- -- 76.8% 23.2% -- --
Number of Leases Expiring............. -- -- -- 1 1 -- --
110 Summit Drive
Square Footage of Expiring Leases..... 2,600 -- -- 26,920 -- -- --
Percentage of Total Leased Square
Feet................................. 8.8 % 91.2%
Final Annual Base Rent Under
Expiring Leases(2)................... $22,646 -- -- $191,110 -- -- --
Final Annual Base Rent per Square Foot
Under Expiring Leases(3)............. $8.71 -- -- $7.10 -- -- --
Percentage of Total Final Annual Base
Rent Represented by Expiring
Leases............................... 10.6 % 89.4%
Number of Leases Expiring............. 1 -- -- 2 -- -- --
<CAPTION>
2007 AND
YEAR OF LEASE EXPIRATION 2003 2004 2005 2006 THEREAFTER TOTAL
- -------------------------------------- ---------- -------- -------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
INITIAL PROPERTIES (CONTINUED):
SOUTHERN ROUTE
202 CORRIDOR, PA
456 Creamery Way
Square Footage of Expiring Leases..... 47,604 -- -- -- -- 47,604
Percentage of Total Leased Square
Feet................................. 100.0% -- -- -- -- 100.0%
Final Annual Base Rent Under
Expiring Leases(2)................... $357,030 -- -- -- -- $357,030
Final Annual Base Rent per Square Foot
Under Expiring Leases(3)............. $7.50 -- -- -- -- $7.50
Percentage of Total Final Annual Base
Rent Represented by Expiring
Leases............................... 100.0% -- -- -- -- 100.0%
Number of Leases Expiring............. 1 -- -- -- -- 1
486 Thomas Jones Way
Square Footage of Expiring Leases..... -- -- -- -- -- 26,230
Percentage of Total Leased Square
Feet................................. 100.00%
Final Annual Base Rent Under
Expiring Leases(2)................... -- -- -- -- -- $302,653
Final Annual Base Rent per Square Foot
Under Expiring Leases(3)............. -- -- -- -- -- $11.54
Percentage of Total Final Annual Base
Rent Represented by Expiring
Leases............................... 100.00%
Number of Leases Expiring............. -- -- -- -- -- 7
468 Creamery Way
Square Footage of Expiring Leases..... -- -- -- -- -- 28,934
Percentage of Total Leased Square
Feet................................. -- -- -- -- -- 100.0%
Final Annual Base Rent Under
Expiring Leases(2)................... -- -- -- -- -- $291,713
Final Annual Base Rent per Square Foot
Under Expiring Leases(3)............. -- -- -- -- -- $10.08
Percentage of Total Final Annual Base
Rent Represented by Expiring
Leases............................... -- -- -- -- -- 100.0%
Number of Leases Expiring............. -- -- -- -- -- 2
110 Summit Drive
Square Footage of Expiring Leases..... -- -- -- -- -- 29,520
Percentage of Total Leased Square
Feet................................. 100.00%
Final Annual Base Rent Under
Expiring Leases(2)................... -- -- -- -- -- $213,756
Final Annual Base Rent per Square Foot
Under Expiring Leases(3)............. -- -- -- -- -- $7.24
Percentage of Total Final Annual Base
Rent Represented by Expiring
Leases............................... 100.00%
Number of Leases Expiring............. -- -- -- -- -- 3
</TABLE>
- ---------------
Footnotes appear on page 81.
74
<PAGE> 13
<TABLE>
<CAPTION>
YEAR OF LEASE EXPIRATION 1996(1) 1997 1998 1999 2000 2001 2002
- -------------------------------------- -------- ---------- -------- ---------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
INITIAL PROPERTIES (CONTINUED):
BLUE BELL/PLYMOUTH MEETING/ FORT WASHINGTON, PA
2240/50 Butler Pike
Square Footage of Expiring Leases..... -- -- 4,430 17,080 -- -- --
Percentage of Total Leased Square
Feet................................. -- -- 8.5% 33.0% -- -- --
Final Annual Base Rent Under
Expiring Leases(2)................... -- -- $56,483 $187,880 -- -- --
Final Annual Base Rent per Square Foot
Under Expiring Leases(3)............. -- -- $12.75 $11.00 -- -- --
Percentage of Total Final Annual Base
Rent Represented by Expiring
Leases............................... -- -- 8.1% 27.0% -- -- --
Number of Leases Expiring............. -- -- 1 1 -- -- --
120 West Germantown Pike
Square Footage of Expiring Leases..... -- -- 1,450 -- -- 29,096 --
Percentage of Total Leased Square
Feet................................. 4.8% 95.2%
Final Annual Base Rent Under
Expiring Leases(2)................... -- -- $17,400 -- -- $510,427 --
Final Annual Base Rent per Square Foot
Under Expiring Leases(3)............. -- -- $12.00 -- -- $17.54 --
Percentage of Total Final Annual Base
Rent Represented by Expiring
Leases............................... -- 3.3% 96.7%
Number of Leases Expiring............. -- -- 1 -- -- 2 --
140 West Germantown Pike
Square Footage of Expiring Leases..... -- -- 7,460 16,900 1,264 -- --
Percentage of Total Leased Square
Feet................................. -- -- 29.1% 66.0% 4.9% -- --
Final Annual Base Rent Under
Expiring Leases(2)................... -- -- $125,701 $215,059 $16,432 -- --
Final Annual Base Rent per Square Foot
Under Expiring Leases(3)............. -- -- $16.85 $12.73 $13.00 -- --
Percentage of Total Final Annual Base
Rent Represented by Expiring
Leases............................... -- -- 35.2% 60.2% 4.6% -- --
Number of Leases Expiring............. -- -- 1 2 1 -- --
2260 Butler Pike
Square Footage of Expiring Leases..... -- -- -- 3,041 21,008 7,843 --
Percentage of Total Leased Square
Feet................................. 9.5% 65.9% 24.6%
Final Annual Base Rent Under
Expiring Leases(2)................... -- -- -- $41,662 $283,608 $98,038 --
Final Annual Base Rent per Square Foot
Under Expiring Leases(3)............. -- -- -- $13.70 $13.50 $12.50 --
Percentage of Total Final Annual Base
Rent Represented by Expiring
Leases............................... -- -- -- 9.8% 67.0% 23.2% --
Number of Leases Expiring............. -- -- -- 1 1 1 --
<CAPTION>
2007 AND
YEAR OF LEASE EXPIRATION 2003 2004 2005 2006 THEREAFTER TOTAL
- -------------------------------------- ---------- -------- -------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
INITIAL PROPERTIES (CONTINUED):
BLUE BELL/PLYMOUTH MEETING/ FORT WASHI
2240/50 Butler Pike
Square Footage of Expiring Leases..... -- -- -- 30,359 -- 51,869
Percentage of Total Leased Square
Feet................................. -- -- -- 58.5% -- 100.0%
Final Annual Base Rent Under
Expiring Leases(2)................... -- -- -- $450,831 -- $695,194
Final Annual Base Rent per Square Foot
Under Expiring Leases(3)............. -- -- -- $14.85 -- $13.40
Percentage of Total Final Annual Base
Rent Represented by Expiring
Leases............................... -- -- -- 64.9% -- 100.0%
Number of Leases Expiring............. -- -- -- 1 -- 3
120 West Germantown Pike
Square Footage of Expiring Leases..... -- -- -- -- -- 30,546
Percentage of Total Leased Square
Feet................................. 100.0%
Final Annual Base Rent Under
Expiring Leases(2)................... -- -- -- -- -- $527,827
Final Annual Base Rent per Square Foot
Under Expiring Leases(3)............. -- -- -- -- -- $17.28
Percentage of Total Final Annual Base
Rent Represented by Expiring
Leases............................... 100.0%
Number of Leases Expiring............. -- -- -- -- -- 3
140 West Germantown Pike
Square Footage of Expiring Leases..... -- -- -- -- -- 25,624
Percentage of Total Leased Square
Feet................................. -- -- -- -- -- 100.0%
Final Annual Base Rent Under
Expiring Leases(2)................... -- -- -- -- -- $357,192
Final Annual Base Rent per Square Foot
Under Expiring Leases(3)............. -- -- -- -- -- $13.94
Percentage of Total Final Annual Base
Rent Represented by Expiring
Leases............................... -- -- -- -- -- 100.0%
Number of Leases Expiring............. -- -- -- -- -- 4
2260 Butler Pike
Square Footage of Expiring Leases..... -- -- -- -- -- 31,892
Percentage of Total Leased Square
Feet................................. 100.0%
Final Annual Base Rent Under
Expiring Leases(2)................... -- -- -- -- -- $423,308
Final Annual Base Rent per Square Foot
Under Expiring Leases(3)............. -- -- -- -- -- $13.27
Percentage of Total Final Annual Base
Rent Represented by Expiring
Leases............................... -- -- -- -- -- 100.0%
Number of Leases Expiring............. -- -- -- -- -- 3
</TABLE>
- ---------------
Footnotes appear on page 81.
75
<PAGE> 14
<TABLE>
<CAPTION>
YEAR OF LEASE EXPIRATION 1996(1) 1997 1998 1999 2000 2001 2002
- -------------------------------------- -------- ---------- -------- ---------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
INITIAL PROPERTIES (CONTINUED):
MAIN LINE, PA
16 Campus Boulevard
Square Footage of Expiring Leases..... -- -- -- -- -- 8,000 --
Percentage of Total Leased Square
Feet................................. -- -- -- -- -- 12.2% --
Final Annual Base Rent Under
Expiring Leases(2)................... -- -- -- -- -- $96,000 --
Final Annual Base Rent per Square Foot
Under Expiring Leases(3)............. -- -- -- -- -- $12.00 --
Percentage of Total Final Annual Base
Rent Represented by Expiring
Leases............................... -- -- -- -- -- 13.4% --
Number of Leases Expiring............. -- -- -- -- -- 1 --
18 Campus Boulevard
Square Footage of Expiring Leases..... -- 6,224 -- 2,042 -- 29,434 --
Percentage of Total Leased Square
Feet................................. -- 16.5% -- 5.4% -- 78.1% --
Final Annual Base Rent Under
Expiring Leases(2)................... -- $78,360 -- $26,546 -- $447,354 --
Final Annual Base Rent per Square Foot
Under Expiring Leases(3)............. -- $12.59 -- $13.00 -- $15.20 --
Percentage of Total Final Annual Base
Rent Represented by Expiring
Leases............................... -- 14.2% -- 4.8% -- 81.0% --
Number of Leases Expiring............. -- 1 -- 1 -- 3 --
LEHIGH VALLEY, PA
7310 Tilghman Street
Square Footage of Expiring Leases..... 13,107 8,667 11,000 3,829 -- 2,980 --
Percentage of Total Leased Square
Feet................................. 33.1 % 21.9% 27.8% 9.7% -- 7.5% --
Final Annual Base Rent Under
Expiring Leases(2)................... $108,788 $86,670 $92,950 $34,461 -- $29,055 --
Final Annual Base Rent per Square Foot
Under Expiring Leases(3)............. $8.30 $10.00 $8.45 $9.00 -- $9.75 --
Percentage of Total Final Annual Base
Rent Represented by Expiring
Leases............................... 30.9 % 24.6% 26.4% 9.8% -- 8.3% --
Number of Leases Expiring............. 1 1 1 1 -- 1 --
7248 Tilghman Street
Square Footage of Expiring Leases..... -- 5,327 -- 2,695 -- 32,180 --
Percentage of Total Leased Square
Feet................................. -- 13.2% -- 6.7% -- 80.1% --
Final Annual Base Rent Under
Expiring Leases(2)................... -- $59,929 -- $30,993 -- $348,540 --
Final Annual Base Rent per Square Foot
Under Expiring Leases(3)............. -- $11.25 -- $11.50 -- $10.83 --
Percentage of Total Final Annual Base
Rent Represented by Expiring
Leases............................... -- 13.6% -- 7.1% -- 79.3% --
Number of Leases Expiring............. -- 1 -- 1 -- 2 --
<CAPTION>
2007 AND
YEAR OF LEASE EXPIRATION 2003 2004 2005 2006 THEREAFTER TOTAL
- -------------------------------------- ---------- -------- -------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
INITIAL PROPERTIES (CONTINUED):
MAIN LINE, PA
16 Campus Boulevard
Square Footage of Expiring Leases..... -- -- -- 57,463 -- 65,463
Percentage of Total Leased Square
Feet................................. -- -- -- 87.8% -- 100.0%
Final Annual Base Rent Under
Expiring Leases(2)................... -- -- -- $620,837 -- $716,837
Final Annual Base Rent per Square Foot
Under Expiring Leases(3)............. -- -- -- $10.80 -- $10.95
Percentage of Total Final Annual Base
Rent Represented by Expiring
Leases............................... -- -- -- 86.6% -- 100.0%
Number of Leases Expiring............. -- -- -- 3 -- 4
18 Campus Boulevard
Square Footage of Expiring Leases..... -- -- -- -- -- 37,700
Percentage of Total Leased Square
Feet................................. -- -- -- -- -- 100.0%
Final Annual Base Rent Under
Expiring Leases(2)................... -- -- -- -- -- $552,260
Final Annual Base Rent per Square Foot
Under Expiring Leases(3)............. -- -- -- -- -- $14.65
Percentage of Total Final Annual Base
Rent Represented by Expiring
Leases............................... -- -- -- -- -- 100.0%
Number of Leases Expiring............. -- -- -- -- -- 5
LEHIGH VALLEY, PA
7310 Tilghman Street
Square Footage of Expiring Leases..... -- -- -- -- -- 39,583
Percentage of Total Leased Square
Feet................................. -- -- -- -- -- 100.0%
Final Annual Base Rent Under
Expiring Leases(2)................... -- -- -- -- -- $351,924
Final Annual Base Rent per Square Foot
Under Expiring Leases(3)............. -- -- -- -- -- $8.89
Percentage of Total Final Annual Base
Rent Represented by Expiring
Leases............................... -- -- -- -- -- 100.0%
Number of Leases Expiring............. -- -- -- -- -- 5
7248 Tilghman Street
Square Footage of Expiring Leases..... -- -- -- -- -- 40,202
Percentage of Total Leased Square
Feet................................. -- -- -- -- -- 100.0%
Final Annual Base Rent Under
Expiring Leases(2)................... -- -- -- -- -- $439,462
Final Annual Base Rent per Square Foot
Under Expiring Leases(3)............. -- -- -- -- -- $10.93
Percentage of Total Final Annual Base
Rent Represented by Expiring
Leases............................... -- -- -- -- -- 100.0%
Number of Leases Expiring............. -- -- -- -- -- 4
</TABLE>
- ---------------
Footnotes appear on page 81.
76
<PAGE> 15
<TABLE>
<CAPTION>
YEAR OF LEASE EXPIRATION 1996(1) 1997 1998 1999 2000 2001 2002
- -------------------------------------- -------- ---------- -------- ---------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
INITIAL PROPERTIES (CONTINUED):
6575 Snowdrift Road
Square Footage of Expiring Leases..... -- -- -- 46,250 -- -- --
Percentage of Total Leased Square
Feet................................. -- -- -- 100.0% -- -- --
Final Annual Base Rent Under
Expiring Leases(2)................... -- -- -- $330,688 -- -- --
Final Annual Base Rent per Square Foot
Under Expiring Leases(3)............. -- -- -- $7.15 -- -- --
Percentage of Total Final Annual Base
Rent Represented by Expiring
Leases............................... -- -- -- 100.0% -- -- --
Number of Leases Expiring............. -- -- -- 1 -- -- --
LANSDALE, PA
1510 Gehman Road
Square Footage of Expiring Leases..... -- -- 53,900 98,725 -- -- --
Percentage of Total Leased Square
Feet................................. -- -- 35.3% 64.7% -- -- --
Final Annual Base Rent Under
Expiring Leases(2)................... -- -- $361,130 $419,581 -- -- --
Final Annual Base Rent per Square Foot
Under Expiring Leases(3)............. -- -- $6.70 $4.25 -- -- --
Percentage of Total Final Annual Base
Rent Represented by Expiring
Leases............................... -- -- 46.3% 53.7% -- -- --
Number of Leases Expiring............. -- -- 1 1 -- -- --
BURLINGTON COUNTY, NJ
One Greentree Centre
Square Footage of Expiring Leases..... 3,701 15,394 5,172 4,415 -- 10,303 --
Percentage of Total Leased Square
Feet................................. 6.6% 27.6% 9.3% 7.9% -- 18.5% --
Final Annual Base Rent Under
Expiring Leases(2)................... $60,813 $247,192 $84,954 $78,366 -- $182,038 --
Final Annual Base Rent per Square Foot
Under Expiring Leases(3)............. $16.43 $16.06 $16.43 $17.75 -- $17.67 --
Percentage of Total Final Annual Base
Rent Represented by Expiring
Leases............................... 6.2% 25.1% 8.6% 8.0% -- 18.5% --
Number of Leases Expiring............. 2 6 3 1 -- 2 --
Two Greentree Centre
Square Footage of Expiring Leases..... 5,680 18,838 3,732 3,183 -- -- --
Percentage of Total Leased Square
Feet................................. 10.1% 33.6% 6.7% 5.7% -- -- --
Final Annual Base Rent Under
Expiring Leases(2)................... $99,400 $283,350 $69,917 $50,928 -- -- --
Final Annual Base Rent per Square Foot
Under Expiring Leases(3)............. $17.50 $15.04 $11.75 $16.00 -- -- --
Percentage of Total Final Annual Base
Rent Represented by Expiring
Leases............................... 10.3% 29.2% 7.2% 5.3% -- -- --
Number of Leases Expiring............. 1 5 2 1 1 -- --
<CAPTION>
2007 AND
YEAR OF LEASE EXPIRATION 2003 2004 2005 2006 THEREAFTER TOTAL
- -------------------------------------- ---------- -------- -------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
INITIAL PROPERTIES (CONTINUED):
6575 Snowdrift Road
Square Footage of Expiring Leases..... -- -- -- -- -- 46,250
Percentage of Total Leased Square
Feet................................. -- -- -- -- -- 100.0%
Final Annual Base Rent Under
Expiring Leases(2)................... -- -- -- -- -- $330,688
Final Annual Base Rent per Square Foot
Under Expiring Leases(3)............. -- -- -- -- -- $7.15
Percentage of Total Final Annual Base
Rent Represented by Expiring
Leases............................... -- -- -- -- -- 100.0%
Number of Leases Expiring............. -- -- -- -- -- 1
LANSDALE, PA
1510 Gehman Road
Square Footage of Expiring Leases..... -- -- -- -- -- 152,625
Percentage of Total Leased Square
Feet................................. -- -- -- -- -- 100.0%
Final Annual Base Rent Under
Expiring Leases(2)................... -- -- -- -- -- $780,711
Final Annual Base Rent per Square Foot
Under Expiring Leases(3)............. -- -- -- -- -- $5.12
Percentage of Total Final Annual Base
Rent Represented by Expiring
Leases............................... -- -- -- -- -- 100.0%
Number of Leases Expiring............. -- -- -- -- -- 2
BURLINGTON COUNTY, NJ
One Greentree Centre
Square Footage of Expiring Leases..... -- -- -- 16,853 -- 55,838
Percentage of Total Leased Square
Feet................................. -- -- -- 30.2% -- 100.0%
Final Annual Base Rent Under
Expiring Leases(2)................... -- -- -- $332,847 -- $986,210
Final Annual Base Rent per Square Foot
Under Expiring Leases(3)............. -- -- -- $19.75 -- $17.66
Percentage of Total Final Annual Base
Rent Represented by Expiring
Leases............................... -- -- -- 33.8% -- 100.0%
Number of Leases Expiring............. -- -- -- 1 -- 15
Two Greentree Centre
Square Footage of Expiring Leases..... 5,255 -- 19,387 -- -- 56,075
Percentage of Total Leased Square
Feet................................. 9.4% -- 34.5% -- -- 100.0%
Final Annual Base Rent Under
Expiring Leases(2)................... $99,845 -- $365,564 -- -- $969,004
Final Annual Base Rent per Square Foot
Under Expiring Leases(3)............. $19.00 -- $18.86 -- -- $16.82
Percentage of Total Final Annual Base
Rent Represented by Expiring
Leases............................... 10.3% -- 37.7% -- -- 100.0%
Number of Leases Expiring............. 1 -- 2 -- -- 12
</TABLE>
- ---------------
Footnotes appear on page 81.
77
<PAGE> 16
<TABLE>
<CAPTION>
YEAR OF LEASE EXPIRATION 1996(1) 1997 1998 1999 2000 2001 2002
- -------------------------------------- -------- ---------- -------- ---------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
INITIAL PROPERTIES (CONTINUED):
Three Greentree Centre
Square Footage of Expiring Leases..... -- 17,676 -- -- 13,150 26,430 --
Percentage of Total Leased Square
Feet................................. -- 26.6% -- -- 19.8% 39.8% --
Final Annual Base Rent Under
Expiring Leases(2)................... -- $317,173 -- -- $242,155 $450,885 --
Final Annual Base Rent per Square Foot
Under Expiring Leases(3)............. -- $17.94 -- -- $18.41 $17.06 --
Percentage of Total Final Annual Base
Rent Represented by Expiring
Leases............................... -- 26.9% -- -- 20.5% 38.2% --
Number of Leases Expiring............. -- 3 -- -- 2 2 --
CAMDEN COUNTY, NJ
457 Haddonfield Road
Square Footage of Expiring Leases..... 11,521 -- 7,233 5,798 6,978 8,912
Percentage of Total Leased Square
Feet................................. 11.4% -- 7.2% 5.6% 6.9% 8.8%
Final Annual Base Rent Under
Expiring Leases(2)................... $184,682 -- $105,819 $102,032 $144,134 $169,328
Final Annual Base Rent per Square Foot
Under Expiring Leases(3)............. $16.03 -- $14.63 $17.60 $20.66 $19.00
Percentage of Total Final Annual Base
Rent Represented by Expiring
Leases............................... 10.4% -- 6.0% 5.8% 8.1% 9.6%
Number of Leases Expiring............. 1 -- 1 2 3 1
OTHER MARKETS
168 Franklin Corner Road,
Lawrenceville, NJ
Square Footage of Expiring Leases..... 8,467 550 -- 4,504 -- 3,902 --
Percentage of Total Leased Square
Feet................................. 48.6% 3.2% -- 25.8% -- 22.4% --
Final Annual Base Rent Under
Expiring Leases(2)................... $106,041 $7,150 -- $62,200 -- $39,020 --
Final Annual Base Rent per Square Foot
Under Expiring Leases(3)............. $12.52 $13.00 -- $13.81 -- $10.00 --
Percentage of Total Final Annual Base
Rent Represented by Expiring
Leases............................... 49.5% 3.3% -- 29.0% -- 18.2% --
Number of Leases Expiring............. 3 1 -- 1 -- 1 --
5910-6090 Six Forks, Raleigh, NC
Square Footage of Expiring Leases..... 17,773 27,794 3,842 18,733 -- 1,674 --
Percentage of Total Leased Square
Feet................................. 24.2% 37.9% 5.2% 25.6% -- 2.3% --
Final Annual Base Rent Under
Expiring Leases(2)................... $247,672 $390,483 $58,175 $286,723 -- $26,784 --
Final Annual Base Rent per Square Foot
Under Expiring Leases(3)............. 13.94 14.05 15.14 15.31 -- 16.00 --
Percentage of Total Final Annual Base
Rent Represented by Expiring
Leases............................... 23.2% 36.5% 5.4% 26.8% -- 2.5% --
Number of Leases Expiring............. 6 22 5 10 -- 1 --
<CAPTION>
2007 AND
YEAR OF LEASE EXPIRATION 2003 2004 2005 2006 THEREAFTER TOTAL
- -------------------------------------- ---------- -------- -------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
INITIAL PROPERTIES (CONTINUED):
Three Greentree Centre
Square Footage of Expiring Leases..... 9,226 -- -- -- -- 66,482
Percentage of Total Leased Square
Feet................................. 13.9% -- -- -- -- 100.0%
Final Annual Base Rent Under
Expiring Leases(2)................... $170,681 -- -- -- -- $1,180,894
Final Annual Base Rent per Square Foot
Under Expiring Leases(3)............. $18.50 -- -- -- -- $17.76
Percentage of Total Final Annual Base
Rent Represented by Expiring
Leases............................... 14.5% -- -- -- -- 100.0%
Number of Leases Expiring............. 1 -- -- -- -- 8
CAMDEN COUNTY, NJ
457 Haddonfield Road
Square Footage of Expiring Leases..... 13,589 9,262 -- -- 37,515 100,808
Percentage of Total Leased Square
Feet................................. 13.5% 9.2% -- -- 37.2% 100.0%
Final Annual Base Rent Under
Expiring Leases(2)................... $269,926 $185,240 -- -- $612,245 $1,773,406
Final Annual Base Rent per Square Foot
Under Expiring Leases(3)............. $19.86 20.00 -- -- $16.32 $17.59
Percentage of Total Final Annual Base
Rent Represented by Expiring
Leases............................... 15.2% 10.5% -- -- 34.5% 100.0%
Number of Leases Expiring............. 2 1 -- -- 1 12
OTHER MARKETS
168 Franklin Corner Road,
Lawrenceville, NJ
Square Footage of Expiring Leases..... -- -- -- -- -- 17,423
Percentage of Total Leased Square
Feet................................. -- -- -- -- -- 100.0%
Final Annual Base Rent Under
Expiring Leases(2)................... -- -- -- -- -- $214,411
Final Annual Base Rent per Square Foot
Under Expiring Leases(3)............. -- -- -- -- -- $12.31
Percentage of Total Final Annual Base
Rent Represented by Expiring
Leases............................... -- -- -- -- -- 100.0%
Number of Leases Expiring............. -- -- -- -- -- 6
5910-6090 Six Forks, Raleigh, NC
Square Footage of Expiring Leases..... 3,524 -- -- -- -- 73,340
Percentage of Total Leased Square
Feet................................. 4.8% -- -- -- -- 100.0%
Final Annual Base Rent Under
Expiring Leases(2)................... $59,908 -- -- -- -- $1,069,745
Final Annual Base Rent per Square Foot
Under Expiring Leases(3)............. 17.00 -- -- -- -- 14.59
Percentage of Total Final Annual Base
Rent Represented by Expiring
Leases............................... 5.6% -- -- -- -- 100.0%
Number of Leases Expiring............. 1 -- -- -- -- 45
</TABLE>
- ---------------
Footnotes appear on page 81.
78
<PAGE> 17
<TABLE>
<CAPTION>
YEAR OF LEASE EXPIRATION 1996(1) 1997 1998 1999 2000 2001 2002
- -------------------------------------- -------- ---------- -------- ---------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED TOTALS FOR INITIAL
PROPERTIES
Square Footage of Expiring Leases.... 54,004 115,886 100,621 296,212 62,670 212,726 8,912
Percentage of Total Leased Square
Feet............................... 4.6 % 9.2% 8.0% 23.6% 5.0% 17.0% .7%
Total Annual Base Rent Under Expiring
Leases(2).......................... $676,134 $1,701,924 $977,905 $2,495,062 $874,483 $2,970,875 $169,328
Total Annual Base Rent per Square
Feet Under Expiring Leases(3)...... $12.86 $14.69 $9.72 $8.42 $13.95 $13.97 $19.00
Percentage of Total Final Annual Base
Rate Represented by Expiring
Leases............................. 4.8 % 11.0% 6.4% 16.2% 5.7% 19.3% 1.1%
Number of Leases Expiring............ 15 42 20 28 10 20 1
CONSOLIDATED TOTALS FOR INITIAL
PROPERTIES
Square Footage of Expiring Leases.... 109,336 9,262 19,387 145,449 116,719 1,251,184
Percentage of Total Leased Square
Feet............................... 8.7% 0.8% 1.5% 11.6% 9.3 % 100.0%
Total Annual Base Rent Under Expiring
Leases(2).......................... $1,361,239 $185,240 $365,564 $1,942,732 $1,580,118 $15,300,604
Total Annual Base Rent per Square
Feet Under Expiring Leases(3)...... $12.45 $20.00 $18.86 $13.36 $13.54 $12.23
Percentage of Total Final Annual Base
Rate Represented by Expiring
Leases............................. 8.9% 1.2% 2.4% 12.7% 10.3 % 100.0%
Number of Leases Expiring............ 7 1 2 6 2 154
</TABLE>
<TABLE>
<CAPTION>
YEAR OF LEASE EXPIRATION 1996(1) 1997 1998 1999 2000 2001 2002
- -------------------------------------- -------- ---------- -------- ---------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
ACQUISITION PROPERTIES:
HORSHAM/WILLOW GROVE/JENKINTOWN PA
700/800 Business Center Drive
Square Footage of Expiring Leases..... -- -- -- 22,761 -- 30,773 --
Percentage of Total Leased Square
Feet................................. -- -- -- 27.8% -- 37.5% --
Final Annual Base Rent Under Expiring
Leases(2)............................ -- -- -- $348,223 -- $499,965 --
Final Annual Base Rent per Square Foot
under Expiring Leases(3)............. -- -- -- $15.30 -- $16.25 --
Percentage of Total Final Annual Base
Rent Represented by Expiring
Leases............................... -- -- -- 27.5% -- 39.5% --
Number of Leases Expiring............. -- -- -- 3 -- 2 --
KING OF PRUSSIA, PA
500 North Gulph Road
Square Footage of Expiring Leases..... 2,362 8,214 6,617 35,085 15,101 12,566 --
Percentage of Total Leased Square
Feet................................. 3.0 % 10.3% 8.3% 43.9% 18.9% 15.7% --
Final Annual Base Rent Under Expiring
Leases(2)............................ $43,697 $133,067 $123,521 $608,010 $286,919 $226,188 --
Final Annual Base Rent per Square Foot
under Expiring Leases(3)............. $18.50 $16.20 $18.67 $17.33 $19.00 $18.00 --
Percentage of Total Final Annual Base
Rent Represented by Expiring
Leases............................... 3.1 % 9.4% 8.7% 42.8% 20.2% 15.9% --
Number of Leases Expiring............. 1 1 3 5 1 1 --
Bucks County, PA
2200 Cabot Boulevard
Square Footage of Expiring Leases..... -- 20,700 -- 21,000 13,381 -- --
Percentage of Total Leased Square
Feet................................. -- 37.6% -- 38.1% 24.3% -- --
Final Annual Base Rent Under Expiring
Leases(2)............................ -- $108,054 -- $80,850 $53,524 -- --
Final Annual Base Rent per Square Foot
under Expiring Leases(3)............. -- $5.22 -- $3.85 $4.00 -- --
Percentage of Total Final Annual Base
Rent Represented by Expiring
Leases............................... -- 44.6% -- 33.3% 22.1% -- --
Number of Leases Expiring............. -- 1 -- 1 1 -- --
2250 Cabot Boulevard
Square Footage of Expiring Leases..... -- -- -- 40,000 -- -- --
Percentage of Total Leased Square
Feet................................. -- -- -- 100.0% -- -- --
Final Annual Base Rent Under Expiring
Leases(2)............................ -- -- -- $140,000 -- -- --
Final Annual Base Rent per Square Foot
under Expiring Leases(3)............. -- -- -- $3.50 -- -- --
Percentage of Total Final Annual Base
Rent Represented by Expiring
Leases............................... -- -- -- 100.0% -- -- --
Number of Leases Expiring............. -- -- -- 1 -- -- --
<CAPTION>
2007 AND
YEAR OF LEASE EXPIRATION 2003 2004 2005 2006 THEREAFTER TOTAL
- -------------------------------------- ---------- -------- -------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
ACQUISITION PROPERTIES:
HORSHAM/WILLOW GROVE/JENKINTOWN PA
700/800 Business Center Drive
Square Footage of Expiring Leases..... -- -- -- -- 28,475 82,009
Percentage of Total Leased Square
Feet................................. -- -- -- -- 34.7 % 100.0%
Final Annual Base Rent Under Expiring
Leases(2)............................ -- -- -- -- $418,583 $1,266,771
Final Annual Base Rent per Square Foot
under Expiring Leases(3)............. -- -- -- -- $14.70 $15.45
Percentage of Total Final Annual Base
Rent Represented by Expiring
Leases............................... -- -- -- -- 33.0 % 100.0%
Number of Leases Expiring............. -- -- -- -- 1 6
KING OF PRUSSIA, PA
500 North Gulph Road
Square Footage of Expiring Leases..... -- -- -- -- -- 79.945
Percentage of Total Leased Square
Feet................................. -- -- -- -- -- 100.0%
Final Annual Base Rent Under Expiring
Leases(2)............................ -- -- -- -- -- $1,421,402
Final Annual Base Rent per Square Foot
under Expiring Leases(3)............. -- -- -- -- -- $17.78
Percentage of Total Final Annual Base
Rent Represented by Expiring
Leases............................... -- -- -- -- -- 100.0%
Number of Leases Expiring............. -- -- -- -- -- 12
Bucks County, PA
2200 Cabot Boulevard
Square Footage of Expiring Leases..... -- -- -- -- -- 55,081
Percentage of Total Leased Square
Feet................................. -- -- -- -- -- 100.0%
Final Annual Base Rent Under Expiring
Leases(2)............................ -- -- -- -- -- $242,428
Final Annual Base Rent per Square Foot
under Expiring Leases(3)............. -- -- -- -- -- $4.40
Percentage of Total Final Annual Base
Rent Represented by Expiring
Leases............................... -- -- -- -- -- 100.0%
Number of Leases Expiring............. -- -- -- -- -- 3
2250 Cabot Boulevard
Square Footage of Expiring Leases..... -- -- -- -- -- 40,000
Percentage of Total Leased Square
Feet................................. -- -- -- -- -- 100.0%
Final Annual Base Rent Under Expiring
Leases(2)............................ -- -- -- -- -- $140,000
Final Annual Base Rent per Square Foot
under Expiring Leases(3)............. -- -- -- -- -- $3.50
Percentage of Total Final Annual Base
Rent Represented by Expiring
Leases............................... -- -- -- -- -- 100.0%
Number of Leases Expiring............. -- -- -- -- -- 1
</TABLE>
- ---------------
Footnotes appear on page 81.
79
<PAGE> 18
<TABLE>
<CAPTION>
YEAR OF LEASE EXPIRATION 1996(1) 1997 1998 1999 2000 2001 2002
- -------------------------------------- -------- ---------- -------- ---------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
ACQUISITION PROPERTIES (CONTINUED):
2260/2270 Cabot Boulevard
Square Footage of Expiring Leases..... 11,283 7,356 8,203 -- 2,796 -- --
Percentage of Total Leased Square
Feet................................. 38.1 % 24.8% 27.7% -- 9.4% -- --
Final Annual Base Rent Under Expiring
Leases(2)............................ $94,613 $72,021 $70,782 -- $34,111 -- --
Final Annual Base Rent per Square Foot
under Expiring Leases(3)............. $8.39 $9.79 $8.63 -- $12.20 -- --
Percentage of Total Final Annual Base
Rent Represented by Expiring
Leases............................... 34.9 % 26.5% 26.1% -- 12.6% -- --
Number of Leases Expiring............. 3 4 3 -- 1 -- --
3000 Cabot Boulevard
Square Footage of Expiring Leases..... 1,900 10,840 11,378 4,933 -- -- --
Percentage of Total Leased Square
Feet................................. 6.5 % 37.3% 39.2% 17.0% -- -- --
Final Annual Base Rent Under Expiring
Leases(2)............................ $34,200 $173,440 $203,048 $84,101 -- -- --
Final Annual Base Rent per Square Foot
under Expiring Leases(3)............. $18.00 $16.00 $17.85 $17.05 -- -- --
Percentage of Total Final Annual Base
Rent Represented by Expiring
Leases............................... 6.9 % 35.1% 41.1% 17.0% -- -- --
Number of Leases Expiring............. 1 1 2 2 -- -- --
GREENWOOD SQUARE
Square Footage of Expiring Leases..... 6,500 80,658 16,105 11,373 3,730 28,454 4,433
Percentage of Total Leased Square
Feet................................. 4.3 % 52.8% 10.6% 7.5% 2.4% 18.6% 2.9%
Final Annual Based Rent Under Expiring
Leases(2)............................ $141,440 $1,334,481 $262,484 $193,957 $70,684 $460,126 $82,764
Final Annual Base Rent per Square Foot
under Expiring Leases(3)............. $21.76 $16.54 $16.30 $17.05 $18.95 $16.17 $18.67
Percentage of Total Final Annual Base
Rent Represented by Expiring
Leases............................... 5.6 % 52.4% 10.3% 7.6% 2.8% 18.1% 3.2%
Number of Leases Expiring............. 1 10 6 5 1 6 1
Burlington County, NJ
8000 Lincoln Drive
Square Footage of Expiring Leases..... -- -- -- -- -- 36,830 --
Percentage of Total Leased Square
Feet................................. -- -- -- -- -- 67.1% --
Final Annual Base Rent Under Expiring
Leases(2)............................ -- -- -- -- -- $662,940 --
Final Annual Base Rent per Square Foot
under Expiring Leases(3)............. -- -- -- -- -- $18.00 --
Percentage of Total Final Annual Base
Rent Represented by Expiring
Leases............................... -- -- -- -- -- 67.2% --
Number of Leases Expiring............. -- -- -- -- -- 1 --
ACQUISITION PROPERTIES (CONTINUED):
<CAPTION>
2007 AND
YEAR OF LEASE EXPIRATION 2003 2004 2005 2006 THEREAFTER TOTAL
- -------------------------------------- ---------- -------- -------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
2260/2270 Cabot Boulevard
Square Footage of Expiring Leases..... -- -- -- -- -- 29,638
Percentage of Total Leased Square
Feet................................. -- -- -- -- -- 100.0%
Final Annual Base Rent Under Expiring
Leases(2)............................ -- -- -- -- -- $271,527
Final Annual Base Rent per Square Foot
under Expiring Leases(3)............. -- -- -- -- -- $9.16
Percentage of Total Final Annual Base
Rent Represented by Expiring
Leases............................... -- -- -- -- -- 100.0%
Number of Leases Expiring............. -- -- -- -- -- 11
3000 Cabot Boulevard
Square Footage of Expiring Leases..... -- -- -- -- -- 29,051
Percentage of Total Leased Square
Feet................................. -- -- -- -- -- 100.0%
Final Annual Base Rent Under Expiring
Leases(2)............................ -- -- -- -- -- $494,789
Final Annual Base Rent per Square Foot
under Expiring Leases(3)............. -- -- -- -- -- $17.03
Percentage of Total Final Annual Base
Rent Represented by Expiring
Leases............................... -- -- -- -- -- 100.0%
Number of Leases Expiring............. -- -- -- -- -- 6
GREENWOOD SQUARE
Square Footage of Expiring Leases..... -- -- -- -- 1,501 152,754
Percentage of Total Leased Square
Feet................................. -- -- -- -- 1.0 % 100.0%
Final Annual Based Rent Under Expiring
Leases(2)............................ -- -- -- -- -- $2,545,336
Final Annual Base Rent per Square Foot
under Expiring Leases(3)............. -- -- -- -- -- $16.67
Percentage of Total Final Annual Base
Rent Represented by Expiring
Leases............................... -- -- -- -- -- 100.0%
Number of Leases Expiring............. -- -- -- -- 1 31
Burlington County, NJ
8000 Lincoln Drive
Square Footage of Expiring Leases..... -- -- -- -- 18,093 54,923
Percentage of Total Leased Square
Feet................................. -- -- -- -- 32.9 % 100.0%
Final Annual Base Rent Under Expiring
Leases(2)............................ -- -- -- -- $323,865 $986,805
Final Annual Base Rent per Square Foot
under Expiring Leases(3)............. -- -- -- -- $17.90 $17.97
Percentage of Total Final Annual Base
Rent Represented by Expiring
Leases............................... -- -- -- -- 32.8 % 100.0%
Number of Leases Expiring............. -- -- -- -- 1 2
</TABLE>
- ---------------
Footnotes appear on page 81.
80
<PAGE> 19
<TABLE>
<CAPTION>
YEAR OF LEASE EXPIRATION 1996(1) 1997 1998 1999 2000 2001 2002
- -------------------------------- ---------- ---------- ---------- ---------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Northern Suburban Wilmington
One Righter Parkway
Square Footage of Expiring
Leases......................... 1,200 2,681 -- 7,933 -- -- --
Percentage of Total Leased
Square Feet.................... 1.1% 2.6% -- 7.6% -- -- --
Final Annual Base Rent Under
Expiring Leases(2)............. $21,000 $45,577 -- $150,651 -- -- --
Final Annual Base Rent per
Square Foot under Expiring
Leases(3)...................... $17.50 $17.00 -- $18.99 -- -- --
Percentage of Total Final Annual
Base Rent Represented by
Expiring Leases................ 0.9% 1.9% -- 6.1% -- -- --
Number of Leases Expiring....... 1 1 -- 3 -- -- --
<CAPTION>
2007 AND
YEAR OF LEASE EXPIRATION 2003 2004 2005 2006 THEREAFTER TOTAL
- -------------------------------- ---------- ---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Northern Suburban Wilmington
One Righter Parkway
Square Footage of Expiring
Leases......................... -- -- 93,014 -- -- 104,828
Percentage of Total Leased
Square Feet.................... -- -- 88.7% -- -- 100.0%
Final Annual Base Rent Under
Expiring Leases(2)............. -- -- $2,252,799 -- -- $2,470,027
Final Annual Base Rent per
Square Foot under Expiring
Leases(3)...................... -- -- $24.22 -- -- $23.56
Percentage of Total Final Annual
Base Rent Represented by
Expiring Leases................ -- -- 91.2% -- -- 100.0%
Number of Leases Expiring....... -- -- 1 -- -- 6
</TABLE>
- ---------------
(1) Represents lease expirations from September 30, 1996 to December 31, 1996.
(2) Represents annual base rent for the final annual period in accordance with
lease terms.
(3) Calculated by dividing the annual base rent for the final annual period by
the net rentable square feet subject to such leases.
CONSOLIDATED TOTALS FOR ACQUISITION PROPERTIES
<TABLE>
<CAPTION>
YEAR OF LEASE EXPIRATION 1996(1) 1997 1998 1999 2000 2001 2002
- -------------------------------- ---------- ---------- ---------- ---------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Square Footage of Expiring
Leases......................... 23,245 130,449 42,303 143,085 35,008 108,623 4,433
Percentage of Total Leased
Square Feet.................... 3.7% 20.8% 6.7% 22.8% 5.6% 17.2% 0.7%
Final Annual Base Rent Under
Expiring Leases(2)............. $334,950 $1,866,640 $659,835 $1,605,792 $445,238 $1,849,219 $82,764
Final Annual Base Rent per
Square Foot under Expiring
Leases(3)...................... $14.41 $14.31 $15.60 $11.22 $12.72 $17.02 $18.67
Percentage of Total Final Annual
Base Rent Represented by
Expiring Leases................ 3.4% 19.0% 6.7% 16.3% 4.5% 8.8% 0.8%
Number of Leases Expiring....... 7 18 14 20 4 10 1
<CAPTION>
2007 AND
YEAR OF LEASE EXPIRATION 2003 2004 2005 2006 THEREAFTER TOTAL
- -------------------------------- ---------- ---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Square Footage of Expiring
Leases......................... -- -- 93,014 -- 48,069 628,229
Percentage of Total Leased
Square Feet.................... -- -- 14.8% -- 7.7 % 100.0%
Final Annual Base Rent Under
Expiring Leases(2)............. -- -- $2,252,799 -- $742,447 $9,839,684
Final Annual Base Rent per
Square Foot under Expiring
Leases(3)...................... -- -- $24.22 -- $15.45 $15.66
Percentage of Total Final Annual
Base Rent Represented by
Expiring Leases................ -- -- 22.9% -- 7.6 % 100.0%
Number of Leases Expiring....... -- -- 1 -- 3 78
</TABLE>
- ---------------
(1) Represents lease expirations from September 30, 1996 to December 31, 1996.
(2) Represents annual base rent for the final annual period in accordance with
lease terms.
(3) Calculated by dividing the annual base rent for the final annual period by
the net rentable square feet subject to such leases.
CONSOLIDATED TOTALS FOR ALL PROPERTIES
<TABLE>
<CAPTION>
YEAR OF LEASE EXPIRATION 1996(1) 1997 1998 1999 2000 2001 2002
- -------------------------------- ---------- ---------- ---------- ---------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Square Footage of Expiring
Leases......................... 77,249 246,335 142,924 439,297 97,678 321,349 13,345
Percentage of Total Leased
Square Feet.................... 4.1% 13.1% 7.6% 22.8% 5.2% 17.1% 0.7%
Final Annual Base Rent Under
Expiring Leases(2)............. $1,011,084 $3,568,563 $1,637,739 $4,100,854 $1,319,720 $4,820,094 $252,092
Final Annual Base Rent per
Square Foot under Expiring
Leases(3)...................... $13.09 $14.49 $11.46 $9.34 $13.51 $15.00 $18.89
Percentage of Total Final Annual
Base Rent Represented by
Expiring Leases................ 4.0% 14.2% 6.5% 16.3% 5.3% 19.2% 1.0%
Number of Leases Expiring....... 22 60 34 48 14 30 2
<CAPTION>
2007 AND
YEAR OF LEASE EXPIRATION 2003 2004 2005 2006 THEREAFTER TOTAL
- -------------------------------- ---------- ---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Square Footage of Expiring
Leases......................... 109,336 9,262 112,401 145,449 164,788 1,879,413
Percentage of Total Leased
Square Feet.................... 5.8% 0.5% 6.0% 7.7% 8.8 % 100.0%
Final Annual Base Rent Under
Expiring Leases(2)............. $1,361,239 $185,240 $2,618,363 $1,942,732 $2,322,565 $25,140,285
Final Annual Base Rent per
Square Foot under Expiring
Leases(3)...................... $12.45 $20.00 $23.29 $13.36 $9.24 $13.38
Percentage of Total Final Annual
Base Rent Represented by
Expiring Leases................ 5.4% 0.7% 10.4% 7.7% 9.3 % 100.0%
Number of Leases Expiring....... 7 1 3 6 5 232
</TABLE>
- ---------------
(1) Represents lease expirations from September 30, 1996 to December 31, 1996.
(2) Represents annual base rent for the final annual period in accordance with
lease terms.
(3) Calculated by dividing the annual base rent for the final annual period by
the net rentable square feet subject to such leases.
81
<PAGE> 20
HISTORICAL TENANT IMPROVEMENTS AND LEASING COMMISSIONS
The following table sets forth certain historical information regarding
tenant improvements ("TI") and leasing commission ("LC") costs attributable to
leases that commenced (i.e., the date the renewal or replacement tenant began to
pay rent) for the Initial Properties during each of the periods presented. TI
and LC costs for commenced leases during a particular period do not equal the
cash paid during such period due to the timing of payments. The following
results for the nine-month period ended September 30, 1996 are not necessarily
indicative of the results that may be expected for the full fiscal year.
Historical TI and LC data relating to the Acquisition Properties was not made
available to the Company.
<TABLE>
<CAPTION>
JANUARY 1 TO TOTAL/WEIGHTED
1993 1994 1995 SEPTEMBER 30, 1996 AVERAGE
-------- -------- -------- ------------------ --------------
<S> <C> <C> <C> <C> <C>
NEW TENANTS(1)(2)
Number of Leases........... 21 8 31 17 77
Square feet of re-tenanted
space.................... 91,590 52,312(2) 168,618 160,863 473,383
TI per square foot......... $ 7.01 $ 22.72(2) $ 4.26 $ 3.88 $ 6.70
LC per square foot......... $ 2.87 $ 2.67 $ 2.19 $ 1.42 $ 2.11
-------- -------- -------- -------- ----------
Total TI and LC per
square foot........... $ 9.88 $ 25.39(2) $ 6.45 $ 5.30 $ 8.81
======== ======== ======== ======== ==========
RENEWAL/EXPANSION LEASES(1)
Number of Leases........... 24 29 32 20 105
Square feet of
Renewals/Expansions...... 72,961 122,178 308,331 148,309 651,779
TI per square foot......... $ 4.21 $ 4.31 $ 4.88 $ 3.46 $ 4.38
LC per square foot......... $ .64 $ 2.13 $ 0.79 $ 1.14 $ 1.10
-------- -------- -------- -------- ----------
Total TI and LC per
square foot........... $ 4.85 $ 6.44 $ 5.67 $ 4.60 $ 5.48
======== ======== ======== ======== ==========
TOTAL NEW TENANTS AND
RENEWAL/EXPANSION
LEASES(1)(2)
Number of Leases........... 45 37 63 37 182
Square feet................ 164,551 174,490 476,949 309,172 1,125,162
TI per square foot......... $ 5.77 $ 9.83 $ 4.66 $ 3.68 $ 5.36
LC per square foot......... $ 1.88 $ 2.29 $ 1.28 $ 1.29 $ 1.52
-------- -------- -------- -------- ----------
Total TI and LC per
square foot........... $ 7.65 $ 12.12 $ 5.94 $ 4.97 $ 6.88
======== ======== ======== ======== ==========
</TABLE>
- ---------------
(1) Includes TI and LC costs relating to the 23 Initial Properties that are
office buildings and excludes the one industrial property.
(2) Represents costs associated with conversion of approximately 44,000 net
rentable square feet of warehouse/laboratory space to office space.
82
<PAGE> 21
HISTORICAL CAPITAL EXPENDITURES
The following table sets forth information relating to the combined
historical capital expenditures (excluding those expenditures which are
recoverable from tenants) of the 23 Initial Properties that are office
buildings. Historical capital expenditure data relating to the Acquisition
Properties was not made available to the Company.
<TABLE>
<CAPTION>
JANUARY 1 TO
SEPTEMBER 30,
1993 1994 1995 1996
---------- ---------- ---------- -------------
<S> <C> <C> <C> <C>
Number of Net Rentable Square Feet(1).... 1,027,431 1,027,431 1,032,764 1,082,257
Capital Expenditures Incurred............ $ -- $ 46,060 $ 78,601 $ 126,738
Capital Expenditures per net rentable
square foot............................ $ -- $ 0.04 $ 0.08 $ 0.12
Annual Weighted Average per square foot
(January 1, 1993 to September 30, 1996)............................................ $ 0.06
</TABLE>
- ---------------
(1) Net rentable square feet are weighted to reflect the acquisitions of 168
Franklin Corner Road in November 1995 and the LibertyView Building (457
Haddonfield Road) in July 1996. In all instances the one industrial property
(1510 Gehman Road) included in the Initial Properties and the Acquisition
Properties are excluded from the calculations.
POTENTIAL REVENUE INCREASE AT REPLACEMENT COST RENTS
The Company believes that the SSI/TNC Properties, the Acquisition
Properties and LibertyView have been purchased at substantial discounts to
replacement cost and have the potential for significant internal revenue growth
as rental rates for office properties in their respective submarkets recover to
levels that would provide a reasonable return on investment to a developer of a
new Class A multi-tenant office building ("Replacement Cost Rents").
ESTIMATED REPLACEMENT COST RENT ANALYSIS
MULTI-TENANT OFFICE BUILDINGS
(PER NET RENTABLE SQUARE FOOT)
<TABLE>
<CAPTION>
SUBURBAN MARKET(1)
-------------------
LOW HIGH
------- -------
<S> <C> <C>
Total Construction (Replacement) Costs(1)................ $135.00 $145.00
Estimated Replacement Cost Rents(1)...................... $ 22.00 $ 24.00
Weighted Average Class A Rental Rates(2)................. $ 18.94 $ 18.94
------- -------
Increase in Class A Rental Rates Necessary to Reach
Replacement Cost Rents................................. $ 3.06 $ 5.06
Percentage Increase in Class A Rental Rates Necessary to
Reach Replacement Cost Rents........................... 16.2 % 26.7 %
</TABLE>
- ---------------
(1) Replacement cost data obtained from C&W Market Analyses. C&W consulted the
Marshall Valuation Service, a nationally recognized construction cost
manual, which indicated that the total cost of development ranges from
approximately $135 to $145 per square foot. This cost includes land, both
direct and indirect costs of construction, a contingency for initial leasing
expenses and an allowance for overhead. This Replacement Cost Rents data
excludes any provision for developers' profit.
(2) Market estimate, provided by C&W.
The Company believes that large corporate users of Class A office space are
beginning to face a shortage of large contiguous blocks of Class A space. This
is illustrated by the fact that, according to C&W, there has been extremely
limited office development for the period from January 1, 1995 to June 30, 1996
(approxi-
83
<PAGE> 22
mately 255,000 net rentable square feet of new office development out of a total
inventory of approximately 43.7 million square feet of office space in the
submarkets where the Properties are located).
HISTORICAL SQUARE FEET UNDER CONSTRUCTION
PHILADELPHIA MSA
<TABLE>
<CAPTION>
1991 1992 1993 1994 1995 JUNE 30, 1996
---- ---- ---- ---- ---- -------------
<S> <C> <C> <C> <C> <C>
1,359,500 332,000 157,290 52,390 227,390 26,600
</TABLE>
HISTORICAL OCCUPANCY
The table below sets forth the average occupancy rates, based on square
feet leased, of the Initial Properties at the indicated dates. Historical
occupancy data relating to the Acquisition Properties was not made available to
the Company.
<TABLE>
<CAPTION>
AGGREGATE RENTABLE PERCENTAGE LEASED
DATE SQUARE FEET(1) AT PERIOD END(2)
-------------------------------------------- ------------------ -----------------
<S> <C> <C>
September 30, 1996.......................... 1,333,794 93.8%
December 31, 1995........................... 1,212,056 89.7%
December 31, 1994........................... 1,180,056 94.0%
December 31, 1993........................... 1,180,056 92.1%
December 31, 1992........................... 1,180,056 91.4%
December 31, 1991........................... 1,180,056 83.8%
</TABLE>
- ---------------
(1) The Properties at 168 Franklin Corner Road and 457 Haddonfield Road
(LibertyView) are excluded from the data for these years because the Company
acquired such Properties subsequent to the applicable period. 168 Franklin
Corner Road was acquired in November 1995 and, at that time, was 54% leased.
457 Haddonfield Road was acquired in July 1996, and at that time was 67%
leased.
(2) Percentage leased for four of the Initial Properties (One, Two and Three
Greentree Centre and Twin Forks Office Park) is as of January 31. The
Company does not believe that percentages at December 31 for such Properties
are materially different than the percentages at January 31.
84
<PAGE> 23
OCCUPANCY AND RENTAL RATES -- PROPERTY BY PROPERTY
The following table sets forth the occupancy rates, average annual
effective rental rate per leased square foot and total annual rental revenue for
each of the Initial Properties during the periods specified. Historical
occupancy data and average annual effective rental rates relating to the
Acquisition Properties were not made available to the Company.
<TABLE>
<CAPTION>
AS OF AND
FOR THE
PERIOD
YEAR ENDED DECEMBER 31, ENDED
---------------------------------------------------------------------- SEPTEMBER 30,
1991 1992 1993 1994 1995 1996
---------- ---------- ---------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
HORSHAM/WILLOW GROVE/
JENKINTOWN, PA
650 DRESHER ROAD
Percentage Leased at Period
End.......................... 100% 100% 100% 100% 100% 100%
Average Annual Effective Rental
Rate Per Leased Square Foot
(1).......................... $ 17.39 $ 17.39 $ 17.09 $ 16.89 $ 15.23 $ 16.50
Total Annual Rental Revenue
(2).......................... $ 524,000 $ 524,000 $ 515,000 $ 509,000 $ 306,000 --
1155 BUSINESS CENTER DRIVE
Percentage Leased at Period
End.......................... 99% 100% 96% 97% 100% 99%
Average Annual Effective Rental
Rate Per Leased Square Foot
(1).......................... $ 16.43 $ 16.68 $ 17.14 $ 16.51 $ 16.50 $ 17.22
Total Annual Rental Revenue
(2).......................... $ 751,000 $ 854,000 $ 863,000 $ 813,000 $ 827,000 --
500 ENTERPRISE ROAD
Percentage Leased at Period
End.......................... 74% 74% 74% 93% 84% 98%
Average Annual Effective Rental
Rate Per Leased Square Foot
(1).......................... $ 11.92 $ 12.80 $ 13.70 $ 11.55 $ 13.13 $ 15.03
Total Annual Rental Revenue
(2).......................... $ 471,000 $ 638,000 $ 683,000 $ 626,000 $ 813,000 --
ONE PROGRESS AVENUE
Percentage Leased at Period
End.......................... 100% 100% 100% 100% 100% 100%
Average Annual Effective Rental
Rate Per Leased Square Foot
(1).......................... $ 12.64 $ 12.06 $ 11.88 $ 12.56 $ 11.45 $ 11.75
Total Annual Rental Revenue
(2).......................... $1,001,000 $ 955,000 $ 941,000 $ 995,000 $ 907,000 --
SOUTHERN ROUTE 202
CORRIDOR, PA
456 CREAMERY WAY
Percentage Leased at Period
End.......................... 100% 100% 100% 100% 100% 100%
Average Annual Effective Rental
Rate Per Leased Square Foot
(1).......................... $ 8.82 $ 5.13 $ 7.71 $ 7.18 $ 7.12 $ 7.25
Total Annual Rental Revenue
(2).......................... $ 420,000 $ 244,000 $ 367,000 $ 342,000 $ 339,000 --
486 THOMAS JONES WAY
Percentage Leased at Period
End.......................... 66% 66% 88% 88% 86% 50.9%
Average Annual Effective Rental
Rate Per Leased Square Foot
(1).......................... $ 14.91 $ 15.18 $ 14.75 $ 14.74 $ 14.58 $ 15.46
Total Annual Rental Revenue
(2).......................... $ 416,000 $ 517,000 $ 646,000 $ 669,000 $ 649,000 --
</TABLE>
85
<PAGE> 24
<TABLE>
<CAPTION>
AS OF AND
FOR THE
PERIOD
YEAR ENDED DECEMBER 31, ENDED
---------------------------------------------------------------------- SEPTEMBER 30,
1991 1992 1993 1994 1995 1996
---------- ---------- ---------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
468 CREAMERY WAY
Percentage Leased at Period
End.......................... 100% 100% 100% 100% 100% 100%
Average Annual Effective Rental
Rate Per Leased Square Foot
(1).......................... $ 12.44 $ 12.96 $ 13.00 $ 13.31 $ 12.89 $ 13.88
Total Annual Rental Revenue
(2).......................... $ 360,000 $ 375,000 $ 376,000 $ 385,000 $ 373,000 --
110 SUMMIT DRIVE
Percentage Leased at Period
End.......................... 79% 90% 100% 100% 87% 68%
Average Annual Effective Rental
Rate Per Leased Square Foot
(1).......................... $ 8.30 $ 10.13 $ 9.42 $ 9.60 $ 8.46 $ 7.20
Total Annual Rental Revenue
(2).......................... $ 314,000 $ 356,000 $ 377,000 $ 419,000 $ 360,000 --
BLUE BELL/PLYMOUTH MEETING/FORT
WASHINGTON, PA
2240/50 BUTLER PIKE
Percentage Leased at Period
End.......................... 79% 100% 100% 100% 100% 99%
Average Annual Effective Rental
Rate Per Leased Square Foot
(1).......................... $ 17.66 $ 17.66 $ 16.69 $ 16.50 $ 16.27 $ 17.55
Total Annual Rental Revenue
(2).......................... $ 819,000 $ 842,000 $ 871,000 $ 861,000 $ 849,000 --
120 WEST GERMANTOWN PIKE
Percentage Leased at Period
End.......................... 100% 100% 100% 100% 100% 100%
Average Annual Effective Rental
Rate Per Leased Square Foot
(1).......................... $ 19.28 $ 20.26 $ 20.66 $ 20.43 $ 18.73 $ 17.52
Total Annual Rental Revenue
(2).......................... $ 589,000 $ 619,000 $ 631,000 $ 624,000 $ 563,000 --
140 WEST GERMANTOWN PIKE
Percentage Leased at Period
End.......................... 100% 72% 96% 100% 100% 99%
Average Annual Effective Rental
Rate Per Leased Square Foot
(1).......................... $ 16.65 $ 16.86 $ 16.19 $ 15.34 $ 15.61 $ 17.38
Total Annual Rental Revenue
(2).......................... $ 432,000 $ 367,000 $ 365,000 $ 394,000 $ 405,000 --
2260 BUTLER PIKE
Percentage Leased at Period
End.......................... 100% 100% 75% 75% 100% 100%
Average Annual Effective Rental
Rate Per Leased Square Foot
(1).......................... $ 16.23 $ 16.62 $ 18.42 $ 17.30 $ 16.76 $ 17.82
Total Annual Rental Revenue
(2).......................... $ 497,000 $ 530,000 $ 455,000 $ 416,000 $ 436,000 --
MAIN LINE, PA
16 CAMPUS BOULEVARD
Percentage Leased at Period
End.......................... 100% 100% 100% 100% 0% 100%
Average Annual Effective Rental
Rate Per Leased Square Foot
(1).......................... $ 16.57 $ 17.53 $ 18.68 $ 18.15 $ 17.22 $ 13.58
Total Annual Rental Revenue
(2).......................... $1,122,000 $1,187,000 $1,265,000 $1,229,000 $1,069,000 --
18 CAMPUS BOULEVARD
Percentage Leased at Period
End.......................... 35% 77% 77% 82% 82% 100%
Average Annual Effective Rental
Rate Per Leased Square Foot
(1).......................... $ 18.33 $ 16.94 $ 17.69 $ 17.56 $ 17.14 $ 18.62
Total Annual Rental Revenue
(2).......................... $ 224,000 $ 350,000 $ 513,000 $ 524,000 $ 532,000 --
</TABLE>
86
<PAGE> 25
<TABLE>
<CAPTION>
AS OF AND
FOR THE
PERIOD
YEAR ENDED DECEMBER 31, ENDED
---------------------------------------------------------------------- SEPTEMBER 30,
1991 1992 1993 1994 1995 1996
---------- ---------- ---------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
LEHIGH VALLEY, PA
7310 TILGHMAN STREET
Percentage Leased at Period
End.......................... 78% 90% 82% 82% 93% 99%
Average Annual Effective Rental
Rate Per Leased Square Foot
(1).......................... $ 10.26 $ 10.91 $ 11.85 $ 11.99 $ 11.23 $ 8.89
Total Annual Rental Revenue
(2).......................... $ 366,000 $ 350,000 $ 402,000 $ 395,000 $ 393,000 --
7248 TILGHMAN STREET
Percentage Leased at Period
End.......................... 96% 96% 83% 92% 92% 94%
Average Annual Effective Rental
Rate Per Leased Square Foot
(1).......................... $ 12.68 $ 12.66 $ 13.82 $ 14.22 $ 13.81 $ 14.76
Total Annual Rental Revenue
(2).......................... $ 439,000 $ 522,000 $ 537,000 $ 549,000 $ 557,000 --
6575 SNOWDRIFT ROAD
Percentage Leased at Period
End.......................... 100% 100% 100% 100% 100% 100%
Average Annual Effective Rental
Rate Per Leased Square Foot
(1).......................... $ 7.82 $ 7.98 $ 8.09 $ 8.52 $ 7.35 $ 7.15
Total Annual Rental Revenue
(2).......................... $ 315,000 $ 369,000 $ 374,000 $ 394,000 $ 340,000 --
1510 GEHMAN ROAD
Percentage Leased at Period
End.......................... 50% 85% 85% 100% 100% 100%
Average Annual Effective Rental
Rate Per Leased Square Foot
(1).......................... $ 5.53 $ 5.82 $ 7.47 $ 7.27 $ 7.21 $ 4.72
Total Annual Rental Revenue
(2).......................... $ 419,000 $ 676,000 $ 969,000 $1,082,000 $1,101,000 --
BURLINGTON COUNTY, NJ
ONE GREENTREE CENTRE
Percentage Leased at Period End
(3).......................... 81% 97% 100% 93% 91% 100%
Average Annual Effective Rental
Rate Per Leased Square Foot
(1).......................... $ 16.82 $ 14.96 $ 15.53 $ 15.80 $ 18.42 $ 16.07
Total Annual Rental Revenue
(2).......................... $ 815,000 $ 744,000 $ 855,000 $ 854,000 $ 949,000 --
TWO GREENTREE CENTRE
Percentage Leased at Period End
(3).......................... 83% 84% 79% 75% 100% 100%
Average Annual Effective Rental
Rate Per Leased Square Foot
(1).......................... $ 16.74 $ 17.78 $ 18.49 $ 16.18 $ 13.60 $ 16.02
Total Annual Rental Revenue
(2).......................... $ 794,000 $ 832,000 $ 845,000 $ 698,000 $ 666,000 --
THREE GREENTREE CENTRE
Percentage Leased at Period End
(3).......................... 100% 95% 100% 74% 99% 96%
Average Annual Effective Rental
Rate Per Leased Square Foot
(1).......................... $ 17.77 $ 17.77 $ 18.35 $ 15.94 $ 15.78 $ 16.41
Total Annual Rental Revenue
(2).......................... $1,226,000 $1,194,000 $1,234,000 $ 957,000 $ 942,000 --
</TABLE>
87
<PAGE> 26
<TABLE>
<CAPTION>
AS OF AND
FOR THE
PERIOD
YEAR ENDED DECEMBER 31, ENDED
---------------------------------------------------------------------- SEPTEMBER 30,
1991 1992 1993 1994 1995 1996
---------- ---------- ---------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
CAMDEN COUNTY, NJ
457 HADDONFIELD ROAD
(LIBERTYVIEW)
Percentage Leased at Period End
(4).......................... -- -- -- -- 63% 83%
Average Annual Effective Rental
Rate Per Leased Square Foot
(4).......................... -- -- -- -- -- $ 18.63
Total Annual Rental Revenue
(4).......................... -- -- -- -- -- --
OTHER MARKETS
168 FRANKLIN CORNER ROAD,
LAWRENCEVILLE, NJ
Percentage Leased at Period End
(5).......................... -- -- -- -- 55% 55%
Average Annual Effective Rental
Rate Per Leased Square Foot
(5).......................... -- -- -- -- $ 15.95 $ 15.55
Total Annual Rental Revenue
(5).......................... -- -- -- -- $ 23,000 --
5910-6090 SIX FORKS, RALEIGH, NC
Percentage Leased at Period End
(3).......................... 92% 93% 97% 100% 97% 100%
Average Annual Effective Rental
Rate Per Leased Square Foot
(1).......................... $ 11.16 $ 12.37 $ 11.22 $ 13.13 $ 14.27 $ 14.25
Total Annual Rental Revenue
(2).......................... $ 630,000 $ 833,000 $ 779,000 $ 944,000 $1,026,000 --
</TABLE>
- ---------------
(1) For the years ended December 31, 1991 through 1995, represents annual rental
revenue divided by the average occupancy level. For the nine-month period
ended September 30, 1996, represents: (i) for office leases written on a
triple net lease basis, the sum of the annualized contracted base rental
rates payable for all space leased as of September 30, 1996 without giving
effect to free rent or scheduled rent increases that would be taken into
account under generally accepted accounting principles plus the 1996
budgeted operating expense excluding tenant electricity; and (ii) for office
leases written on a full service basis, the annualized contracted base
rental rate payable for all space leased as of September 30, 1996 without
giving effect to free rent or scheduled rent increases that would be taken
into account under generally accepted accounting principles. In both cases,
the annualized rental is divided by the total square footage leased as of
September 30, 1996.
(2) Represents rental revenue including tenant reimbursements, determined on a
straight-line basis in accordance with generally accepted accounting
principles. Tenant reimbursements generally include payment of real estate
taxes, operating expenses and escalations and common area maintenance and
utility charges.
(3) Percentage leased for four of the Properties (One, Two and Three Greentree
Centre and Twin Forks Office Park) is as of January 31. The Company does not
believe that percentages at December 31 for such Properties are materially
different than the percentages at January 31.
(4) Property acquired in July 1996.
(5) Property acquired in November 1995.
88
<PAGE> 27
SUBMARKETS AND PROPERTY INFORMATION
The Properties owned and operated by the Company contain an aggregate of
approximately 2.0 million net rentable square feet. Thirty-five of the
Properties are located in the Market. The C&W Mid-Year Report divides the six
Pennsylvania counties included within the Market into nine submarkets. While the
Company considers all nine of these Pennsylvania submarkets and the two southern
New Jersey counties within the Market as its primary market, its currently owned
Properties are concentrated in several key submarket areas. These submarkets are
discussed below. Unless otherwise indicated, the market data contained in the
following discussion have been derived from the C&W Mid-Year Report and from
nine additional market analyses prepared by C&W at the request of the Company
(the "C&W Market Analyses").
HORSHAM/WILLOW GROVE/JENKINTOWN
The Company owns four Initial Properties and will acquire two Properties in
the Horsham/Willow Grove/Jenkintown submarket. This submarket contains, as of
June 30, 1996, approximately 3.3 million net rentable square feet of commercial
office space. As of June 30, 1996, total vacancy was approximately 12.1%, down
from 15.6% as of June 30, 1995. Demand for office space in this submarket has
historically come from the movement of users outward from Philadelphia and from
the formation of new high-tech/service oriented businesses.
HORSHAM BUSINESS CENTER
Horsham Business Center is a business park developed by the Company and
consists of 16 Class A suburban office buildings aggregating approximately
600,000 net rentable square feet. Horsham Business Center is located on the
northwestern side of the Philadelphia metropolitan area in Montgomery County,
Pennsylvania.
As of June 30, 1996, the direct competition to the Company's Properties
within this submarket consisted of approximately 1.1 million net rentable square
feet of existing Class A office space (in 22 buildings), with an overall vacancy
rate of 8.9%, as compared to 17.2% as of June 30, 1995. The weighted average
asking rental rate in directly competitive properties is $18.02 per square foot
compared to the average existing rental rates of $16.50 and $17.22 in the
Company's two buildings as of September 30, 1996.
650 Dresher Road
650 Dresher Road is a one story office building completed in 1984.
This Property contains 30,138 net rentable square feet and is situated on
4.2 acres. This Property is constructed of structural steel framing with a
brick exterior. As of September 30, 1996, this Property was 100% leased to
GMAC Mortgage Corporation at an average annualized existing base rent of
$11.75 per leased square foot. After factoring in 1996 projected operating
expense recoveries, the annualized existing rental rate at the building as
of August 31, 1996 excluding tenant utilities was $16.50 per leased square
foot. The lease is scheduled to expire in May 2003 and is structured on a
triple net basis which allows for a complete pass through of all property
operating expenses.
1155 Business Center Drive
1155 Business Center Drive is a two story office building completed in
1990. This Property contains 51,388 net rentable square feet and is
situated on 5 acres. This Property is constructed of structural steel
framing with a brick exterior. As of September 30, 1996, this Property was
99.4% leased to four tenants with an average annualized existing base rent
of $12.37 per leased square foot. After factoring in 1996 projected
operating expense recoveries, the average annualized existing rental rate
at the building as of September 30, 1996 excluding tenant utilities was
$17.22 per leased square foot. The largest tenant in this property is IMS
(International Mill Service) occupying 40,774 square feet or 79.4% of the
total net rentable square feet, with a lease scheduled to expire in March
2006. There are no existing leases at this property that are scheduled to
expire in 1996 or 1997.
89
<PAGE> 28
700/800 Horsham Business Center Drive (Acquisition Properties)
700/800 Business Center Drive is a two building, one and two story
office complex completed in 1986. These buildings aggregate 82,009 net
rentable square feet and are situated on 13.2 acres. The buildings are
constructed of structural steel framing with a brick exterior. As of
September 30, 1996, the buildings were 100% leased to five tenants. After
factoring in 1996 projected operating expense recoveries, the average
annualized existing rental rate at the buildings as of September 30, 1996
excluding tenant utilities was $14.60 per leased square foot. The primary
tenant, is Metpath, which occupies 28,475 net rentable square feet,
expanding to 51,236 net rentable square feet in July 1999, under a lease
scheduled to expire in January 2012.
KEITH VALLEY BUSINESS CENTER
Keith Valley Business Center contains two office buildings, and is located
in Horsham, Montgomery County, Pennsylvania. Keith Valley Business Center is
located several miles from, and is within the same submarket as, Horsham
Business Center.
500 Enterprise Road
500 Enterprise Road is a one story office/flex building completed in
1990. This Property contains 67,800 net rentable square feet and is
situated on 7.4 acres. This Property is constructed of structural steel
framing with a brick exterior. As of September 30, 1996, this Property was
98.5% leased to two tenants, with an average annualized existing base rent
per leased square foot of $10.75. After factoring in 1996 projected
operating expense recoveries, the average annualized existing rental rate
at this Property as of September 30, 1996 excluding tenant utilities was
$15.03 per leased square foot. Conti Trade Services Corporation, a wholly
owned subsidiary of Continental Grain, leases 53,906 square feet
(representing 79.6% of the net rentable square feet) under a lease
scheduled to expire in April 2001, provided that Conti Trade Services
Corporation may terminate the lease in April 2000 with a penalty payment.
The other lessee (constituting 12,845 net rentable square feet) at this
Property is Pioneer Technologies, under a lease scheduled to expire in
October 2000. This property competes for tenants in the same office
submarket as the Properties in the Horsham Business Center.
One Progress Drive
One Progress Drive is a two story office building completed in 1986.
This Property contains 79,204 net rentable square feet and is constructed
of structural steel framing with a brick exterior. As of September 30,
1996, this Property was 100% leased to Reed Technology at an average
existing base rent per leased square foot of $9.25. After factoring in 1996
projected operating expense recoveries, the annualized existing rental rate
at the building as of September 30, 1996, excluding tenant utilities, is
$11.75 per leased square foot. Reed Technology is a wholly-owned subsidiary
of Reed Elsevier, and the lease is scheduled to expire in June 2011. In
connection with this tenancy, the interior of the building was
substantially renovated at the tenant's expense. The lease contains the
following two early termination provisions: in July 2001 the tenant may
terminate the lease upon one year's prior written notice to the Company and
by making a termination payment of $3.2 million; in July 2006 the tenant
may terminate the lease upon one year's written notice and by making a
termination payment of $840,000. According to C&W, One Progress Drive
competes for tenants in the same office submarket as the Horsham Business
Center properties. The tenant has a right of first offer to purchase this
Property during the term of its lease.
SOUTHERN ROUTE 202 CORRIDOR
The Company owns four Properties in the Southern Route 202 Corridor
submarket. This submarket contains, as of June 30, 1996, approximately 3.5
million net rentable square feet of commercial office space and an additional
approximately 2.6 million net rentable square feet of flex space. As of June 30,
1996, total vacancy for commercial office space in this submarket was
approximately 13.9%, down from 22.9% as of
90
<PAGE> 29
June 30, 1995. Over the 18-month period ended June 30, 1996, net absorption of
office space in this submarket averaged 39,800 square feet per quarter or
approximately 160,000 square feet per annum. Leasing activity during this period
averaged approximately 100,000 square feet per quarter or 400,000 square feet
per annum. As of June 30, 1996, total vacancy for flex space in this submarket
was approximately 2.8%, down from 8.5% at the end of the first quarter of 1995.
The Company's Properties in this submarket are located in two separate
business complexes: Whitelands Business Park and Oaklands Corporate Center, in
which the Company developed a total of seven buildings. Of these seven
buildings, four were build-to-suit and were sold to the occupant. The buildings
were constructed between 1987 and 1990, contain an aggregate of 171,698 net
rentable square feet and are situated on 17.6 acres.
OAKLANDS BUSINESS CENTER
456 Creamery Way
456 Creamery Way is a single story office/flex building completed in
1987. This Property contains 47,604 net rentable square feet and is
situated on 5.2 acres and is currently 100% leased to Neutronics, Inc.
under a lease scheduled to expire in January 2003 at an existing rental
rate of $7.25 per square foot. This lease is written on a triple net basis
and, pursuant to its terms, the tenant contracts directly with third
parties that provide building services, including landscaping, janitorial
service and snow removal.
486 Thomas Jones Way
486 Thomas Jones Way is a two story office building completed in 1990.
This Property contains 51,500 net rentable square feet and is situated on
4.6 acres. This Property is constructed of steel framing with a brick
exterior. As of September 30, 1996, this Property was 50.93% leased to
seven tenants at an average annualized existing rental rate of $11.54 per
square foot. After factoring in 1996 projected operating expense
recoveries, the average annualized existing rental rate at this Property as
of September 30, 1996 excluding tenant utilities was $15.46 per leased
square foot. The primary tenant at this Property is First American Real
Estate, which occupies 10,086 square feet under a lease scheduled to expire
in December 1999.
468 Creamery Way
468 Creamery Way is a single story office building completed in 1990.
This Property contains 28,934 net rentable square feet and is situated on
2.6 acres. As of September 30, 1996, this Property was 100% leased to two
tenants at an average annualized existing rental rate of $10.08 per square
foot. After factoring in 1996 projected operating expense recoveries, the
average annualized existing rental rate at this Property as of September
30, 1996 excluding tenant utilities was $13.88 per leased square foot. The
primary tenant at this Property is Franciscan Health System, which occupies
23,588 square feet under a lease scheduled to expire in June 1999.
WHITELANDS BUSINESS CENTER
110 Summit Drive
110 Summit Drive is a single story office building completed in 1985.
This Property contains 43,660 net rentable square feet and is situated on
5.2 acres. As of September 30, 1996, this Property was 67.6% leased to
three tenants at an average existing base rent of $7.20 per square foot.
The primary tenant is Maris Equipment, which occupies 21,580 square feet
under a lease scheduled to expire in April 1999.
91
<PAGE> 30
BLUE BELL/PLYMOUTH MEETING/FORT WASHINGTON
The Company owns four Properties in the Blue Bell/Plymouth Meeting/Fort
Washington submarket. As of June 30, 1996, this submarket contains approximately
4.9 million square feet of commercial office space. As of June 30, 1996, total
vacancy for commercial office space was approximately 6.9%, down from 11.8% as
of June 30, 1995. As of September 30, 1996, there were no projects under
construction. Absorption of office space in this submarket has averaged 55,000
square feet per quarter or 218,000 square feet annually during the 18-month
period ended June 30, 1996. Leasing activity has averaged approximately 95,000
square feet per quarter or 380,000 square feet per annum during the 18-month
period ended June 30, 1996.
MEETINGHOUSE BUSINESS CENTER
Meetinghouse Business Center was developed by the Company and consists of
five office buildings aggregating approximately 140,000 net rentable square
feet. This complex is located on the northeastern side of the Philadelphia
metropolitan area in Montgomery County, Pennsylvania. The buildings were
completed in 1984 and are situated on 20.5 acres. The buildings are one and two
story, with structural steel framing and stone and stucco exteriors. This
complex was developed consistent with the requirements of the Meetinghouse
historical district. The complex is at the interchange of the Pennsylvania
Turnpike (both East-West and Northeast Extension) and Interstate 476, which is
the largest interchange on the Pennsylvania Turnpike.
Meetinghouse Business Center competes for tenants in the Blue Bell/Plymouth
Meeting/Fort Washington submarket which consists of approximately 4.9 million
square feet. As of June 30, 1996, total vacancy in this marketplace was 6.9%,
which represents a significant decline from 11.8% as of June 30, 1995. C&W
identified five other buildings which directly compete with Meetinghouse
Business Center. These buildings aggregate 443,000 net rentable square feet, and
as of June 30, 1996 were less than 1.9% vacant. Average annual asking rental
rates for this direct competition range from $18.00 to $19.00 per square foot
while existing tenants at this Property were paying $15.45 to $18.60 per square
foot as of September 30, 1996.
2240/50 Butler Pike
2240/50 Butler Pike is a one story office building completed in 1984.
This Property contains 52,183 net rentable square feet and is situated on
7.5 acres. As of September 30, 1996, this Property was 99.4% leased to
three tenants. The primary tenant is CoreStates Bank, which occupies 30,359
net rentable square feet (representing 58% of the aggregate net rentable
square feet at the Property) at an existing annualized rental rate of
$13.50 per square foot under a lease scheduled to expire in April 2006. The
other major tenant in this Property is Worldwide Marketing, which occupies
17,080 net rentable square feet (representing 33% of the net rentable
square feet at the Property) at an existing annualized rental rate of
$11.00 per square foot under a lease scheduled to expire in October 1999.
After factoring in 1996 projected operating expense recoveries, the annual
average existing rental rate for this Property as of September 30, 1996
(excluding tenant utilities) was $17.55 per leased square foot.
120 W. Germantown Pike
120 W. Germantown Pike is a two story office building completed in
1984. This Property contains 30,546 net rentable square feet and is
situated on 3.2 acres. As of September 30, 1996, this Property was 100%
leased to three tenants. The primary tenant is Clair O'Dell, a regional
insurance agency, which occupies 25,177 net rentable square feet
(representing 82% of the net rentable square feet at the Property) under a
lease scheduled to expire in July 2001 at an existing annualized rental
rate of $17.50 per square foot. After factoring in 1996 projected operating
expense recoveries, the average annual existing rental rate for this
Property as of September 30, 1996 excluding tenant utilities was $17.52 per
leased square foot.
140 W. Germantown Pike
140 W. Germantown Pike is a two story office building completed in
1984. This Property contains 25,953 net rentable square feet and is
situated on 3.6 acres. As of September 30, 1996, this Property was
92
<PAGE> 31
98.7% leased to four tenants. The primary tenant is Healthcare, Inc., which
occupies 11,822 net rentable square feet (representing 46% of the net
rentable square feet at the Property) under a lease scheduled to expire in
September 1999 at an average annualized existing rental rate of $12.50
square foot. After factoring in 1996 projected operating expense
recoveries, the annual existing rental rate for all tenants at this
Property as of September 30, 1996 (excluding tenant utilities) was $17.38
per leased square foot.
2260 Butler Pike
2260 Butler Pike is a one story office building completed in 1984.
This Property contains 31,892 net rentable square feet and is situated on
6.2 acres. As of September 30, 1996, this Property was 100% leased to three
tenants. The primary tenant is Information Resources, which occupies 21,008
net rentable square feet (representing 66% of the net rentable square feet
at the Property) under a lease scheduled to expire in December 2000 at an
existing annualized rental rate of $13.50 per square foot. After factoring
in 1996 projected operating expense recoveries, the annual existing rental
rate for all tenants at this Property as of September 30, 1996 (excluding
tenant utilities) was $17.82 per leased square foot.
MAIN LINE
The Company owns two Properties in the Main Line submarket. This submarket
contains, as of June 30, 1996, approximately 2.5 million square feet of
commercial office space. As of June 30, 1996, the total vacancy rate was
approximately 8.5%, down from 14.5% at June 30, 1995. Over the 18-month period
ended June 30, 1996, net absorption of office space in this submarket totalled
approximately 150,000 square feet, while leasing activity exceeded 315,000
square feet. The Company's Properties in this submarket are located in the
Newtown Square Corporate Campus.
NEWTOWN SQUARE CORPORATE CAMPUS
According to C&W, as of June 30, 1996, there were 21 buildings aggregating
approximately 2.3 million net rentable square feet that are in direct
competition to the Company's Newtown Square Properties. The vacancy rate in
these directly competitive properties was 7.2% as of June 30, 1996. As a result,
vacancy rates in these directly competitive properties compare favorably to the
8.5% vacancy rate in the overall Main Line office submarket area as of June 30,
1996. Rental rates in the directly comparable properties range from $18.00 per
square foot full service (which includes a pro rata share of all costs of
operating the property) to $24.00 per square foot plus tenant electricity. On a
gross rental rate basis, excluding tenant utilities, existing tenants in 16 and
18 Campus Boulevard were paying from $11.49 to $17.60 and from $16.50 to $17.95,
respectively, per leased square foot plus electricity as of September 30, 1996.
16 Campus Boulevard
16 Campus Boulevard is a three story office building completed in
1990. This Property contains 65,463 net rentable square feet and is
situated on 14.6 acres. This Property is constructed of structural steel
framing with a brick exterior. As of September 30, 1996, this Property was
100% leased to four tenants at an average annualized base rent per leased
per square foot of $9.43. The largest tenant at this Property, New England
Mutual Life, occupies 31,907 net rentable square feet under a lease
scheduled to expire in 2006. 16 Campus Boulevard also is the headquarters
building of the Company. After factoring in 1996 projected operating
expense recoveries, the average annual existing rental rate for the
building as of September 30, 1996 (excluding tenant utilities) was $13.58
per square foot. A tenant at this Property has a right of first offer to
purchase this Property during the term of its lease, which is scheduled to
expire in June 2006.
18 Campus Boulevard
18 Campus Boulevard is a two story office building completed in 1990.
This Property contains 37,700 net rentable square feet and is situated on
6.4 acres. This Property is constructed of structural steel framing with a
brick exterior. This Property is currently 100% leased to tenants at an
average existing annualized base rent per square foot of $14.62. The major
tenant at the Property, Devco Mutual, occupies 13,332 net rentable square
feet under a lease expiring in January 2001, provided, that, Devco may
terminate the lease at January 1998 with a penalty payment. There are no
existing leases that are scheduled to expire in 1996. The aggregate net
rentable square footage of leases expiring in 1997
93
<PAGE> 32
represent 14.2% of this Property's total net rentable square feet. After
factoring in 1996 projected operating expense recoveries, the annual
existing rental rate for this Property as of September 30, 1996 (excluding
tenant utilities) was $18.62 per leased square foot.
LEHIGH VALLEY
The Company owns three Properties in the Lehigh Valley submarket. This
submarket contains approximately 4.4 million square feet of commercial office
space. As of June 30, 1996, total vacancy in this submarket was approximately
11.6% down from 15.4% at June 30, 1995. Over the 18-month period ended June 30,
1996, absorption of office space in this submarket was approximately 37,000
square feet per quarter or 148,000 square feet per year.
In addition to competing in the office market within this submarket,
certain of the Properties compete in the industrial/flex market sector.
According to C&W, as of June 30, 1996 there was an estimated 19.1 million net
rentable square feet of industrial space located in 12 business parks throughout
this market sector. As of June 30, 1996, the vacancy rate in this market sector
was 9.9%. Included in this market sector was an estimated 1.7 million square
feet of flex space as of June 30, 1996. As of that date, the vacancy rate for
flex space was only 14.2%. C&W identified seven flex complexes aggregating
629,000 net rentable square feet that are in direct competition with the
Properties located within this submarket. Such competing properties had an
overall vacancy rate of 5.2% as of June 30, 1996, compared to 36.7% as of June
30, 1995. Average asking rents in these competing properties ranged from $3.75
to $10.50 per square foot.
IRON RUN CORPORATE CENTER
The Company owns three Properties in the Iron Run Corporate Center, a 725
acre business park located in Allentown, Pennsylvania. The park contains 37
buildings containing over 3 million net rentable square feet. The Company
developed five buildings in the park totalling over 326,000 net rentable square
feet. Two buildings, aggregating 200,000 net rentable square feet, were
build-to-suit for an end user and a life insurance company. The Company's three
Iron Run Corporate Center buildings aggregate 129,113 net rentable square feet
and are both office and office/flex buildings.
7310 Tilghman Street
7310 Tilghman Street is a one story office building completed in 1985.
This Property contains 40,000 net rentable square feet and is situated on
5.2 acres. The structural steel framed building has a brick exterior and an
interior ceiling height capability of 18 feet. As of September 30, 1996,
this Property was 99% leased to three tenants at an average annualized
existing base rent of $8.89 per square foot. The primary tenant is AT&T,
which occupies 32,774 net rentable square feet under three leases scheduled
to expire as follows: December 1996 (13,107 net rentable square feet);
November 1997 (8,667 net rentable square feet); and August 1998 (11,000 net
rentable square feet).
7248 Tilghman Street
7248 Tilghman Street is a one story office/flex building completed in
1987. This Property contains 42,863 net rentable square feet and is
situated on 4.2 acres. As of September 30, 1996, this Property was 94%
leased to four tenants. The primary tenant is Ohio Casualty, which occupies
19,877 net rentable square feet under a lease scheduled to expire in July
2001. After factoring in 1996 projected operating expense recoveries, the
annual existing rental rate for this Property as of September 30, 1996
excluding tenant utilities was 14.76 per leased square foot.
According to C&W, these properties compete for office tenants in the Lehigh
Valley area which contains of 4.3 million net rentable square feet and, as of
June 30, 1996, had a total vacancy of 11.6%, down from 15.4% at June 30, 1995.
The average asking rental rate for properties directly competing with the
Properties in this submarket ranges between $8.75 to $13.50 per square foot on a
triple net basis.
94
<PAGE> 33
6575 Snowdrift Road
6575 Snowdrift Road is a one story office/flex building completed in
1989. This Property contains 46,250 net rentable square feet and is
situated on 6.3 acres. As of September 30, 1996, this Property was 100%
leased to Corning Packaging under a lease scheduled to expire in February
1999 at an average annual rental rate of $7.15 per leased square foot.
LANSDALE
The Company has a warehouse/distribution facility located in Lansdale,
Pennsylvania, which is located along the Northeast Extension of the Pennsylvania
Turnpike between Plymouth Meeting and Allentown, Pennsylvania. C&W indicated
that, in the four suburban Pennsylvania counties that are adjacent to the City
of Philadelphia, there were an estimated 67.5 million net rentable square feet
of warehouse/distribution space with a vacancy rate of 13.5% as of June 30,
1996. C&W has indicated that the Company's Property in this submarket competes
within the Western Montgomery County area submarket. Within this submarket,
there are approximately 4.5 million net rentable square feet of
warehouse/distribution space with a vacancy rate as of June 30, 1996 of 15.0%.
During the 18-month period ended June 30, 1996, the vacancy rate for warehouse
space in the Western Montgomery County market area was highly variable, with a
rate as low as 11.4% and as high as 16.3%. During such period, leasing activity
amounted to over 700,000 square feet which equated to 120,000 square feet per
quarter.
1510 Gehman Road
1510 Gehman Road is a warehouse/flex building located in northern
Montgomery County completed in 1990 and situated in a park that contains
three buildings that were developed by the Company. Two of the buildings
were build-to-suit for a user and the other facility was sold to an
institutional investor in 1992. This Property contains 152,625 net rentable
square feet and is situated on 14.8 acres. This Property is constructed of
structural steel framing, insulated metal panels and exterior masonry units
with an interior ceiling height of 24 feet. This Property consists of 65%
warehouse space and 35% finished space. As of September 30, 1996, this
Property was 100% leased to two tenants with an average annualized existing
base rent per leased square foot of $4.72. Nibco, Inc. occupies 98,725 net
rentable square feet as warehouse space under a lease scheduled to expire
in August 1999 at an existing rate of $4.00 per net rentable square foot.
Ford Electronics occupies 53,900 net rentable square feet utilized as
design space under a lease scheduled to expire in June 1998 at an existing
rental rate of $6.05 per net rentable square foot. Ford has contractual
right to acquire the 1510 Gehman Road property provided Ford occupies
greater than 50% of the building. As of November 7, 1996, Ford occupied 35%
of the building and the balance was occupied by Nibco, Inc.
BUCKS COUNTY OFFICE AND INDUSTRIAL MARKET
Eight of the Acquisition Properties are located in the Bucks County Office
and Industrial market. This submarket contains, as of June 30, 1996
approximately 37 million net rentable square feet of industrial space and 2.6
million net rentable square feet of office space. As of June 30, 1996, the
vacancy rate in this submarket was approximately 16.8% for industrial properties
and 12.8% for office properties, down from 18.4% at January 1, 1996.
As of June 30, 1996, the average rental rate for Class A office space was
$18.95 (full service), per net rentable square foot. Office leasing activity
during the past few years has averaged approximately 150,000 to 200,000 net
rentable square feet per year while net absorption of office space has averaged
approximately 75,000 to 200,000 net rentable square feet per year.
The average rental rate for industrial space in this submarket was $3.37
per square foot for the six-month period ended June 30, 1996, but varies between
$3.00 to $5.00 per net rentable square foot depending on tenant size, percentage
of office and special finishes. The average rental rate for office/flex space
was $6.45 per net rentable square foot for the six month period ended June 30,
1996 but was between $6.00 and $10.00 per net rentable square foot depending on
tenant size, percentage of office and special finishes. Leasing activity
95
<PAGE> 34
in this submarket during the six month period ended June 30, 1996 was
approximately 353,000 net rentable square feet.
2200 Cabot Boulevard (an Acquisition Property)
2200 Cabot Boulevard is a one story industrial building completed in
1979. This Property contains 55,081 net rentable square feet and is
situated on 3.98 acres. This Property is constructed of structural steel
framing with a brick and glass exterior. As of September 30, 1996, this
Property was 100% leased to three tenants with an average annualized
existing base rent of $4.40 per square foot. The largest tenants in this
Property are Hussman and Noble Printing, occupying 21,000 and 20,700 square
feet, respectively, with leases scheduled to expire in March 1999 and May
1997, respectively, provided, that, Hussman may terminate the lease at
September 1997 with a penalty payment.
2250 Cabot Boulevard (an Acquisition Property)
2250 Cabot Boulevard is a one story industrial building completed in
1982. This Property contains 40,000 net rentable square feet and is
situated on 3.3 acres. This Property is constructed of structural steel
framing with a brick and glass exterior. As of September 30, 1996, this
Property was 100% leased to one tenant with an average annualized existing
base rent of $3.50 per square foot. This tenant, Bucks County Nut, occupies
40,000 square feet under a lease scheduled to expire in July 1999.
2260/2270 Cabot Boulevard (Acquisition Properties)
2260/2270 Cabot Boulevard consists of two one story office/flex
buildings completed in 1984. This Property contains an aggregate of 29,638
net rentable square feet and is situated on 2.1 acres. This Property is
constructed of structural steel framing with a brick and glass exterior. As
of September 30, 1996, this Property was 100% leased to 12 tenants with an
average annualized existing base rent of $8.54 per square foot. The largest
tenant in this Property, Sager Electrical, occupies 4,238 square feet under
a lease scheduled to expire in October 1998.
3000 Cabot Boulevard (an Acquisition Property)
3000 Cabot Boulevard is a one story office building completed in 1986.
This Property contains 34,640 net rentable square feet and is situated on
4.9 acres. This Property is constructed of structural steel framing with a
brick and glass exterior. As of September 30, 1996, this Property was 83.8%
leased to six tenants with an average annualized existing base rent of
$17.03 per square foot. The largest tenant in this Property, Geraghty
Miller, occupies 10,840 square feet under a lease scheduled to expire in
November 1997.
3333, 3331, 3329 Street Road -- Greenwood Square (Acquisition Properties)
The Greenwood Square Property consists of three multi-story office
buildings completed from 1985 through 1988. 3333 Street Road is a three
story office building, containing 60,408 net rentable square feet situated
on 3.4 acres; 3331 Street Road is a four story office building, containing
80,521 net rentable square feet situated on 4.5 acres; and 3329 Street Road
is a two story office building, containing 25,000 net rentable square feet
situated on 1.5 acres. All three buildings are constructed of structural
steel with brick and glass exteriors. As of September 30, 1996 this
Property was 92.1% leased to 30 tenants with an average annualized existing
gross rent of $16.54 per square foot. The largest tenant in this Property,
Waste Management, occupies 45,764 net rentable square feet under a lease
scheduled to expire in March 1997.
KING OF PRUSSIA/VALLEY FORGE MARKET
The Company is acquiring one building in the King of Prussia/Valley Forge
market. As of June 30, 1996, this submarket contained approximately 9.3 million
square feet of office space. As of June 30, 1996, vacancy in this submarket was
approximately 10.8%, down from 17.6% at June 30, 1995. Leasing activity in this
96
<PAGE> 35
submarket for the six months ended June 30, 1996 was 586,438 net rentable square
feet. Absorption in this submarket for the six months ended June 30, 1996 was
939,237 net rentable square feet compared to 167,504 net rentable square feet
for the comparable period during 1995.
500 North Gulph Road (an Acquisition Property)
500 North Gulph Road is a five story office building completed in
1979. This Property contains 92,851 net rentable square feet and is
situated on 5.3 acres. This Property is constructed of structural steel
framing with a pre-cast concrete exterior. As of September 30, 1996, this
Property was 86.1% leased to 13 tenants with an average annualized existing
gross rent of $16.51 per square foot. The largest tenants in this Property
are Strohl Systems and Transition Software, which are related companies and
occupy 26,378 net rentable square feet under two separate leases scheduled
to expire in October 1999 and September 2000.
SOUTHERN NEW JERSEY
The Southern New Jersey market is divided into two principal submarket
areas: Burlington County and Camden County.
BURLINGTON COUNTY SUBMARKET
The Company owns three Initial Properties and will acquire one Property in
Burlington County. This submarket contains approximately 4.6 million net
rentable square feet of commercial office space. As of June 30, 1996, total
office vacancy was 19.3% down from 21.2% as of June 30, 1995 in this submarket.
However, the vacancy rate of Class A space as of June 30, 1996 was 12.6%
compared to the market average of 19.3%. Leasing activity within the Burlington
County market was approximately 93,000 square feet per quarter or 371,000 square
feet per annum during the 18-month period ended June 30, 1996.
One Greentree Centre
One Greentree Centre is a three story midrise office building
completed in 1982. This Property contains 55,838 net rentable square feet
and is situated on 4.2 acres. This Property is constructed of structural
steel framing with a brick exterior. The lobby in this Property was
renovated in 1996. As of September 30, 1996, this Property was 100% leased
to fourteen tenants at an average annualized base rent per leased square
foot of $16.07 full service. The largest tenant in this Property is
American Executive Centers, which occupies 16,853 square feet under a lease
scheduled to expire in January, 2006. Aggregate square footage of leases
scheduled to expire in 1996, 1997 and 1998 represent 7%, 28% and 9% of this
Property's total net rentable square footage.
Two Greentree Centre
Two Greentree Centre is a three story midrise office building
completed in 1983. This Property contains 56,075 net rentable square feet
and is situated on 4.2 acres. This Property is a sister building to One
Greentree Center and is constructed of structural steel framing with a
brick exterior. The lobby was renovated in 1996. As of September 30, 1996,
this Property was 100% leased to eleven tenants at an average annualized
base rent per lease square foot of $16.02 full service. The largest tenant
in this Property is Merrill, Lynch, Pierce, Fenner and Smith, which
occupies 12,672 net rentable square feet under a lease scheduled to expire
in November 2005. Aggregate square footage of leases scheduled to expire in
1996, 1997 and 1998 represent 0%, 30%, and 5%, respectively, of this
Property's total net rentable square feet.
Three Greentree Centre
Three Greentree Centre is a four story midrise office building
completed in 1984. This Property contains 69,101 net rentable square feet
and is situated on 5.4 acres. This Property is constructed of structural
steel framing with a brick and dryvit exterior. The two story lobby was
renovated in 1996. As of
97
<PAGE> 36
September 30, 1996, this Property was 96% leased to eight tenants at an
average annualized base rent per lease square foot of $16.41 full service.
The largest tenant at the Property is Parker, McKay, Criscuolo &
Associates, a regional law firm, which occupies 25,905 net rentable square
feet under a lease scheduled to expire in May 2001. Aggregate square
footage of leases scheduled to expire in 1996, 1997 and 1998 represent 0%,
25% and 0%, respectively, of this Property's total net rentable square
feet.
8000 Lincoln Drive (an Acquisition Property)
8000 Lincoln Drive is a five story office building completed in 1983.
This Property contains 54,923 net rentable square feet and is situated on
7.5 acres. This Property is constructed of structural steel framing with a
pre-cast concrete exterior. As of September 30, 1996, this Property was
100% leased for occupancy by January 1997 to two tenants with an average
annualized existing base rent of $17.13 per square foot. The largest tenant
in this Property will be Computer Science Corp. occupying 36,830 net
rentable square feet under a lease scheduled to expire in November 2001,
provided that, Computer Science may terminate the lease at November 1999
with a penalty payment.
C&W identified 15 office buildings aggregating approximately 1.3 million
net rentable square feet that, as of June 30, 1996, compete directly with the
Greentree Centre Properties. As of June 30, 1996, these competing properties
were approximately 22% vacant, with rental rates ranging from $19.50 to $22.00,
per square foot for leases with full operating expenses included.
CAMDEN COUNTY SUBMARKET
The Company owns one Property in Camden County. This submarket contains
approximately 4.8 million net rentable square feet of commercial office space.
At June 30, 1996, the vacancy rate was approximately 20%. This high vacancy rate
is primarily attributable to vacancy rates of 18.4% and 21% on Class B and Class
C space, respectively. At June 30, 1996, the vacancy rate for Class A office
space was 9.0%. While there has been negative absorption in this submarket in
the 18-month period ended June 30, 1996, C&W has reported that during the
three-month period ended June 30, 1996, absorption has been a positive 112,572
square feet. In addition, during the 18-month period ended June 30, 1996,
leasing activity in this submarket has approximated 70,000 square feet per
quarter or 280,000 square feet annually.
457 Haddonfield Road
457 Haddonfield Road (known as the LibertyView Building) is a seven
story midrise office building completed in 1990. This Property contains
121,737 net rentable square feet and is situated on approximately 7 acres.
This Property features a structural steel framing, reinforced concrete
footings with an exterior of precast panels with reflective glass. Key
features in this Property include a two story marble lobby, working
balconies on the upper floors, permanent neon lighting and dramatic views
of Center City Philadelphia. As of September 30, 1996, this Property was
83% leased to twelve tenants at an average annualized existing rental rate
of $18.63 per square foot. The largest tenant of this Property is HIP
Health of N.J., which occupies 37,515 net rentable square feet under a
lease scheduled to expire in December 2007.
NORTHERN SUBURBAN WILMINGTON
New Castle County Delaware
The Company is acquiring one building in the Northern Suburban
Wilmington submarket. As of June 30, 1996 the subtotal market contained
approximately 3.0 net rentable million square feet of commercial office
space, with a vacancy rate of 12.6% which is down from 15.7% at June 30,
1995. C&W has identified eleven Class A Buildings aggregating approximately
1.2 million net rentable square feet which are directly competitive with
the Company's Property in this submarket. As of June 30, 1996, vacancy in
the competitive submarket product was approximately 3.7%. The average
rental rate for comparable properties in the submarket for Class A space is
$20.50 per net rentable square foot. Leasing
98
<PAGE> 37
activity in the submarket during the eighteen months period ended June 30,
1996 has averaged 544,000 net rentable square feet on an annualized basis,
while annual net absorption of office space has averaged approximately
350,000 net rentable square feet.
One Righter Parkway -- Delaware Corporate Center I (an Acquisition
Property)
Delaware Corporate Center I is a three story office building completed
in 1989. This Property contains 104,828 net rentable square feet and is
situated on 3 acres. This Property is constructed of structural steel
framing and precast concrete exterior. As of September 30, 1996, this
Property was 100% leased to six tenants with an average annualized existing
base rent of $19.30 per square foot. The largest tenant in this Property,
Kimberly Clark, occupies 93,014 net rentable square feet under a lease
scheduled to expire in December 2005. Delaware Corporate Center I is a
ground leased property. See "-- Ground Lease." Fee ownership is held by
Woodlawn Trustees, Incorporated, and the ground lessee's interest will be
acquired by the Operating Partnership from the seller. Fifty-one years
remain on the original term of the ground lease and the ground lessee has
the option to extend the term for two consecutive ten-year terms. The
ground lessee holds a right of first refusal to acquire the fee interest in
the property. The property is ground leased on a triple-net basis, with the
ground lessee assuming all carrying charges respecting the property, in
addition to payment of base rent.
OTHER MARKETS
168 Franklin Corner Road
168 Franklin Corner Road is located in Lawrenceville, Mercer County,
New Jersey and was completed in 1976. This Property contains 32,000 net
rentable square feet. As of September 30, 1996, this Property was 55%
leased to six tenants at an average annualized existing rental rate of
$12.31 per leased square foot.
Twin Forks Office Park
Twin Forks Office Park is located in Raleigh, North Carolina. This
Property was completed in 1982 and contains 73,339 net rentable square
feet. As of September 30, 1996 this Property was 100% leased to 46 tenants
at an average annualized existing rental rate of $14.25 per leased square
foot. The primary tenant in this Property is GE Mortgage, occupying 19,373
square feet (26% of the total net rentable square feet at the Property)
under a lease that expired in October 1996. GE Mortgage has announced its
intention to vacate and to relocate its Raleigh operations to Cherry Hill,
NJ. Since this announcement the Company has actively been marketing this
space and, as of September 30, 1996, has re-leased 8,801 of the total
19,373 square feet to three tenants at an annualized existing rental rate
of $15.25 per square foot.
COMPETITION
The Company competes with other owners and developers that have greater
resources and more experience than the Company. Within the Suburban Philadelphia
Office and Industrial Market, the Company's office and industrial Properties
compete generally with properties owned by other real estate developers and
institutions principally on the basis of price, property quality and location,
especially proximity to major area highways, suburban residential areas, and
access to the central Philadelphia business district and the northeast corridor
business communities of New York, Baltimore and Washington. The Company's
industrial Properties compete principally with buildings owned by other local
developers largely on the basis of services provided and access to
transportation, both highway and rail, and access to Northeast corridor and
national markets.
ENVIRONMENTAL MATTERS
Under various Federal, state and local laws, ordinances and regulations, a
current or previous owner or operator of real property may be liable for the
costs of removal or remediation of certain hazardous or toxic
99
<PAGE> 38
substances on, in or under such property. Such laws often impose such liability
without regard to whether the owner or operator knew of, or was responsible for,
the presence of such hazardous or toxic substances. The costs of remediation or
removal of such substances may be substantial, and the presence of such
substances, or the failure to promptly remediate such substances, may adversely
affect the owner's or operator's ability to sell or rent such property or to
borrow using such property as collateral. Persons who arrange for the disposal
or treatment of hazardous or toxic wastes may be liable for the costs of removal
or remediation of such wastes at the disposal or treatment facility, regardless
of whether such facility is owned or operated by such person. Certain other
federal, state and local laws, ordinances and regulations may impose liability
on an owner of real property where on-site contamination discharges into waters
of the state, including groundwater, or otherwise affects the beneficial use of
such waters. Other federal, state and local laws, ordinances and regulations
require abatement or removal of certain asbestos-containing materials in the
event of demolition or certain renovations or remodeling and also govern
emissions of asbestos fibers in the air. The operation and subsequent removal of
certain underground storage tanks are also regulated by federal, state and local
laws, ordinances and regulations. In connection with its ownership and operation
of the Properties, the Company could be held liable for the costs of remedial
action with respect to contamination, asbestos-containing materials or tanks or
related claims.
All of the Properties have been subjected to either Phase I environmental
site assessments, or updates of earlier assessments, performed by independent
third parties. Phase I environmental site assessments are intended to evaluate
the environmental condition of, and potential environmental liabilities
associated with, the Property and include a site visit and review of public and
historical records, but involve no soil or groundwater sampling or subsurface
investigation. Such assessments generally consist of an investigation of
environmental conditions of the Properties, including a preliminary
investigation of the Properties and identification of publicly known conditions
concerning properties in the vicinity of the Properties, an investigation as to
the presence of polychlorinated biphenyls and aboveground and underground
storage tanks at the Properties and the preparation and issuance of written
reports. The primary focus of the recent Phase I environmental site assessments
and updates of earlier assessments conducted on the Properties was to identify
any "recognized environmental conditions." These are conditions arising from the
presence or likely presence of hazardous substances or petroleum products that
would present a risk of harm to the public health or environment or that would
be the subject of an enforcement action if brought to the attention of
appropriate governmental agencies, or of third party actions.
Except as discussed below with respect to the Whitelands Property, the
environmental site assessments have not revealed any significant environmental
liability, nor is the Company aware of any environmental liability with respect
to the Properties that the Company's management believes would have a material
adverse effect on the Company. An environmental assessment has identified
environmental contamination of potential concern with respect to the Whitelands
Property (110 Summit Drive). Petroleum products, solvents and heavy metals were
detected in the groundwater. These contaminants are believed to be associated
with debris deposited by others in a quarry formerly located on the Whitelands
Property. The quarry previously appeared on the Comprehensive Environmental
Response Compensation and Liability Information System List, a list maintained
by the United States Environmental Protection Agency (the "EPA") of abandoned,
inactive or uncontrolled hazardous waste sites which may require cleanup. The
EPA conducted a preliminary assessment in 1984 with the result that no further
action was taken. Subsequently, the quarry was removed from the list. While the
Company believes it is unlikely that the Operating Partnership will be required
to undertake remedial action with respect to such contamination, there can be no
assurance in this regard. If the Operating Partnership were required to
undertake remedial action on the Whitelands Property, it has been indemnified
against the cost of such remediation by the seller, SSI, subject to a maximum of
$2,018,000. The term of SSI's indemnity agreement expires on August 22, 2001. If
SSI is unable to fulfill its obligations under its indemnity agreement or if the
Operating Partnership is required to undertake remedial action after the
expiration of the five-year term of the agreement, the costs of such remediation
could be substantial. Because the Company does not believe that any remediation
at the Whitelands Property is probable, no amounts have been accrued for any
such potential liability.
100
<PAGE> 39
No assurance can be given that existing environmental studies with respect
to the Properties reveal all environmental liabilities or that any prior owner
of any such property did not create any material environmental condition not
know to the Company. Moreover, no assurance can be given that: (i) future laws,
ordinances or regulations will not impose any material environmental liability
or (ii) the current environmental condition of the Properties will not be
affected by tenants and occupants of the Properties, by the condition of
properties in the vicinity of the Properties (such as the presence of
underground storage tanks) or by third parties unrelated to the Company.
GROUND LEASE
Delaware Corporate Center I (an Acquisition Property) is a ground leased
property. Fee ownership is held by Woodlawn Trustees, Incorporated, and the
ground lessee's interest will be acquired by the Operating Partnership from the
seller. Fifty-one years remain on the original term of the ground lease and the
ground lessee has the option to extend the term for two consecutive ten-year
terms. The ground lessee holds a right of first refusal to acquire the fee
interest in the property. The property is ground leased on a triple-net basis,
with the ground lessee assuming all carrying charges respecting the property, in
addition to payment of base rent which is approximately $109,000 per annum,
subject to certain periodic adjustments.
INSURANCE
The Operating Partnership carries comprehensive liability, fire, extended
coverage and rental loss insurance covering all of the Properties, with policy
specifications and insured limits which the Company believes are adequate and
appropriate under the circumstances. There are, however, certain types of losses
that are not generally insured because they are either uninsurable or not
economically feasible to insure. Should an uninsured loss or a loss in excess of
insured limits occur, the Company could lose its capital invested in the
Property, as well as the anticipated future revenues from the Property and, in
the case of debt which is with recourse to the Company, would remain obligated
for any mortgage debt or other financial obligations related to the Property.
Any such loss would adversely affect the Company. Moreover, the Company will
generally be liable for any unsatisfied obligations other than non-recourse
obligations. Company management believes that the Properties are adequately
insured. No assurance can be given that material losses in excess of insurance
proceeds will not occur in the future.
CERTAIN PROPERTY TAX INFORMATION
The aggregate real estate property tax obligations paid by the Company
(with or without tenant reimbursement) for calendar 1995 were approximately
$391,000. The aggregate real estate property tax obligations paid by SSI and TNC
(with or without tenant reimbursement) for calendar 1995 with respect to the
SSI/TNC Properties were approximately $968,000. These amounts do not include
real estate property taxes paid directly by tenants. On a pro forma basis, more
than 95.3% of the aggregate annualized base rent at the Properties as of
September 30, 1996 is generated by leases which contain provisions requiring
tenants to pay as additional rent their proportionate share of any real estate
taxes or increases in real estate taxes over base amounts.
EMPLOYEES
As of September 30, 1996, the Company employed 26 persons, including four
executive officers.
LEGAL PROCEEDINGS
The Company is not currently involved in any material litigation nor, to
the Company's knowledge, is any material litigation currently threatened against
the Company, other than routine litigation arising in the ordinary course of
business, substantially all of which is expected to be covered by liability
insurance.
MORTGAGE DEBT AND CREDIT FACILITY
Mortgage Indebtedness
The following table sets forth the Company's mortgage indebtedness that
will remain outstanding after the closing of the Offering and the Concurrent
Investments and the application of the use of proceeds therefrom. In addition to
mortgage indebtedness listed below, the Credit Facility is expected to be
secured by
101
<PAGE> 40
cross-collateralized mortgages and assignments and rents on all Properties,
except for those set forth in the table below.
<TABLE>
<CAPTION>
PROPERTIES -- INDEBTEDNESS
(DOLLARS IN THOUSANDS)
PRINCIPAL BALANCE INTEREST
AS OF RATE AT ANNUAL DEBT MATURITY PREPAYMENT
PROPERTY/LOCATION SEPTEMBER 30, 1996 SEPTEMBER 30, 1996 SERVICE(1) DATE PREMIUMS
- --------------------------- ------------------ ------------------ ----------- --------- ----------
<S> <C> <C> <C> <C> <C>
Horsham Business Center
Horsham, PA
650 Dresher Road(2)...... $ 2,500 8.00% $ 237 8/1998 None
After
2/1/97
Oaklands Corporate Center
Exton, PA
486 Thomas Jones Way(3)..
468 Creamery Way(3)...... 6,427 8.00% 638 2/1998 None
Whitelands Business Park
Exton, PA
110 Summit Drive(4)...... 1,583 9.25% 220 4/1997 None
Iron Run Industrial Park
Allentown, PA
7310 Tilghman Street..... 2,533 9.25% 274 3/2000 (9)
6575 Snowdrift Road...... 2,348 8.00% 230 2/1998 None
Greentree Centre
Marlton, New Jersey
One Greentree
Centre(5)(6)
Two Greentree
Centre(5)(6)
Three Greentree
Centre(5)(6) 6,147 9.00% 628 4/2001 (10)
LibertyView
Cherry Hill, NJ
457 Haddonfield
Road(7)(8)............ 8,461 8.00% 339 1/1999 (11)
910 8.00% 0 12/1997
None
Twin Forks Office Park
Raleigh, NC
5910-6090 Six Forks(6)... $ 2,704 9.00% $ 276 4/2001 (12)
--------- -------
TOTAL MORTGAGE
INDEBTEDNESS............. $ 33,613 $ 2,842
========= =======
</TABLE>
- ---------------
(1) "Annual Debt Service" is calculated for the twelve-month period ending
December 31, 1996. For loans that bear interest at a variable rate, the
rates in effect at September 30, 1996 have been assumed to remain constant
for the balance of 1996.
(2) On July 31, 1996, this loan was refinanced by paying the former mortgage
lender $2.4 million in full satisfaction thereof with the partial proceeds
of a new loan from GMAC in the principal amount of $2.5 million. The new
mortgage loan matures on August 1, 1998, bears interest at a variable rate
equal to LIBOR plus 250 basis points and provides for principal
amortization of $4,000 per month during the period September 1, 1997
through July 1, 1998.
(3) Both of these properties secure a single loan.
(4) Interest rate is variable and equal to the prime rate plus 1.0%.
102
<PAGE> 41
(5) These properties secure two loans payable to a single lender. The interest
rate was fixed at 9.0% through October 15, 1996 and is currently fixed at
9.31% through April 15, 1998. After April 15, 1998, the interest rate is
reset based upon the mortgage lender's evaluation of such factors as
financial performance and projected risk of the Properties securing such
loan. The mortgage loans are due on April 15, 2001, and the lender has the
right to call the loans at par on April 15, 1998.
(6) The Company has made an application to the lender that, if accepted, would
result in (i) an increase in the principal amount of the Greentree Centre
loan to $7.3 million and the Twin Forks loan to $2.7 million, (ii) a fixed
interest rate of 7.6%, (iii) a maturity date of 5 years from closing, and
(iv) a 20-year amortization of principal.
(7) The $8,461,000 debt was incurred as a result of the acquisition of the
Property on July 19, 1996 and the amount of debt service reflects debt
service from July 19, 1996 through December 31, 1996. Pursuant to the terms
of this loan, the Company has the right to borrow up to approximately $1.4
million to fund tenant improvements and leasing commissions.
(8) The $910,000 of debt was incurred as a result of the acquisition of the
Property on July 19, 1996. The mortgage note payable is in the principal
amount of $1.0 million, is due in December 1997 and does not bear interest.
The Company recorded a $104,000 adjustment to the purchase price and a
corresponding reduction in debt to reflect the fair value of the note
payable to the seller and will accrue interest expense to the date of
maturity.
(9) Four percent through December 31, 1996, which prepayment penalty is reduced
by 1% for each subsequent year through 1999.
(10) This loan may not be prepaid unless the Twin Forks loan is also prepaid.
The prepayment penalty equals greater of 1% of principal amount prepaid or
a yield maintenance premium.
(11) One percent of any portion of the original acquisition portion of the loan
being prepaid.
(12) This loan may be prepaid without prepayment of the loan secured by One
Greentree Centre, Two Greentree Centre and Three Greentree Centre, provided
certain loan-to-value ratios and coverage tests with regard to the
Greentree Centre loan are satisfied and upon payment of a premium equal to
the greater of 1% of the principal amount prepaid or a yield maintenance
premium.
CREDIT FACILITY
The Company and Operating Partnership have obtained a commitment from Smith
Barney Mortgage Capital Group, Inc. and NationsBank, N.A. for a two year, $80
million secured revolving Credit Facility. The Credit Facility will be used to
refinance existing indebtedness, fund acquisitions and new development projects,
and for general working capital purposes, including capital expenditures and
tenant improvements. The amount available to be borrowed under the Credit
Facility will be reduced by the amount of the letters of credit issued by the
lenders for as long as such letters of credit are outstanding. The Credit
Facility will be recourse to the Company and the Operating Partnership and will
be secured by, among other items, cross-collateralized and cross-defaulted first
mortgage liens on approximately 25 Properties, owned directly or indirectly by
the Company, the Operating Partnership or their representative subsidiaries.
The Credit Facility will bear interest at a per annum floating rate equal
to the 30, 60, or 90-day LIBOR, plus 175 basis points. The Credit Facility will
require monthly payments of interest only, with all outstanding advances and all
accrued but unpaid interest due 2 years from the closing of the Credit Facility.
A fee equal to 0.75% of the maximum amount available under the Credit Facility
will be paid to the lenders in respect of the Credit Facility at closing. In
addition, a fee of 0.25% per annum (0.125% per annum until 4/1/97) on the unused
amount of the Credit Facility will be payable quarterly in arrears. An annual
fee in the amount of $35,000 will be payable annually in advance to NationsBank,
N.A. as compensation for administration of the Credit Facility. The Credit
Facility will carry minimum debt service coverage, fixed charge,
debt-to-tangible net worth ratios and other financial covenants and tests, and
will require payment of prepayment premiums in certain instances.
103
<PAGE> 42
Closing of the Credit Facility is subject to satisfactory completion of
this Offering, the negotiation and execution of a definitive Credit Facility
agreement and related documentation, and other customary closing conditions.
OPTION PROPERTIES
At the closing of the SSI/TNC Transaction, the Operating Partnership
acquired an option from an affiliate of TNC (C/N Horsham Towne Limited
Partnership) entitling the Company to acquire, at its discretion, the four
Option Properties at any time during the two-year period ending August 22, 1998
(subject to two extensions of one year each). The Operating Partnership may not
exercise its option for less than all of the Option Properties. The parties have
agreed that the purchase price payable by the Operating Partnership upon
exercise of its option will consist of $10.00 in excess of the mortgage debt
encumbering the Option Properties at the time of exercise (which, as of
September 30, 1996, aggregated $21.0 million, including approximately $4.2
million of accrued debt and unpaid interest). The right of the Operating
Partnership to exercise its option to acquire the Option Properties is
conditioned on receipt of consent of the mortgage lender for the Option
Properties. As of the date hereof, no lender consent has been requested, and no
determination to seek any such consent has been made. There can be no assurance
that any of the Option Properties will be acquired.
The following table summarizes certain information with respect to the
Option Properties:
<TABLE>
<CAPTION>
AVERAGE TOTAL
TOTAL BASE RENT
PERCENTAGE BASE RENT PLUS EXPENSE
LEASED AS OF FOR THE TWELVE RECOVERIES PER
NET SEPTEMBER MONTHS ENDED RENTABLE SQUARE
YEAR RENTABLE 30, SEPTEMBER 30, 1996 FOOT LEASED AT
PROPERTY/LOCATION BUILT SQUARE FEET 1996(1) (000'S)(2) SEPTEMBER 30, 1996(3)
- ---------------------------------------- ----- ----------- ------------ --------------------- ---------------------
<S> <C> <C> <C> <C> <C>
HORSHAM BUSINESS CENTER HORSHAM, PA
255 Business Center Drive............. 1987 50,616 100% $ 524 $ 14.60
355 Business Center Drive............. 1987 26,637 88% 139 8.48
455 Business Center Drive............. 1988 51,505 94% 420 11.97
555 Business Center Drive............. 1988 30,122 99% 340 16.26
------- -------
158,880 $ 1,423
======= =======
<CAPTION>
TENANTS LEASING 10% OR MORE
OF RENTABLE SQUARE FOOTAGE PER
PROPERTY AS OF SEPTEMBER 30,
PROPERTY/LOCATION 1996 AND LEASE EXPIRATION DATE
- ---------------------------------------- ------------------------------
<S> <<C>
HORSHAM BUSINESS CENTER HORSHAM, PA
255 Business Center Drive............. Stroehmann (38%) - 6/99;
Great Expectations
(23%) - 3/97;
GMAC (13%) - 9/97-9/01;
Buckman Van Buren (21%) - 2/97
355 Business Center Drive............. Anthem Electronic
(34%) - 9/01;
Seimens Printing Sys.
(22%) - 8/98;
GE Capital (16%) - 9/01
455 Business Center Drive............. Astea (65%) - 10/02;
Letven/Diccicco (29%) - 7/00
555 Business Center Drive............. GMAC (77%) - 9/99;
First American Home Care
(13%) - 4/00
</TABLE>
- ---------------
(1) Based on all leases dated on or before September 30, 1996.
(2) "Total Base Rent" for the twelve months ended June 30, 1996 represents base
rents excluding tenant reimbursements calculated in accordance with
generally accepted accounting principles determined on a straight-line
basis. Tenant reimbursements generally include payment of real estate taxes,
operating expenses and escalations and common area maintenance and utility
charges.
(3) Represents Total Base Rent for the twelve months ended September 30, 1996,
plus tenant reimbursements for the twelve months ended September 30, 1996,
divided by net rentable square feet leased.
104
<PAGE> 43
AGGREGATE TAX BASIS -- INITIAL PROPERTIES
The following table sets forth the aggregate tax basis of the Initial
Properties as of December 31, 1995 for federal income tax purposes:
<TABLE>
<CAPTION>
31.5 19
AGGREGATE 40 YEAR 39 YEAR YEAR YEAR 19 YEAR 18 YEAR 7 YEAR 5 YEAR
SUBMARKET/PROPERTY TAX BASIS LAND MACRS(1) MACRS(1) MACRS(1) ACRS(2) STRAIGHT-LINE STRAIGHT-LINE MACRS(3) ACRS(2)
- ------------------- --------- ------ ------- ------- ------- ------ ------------- ------------- ------- ------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
HORSHAM/WILLOW
GROVE/JENKINTOWN,
PA
650 Dresher
Road........... $ 2,702 $ 413 -- -- -- $1,158 -- $ 967 $ 120 $ 44
1155 Business
Center Drive... 5,434 943 -- $4,491 -- -- -- -- -- --
500 Enterprise
Road........... 4,981 814 -- 4,167 -- -- -- -- -- --
One Progress
Avenue......... 3,687 803 -- 2,884 -- -- -- -- -- --
SOUTHERN ROUTE 202
CORRIDOR, PA
456 Creamery
Way............ 1,865 311 -- 1,554 -- -- -- -- -- --
486 Thomas Jones
Way............ 4,607 467 -- 322 $3,818 -- -- -- -- --
468 Creamery
Way............ 2,370 253 -- 118 1,999 -- -- -- -- --
WHITELANDS BUSINESS
PARK
110 Summit
Drive.......... 2,727 343 -- -- 183 888 1,039 -- 265 9
BLUE BELL/PLYMOUTH
MEETING/FORT
WASHINGTON, PA
2240/50 Butler
Pike........... 4,995 448 -- -- 275 903 -- 2,693 548 128
120 West
Germantown
Pike........... 3,558 379 -- -- 97 2,794 -- -- 283 5
140 West
Germantown
Pike........... 2,867 318 -- -- 509 1,723 -- -- 292 25
2260 Butler
Pike........... 3,023 381 -- -- 496 1,962 -- -- 159 25
MAIN LINE, PA
16 Campus
Boulevard...... 6,178 1,082 -- 5,096 -- -- -- -- -- --
18 Campus
Boulevard...... 3,414 692 -- 2,722 -- -- -- -- -- --
LEHIGH VALLEY, PA
7310 Tilghman
Street......... 2,789 213 -- -- 414 804 897 -- 437 24
7248 Tilghman
Street......... 2,519 371 -- -- 2,148 -- -- -- -- --
6575 Snowdrift
Road........... 3,184 245 -- 245 2,694 -- -- -- -- --
1510 Gehman
Road........... 4,998 526 -- 4,472 -- -- -- -- -- --
BURLINGTON COUNTY,
NJ
One Greentree
Centre......... 7,436 751 401 -- 617 5,667 -- -- -- --
Two Greentree
Centre......... 8,030 744 897 -- 594 5,795 -- -- -- --
Three Greentree
Centre......... 10,170 987 1,134 -- 423 7,626 -- -- -- --
CAMDEN COUNTY, NJ
457 Haddonfield
Road(4)........ 0 -- -- -- -- -- -- -- -- --
OTHER MARKETS
168 Franklin
Corner Road,
Lawrenceville,
NJ............. 3,199 481 -- 2,718 -- -- -- -- -- --
Twin Forks Office
Park
5910-6090 Six
Forks
Raleigh, NC...... 7,779 2,487 961 -- 537 3,794 -- -- -- --
</TABLE>
- ---------------
(1) Modified accelerated cost recovery system -- straight line.
(2) Accelerated cost recovery system.
(3) Modified accelerated cost recovery system -- accelerated.
(4) Acquired in July 1996.
105
<PAGE> 44
C&W MID-YEAR REPORT AND C&W MARKET ANALYSES
The C&W Market Analyses were prepared for the Company by Cushman &
Wakefield of Pennsylvania, Inc., which is a real estate service firm with
significant experience and expertise relating to the Suburban Philadelphia
Office and Industrial Market and the various submarkets therein. The information
in the C&W Mid-Year Report and C&W Market Analyses reflect data available at
June 30, 1996 and August 1, 1996, respectively, and do not reflect data or
changes subsequent to those dates. The information contained in the C&W Mid-Year
Report and C&W Market Analyses have been gathered by C&W from sources assumed to
be reliable, including publicly available records. Because records of all
transactions are not readily available, the information contained in the C&W
Mid-Year Report and C&W Market Analyses may not reflect all transactions
occurring in the geographic area discussed in the C&W Mid-Year Report and C&W
Market Analyses. In addition, transactions that are reported may not be
described accurately or completely in the publicly available records. C&W shall
not be responsible for and does not warrant the accuracy or completeness of any
such information derived from such publicly available records (or information
relating to transactions that were not reported).
In connection with the C&W Mid-Year Report and C&W Market Analyses, C&W
made numerous assumptions with respect to industry performance, general business
and economic conditions, and other matters. Any estimates or approximations
contained therein could reasonably be subject to different interpretations by
other parties. Because predictions of future events are inherently subject to
uncertainty, none of C&W, the Company or any other person can assume that such
predicted rental rates, absorption or other events will occur as outlined or
predicted in the C&W Mid-Year Report or C&W Market Analyses. Reported asking
rental rates of properties, replacement cost rents or estimated replacement
costs do not purport to necessarily reflect the rental rates at which properties
may actually be rented, actual rents required to support new development or the
actual cost of replacement. In many instances, asking rents and actual rental
rates differ significantly.
Changes in local, national and international economic conditions will
affect the markets described in the C&W Mid-Year Report and C&W Market Analyses.
Therefore, C&W can give no assurance that occupancy and absorption levels and
rental rates as of the date of the C&W Mid-Year Report or C&W Market Analyses
will continue or that such occupancy levels and rental rates will be attained at
any time in the future. Forecasts of absorption rates, rental activity,
replacement cost rents and replacement costs are C&W's estimates as of the dates
of the C&W Mid-Year Report and C&W Market Analyses. Actual future market
conditions may differ materially from the forecasts and projections contained
therein.
C&W is a part of a national network of affiliated companies providing real
estate services. As such, from time to time, C&W and its affiliates have
provided and in the future may provide real estate related services, including
brokerage and leasing agent services, to the Company or its principals, or may
represent the Company, its principals or others doing business with the Company.
C&W received compensation of $21,000 from the Company in connection with C&W's
preparation of the C&W Market Analyses.
106
