<PAGE>
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) August 22, 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)
Two Greentree Centre, Marlton, New Jersey 08053
(Former address of principal executive offices)
(610) 325-5600
(Registrant's telephone number, including area code)
Page 1 of 48 pages
<PAGE>
Item 2. Acquisition or Disposition of Assets.
On August 22, 1996, the Trust consummated its previously
disclosed transaction (the "SSI/TNC Transaction") with Safeguard Scientifics,
Inc. ("SSI") and The Nichols Company ("TNC"). Reference is made to the summary
of such transaction contained in the response to Item 5 of the Trust's Quarterly
Report on Form 10-Q filed with the Securities and Exchange Commission for the
quarter ended June 30, 1996. Such response is hereby incorporated herein by
reference. Terms used herein as defined terms but not otherwise defined herein
have the meanings assigned to them in the foregoing Form 10-Q.
On August 22, 1996, the Trust's shareholders approved the
SSI/TNC Transaction at the Trust's Annual Meeting of Shareholders and the
SSI/TNC Transaction closed ("Closing") whereby the Trust acquired the Initial
Properties at a purchase price of $75.5 million subject to related mortgage debt
encumbering the Initial Properties of $63.7 million. Upon Closing, the Trust
received $426,250 in cash and obtained a controlling interest in a newly formed
limited partnership ("Operating Partnership") which acquired direct and indirect
ownership interests of the Initial Properties. In the SSI/TNC Transaction, the
Trust issued 775,000 common shares of beneficial interest, par value $.01 per
share ("Common Shares"), of the Trust and a six-year warrant exercisable for an
additional 775,000 Common Shares at a per share exercise price of $6.50 (subject
to customary antidilution adjustments) to a wholly owned subsidiary of SSI. The
balance of the consideration was in the form of limited partnership units
(1,620,477 Class A Units) of the Operating Partnership issued or issuable, and
convertible, under certain circumstances up to 1,620,477 Common Shares, subject
to certain potential adjustments.
Based on an aggregate of 2,691,149 Common Shares being issued and outstanding
immediately following the SSI/TNC Transaction, SSI owned, immediately following
the SSI/TNC Transaction, 44.72% of the issued and outstanding Common Shares,
computed in a manner consistent with Rule 13d-3.
The actual number of Class A Units issued on the closing date of the SSI/TNC
Transaction was based on the actual debt balances encumbering the Initial
Properties (as defined therein) as of the closing date. Accordingly, at the
closing, the Operating Partnership issued, and agreed to issue, the following
Class A Units:
Units
-----
Issuance
Class Number Date Recipient
- ----- ------ -------- ---------
A 1,187,567 Closing Date Owners (2)
A 299,943 Closing Date Escrow (3)
A 132,967 (1) Owners
1,620,477
- ----------
(1) These units will be issued no later than the 37th full month
following the Closing Date.
(2) The Owners consist of SSI, TNC and seven other persons who contributed
interests in properties to the Operating Partnership at the closing. Of the
total Class A Units issued at the closing, 166,366 were issued to SSI,
894,412 were issued to TNC and 126,789 were issued to the other owners.
(3) Of the 299,943 units in escrow, 227,712 are issuable to SSI upon release
from escrow and 72,231 are issuable to TNC upon release from escrow.
2
<PAGE>
As part of the SSI/TNC Transaction, three individuals designated by
SSI and TNC (Anthony A. Nichols, Sr., Warren V. Musser and Walter D'Alessio)
were elected to the Board of Trustees of the Trust, and one individual (Charles
P. Pizzi) designated jointly by SSI, TNC and the Trust was also elected to the
Board. Joseph Carboni, Richard M. Osborne and Gerard H. Sweeney have continued
as members of the Board.
The tables set forth below under the captions "The Initial Properties" identify
each of the 19 Initial Properties and provide certain information relating to
each such Property:
3
<PAGE>
The Initial Properties
The Initial Properties are comprised of seven properties that
were owned immediately prior to the closing of the SSI/TNC Transaction directly
and indirectly by SSI and 12 properties that were owned immediately prior to the
closing of the SSI/TNC Transaction by certain of TNC's affiliates and SSI. The
Initial Properties aggregate approximately 960,000 square feet. All of the
Initial Properties are located in the Greater Philadelphia Region. As of August
31, 1996, the Initial Properties were approximately 95.1% leased to
approximately 63 tenants. The following tables set forth summary information
about the Initial Properties:
<TABLE>
<CAPTION>
Initial Properties - General Information
==================================================================================================================================
Property/ Transfer Use(2) Rentable Acquisition Occupancy Number Annualized Base Rent
Location Category(1) Square Price (3) Rate at of June 30,
Footage August 31, Tenants 1996(4)
1996
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Horsham Business Center Witmer O 51,388 $5,136,000 99.4% 4 $573,000
(Bldg. 15)
1155 Business Center Dr.
Horsham, PA 19044
- ----------------------------------------------------------------------------------------------------------------------------------
Oaklands Corporate Center Witmer F 47,604 $3,136,000 100.0% 1 $334,000
(Bldg. 5)
456 Creamery Way
Exton, PA 19341
- ----------------------------------------------------------------------------------------------------------------------------------
Newtown Square Corporate Campus Witmer O 37,700 $3,918,000 82.3% 4 $404,000
(Bldg. 11)
18 Campus Boulevard
Newtown Square, PA 19073
- ----------------------------------------------------------------------------------------------------------------------------------
Newtown Square Corporate Campus Witmer O 67,722 $5,800,000 100.0% 4 $362,000
(Bldg. 12)
16 Campus Boulevard
Newtown Square, PA 19073
- ----------------------------------------------------------------------------------------------------------------------------------
Keith Valley Business Park Witmer F 67,800 $6,472,000 100.0% 2 $657,000
(Bldg. 7)
500 Enterprise Road
Horsham, PA 19044
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Keith Valley Business Park Witmer O 79,204 $6,977,000 100.0% 1 $674,000
One Progress Avenue
Horsham, PA 19044
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Lansdale Industrial Park
1510 Gehman Road Witmer I 152,624 $6,000,000 100.0% 2 $771,000
Lansdale, PA 19446
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Lawrenceville Office Park Witmer O 32,000 $2,000,000 54.5% 6 $128,000
168 Franklin Corner Road
Lawrenceville, NJ 08648
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Iron Run Industrial Park
(Bldg. 2)
7310 Tilghman Street TI F 40,000 $2,782,000 100.0% 5 $322,000
Allentown, PA 18106
- ----------------------------------------------------------------------------------------------------------------------------------
Whitelands Business Park
110 Summit Drive
Exton, PA 19341 TI F 43,660 $2,018,000 82.7% 4 $252,000
==================================================================================================================================
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
==================================================================================================================================
Property/ Transfer Use(2) Rentable Acquisition Occupancy Number Annualized Base Rent
Location Category(1) Square Price (3) Rate at of June 30,
Footage August 31, Tenants 1996(4)
1996
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Meetinghouse Business Center TI O 52,183 $5,554,000 100.0% 3 $543,000
(Bldg. 1A and 1B)
2240/50 Butler Pike
Plymouth Meeting, PA 19462
- ----------------------------------------------------------------------------------------------------------------------------------
Meetinghouse Business Center PIT O 30,546 $3,445,000 100.0% 3 $363,000
(Bldg. 2)
120 West Germantown Pike
Plymouth Meeting, PA 19462
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Meetinghouse Business Center TI O 25,953 $2,420,000 98.7% 4 $292,000
(Bldg. 3)
140 West Germantown Pike
Plymouth Meeting, PA 19462
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Meetinghouse Business Center TI O 31,892 $3,327,000 100.0% 3 $352,000
(Bldg. 4)
2260 Butler Pike
Plymouth Meeting, PA 19462
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Horsham Business Center TI O 30,138 $3,200,000 100.0% 1 $281,000
(Bldg. 6)
650 Dresher Road
Horsham, PA 19044
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Iron Run Industrial Park PIT O 42,863 $3,664,000 93.8% 4 $389,000
(Bldg. 3)
7248 Tilghman Street
Allentown, PA 18106
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Iron Run Industrial Park PIT F 46,250 $3,000,000 100.0% 1 $328,000
(Bldg. 5)
6375 Snowdrift Road
Allentown, PA 18106
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Oaklands Corporate Center PIT O 28,934 $2,645,000 100.0% 2 $287,000
(Bldg. 45)
468 Creamery Way
Exton, PA 19341
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Oaklands Corporate Center PIT O 51,500 $4,000,000 71.8% 9 $443,000
(Bldg. 50)
486 Thomas Jones Way $75,494,000
Exton, PA 19341
==================================================================================================================================
</TABLE>
(1) "Witmer" denotes that the Operating Partnership will acquire the Property
through its acquisition of interests in the Witmer Partnership; "TI" denotes
that the Operating Partnership will acquire directly title to the Property;
and "PIT" denotes that the Operating Partnership will acquire the Property
through its acquisition of interests in the limited partnerships that own
such Property.
(2) "O" is Office; "I" is Industrial; and "F" is Flex.
(3) "Acquisition Price" represents the agreed upon price for each of the
Properties, computed prior to any reduction on account of indebtedness
encumbering such Properties.
(4) "Annualized Base Rent" represents base rents excluding tenant reimbursements
calculated for the twelve months ended June 30, 1996, in accordance with
generally accepted accounting principles for financial reporting purposes
which is determined on a straight-line basis. Tenant reimbursements
generally include payments on account of real estate taxes, operating
expense escalations and utility charges.
5
<PAGE>
<TABLE>
<CAPTION>
Initial Properties - Indebtedness
==================================================================================================================================
Principal Debt
Balance at
Property/Location Lender June 30, 1996 Maturity Notes
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Horsham Business Center GECC $30,789,000(1) 11/30/00 These properties are all encumbered by
(Bldg. 15) this one loan. The loan is a
1155 Business Center Dr. non-recourse obligation, subject to
Horsham, PA 19044 stated exclusions. Borrower must pay
Additional Amortization (as defined in
the loan documents) to reduce principal
of the loan. Borrower must also pay
Additional Interest (as defined in the
loan documents) upon a sale or
refinancing. The loan may be prepaid
subject to a prepayment penalty but may
not be prepaid prior to November 30,
1997 except in conjunction with an
equity offering meeting certain
conditions. The loan is additionally
secured by a $1,500,000 letter of credit
provided by SSI, a limited guaranty of
TNC, and a pledge and security agreement
delivered by the Witmer Partnership.
GECC retains a right of first offer to
purchase the properties and has a right
of first offer to refinance its debt
through a debt financing under certain
circumstances.
- ----------------------------------------------------------------------------------------
Oaklands Corporate Center GECC (1) 11/30/00
(Bldg. 5)
456 Creamery Way
Exton, PA 19341
- ----------------------------------------------------------------------------------------
Newtown Square Corporate Campus GECC (1) 11/30/00
(Bldg. 11)
18 Campus Boulevard
Newtown Square, PA 19073
- ----------------------------------------------------------------------------------------
Newtown Square Corporate Campus GECC (1) 11/30/00
(Bldg. 12)
16 Campus Boulevard
Newtown Square, PA 19073
- ----------------------------------------------------------------------------------------
Keith Valley Business Park GECC (1) 11/30/00
(Bldg. 7)
500 Enterprise Road
Horsham, PA 19044
- ----------------------------------------------------------------------------------------
Keith Valley Business Park GECC (1) 11/30/00
One Progress Avenue
Horsham, PA 19044
- ----------------------------------------------------------------------------------------
Lansdale Industrial Park GECC (1) 11/30/00
1510 Gehman Road
Lansdale, PA 19446
- ----------------------------------------------------------------------------------------
Lawrenceville Office Park
168 Franklin Corner Road
Lawrenceville, NJ 08648 GECC (1) 11/30/00
- ---------------------------------------------------------------------------------------------------------------------------------
Iron Run Industrial Park Pennsylvania $2,539,000 3/31/00 The loan is a non-recourse obligation
(Bldg. 2) State subject to stated exclusions.
7310 Tilghman Street Employees'
Allentown, PA 18106 Retirement
==================================================================================================================================
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
==================================================================================================================================
Principal Debt
Balance at
Property/Location Lender June 30, 1996 Maturity Notes
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Whitelands Business Park Midlantic $1,604,000 6/1/97 The borrower is liable for the total
110 Summit Drive Bank, N.A. (a amount of the debt.
Exton, PA 19341 division of
PNC Bank)
- -----------------------------------------------------------------------------------------------------------------------------------
Meetinghouse Business Center New England $13,467,000(2) 7/1/00 Meetinghouse buildings 1, 2, 3 and 4 are
(Bldg. 1A and 1B) Mutual Life encumbered by this one loan. The loan
2240/50 Butler Pike Insurance Co. is a non-recourse obligation, subject to
Plymouth Meeting, PA 19462 stated exclusions. Borrower must pay
Additional Interest and Appreciation
Interest as such terms are defined in the
loan documents. The loan may be prepaid,
subject to a prepayment penalty. The loan
is additionally secured by a $500,000
letter of credit provided by SSI.
- -----------------------------------------------------------------------------------------
Meetinghouse Business Center New England (2) 7/1/00
(Bldg. 2) Mutual Life
120 West Germantown Pike Insurance Co.
Plymouth Meeting, PA 19462
- -----------------------------------------------------------------------------------------
Meetinghouse Business Center New England (2) 7/1/00
(Bldg. 3) Mutual Life
140 West Germantown Pike Insurance Co.
Plymouth Meeting, PA 19462
- -----------------------------------------------------------------------------------------
Meetinghouse Business Center New England (2) 7/1/00
(Bldg. 4) Mutual Life
2260 Butler Pike Insurance Co.
Plymouth Meeting, PA 19462
- -----------------------------------------------------------------------------------------
Horsham Business Center Allmerica $2,894,000 1/1/97 (3)
(Bldg. 6) Financial (3)
650 Dresher Road
Horsham, PA 19044 Safeguard
Scientifics, $364,000 7/31/99 (4)
Inc.
- -----------------------------------------------------------------------------------------
Iron Run Industrial Park New England $3,218,000 6/1/04 The loan is a non-recourse obligation,
(Bldg. 3) Mutual subject to stated exclusions. Borrower
7248 Tilghman Street Life Insurance must pay Additional Interest and
Allentown, PA 18106 Co. Appreciation Interest as such terms are
defined in the loan documents. Lender
retains a right of first refusal on any
sale of the property.
- -----------------------------------------------------------------------------------------
Iron Run Industrial Park First Union, $2,358,000 2/1/98 The loan is guaranteed by TNC. The
(Bldg. 5) National Bank borrower is liable for the total amount
6375 Snowdrift Road of the debt.
Allentown, PA 18106
- -----------------------------------------------------------------------------------------
Oaklands Corporate Center First Union, $6,453,000(5) 2/1/98 Oaklands Corporate Center Buildings 45
(Bldg. 45) National Bank and 50 are encumbered by this one loan.
468 Creamery Way The loan is guaranteed by TNC. The
Exton, PA 19341 borrower is liable for the total amount
of the debt.
- -----------------------------------------------------------------------------------------
Oaklands Corporate Center First Union, (5) 2/1/98
(Bldg. 50) National Bank
486 Thomas Jones Way
Exton, PA 19341
===================================================================================================================================
</TABLE>
- --------
(1) All of these properties secure the GECC Loan. As of June 30, 1996
the outstanding principal balance of this loan was $30,789,000.
(2) All of these Properties secure a single loan. As of June 30, 1996 the
outstanding principal balance of this loan was $13,467,000.
(3) On July 30, 1996, this loan was refinanced paying the former mortgage lender
$2,400,000 with proceeds of a new loan, with GMAC in the amount of
$2,500,000. The new mortgage loan matures on August 1, 1998, bears interest
at 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.
7
<PAGE>
(4) Certain tenant improvements and leasing commissions in the aggregate amount
of $460,000 ($364,000 outstanding as of June 30, 1996) are financed by
Safeguard Scientifics, Inc. and are secured by a second mortgage on the
property. The loan bears interest, payable monthly, at prime and matures on
the earlier of (a) the completion of a secondary stock offering by the
Trust; (b) a sale or refinance of the property providing sufficient funds to
satisfy all other priority debts of the property; or (c) July 31, 1999.
(5) Both of these Properties secure a single loan. As of June 30, 1996, the
outstanding principal balance of this loan was $6,453,000.
The following table sets forth the principal amount of the loans secured by
the Initial Properties that is repayable in the years indicated:
<TABLE>
<CAPTION>
==================================================================================================================================
Property/Location 1996 1997 1998 1999 2000 2001+
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Horsham Business Center $140,000 $151,000 $150,000 $150,000 $30,197,000
(Bldg. 15) (1) (1) (1) (1) (1)
1155 Business Center Dr.
Horsham, PA 19044
- ----------------------------------------------------------------------------------------------------------------------------------
Oaklands Corporate Center (1) (1) (1) (1) (1)
(Bldg. 5)
456 Creamery Way
Exton, PA 19341
- ----------------------------------------------------------------------------------------------------------------------------------
Newtown Square Corporate Campus (1) (1) (1) (1) (1)
(Bldg. 11)
18 Campus Boulevard
Newtown Square, PA 19073
- ----------------------------------------------------------------------------------------------------------------------------------
Newtown Square Corporate Campus (1) (1) (1) (1) (1)
(Bldg. 12)
16 Campus Boulevard
Newtown Square, PA 19073
- ----------------------------------------------------------------------------------------------------------------------------------
Keith Valley Business Park (1) (1) (1) (1) (1)
(Bldg. 7)
500 Enterprise Road
Horsham, PA 19044
- ----------------------------------------------------------------------------------------------------------------------------------
Keith Valley Business Park (1) (1) (1) (1) (1)
One Progress Avenue
Horsham, PA 19044
- ----------------------------------------------------------------------------------------------------------------------------------
Lansdale Industrial Park (1) (1) (1) (1) (1)
1510 Gehman Road
Lansdale, PA 19446
- ----------------------------------------------------------------------------------------------------------------------------------
Lawrenceville Office Park (1) (1) (1) (1) (1)
168 Franklin Corner Road
Lawrenceville, NJ 08648
- ----------------------------------------------------------------------------------------------------------------------------------
Iron Run Industrial Park $24,000 $26,000 $29,000 $25,000 $2,446,000
(Bldg. 2)
7310 Tilghman Street
Allentown, PA 18106
- ----------------------------------------------------------------------------------------------------------------------------------
Whitelands Business Park $72,000 $1,572,000
110 Summit Drive
Exton, PA 19341
- ----------------------------------------------------------------------------------------------------------------------------------
Meetinghouse Business Center $164,000 $176,000 $188,000 $203,000 $12,818
(Bldg. 1A and 1B) (2) (2) (2) (2) (2)
2240/50 Butler Pike
Plymouth Meeting, PA 19462
- ----------------------------------------------------------------------------------------------------------------------------------
Meetinghouse Business Center (2) (2) (2) (2) (2)
(Bldg. 2)
120 West Germantown Pike
Plymouth Meeting, PA 19462
- ----------------------------------------------------------------------------------------------------------------------------------
==================================================================================================================================
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
==================================================================================================================================
Property/Location 1996 1997 1998 1999 2000 2001+
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Meetinghouse Business Center (2) (2) (2) (2) (2)
(Bldg. 3)
140 West Germantown Pike
Plymouth Meeting, PA 19462
- ----------------------------------------------------------------------------------------------------------------------------------
Meetinghouse Business Center (2) (2) (2) (2) (2)
(Bldg. 4)
2260 Butler Pike
Plymouth Meeting, PA 19462
- ----------------------------------------------------------------------------------------------------------------------------------
Horsham Business Center $2,894,000 $364,000
(Bldg. 6)
650 Dresher Road (4)
Horsham, PA 19044
- ----------------------------------------------------------------------------------------------------------------------------------
Iron Run Industrial Park $3,218,000
(Bldg. 3)
7248 Tilghman Street
Allentown, PA 18106
- ----------------------------------------------------------------------------------------------------------------------------------
Iron Run Industrial Park $43,000 $47,000 $2,287,000
(Bldg. 5)
6575 Snowdrift Road
Allentown, PA 18106
- ----------------------------------------------------------------------------------------------------------------------------------
Oaklands Corporate Center $117,000 $128,000 $6,260,000
(Bldg. 45) (3) (3) (3)
468 Creamery Way
Exton, PA 19341
- ----------------------------------------------------------------------------------------------------------------------------------
Oaklands Corporate Center (3) (3) (3)
(Bldg. 50)
486 Thomas Jones Way
Exton, PA 19341
==================================================================================================================================
</TABLE>
- --------
(1) All of these properties secure a single loan.
(2) All of these properties secure a single loan.
(3) Both of these properties secure a single loan.
(4) On July 30, 1996, this loan was refinanced paying the former mortgage
lender $2,400,000 with proceeds of a new loan, with GMAC in the amount
of $2,500,000. The new mortgage loan matures on August 1, 1998, bears
interest at 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.
9
<PAGE>
Lease Expirations
Initial Properties. The table set forth below shows certain information
regarding rental rates and lease expirations for the Initial Properties.
Scheduled Lease Expirations
(The Initial Properties)
<TABLE>
<CAPTION>
Rentable Square Percentage of Total Final
Year of Number of Leases Footage Subject to Final Annualized Base Annualized Base Rent From
Lease Expiring Within Expiring Rent From Properties Properties
Expiration the Year(1) Leases Under Expiring Leases(2) Under Expiring Leases
----------- --------------- ------------------- ------------------------ -----------------------------
<S> <C> <C> <C> <C>
1996 10 46,635 $483,000 5.2%
1997 6 84,108 $685,000 7.3%
1998 8 33,975 $404,000 4.3%
1999 14 259,607 $1,922,000 20.5%
2000 7 47,617 $577,000 6.2%
2001 9 147,320 $1,896,000 20.2%
2002 1 4,517 $63,000 0.7%
2003 2 77,742 $764,000 8.1%
2004 0 -0- $-0- 0.0%
2005 and 6 207,800 $2,578,000 27.5%
thereafter -------- --------- ----------- --------
Total 63 909,321 $ 9,372,000 100.0%
======== ========= ============ ========
</TABLE>
- --------
(1) A lease is considered to expire if, and at any time, it is terminable by the
tenant without payment of penalty or premium.
(2) "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 twelve. Tenant reimbursements
generally include payments on account of real estate taxes, operating
expense escalations and utility charges.
10
<PAGE>
Item 5. Other Events
(i) The Trust issued, as of August 23, 1996, 42,405 units (each of
which is comprised of one Common Share and one six-year warrant exercisable for
one additional Common Share at a per share exercise price of $6.50) to Turkey
Vulture Fund XIII, Ltd. (the "RMO Fund") pursuant to, and in accordance with, a
promissory note in the original principal amount of $992,293 issued by the Trust
to the RMO Fund on June 21, 1996. The foregoing units were issued in partial
prepayment of the promissory note. Under the terms of the promissory note, each
unit so issued reduced the principal amount of the loan by $5.63 or an aggregate
of $238,740.
(ii) On August 22, 1996, at the annual meeting of shareholders of the
Trust, the shareholders of the Trust approved all but one of the proposals
contained in the Trust's proxy statement dated July 18, 1996 by the votes
indicated below:
Matters Approved:
a. SSI/TNC Transaction:
Votes for: 1,053,929
Votes against: 66,011
Abstentions: 34,694
Broker Non-Votes: 369,789
b. Amendment to Declaration of Trust to increased
authorization number of Common shares from 15,000,000 to 75,000,000:
Votes for: 1,040,646
Votes against: 100,238
Abstentions: 30,875
Broker Non-Votes: 352,664
c. Amendment to Declaration of Trust to eliminate the
restriction on the Trust's ability to issues Common Shares or preferred shares
below book value:
Votes for: 932,396
Votes against: 159,730
Abstentions: 79,633
Broker Non-Votes: 352,664
d. Amendment to Declaration of Trust to confirm the authority
of the Trust's Board of Trustees to effectuate from time to time and without
shareholder approval reverse stock splits:
Votes for: 964,775
Votes against: 163,628
Abstentions: 77,174
Broker Non-Votes: 318,846
11
<PAGE>
e. Amendment to Declaration of Trust to eliminate the
mandatory distribution requirement applicable to net sale and refinancing
proceeds attributable to certain properties:
Votes for: 977,591
Votes against: 188,042
Abstentions: 39,944
Broker Non-Votes: 318,846
f. Amendment to Declaration of Trust to substitute a
new share ownership limitation:
Votes for: 1,089,936
Votes against: 79,178
Abstentions: 36,463
Broker Non-Votes: 318,846
g. Reelection to the Board of Trustees of each of
Joseph L. Carboni, Richard M. Osborne and Gerard H. Sweeney:
Mr. Carboni:
Votes for: 1,460,366
Votes Withheld: 64,057
Abstentions: -0-
Mr. Osborne:
Votes for: 1,459,845
Votes Withheld: 64,578
Abstentions: -0-
Mr. Sweeney:
Votes for: 1,460, 166
Votes Withheld: 64,257
Abstentions: -0-
Matter Not Approved:
The shareholders did not cast the requisite
affirmative votes to restore voting rights on certain Common Shares
beneficially owned by Richard M. Osborne:
Votes for: 645,482
Votes against: 146,272
Abstentions: 42,584
Broker Non-Votes: 690,085
12
<PAGE>
Item 7. Financial Statements and Exhibits.
(a) Financial Statements of Businesses Acquired.
Combined Financial Statements of Initial
Properties as of December 31, 1995
(b) Pro Forma Financial Information
Unaudited Pro Forma Condensed Consolidating Financial Statements
o Pro Forma Condensed Consolidating Balance Sheet as of
June 30, 1996
o Pro Forma Condensed Consolidating Statements of Operations
for the Year Ended December 31, 1995, and the Six-Month
Period Ended June 30, 1996
(c) Management's Discussion and Analysis of Financial Condition and
Results of Operations
(d) Exhibits
13
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners and Owners of the Initial Properties:
We have audited the accompanying combined balance sheets of the Initial
Properties, a nonlegal entity more fully described in Note 1, as of December 31,
1995 and 1994, and the related combined statements of operations, owners'
deficit, and cash flows for each of the three years in the period ended December
31, 1995. These financial statements are the responsibility of the Initial
Properties' management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the combined financial position of the Initial
Properties and the combined results of their operations and their combined cash
flows for each of the three years in the period ended December 31, 1995, in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Philadelphia, Pa.,
April 12, 1996
14
<PAGE>
INITIAL PROPERTIES
COMBINED BALANCE SHEETS (NOTE 1)
(In thousands)
<TABLE>
<CAPTION>
December 31 June 30,
1995 1994 1996
--------------- --------------- ---------------
(Unaudited)
<S> <C> <C> <C>
ASSETS:
Real estate investments (Note 2)-
Operating properties, at cost $ 78,190 $ 75,577 $ 79,563
Less- Accumulated depreciation (21,669) (17,858) (23,571)
--------------- --------------- ---------------
56,521 57,719 55,992
Cash (Note 2) 773 438 655
Escrowed cash (Note 2) 519 504 513
Accounts receivable 253 386 651
Accrued rental income (Notes 2 902 1,313 785
and 6)
Deferred costs, net (Note 2) 1,884 1,526 2,145
Prepaid expenses and other assets 400 393 140
--------------- --------------- ---------------
$ 61,252 $ 62,279 $ 60,881
=============== =============== ===============
LIABILITIES AND OWNERS' DEFICIT:
Mortgage notes payable (Note 3) $ 63,259 $ 70,515 $ 63,322
Note payable (Note 7) -- -- 364
Accrued interest payable 599 1,124 444
Tenant security deposits and other
liabilities (Note 2) 947 729 1,320
--------------- --------------- ---------------
64,805 72,368 65,450
COMMITMENTS AND CONTINGENCIES
(Note 6)
OWNERS' DEFICIT (3,553) (10,089) (4,569)
--------------- --------------- ---------------
$ 61,252 $ 62,279 $ 60,881
=============== =============== ===============
</TABLE>
The accompanying notes are an integral part of these statements.
15
<PAGE>
INITIAL PROPERTIES
COMBINED STATEMENTS OF OPERATIONS (NOTE 1)
(In thousands)
<TABLE>
<CAPTION>
For the
Six-Month
For the Year Ended Period Ended
December 31 June 30
----------- -------
1995 1994 1993 1996 1995
----------- ----------- ----------- ----------- ------------
(Unaudited)
<S> <C> <C> <C> <C> <C>
REVENUE (Note 4):
Base rents (Notes 2 and 6) $ 7,829 $ 8,050 $ 7,955 $ 3,888 $ 3,960
Tenant reimbursements 2,895 3,130 2,754 1,870 1,381
Management operations (Note 2) 617 946 976 277 319
Other income 3 46 2 100 --
----------- ----------- ----------- ----------- ----------
Total revenue 11,344 12,172 11,687 6,135 5,660
----------- ----------- ----------- ----------- -----------
OPERATING EXPENSES:
Interest (Note 3) 5,855 5,915 5,807 2,581 3,051
Depreciation and amortization
(Note 2) 4,336 3,618 3,568 2,103 1,923
Real estate taxes 968 1,076 1,107 511 497
Building operating costs 2,456 2,719 2,073 1,790 1,121
Selling, general and
administrative (Note 5) 906 1,220 1,328 456 478
Provision for loss on real estate
investments (Note 2) 202 -- -- -- --
----------- ----------- ----------- ----------- ----------
Total operating expenses 14,723 14,548 13,883 7,441 7,070
----------- ----------- ----------- ----------- -----------
LOSS BEFORE
EXTRAORDINARY ITEMS (3,379) (2,376) (2,196) (1,306) (1,410)
EXTRAORDINARY ITEMS--
GAIN ON RESTRUCTURING
OF DEBT (Note 3) 5,559 614 -- -- --
----------- ----------- ----------- ----------- ----------
NET INCOME (LOSS) $ 2,180 $ (1,762) $ (2,196) $ (1,306) $ (1,410)
=========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
16
<PAGE>
INITIAL PROPERTIES
COMBINED STATEMENTS OF OWNERS' DEFICIT (NOTE 1)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993,
AND THE SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED)
(In thousands)
BALANCE AT JANUARY 1, 1993 $ (6,181)
Contributions 752
Net loss (2,196)
BALANCE AT DECEMBER 31, 1993 (7,625)
Contributions 64
Distributions (766)
Net loss (1,762)
-----------
BALANCE AT DECEMBER 31, 1994 (10,089)
Contributions 4,356
Net income 2,180
BALANCE AT DECEMBER 31, 1995 (3,553)
Contributions 323
Distributions (33)
Net loss (1,306)
-----------
BALANCE AT JUNE 30, 1996 (Unaudited) $ (4,569)
===========
The accompanying notes are an integral part of these statements.
17
<PAGE>
INITIAL PROPERTIES
COMBINED STATEMENTS OF CASH FLOWS (NOTE 1)
(In thousands)
<TABLE>
<CAPTION>
For the
Six-Month
For the Year Ended Period Ended
December 31 June 30
----------- -------
1995 1994 1993 1996 1995
--------- --------- --------- --------- -----------
(Unaudited)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 2,180 $ (1,762) $ (2,196) $ (1,306) $ (1,410)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities-
Extraordinary gain on extinguishment
of debt (5,559) (614) -- -- --
Depreciation and amortization 4,336 3,618 3,568 2,103 1,923
Provision for loss on real
estate investments 202 -- -- -- --
Changes in assets and liabilities-
(Increase) decrease in-
Accounts receivable 133 (14) (248) (397) (64)
Accrued rental income 411 458 (72) 117 230
Prepaid expenses and other assets (7) 427 (52) 260 273
Increase (decrease) in-
Accrued interest payable (525) 253 422 (155) 179
Tenant security deposits and
other liabilities 218 (204) 22 373 112
--------- --------- --------- --------- ---------
Net cash provided by
operating activities 1,389 2,162 1,444 995 1,243
--------- --------- --------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures and leasing
commissions paid (2,774) (1,802) (908) (1,783) (375)
(Increase) decrease in escrowed cash (15) 87 (575) 6 82
--------- --------- --------- --------- ---------
Net cash used in
investing activities (2,789) (1,715) (1,483) (1,777) (293)
--------- --------- --------- --------- ---------
</TABLE>
(Continued)
18
<PAGE>
INITIAL PROPERTIES
COMBINED STATEMENTS OF CASH FLOWS (NOTE 1)
(In thousands)
<TABLE>
<CAPTION>
For the
Six-Month
For the Year Ended Period Ended
December 31 June 30
----------- -------
1995 1994 1993 1996 1995
--------- --------- --------- --------- ---------
(Unaudited)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Contributions $ 4,356 $ 64 $ 752 $ 323 $ 287
Distributions -- (766) -- (33) --
Repayments on mortgage notes payable (1,899) (874) (1,038) (279) (531)
Borrowings on mortgage notes payable -- 1,200 414 342 --
Proceeds from note payable -- -- -- 364 --
Costs associated with financing (722) (160) 17 (53) (33)
--------- --------- --------- --------- ---------
Net cash provided by (used in)
financing activities 1,735 (536) 145 664 (277)
--------- --------- --------- --------- ---------
NET INCREASE (DECREASE) IN CASH 335 (89) 106 (118) 673
CASH, BEGINNING OF PERIOD 438 527 421 773 438
--------- --------- --------- --------- ---------
CASH, END OF PERIOD $ 773 $ 438 $ 527 $ 655 $ 1,111
========= ========= ========= ========= =========
SUPPLEMENTAL DISCLOSURE:
Interest paid $ 6,254 $ 5,763 $ 5,411 $ 2,736 $ 2,744
========= ========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
19
<PAGE>
INITIAL PROPERTIES
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
1. ORGANIZATION AND BASIS OF COMBINATION:
The accompanying combined financial statements consist of the accounts of the
following properties and business operations:
The Property Management, Leasing, and Development
Operations of The Nichols Realty Services Company (the "Company")
The Nichols Company ("Nichols") Properties:
Property Square Footage
-------- --------------
456 Creamery Way, Exton, PA 47,600*
468 Creamery Way, Exton, PA 28,900
486 Thomas Jones Way, Exton, PA 51,500
7248 Tilghman Street, Allentown, PA 42,900
6575 Snowdrift Road, Allentown, PA 46,250
1510 Gehman Road, Lansdale, PA 152,600*
16 Campus Blvd., Newtown Square, PA 67,700*
18 Campus Blvd., Newtown Square, PA 37,700*
One Progress Avenue, Horsham, PA 79,200*
1155 Business Center Drive, Horsham, PA 51,400*
500 Enterprise Avenue, Horsham, PA 67,800*
168 Franklin Corner Road, Lawrenceville, NJ 32,000*
- ------------------------------------------
*Included in the "Witmer Partnership"
Safeguard Scientifics, Inc. ("Safeguard") Properties:
Property Square Footage
-------- --------------
650 Dresher Road, Horsham, PA 30,100
7310 Tilghman Street, Allentown, PA 40,000
2240-50 Butler Pike, Plymouth Meeting, PA 52,200
2260 Butler Pike, Plymouth Meeting, PA 31,900
120 Germantown Pike, Plymouth Meeting, PA 30,500
140 Germantown Pike, Plymouth Meeting, PA 25,900
110 Summit Drive, Exton, PA 43,700
The Initial Properties listed above have common management and were developed by
an affiliated ownership group referred to collectively as "Nichols Safeguard."
Nichols Safeguard is engaged in the development and ownership of commercial and
industrial real estate in the Philadelphia/Delaware Valley Area and provides
management, leasing, and development services on a contractual basis to the
above properties and third parties.
20
<PAGE>
The Initial Properties are intended to be acquired in a transaction with
Brandywine Realty Trust (the "Trust"), which intends to remain qualified as a
real estate investment trust under the Internal Revenue Code. These financial
statements have been prepared on a combined basis to present the financial
position and results of operations of the 19 properties and the related
management business of Nichols Safeguard as if the operations were managed as a
single predecessor business under common control. Accordingly, all inter-entity
accounts have been eliminated to reflect the combined results.
The combined financial statements as of June 30, 1996, and for the six months
ended June 30, 1996 and 1995, are unaudited; however, in the opinion of
management, all adjustments (consisting solely of normal recurring adjustments)
necessary for a fair presentation of the combined financial statements for the
interim periods have been included. The results for the interim periods are not
necessarily indicative of the results for the full year.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Real Estate Investments
A summary of real estate investments, less accumulated depreciation and
amortization at December 31, 1995 and 1994, and June 30, 1996, follows (in
thousands):
December 31 June 30
----------- -------------
1995 1994 1996
----------- ------------ -------------
Land $ 9,275 $ 8,975 $ 9,275
Buildings 53,761 52,263 53,821
Tenant improvements 15,107 14,299 16,420
Furniture, fixtures and equipment 47 40 47
----------- ------------ ------------
78,190 75,577 79,563
Accumulated depreciation (21,669) (17,858) (23,571)
----------- ------------ ------------
$ 56,521 $ 57,719 $ 55,992
=========== =========== ===========
21
<PAGE>
Costs associated with the acquisition, development and construction of these
properties are capitalized. Properties are carried at the lower of depreciated
cost or net realizable value. For financial reporting purposes, depreciation is
computed on a straight-line basis over the estimated useful lives of the assets,
as follows:
Buildings 31.5 years
Tenant improvements 5 to 10 years, which reflect the
expected terms of the lease
Furniture, fixtures and
equipment 3 to 5 years
Management reviews the net realizable value of the properties periodically to
determine whether an allowance for possible losses is necessary. The carrying
value of the properties is evaluated on an individual basis, and to the extent
management's estimate of the net realizable value of each investment is less
than its carrying value, a provision for loss on real estate investments is
recorded. During 1995, a $202,000 provision for loss on real estate investments
was recorded.
For federal income tax purposes, the Company utilizes straight-line and
accelerated methods of depreciation. As a result, accumulated depreciation for
tax purposes differs from accumulated depreciation for financial statement
purposes by approximately $(408,000) and $1,072,000 at December 31, 1995 and
1994, respectively.
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets to be Disposed Of." This statement requires that long-lived
assets to be held and used by the Company be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. In performing the review for recoverability, management
estimates the future cash flows expected to result from the use of the asset and
its eventual disposition. If the sum of the expected future cash flows
(undiscounted and without interest charges) is less than the carrying amount of
the asset, an impairment loss should be recognized. Measurement of an impairment
loss for these assets should be based on the fair market value of the asset. On
January 1, 1996, the Company adopted this statement. The effect of adopting this
statement was not material to the Initial Properties' financial position or
results of operations.
Escrowed Cash
In accordance with the mortgage agreements of several properties, the owners
were required to place funds on deposit in interest-bearing accounts to secure
the payments of real estate taxes, debt service and other anticipated capital
expenditures.
22
<PAGE>
Deferred Costs
Fees and costs associated with lease origination and costs incurred to obtain
long-term financing have been capitalized and are being amortized on a
straight-line basis, which approximates the interest method, over the terms of
the respective leases or debt. At December 31, 1995 and 1994, and June 30, 1996,
deferred costs include the following (in thousands):
December 31 June 30
----------- ------------
1995 1994 1996
---------- ---------- ------------
Deferred financing costs $ 1,009 $ 349 $ 1,061
Deferred leasing costs 2,770 2,957 3,190
---------- ---------- -----------
3,779 3,306 4,251
Less- Accumulated amortization 1,895 1,780 2,106
---------- ---------- -----------
$ 1,884 $ 1,526 $ 2,145
========== ========== ===========
Revenue Recognition
Rental income from tenants is recognized on a straight-line basis regardless of
when payments are due. Accrued rental income represents rental income recognized
in excess of payments currently due (see Note 6).
The Company provides management, leasing and development services. Fees for such
services are based on contracted rates, which are consistent with the general
marketplace. Management fees, leasing commissions, and developer fees are
recognized as income in the period earned.
Income Taxes
No federal or state income taxes are payable by Nichols Safeguard, and none have
been provided in the accompanying financial statements. The partners are
required to include their respective shares of partnership profits and losses in
their individual tax returns.
Tenant Security Deposits
Cash consists of demand accounts and money market accounts. At December 31, 1995
and 1994, and June 30, 1996, cash includes unrestricted tenant security deposits
of $350,000, $270,000, and $353,000, respectively.
23
<PAGE>
3. MORTGAGE NOTES PAYABLE:
Mortgage notes payable are collateralized by the properties and the assignment
of rents and generally require monthly principal and interest payments. Mortgage
notes payable totaling $31,092,000 at December 31, 1995, bear fixed annual
interest ranging from 7% to 9.25%. Nichols Safeguard also has two mortgage notes
payable totaling $30,523,000 and $1,644,000 at December 31, 1995, which have
variable rates of interest based on the lender's commercial paper plus 2.75% and
prime plus 1%, respectively. At December 31, 1995, these interest rates were
8.6% and 9.5%, respectively. The weighted average interest rates on the mortgage
notes for the years ended December 31, 1995, 1994 and 1993, were 8.6%, 8.0% and
8.2%, respectively. Weighted average interest rates for the six months ended
June 30, 1996 and 1995, were 8.2% and 8.3%, respectively.
In November 1995, Nichols Safeguard refinanced certain mortgage notes on the
Witmer properties totaling $37,354,000 with proceeds of mortgage loans totaling
up to $32,211,600, including tenant improvement holdbacks of $1,688,000, plus
cash of $4,052,000 contributed by Safeguard. At June 30, 1996, $342,000 of the
tenant improvement holdbacks had been advanced to Nichols Safeguard and is
included in mortgage notes payable. In connection with the refinancing, Nichols
Safeguard acquired the Lawrenceville, New Jersey property with outstanding debt
of $3,200,000 from the lender. As a result of the debt refinancing, Nichols
Safeguard recorded an extraordinary gain of $5,559,000 in 1995.
Commencing January 1, 1996, through maturity, November 30, 2000, Nichols
Safeguard will make monthly principal and interest payments with interest based
on the lender's composite commercial paper plus 2.75% per annum. Minimum monthly
principal payments are equal to 1/12 of .5% of the principal balance outstanding
on the first day of each loan year beginning December 1. Additional principal
payments will be made monthly on the $30,523,000 principal outstanding as of
December 31, 1995, based on 100% of the net cash flow from the properties, as
defined. No principal payments were made from these participating interests in
cash flows during 1995 or the six months ended June 30, 1996. The loans are
cross-collateralized and cross-defaulted. The loan is further secured by a
$1,500,000 letter of credit provided by Safeguard. The loans are subject to
certain prepayment penalties as defined. As additional consideration, the lender
may receive additional contingent interest, as defined, at scheduled maturity or
upon early loan repayment. The percentage used to compute the additional
contingent interest may vary based upon the level of any additional drawdowns
under the loan and was 25% at December 31, 1995. No additional contingent
interest was paid in 1995 or during the six months ended June 30, 1996.
In July 1994, Nichols Safeguard negotiated with a lender to restructure a
mortgage note totaling $4,718,000. The principal amount of the loan was reset at
$4,100,000. Interest was reset from prime plus 1% to prime plus .5% retroactive
to January 1, 1994, and the maturity was extended to March 31, 1996. As a result
of the debt restructuring, Nichols Safeguard recorded an extraordinary gain of
$614,000 during 1994. This mortgage note was included in the November 1995
refinancing.
24
<PAGE>
Mortgage notes are due between December 1996 and June 2004. At December 31,
1995, the carrying value of the mortgage notes payable approximates the fair
value as the debt bears interest at rates that approximate current market rates.
The annual maturities of the mortgage notes payable as of December 31, 1995, are
as follows (in thousands):
Recourse Nonrecourse Total
-------- ----------- -----
1996 $ 233 $ 3,222 $ 3,455
1997 1,746 354 2,100
1998 8,548 368 8,916
1999 -- 378 378
2000 -- 45,192 45,192
Thereafter -- 3,218 3,218
---------- ------------- -------------
$ 10,527 $ 52,732 $ 63,259
========== ============= =============
At December 31, 1995, mortgage notes payable of $30,523,000 and $13,548,000 are
also collateralized by outstanding letters of credit totaling $1,500,000 and
$500,000 which expire in November 1996 and July 1996, respectively.
Guarantees by the Company and certain other limited partners totaled
$10,527,000. Two mortgage notes totaling $13,548,000 and $3,219,000 at December
31, 1995, are entitled to receive additional interest in the form of 50% and
80%, respectively, of the cash flows, as defined. During 1995, 1994 and 1993,
additional interest expense recorded as a result of cash flow participation by
lenders totaled $61,000, $201,000 and $0, respectively. For the six months ended
June 30, 1996 and 1995, additional interest expense totaled $0 and $114,000,
respectively.
4. RELATED-PARTY TRANSACTIONS:
The Company provides management, leasing and development services for certain
affiliated partnerships. Management and leasing fees earned by the Company
related to these partnerships totaled $171,000, $420,000 and $359,000,
respectively, for the years ended December 31, 1995, 1994 and 1993, and are
included in management operations.
Nichols Safeguard occupied approximately 28,000 square feet of the properties
during 1995, 1994 and 1993. In addition, 4,600 square feet was occupied by a
Nichols Safeguard affiliate during 1994 and part of 1993. Base rents from these
affiliates for the years ended December 31, 1995, 1994 and 1993, were $246,000,
$260,000 and $230,000, respectively. Base rents from these affiliated
partnerships for the six months ended June 30, 1996 and 1995, were $117,000 and
$126,000, respectively.
5. EMPLOYEE BENEFIT PLAN:
Employees of the Company participate in a profit sharing plan covering
substantially all employees. Annual contributions are determined at the
discretion of the employer. No contributions were made in 1995, 1994 and 1993,
respectively.
25
<PAGE>
6. OPERATING LEASES:
Nichols Safeguard leases its properties to tenants under operating leases with
various expiration dates extending to the year 2006. During 1996, leases
covering 99,000 square feet or approximately 11% of the net leasable space are
scheduled to expire.
Future minimum rentals on non-cancelable tenant leases at December 31, 1995,
excluding tenant reimbursements for increases in operating expenses are as
follows (in thousands):
<TABLE>
<CAPTION>
Decrease
Rental in Accrued Minimum
Payments Due Rental Income Rental Income
------------- ------------- -------------
<S> <C> <C> <C>
1996 $ 7,122 $ 163 $ 6,959
1997 5,209 227 4,982
1998 4,498 147 4,351
1999 3,358 138 3,220
2000 2,262 135 2,127
Thereafter 2,187 92 2,095
-------------- ------------- --------------
$ 24,636 $ 902 $ 23,734
============== ============= ==============
</TABLE>
During 1995, 1994 and 1993, no tenants individually accounted for more than 10%
of rental revenue.
7. SUBSEQUENT EVENTS (UNAUDITED):
On August 22, 1996, the Trust consummated its transaction with Nichols and
Safeguard. Upon Closing, the Trust obtained controlling ownership interests of
the Initial Properties and received $426,250 in cash. In the SSI/TNC
Transaction, the Trust issued 775,000 common shares of beneficial interest
("Common Shares") and a six-year warrant exercisable for an additional 775,000
common shares of beneficial interest at a per share exercise price of $6.50. The
balance of the consideration was in the form of limited partnership units issued
or issuable, and convertible under certain circumstances, up to 1,620,477 Common
Shares, subject to certain potential adjustments.
In July 1996, Nichols Safeguard refinanced $2,894,000 of mortgage notes which
were due in December 1996. The notes were satisfied by the payment of $2,400,000
which represents the partial proceeds of a new mortgage loan of $2,500,000 which
bears interest at 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 and a final balance due August 1, 1998. As a result of the
refinancing, Nichols Safeguard recorded an extraordinary gain of $494,000.
Certain tenant improvements and leasing commissions associated with the same
property, in the aggregate amount of $460,000 ($364,000 outstanding as of June
30, 1996) have been financed by a loan from Safeguard and is secured by a second
mortgage on the property. The loan requires interest payable monthly at the
prime rate and matures on the earlier of: (a) the completion of a secondary
stock offering by the Trust (b) a sale or refinance of the property providing
sufficient funds to satisfy all other priority debts of the property or (c) July
31, 1999.
26
<PAGE>
Item 7(b).
BRANDYWINE REALTY TRUST
PRO FORMA CONDENSED CONSOLIDATING FINANCIAL INFORMATION
The following sets forth the pro forma condensed consolidating balance sheet of
Brandywine Realty Trust as of June 30, 1996, and the pro forma condensed
consolidating statements of operations for the year ended December 31, 1995, and
the six-month period ended June 30, 1996.
The pro forma condensed consolidating financial information is presented as if
the following completed transactions had been consummated on June 30, 1996, for
balance sheet purposes and January 1, 1995, for purposes of the statements of
operations; (i) the Trust obtained the sole general partnership interest and
approximately 59% limited partnership interest in the Operating Partnership;
(ii) the contributions of the Initial Properties in connection with the SSI/TNC
transaction; (iii) the investment by the RMO Fund of $1,330,000 in debt and
equity securities of the Trust; and (iv) the acquisition of the LibertyView
Building directly by the Trust. This unaudited pro forma condensed consolidating
financial information should be read in conjunction with the historical
financial statements of the Trust, the Initial Properties and the LibertyView
Building and the related notes thereto either included elsewhere herein or
previously filed by the Trust with the Securities and Exchange Commission on its
Form 10-K/A for the year ended December 31, 1995 and its Form 10Q for the
quarter ended June 30, 1996 . In management's opinion, all adjustments necessary
to reflect the effects of the above referenced transactions have been made. The
accounting effecting the pro forma condensed consolidated financial information
is summarized as follows:
o The Trust formed the Operating Partnership by contributing $3,937,000
of partnership interests in the Initial Properties in exchange for all
of the Class B Units (715,818 Units). The Trust is entitled to receive
a 9.5% preferential return on this contribution.
The Operating Partnership acquired fee title to, and the remaining
limited partnership interests in the Initial Properties, which includes
the Witmer properties, in exchange for 1,620,477 Class A Units.
o Initial Properties have been reflected at the fair value upon
acquisition to the extent that such properties are being acquired by
the Operating Partnership in exchange for Class A Units.
o The Trust's interest in the Operating Partnership has been determined
after giving effect to the expected issuance of an additional 132,967
Class A Units in the Operating Partnership in connection with the
acquisition of the Residual Interests in the Title Holdings
Partnerships since the Operating Partnership and Residual Interests
holders have agreed to the purchase and sale of these interests within
37 months of the Closing Date. Accordingly, these Units are included in
the 1,620,477 Class A Units issued to SSI, TNC and the other Owners in
Note 1 to the pro forma financial information. At a value of $5.50 per
Class A Unit, the aggregate value of the additional Class A Units to be
issued for the Residual Interests equals $731,319. The agreed purchase
price consideration for the Residual Interests is to be paid by 1999
and is equal to the amount of Class A Units in the Operating
Partnership that the Residual Interests holders would have received on
August 22, 1996, upon the closing of the SSI/TNC Transaction
("Closing") plus the cash amount necessary for the Residual Interests
holders to receive the same economic benefit as if these interests had
been transferred at Closing. In addition, the Operating Partnership may
issue additional Class A Units to the contributors if certain economic
performance criteria are achieved in the future.
27
<PAGE>
o The Trust owns a 70% controlling general partnership interest in
Brandywine Realty Partners ("BRP") as disclosed in the Trust's 1995
financial statements. The Operating Partnership acquired the Trust's
interests in BRP in exchange for 1,856,200 Class C Units which will be
valued at the Trust's carryover basis since the Trust will continue to
consolidate these assets. A total of 1,600,000 Class C Units were
issued to the Trust at Closing, and 256,200 Class C Units are expected
to be exchanged on August 23, 1997. The impact on the Trust's effective
ownership of the Operating Partnership from this second exchange will
be to increase its percentage ownership of the Operating Partnership
from 59% to 61%. Since the Trust will continue to receive substantially
all of the income allocated from BRP, there will be no material impact
on the Trust's consolidated results of operations from these exchanges.
o The Trust acquired the LibertyView Building and retains 100% of the
ownership interests therein and therefore consolidates it at the Trust
level.
The Trust issued 59,949 share units (each consisting of one common
share of beneficial interest, par value $0.01 per share ("Common
Stock"), and one warrant exerciseable for six years for an additional
share of Common Stock at an initial exercise price of $6.50) to the RMO
Fund in exchange for $338,000. The balance of the investment of
$992,000 by the RMO Fund was made in the form of a loan. This loan was
partially prepaid in the aggregate amount of $238,000 as of August 23,
1996, whereby the Trust issued 42,405 share units to the RMO Fund.
o The Operating Partnership owns 5% of the voting common stock of the
Management Company and is entitled to receive approximately 95% of the
economic benefits through its ownership of all the preferred stock and
5% of the voting common stock of the Management Company. The balance of
the common stock is owned by a partnership comprised of officers of the
Trust. The Management Company employs all of the key officers of the
Trust and a majority of the employees responsible for managing, leasing
and developing the Trust's properties. Since the Operating Partnership
receives substantially all of the economic benefits of ownership and
has common officers and employees, the Management Company is reflected
using the consolidation method of accounting.
The pro forma condensed consolidating financial information is unaudited and is
not necessarily indicative of what the actual financial position would have been
at June 30, 1996, nor does it purport to represent the future financial position
and the results of operations of the Trust.
28
<PAGE>
BRANDYWINE REALTY TRUST
PRO FORMA CONDENSED CONSOLIDATING BALANCE SHEET
JUNE 30, 1996 (Notes 1 and 2)
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Brandywine Initial
Realty Trust Properties
Historical Historical LibertyView
Consolidated Combined Pro Forma Property Pro Forma
(A) (B) Adjustments Subtotal (J) Consolidated
------------- ---------- ----------- -------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Assets:
Real estate investments, net $13,752 $55,992 $ 20,368 (D)(E)(F)(G) $90,112 $10,696 $100,808
Cash and cash equivalents 1,643 655 4 (C)(D) 2,302 (1,120) 1,182
Escrowed cash 629 513 -- 1,142 -- 1,142
Deferred costs, net 1,411 2,145 (1,543)(E)(G) 2,013 100 2,113
Other assets 732 1,576 (785)(G) 1,523 (300) 1,223
--------- -------- -------- ------- ------- --------
Total assets $18,167 $60,881 $ 18,044 $97,092 $ 9,376 $106,468
======= ======= ======== ======= ======= ========
Liabilities:
Mortgages and notes payable $ 9,870 $63,686 $ 162 (D)(F) (I) $73,718 $ 9,376 $ 83,094
Other liabilities 725 1,764 493 (G) 2,982 -- 2,982
--------- -------- -------- ------- ------- --------
Total liabilities 10,595 65,450 655 76,700 9,376 86,076
--------- -------- -------- ------- ------- --------
Minority Interest -- -- 8,469 (D)(G) 8,469 -- 8,469
--------- -------- -------- ------- ------- --------
Shareholders' Equity:
Common shares of beneficial interest 19 -- 7 (C) 26 -- 26
Additional paid-in capital 17,068 -- 3,728 (C)(D)(E)(G)(H)(I) 20,796 -- 20,796
Stock warrants 42 -- 616 (C)(I) 658 -- 658
Accumulated equity (deficit) (9,557) (4,569) 4,569 (C)(H) (9,557) -- (9,557)
--------- -------- -------- ------- ------- --------
Total shareholders' equity 7,572 (4,569) 8,920 11,923 -- 11,923
--------- -------- -------- ------- ------ --------
Total liabilities and
shareholders' equity $18,167 $60,881 $ 18,044 $97,092 $ 9,376 $106,468
======= ======= ======== ======= ======= ========
</TABLE>
The accompanying notes and management assumptions
are an integral part of these statements.
29
<PAGE>
BRANDYWINE REALTY TRUST
PRO FORMA CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE YEAR ENDED
DECEMBER 31, 1995 (Notes 1 and 3)
(Unaudited)
(in thousands, except Share and per Share amounts)
<TABLE>
<CAPTION>
Brandywine Initial Liberty Liberty
Realty Trust Properties View View
Historical Historical Building Building
Consolidated Combined Pro Forma Historical Pro Forma Pro Forma
(A) (B) Adjustments Subtotal (G) Adjustment Consolidated
----------- ------------ ------------- --------- ---------- ---------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue:
Base rents $ 3,517 $ 7,829 $ -- $11,346 $ 1,119 $ -- $ 12,465
Tenant reimbursements 66 2,895 -- 2,961 535 -- 3,496
Management fees -- 617 -- 617 -- -- 617
Other 83 3 -- 86 -- -- 86
---------- --------- -------- ------- --------- -------- ----------
Total revenue 3,666 11,344 -- 15,010 1,654 -- 16,664
---------- --------- -------- ------- --------- -------- ----------
Operating expenses:
Interest 793 5,855 33 (D) 6,681 -- 812 (I)(J)(K) 7,493
Depreciation and amortization 1,402 4,336 (395)(C)(E) 5,343 -- 284 (H)(L) 5,627
Other expenses 2,290 4,532 -- 6,822 798 -- 7,620
---------- --------- -------- ------- --------- -------- ----------
Total operating expenses 4,485 14,723 (362) 18,846 798 1,096 20,740
---------- --------- -------- ------- --------- -------- ----------
Income (loss) before (819) (3,379) 362 (3,836) 856 (1,096) (4,076)
minority interest
Minority interest in income 5 -- (1,237)(F) (1,232) -- -- (1,232)
(loss) ---------- --------- -------- ------- --------- -------- ---------
Income (loss) before $ (824) $ (3,379) $ 1,599 $(2,604) $ 856 $ (1,096) $ (2,844)
extraordinary items --------- ---------- -------- -------- --------- --------- ---------
Earnings per share of beneficial $ (0.44) $ (1.03)
interest ---------- ----------
Weighted average number of
shares outstanding including 1,874,372 2,751,726
share equivalents ========== ==========
</TABLE>
The accompanying notes and management assumptions
are an integral part of these statements.
30
<PAGE>
BRANDYWINE REALTY TRUST
PRO FORMA CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE SIX-MONTH PERIOD
ENDED JUNE 30, 1996 (Notes 1 and 3)
(Unaudited)
(in thousands, except Share and per Share amounts)
<TABLE>
<CAPTION>
Brandywine Initial Liberty Liberty
Realty Trust Properties View View
Historical Historical Building Building
Consolidated Combined Pro Forma Historical Pro Forma Pro Forma
(A) (B) Adjustments Subtotal (G) Adjustments Consolidated
----------- --------- ------------- --------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue:
Base rents $ 1,907 $ 3,888 $ -- $ 5,795 $ 605 $ -- $ 6,400
Tenant reimbursements 68 1,870 -- 1,938 241 -- 2,179
Management fees -- 277 -- 277 -- -- 277
Other 52 100 -- 152 -- -- 152
---------- -------- ------- -------- ------ ------ --------
2,027 6,135 -- 8,162 846 -- 9,008
---------- -------- ------- -------- ------ ------ --------
Operating expenses:
Interest 416 2,581 17 (D) 3,014 -- 404 (I)(J) (K) 3,418
Depreciation and amortization 465 2,103 (156)(C)(E) 2,412 -- 142 (H)(L) 2,554
Other expenses 1,140 2,757 -- 3,897 368 -- 4,265
---------- -------- ------- -------- ------ ------ --------
Total operating expenses 2,021 7,441 (139) 9,323 368 546 10,237
---------- -------- ------- -------- ------ ------ --------
Income (loss) before minority 6 (1,306) 139 (1,161) 478 (546) (1,229)
interest
Minority interest in income (loss) 5 -- (478)(F) (473) -- -- (473)
---------- -------- ------- -------- ------ ------ ---------
Income (loss) before extraordinary $ 1 $ (1,306) $ 617 $ (688) $ 478 $(546) $ (756)
items ======== ======== ======= ======== ====== ===== =========
Earnings per share of beneficial interest $ 0.00 $ (0.27)
========= ==========
Weighted average number of shares
outstanding including share equivalents 1,888,923 2,763,321
========== =========
</TABLE>
The accompanying notes and management assumptions
are an integral part of these statements.
31
<PAGE>
BRANDYWINE REALTY TRUST
NOTES AND MANAGEMENT'S ASSUMPTIONS TO
UNAUDITED PRO FORMA CONDENSED CONSOLIDATING
FINANCIAL INFORMATION
(in thousands, except share and per-share amounts)
1. BASIS OF PRESENTATION:
Brandywine Realty Trust (the "Trust") is a Maryland real estate investment
trust. As of June 30, 1996, the Trust owns 4 properties. As of August 22, 1996,
the Trust owns or holds an interest in 24 properties, consisting of suburban
office buildings in three states. Upon the August 22, 1996 closing of the
SSI/TNC Transaction discussed herein, the Trust became the sole general partner
and holds approximately 59% interest in Brandywine Operating Partnership, L.P.
(the "Operating Partnership"). The following is a summary of the units issued
upon the completed SSI/TNC Transaction:
<TABLE>
<CAPTION>
Trust TNC SSI Total
----------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
General Partner interest
182(1) -- -- 182
Limited Partner interests:
Class A units -- 1,216,659(2) 403,818(2) 1,620,477
Class B units 715,818(1) -- -- 715,818
Class C units 1,600,000(3)(4) -- -- 1,600,000
--------- ---------- ---------- ----------
2,316,000 1,216,659 403,818 3,936,477
========= ========== ========== ==========
Ownership interest 59%(4) 31% 10% 100%
========= ========== ========== ==========
</TABLE>
(1) See Note 2(C) for the Trust's acquisition of Class B units.
(2) Units issued to TNC, other owners and SSI resulting from the sale to the
Operating Partnership by TNC, SSI and other owners of substantially all of
their ownership interests in the Initial Properties. The 1,620,477 Class A
Units include 132,967 Units to be issued within 37 months following the
Closing Date in exchange for Residual Interests (of which 123,227 will be
issued to TNC and other Owners and 9,740 will be issued to SSI). SSI owns
40% of the capital stock of TNC.
(3) Units issued to the Trust at Closing in exchange for the contribution to the
Operating Partnership of a majority of the Trust's general partnership
interest in Brandywine Realty Partners ("BRP").
32
<PAGE>
(4) On August 23, 1997, it is expected that the Trust will contribute its
remaining general partnership interest in BRP in exchange for an
additional 256,200 Class C Units. This contribution will result in an
increase in the Trust's ownership of the Operating Partnership from 59%
to 61% at such time.
These pro forma financial statements should be read in conjunction with the
historical financial statements and notes thereto of the Trust, the Initial
Properties and the LibertyView Building either included elsewhere herein or
previously filed by the Trust with the Securities and Exchange Commission on its
form 10-K/A for the year ended December 31, 1995 and its Form 10-Q for the
quarter ended June 30, 1996. In management's opinion, all adjustments necessary
to reflect the effects of the acquisitions of the Initial Properties and the
LibertyView Building by the Trust have been made.
2. ADJUSTMENTS TO PRO FORMA CONDENSED CONSOLIDATING BALANCE SHEET:
(A) Reflects the historical consolidated balance sheet of the Trust as of
June 30, 1996.
(B) Reflects the historical combined balance sheet of the Initial
Properties as of June 30, 1996.
SSI/TNC Transaction
(C) The Trust issued 775,000 Common Shares and Warrants to SSI in
exchange for SSI's Ownership Interest in the Witmer Properties and
$426,250 in cash. SSI's investment in the Initial Properties reflects
SSI's recent cash investment to facilitate a debt financing of the
Witmer Properties in November 1995. The Trust issued 699,289 Common
Shares and Warrants in exchange for the SSI Ownership Interest at a
value of $3,937,000. The $5.63 per Common Share and Warrant value is
based on the range of trading prices of the Common Shares at the time
the SSI/TNC Transaction was announced ($4-7/8 and $4-7/16 being the
high and low sales prices on March 27, 1996, the last full trading
day prior to the public announcement) and based on a $.70 per warrant
value (based on a modified Black Scholes calculation). The Trust
issued 75,711 Common Shares and Warrants at the same $5.63 per unit
in exchange for $426,250 in cash.
<TABLE>
<CAPTION>
<S> <C> <C>
Dr. Cash $ 426,000
Dr. Accumulated equity (deficit) 3,937,000
Cr. Common shares of beneficial interest $ 7,000
Cr. Additional paid-in capital 3,813,000
Cr. Stock warrants (at $.70 per warrant) 543,000
</TABLE>
33
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
The Trust contributed its investment in the limited partnership to
form the Operating Partnership and obtained the general partnership
interest and all of the Class B limited partnership interest (715,818
Units) in the Operating Partnership as follows:
Dr. Investment in Operating Partnership $ 3,937,000
Cr. Investment in limited partnership $ 3,937,000
(D) To borrow funds from SSI (item i) and pay the costs associated with
the acquisition of the real estate investment of the Initial
Properties totaling $650,000 (item ii). The costs associated with
the acquisition (50% of the total) have been capitalized. The
remaining costs are attributed to the cost of issuing the common
shares to SSI and other equity interests of the Trust and have been
charged against equity and minority interest in proportion to the
respective ownership interests (59% to the Trust and 41% to the
Minority Interest) by the cash proceeds raised from the stock
issuance and by a loan from SSI, payable in 1999, with interest
accruing at prime.
(i)
Dr. Cash $ 228,000
Cr. Mortgages and notes payable $ 228,000
(ii)
Dr. Real estate investments $ 325,000
Dr. Additional paid-in capital 192,000
Dr. Minority interest 133,000
Cr. Cash $650,000
(E) To reflect the allocation of previously deferred costs associated
with the acquisition of the real estate investments of the Initial
Properties and the issuance of equity interests by the Trust.
Dr. Real estate investments $ 369,000
Dr. Additional paid-in capital 369,000
Cr. Deferred costs $738,000
(F) To increase real estate investments and related notes payable for
the capitalization of the Operating Partnership's portion of the
transfer taxes on six of the Initial Properties partially funded by
a loan from SSI, payable in 1999, with interest accruing at prime.
Dr. Real estate investments $ 172,000
Cr. Mortgages and notes payable $ 172,000
</TABLE>
34
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
(G) To record the purchase of the Initial Properties by the Trust in
exchange for 1,620,477 Class A Units at $5.50 per unit ($8,913,000) and
715,818 Class B Units at $5.50 ($3,937,000) for a total consideration
value of $12,850,000. Such value was determined based upon (i) the
$75,494,000 fair value of the real estate assets received, (ii) the
adjusted fair value of other assets received of $3,299,000 and (iii)
the fair value of the total liabilities encumbering the Initial
Properties of $65,943,000, as adjusted. The step-up adjustment was
recorded as additional paid-in-capital after recognition of the
minority interest shares of such adjustments as of June 30, 1996, as
follows:
(a) Real estate investments acquired at fair value
per Purchase Agreement $ 75,494,000
(b) Other assets acquired $ 4,889,000 (i)
Less: Deferred financing costs (805,000) (ii)
Less: Straight-line rent receivables (785,000) (iii)
---------------
Net other assets 3,299,000
(c) Mortgage Notes $ (63,686,000) (i)
Other liabilities (1,764,000) (i)
Other debt transfer costs (493,000) (i)
---------------
(65,943,000)
----------------
Total equity consideration $ 12,850,000
Less: Accumulated deficit of Initial Properties
(4,569,000)
----------------
Total adjustments 17,419,000
Less: Minority interest share (8,604,000) (iv)
----------------
Trust - Additional paid-in capital $ 8,815,000
================
(i) Other assets include cash and cash equivalents, escrowed cash,
deferred costs, net, and other. The fair values of all assets,
mortgage notes payable and other liabilities approximate their
carrying amounts.
(ii) These financing costs were deferred on a historical basis by
the Initial Properties. However, the Trust will write off
these deferred financing costs as the debt and related future
interest costs have been reflected at fair market value absent
these deferred costs.
(iii) The accrued straight-line rent receivable has no future fair
market value as the leases acquired are at market rates.
</TABLE>
35
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
(iv) Presented below is the calculation of the minority interest
share as reflected above and reconciled to the pro formas (in thousands):
Allocation
Minority
Total BRT (59%) Interest (41%)
--------------- ---------------- ---------------
The Trust:
Trust's equity at 6/30/96 $ 7,573
Issuance of shares to SSI in
exchange for:
LP units 3,937
Cash 426
---------------
Pro Forma Equity at 6/30/96 11,936 $ 7,009 $ 4,927
---------------
Operating Partnership (BOP):
Total equity investment $ 12,850
SSI GP interest acquired by BRT (3,937)
---------------
BOP adjusted equity 8,913 5,238 3,675
--------------- ------ ------
$ 20,849 $ 12,247 8,602
=============== ===============
Charges against minority interest reflecting the cost of
issuing the Common Shares to SSI and other equity
interests of the Trust (see (D) (ii)
(133)
----------------
Total pro forma minority
interest at 6/30/96 $ 8,469
===============
(H) To adjust the accumulated deficit of Initial Properties acquired
subsequent to the distribution to SSI per 2 (D) (i):
Dr. Additional paid-in capital $4,569,000
Cr. Accumulated equity (deficit) $4,569,000
Dr. Additional paid-in capital $3,937,000
Cr. Accumulated equity (deficit) $3,937,000
(I) To reflect the partial prepayment of the note payable to the RMO Fund
through the issuance of 42,405 Common Shares and one six year warrant
exerciseable for an additional 42,405 Common Shares at a per share
exercise price of $6.50. The $7.73 per Common Share and warrant value
is based on the trading price of the Common Shares at the time of the
prepayment ($6.00 per share) and based on a $1.73 per Warrant Value
(based on a modified Black Scholes calculator).
Dr. Mortgages and NotesPayable $238,000
Cr. Common Shares of Beneficial Interest $-
Cr. Additional paid in capital $165,000
Cr. Stock warrants (at $1.73 per warrant) $73,000
</TABLE>
36
<PAGE>
LibertyView Building Acquisition
(J) Reflects the Trust's acquisition of the LibertyView Building as of June
30, 1996, based upon the purchase price of $10,600,000 plus closing
costs of $200,000 acquired with cash of $1,120,000, a mortgage note
payable of $8,480,000 due in January 1999 with interest payable monthly
at 8% and a note payable to the seller of $1,000,000 due in December
1997 with no interest payable. The Trust recorded a $104,000 adjustment
to the purchase price to reflect the fair market value of the note
payable to the seller. Deferred financing costs of $100,000 related to
the mortgage note payable have been capitalized. Further, $300,000 of
deposits included in other assets at June 30, 1996 were applied to the
purchase price.
37
<PAGE>
3. ADJUSTMENTS TO PRO FORMA CONDENSED
CONSOLIDATING STATEMENTS OF OPERATIONS:
(A) Reflects the historical consolidated operations of the Trust.
(B) Reflects the historical operations of the Initial Properties,
excluding the extraordinary gain on restructuring of debt of
$5,559,000.
SSI/TNC Transaction
(C) Reflects depreciation of the capitalized transfer taxes and
amortization of the deferred costs included in real estate investments
on the SSI/TNC Transaction of $7,000 and $26,000, respectively, for the
year ended December 31, 1995. For the six months ended June 30, 1996,
depreciation and amortization was $4,000 and $13,000, respectively.
(D) Reflects the increase in interest expense related to the notes payable
to SSI (which bear interest at prime) of $33,000 and $17,000 for
the year ended December 31, 1995 and the six month period ended
June 30, 1996, assuming a prime rate of 8.25%.
(E) Reflects depreciation of the buildings acquired over a 25-year useful
life and tenant improvements and other furniture, fixtures and
equipment (FF&E) over five years in general. The adjustments to
depreciation expense for the year ended December 31, 1995, and for the
six-month period ended June 30, 1996, were determined as follows (in
thousands):
<TABLE>
<CAPTION>
Pro Forma Pro Forma
Fair Market Amounts Amounts
Historical Net Book Value: Value 12/31/95 6/30/96
-------------------------- ---------------- -------------- --------------
<S> <C> <C> <C> <C>
Land $ 9,275 $ 15,099 $ 15,099 $ 15,099
Buildings $ 41,077 $ 54,226 $ 54,226 $ 53,899
Tenant Improvements $ 6,132 $ 6,132 $ 6,132 $ 6,462
FF&E $ 37 $ 37 $ 37 $ 34
Total $ 56,521 $ 75,494 $ 75,494 $ 75,494
Depreciation Expense:
Buildings $ 54,226/25 years $ 2,169 $
$ 53,899/25 years/6 mos. $ 1,078
Tenant Improvements $ 6,132/5 years $ 1,227
$ 6,462/5 years/6 mos. $ 646
FF&E $ 37/5 years $ 7
$ 34/5 years/6 mos. $ 4
Total pro forma
depreciation expense $ 3,403 $ 1,728
Historical depreciation
expense of the
Initial Properties $ 3,831 $ 1,901
------------- -------------
Pro forma
adjustments $ (428) $ (173)
============= =============
</TABLE>
38
<PAGE>
(F) Minority interest in income (loss) has been reflected in accordance
with the terms of the Operating Partnership Agreement. Upon
consummation of the SSI/TNC Transaction described herein, the Trust
owns 59% of the Operating Partnership. The remaining 41% of the
Operating Partnership is owned by TNC, SSI and the other owners whose
interests are reflected as Minority Interest. The adjustments to record
the income effect of Minority Interest Share of Loss for the periods
ended December 31, 1995 and June 30, 1996, in the pro forma statements
of operations were computed as follows:
<TABLE>
<CAPTION>
For the
For the Six Months
Year Ended Ended
December 31, June 30,
1995 1996
----------------- ----------------
<S> <C> <C>
Initial Properties loss before Minority Interest $ (3,379,000) $ (1,306,000)
Impact of pro forma adjustments(3)(C,D,E) 362,000 139,000
----------------- ----------------
Total Loss $ (3,017,000) $ (1,167,000)
Minority Share (41%) x41% x41%
----------------- ----------------
Pro forma Minority Interest in Loss (F) $ (1,237,000) $ (478,000)
================= ===============
</TABLE>
LibertyView Building Acquisition
(G) Reflects the historical operations of the LibertyView Building,
excluding certain expenses such as interest, depreciation and
amortization, professional costs, and other costs not directly related
to the future operations of the LibertyView Building.
(H) Reflects depreciation totaling $244,000 and $122,000, respectively, of
the LibertyView Building using a 35-year depreciable life for the year
ended December 31, 1995, and the six-month period ended June 30, 1996.
(I) Reflects the increase in interest expense of $680,000 and $340,000,
respectively, related to the $8,480,000 mortgage note payable of the
LibertyView Building, which has an interest rate of 8% per annum for
the year ended December 31, 1995, and for the six-month period ended
June 30, 1996.
(J) Reflects the increase in interest expense of $70,000 and $35,000 for
the year ended December 31, 1995 and the six-month period ended June
30, 1996, respectively, related to the note payable to the seller of
the LibertyView Building, which note bears no interest, discounted at
an interest rate of 8% per annum.
(K) Reflects the increase in interest expense related to the note payable
to the RMO Fund (which bears interest at prime) of $62,000 and
$29,000 for the year ended December 31, 1995 and the six-month period
ended June 30, 1996, assuming a prime rate of 8.25%.
(L) Reflects the amortization of deferred financing costs related to the
LibertyView Building of $40,000 and $20,000, respectively, for the
year ended December 31, 1995, and the six-month period ended
June 30, 1996.
39
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THE TRUST
Reference is made to Management's Discussion and Analysis of Financial
Condition and Results of Operations contained in the response to Item 2 of the
Trust's Quarterly Report on Form 10-Q filed with the Securities and Exchange
Commission for the quarter ended June 30, 1996 and to Management's Discussion
and Analysis of Financial Condition and Results of Operations contained in the
response to Item 7 of the Trust's Annual Report on Form 10-K/A filed with the
Securities and Exchange Commission for the year ended December 31, 1995. Such
responses are hereby incorporated herein by reference.
INITIAL PROPERTIES
The following table presents the historical combined results of
operations of the Initial Properties acquired by the Operating Partnership for
each of the years in the three years ended December 31, 1995 and for the six
months ended June 30, 1996 and 1995, respectively.
<TABLE>
<CAPTION>
Six months ended
Year Ended December 31 June 30, 1996
---------------------- -------------
1995 1994 1993 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Revenues $11,344 $12,172 $11,687 $6,135 $5.660
------- ------- ------- ------ ------
Other operating expenses 4,532 5,015 4,508 2,757 2,096
Depreciation and amortization 4,336 3,618 3,568 2,103 1,923
Interest 5,855 5,915 5,807 2,581 3,051
----- ----- ----- ----- -----
Total operating expenses 14,723 14,548 13,883 7,441 7,070
------ ------ ------ ----- -----
Loss before extraordinary
items ($3,379) ($2,376) ($2,196) ($1,306) ($1,410)
-------- -------- -------- -------- --------
</TABLE>
Comparison of Six Months Ended June 30, 1996 to Six Months Ended June 30, 1995
Total revenues increased by $0.5 million or 8%, to $6.1 million from
$5.7 million in the first six months of 1996. This increase is primarily
attributable to an increase in tenant expense recoveries of $0. 5 million due to
an increase in other operating expenses. Base rents during this same period
declined due to interim vacancies relating to lease rollovers, offset by certain
new tenants and additional rents relating to the Lawrenceville property acquired
in November of 1995.
40
<PAGE>
Other operating expenses increased by $0.7 million in comparing the
first six months of 1996 to the first six months of 1995. This increase was
attributable to increases in maintenance; snow removal costs resulting from
severe winter storms in the region of the Initial Properties and the additional
operating costs associated with the Lawrenceville property. Depreciation and
amortization expense increased by $0.2 million in the first six months of 1996
as compared to the first six months of 1995 as a result of additional
amortization expense associated with deferred financing costs incurred in
November 1995 plus additional amortization expense attributable to tenant
improvements and leasing commissions.
Interest expense decreased by $0.5 million in the first six months of
1996 as compared to the first six months of 1995. This decrease results from a
debt reduction aggregating $7.3 million when comparing 1996 to 1995, which debt
reduction is primarily attributable to a $30.5 million debt refinancing in the
fourth quarter of 1995. Further, interest rate reductions occurred in two other
mortgage loans.
The loss before extraordinary items decreased $0.1 million to $1.3
million in the first six months of 1996 from $1.4 million in the first six
months of 1995. The decreased loss was attributable to an increase in tenant
expense recoveries and a decrease in interest costs partially offset by a
decrease in base rents and an increase in other operating expenses.
Comparison of Year Ended December 31, 1995 to Year Ended December 31, 1994.
Total revenues decreased by $0.9 million or 6.8%, to $11.3 million in
1995 from $12.2 million in 1994. This decrease primarily consisted of a decrease
of $0.2 million in base rents due to interim vacancy from lease rollovers, a
decrease in tenant expense recoveries of $0.2 million due to a decrease in other
operating expenses and a decrease of $0.4 million in management revenue
resulting from discontinued contracts on certain managed properties sold and
fewer brokerage transactions.
Other operating expenses decreased by $0.5 million in 1995 compared to
1994. This decrease was attributable to reductions in real estate taxes
resulting from tax assessment appeals, reduction in building operating expenses
associated with occupancy levels and reductions in general and administrative
expenses due to staff reductions and the elimination of certain non-recurring
expenses. Depreciation and amortization expense increased $0.7 million in 1995.
This increase is attributable to the additional tenant improvements completed in
1995 and the write off of unamortized tenant improvements associated with leases
which terminated.
41
<PAGE>
Interest expense decreased by $0.1 million in 1995. This decrease
results from interest rate reductions in two restructured loans.
The loss before extraordinary items increased $1.0 million to $3.4
million in 1995 from $2.4 million in 1994. The increase was attributable to
reductions in rents collected and management revenue, partially offset by
reduction in other operating expenses.
Comparison of Year Ended December 31, 1994 to Year Ended December 31, 1993
Total revenues increased by $0.5 million or 4.1%, to $12.2 million in
1994 from $11.7 million in 1993. This increase resulted primarily from an
increase in base rents of $0.1 million relating to increased occupancy and an
increase in tenant expense recoveries of $0.4 million due to increases in other
operating expenses.
Other operating expenses increased by $0.5 million in 1994 compared to
1993. This increase was attributable to increases in building operating expenses
associated with occupancy levels, significant snow removal costs and certain
non-recurring operating expenses.
Interest expense increased by $0.1 million in 1994. This increase
results from prime interest rate increases.
The loss before extraordinary items increased $0.2 million to $2.4
million in 1994 from $2.2 million in 1993. The increase was attributable to
increases in other operating expenses and interest costs.
THE TRUST, PRO FORMA CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
Comparison of Pro Forma Consolidated Six Months Ended June 30, 1996 to
Historical Six Months Ended June 30, 1996
For the six months ended June 30, 1996, the Trust's consolidated pro
forma net loss was ($756,000) or ($0.27) per share as compared to the Trust's
consolidated historical results for the six months ended June 30, 1996 of $1,000
or $0.00 per share. Of the loss, on a pro forma basis, ($689,000) is
attributable to the inclusion of operations from the Trust's acquisition of the
Initial Properties and ($68,000) is attributable to the inclusion of operations
from the Trust's acquisition of the LibertyView Building.
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Total revenues increased by $6.9 million in comparing the Trust's
consolidated pro forma revenue for the six months ended June 30, 1996 to the
Trust's consolidated historical revenues for the same period. Of this total
increase, $6.1 million is attributable to the inclusion of revenues from the
Trust's acquisition of the Initial Properties and $0.8 million is attributable
to the Trust's acquisition of the LibertyView Building.
Pro forma interest expense was $3.4 million for the six months ended
June 30, 1996 which represents an increase of $3.0 million in comparison to $0.4
million of interest expense in the Trust's consolidated historical results for
the six months ended June 30, 1996. Of this increase, $2.6 million is
attributable to debt encumbering the Initial Properties, $375,000 is
attributable to debt encumbering the LibertyView Building, $29,000 is
attributable to interest on the note payable to the RMO Fund and $17,000 is
attributable to financing received from SSI to pay for a portion of the costs of
the SSI/TNC Transaction.
Pro forma depreciation and amortization expense was $2.6 million for
the six months ended June 30, 1996 which represents an increase of $2.1 million
in comparison to $0.5 million of depreciation and amortization expense in the
Trust's consolidated historical results for the six months ended June 30, 1996.
Of this increase, $1.9 million is attributable to the inclusion of depreciation
and amortization expense relating to the Initial Properties and $142,000 is
attributable to depreciation and amortization expense relating to the
LibertyView Building.
Pro forma other operating expenses were $4.3 million for the six months
ended June 30, 1996 which represents an increase of $3.2 million in comparison
to $1.1 million of other operating expenses in the Trust's consolidated
historical results for the six months ended June 30, 1996. Of this increase,
$2.8 million is attributable to the inclusion of other operating expenses
relating to the Initial Properties and $0.4 million is attributable to the
inclusion of other operating expenses relating to the LibertyView Building.
Comparison of Pro Forma Year Ended December 31, 1995 to Historical
Year Ended December 31,1995
For the year ended December 31, 1995, the Trust's consolidated pro
forma net loss was $2.8 million or ($1.03) per share as compared to the Trust's
consolidated historical results for the year ended December 31, 1995 of ($0.8)
million or ($0.44) per share. Of the total increased loss, on a pro forma basis,
$1.8 million is attributable to the inclusion of operations from the Trust's
acquisition of the Initial Properties and $0.2 million is attributable to the
inclusion of operations from the Trust's acquisition of the LibertyView
Building.
Total revenues increased by $13.0 million in comparing the Trust's
consolidated pro forma revenues for the year ended December 31, 1995 to the
Trust's consolidated historical revenues for the same period. Of this total
increase, $11.3 million is attributable to the inclusion of revenues from the
Trust's acquisition of the Initial Properties and $1.7 million is attributable
to the Trust's acquisition of the LibertyView Building.
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Pro forma interest expense was $7.5 million for the year ended December
31, 1995 which represents an increase of $6.7 million in comparison to $0.8
million of interest expense in the Trust's consolidated historical results for
the year ended December 31, 1995. Of this increase, $5.9 million is attributable
to debt encumbering the Initial Properties, $750,000 is attributable to debt
encumbering the LibertyView Building, $62,000 is attributable to interest on the
note payable to the RMO Fund and $33,000 is attributable to financing received
from SSI to pay for a portion of the costs of the SSI/TNC Transaction.
Pro forma depreciation and amortization expense was $5.6 million for
the year ended December 31, 1995 which represents an increase of $4.2 million in
comparison to $1.4 million of depreciation and amortization expense in the
Trust's consolidated historical results for the year ended December 31, 1995. Of
this increase, $3.9 million is attributable to the inclusion of depreciation and
amortization expense relating to the Initial Properties and $0.3 million is
attributable to depreciation and amortization expense relating to the
LibertyView Building.
Pro forma other operating expenses were $7.6 million for the year ended
December 31,1995 which represents an increase of $5.3 million in comparison to
$2.3 million of other operating expenses in the Trust's consolidated historical
results for the year ended December 31, 1995. Of this increase, $4.5 million is
attributable to the inclusion of other operating expenses relating to the
Initial Properties and $0.8 million attributable to the inclusion of other
operating expenses relating to the LibertyView Building.
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Liquidity and Capital Resources
On July 19, 1996, the Trust acquired the LibertyView Building from an
unrelated party for a purchase price of $10.6 million. The Trust financed this
acquisition through a combination of proceeds from investments by the RMO Fund
aggregating $1.3 million, term financing from a commercial bank (initially
funding $8.5 million) and seller financing totaling $1.0 million. On August 22,
1996, the Trust closed on the acquisition of the Initial Properties at a
purchase price of $75.5 million subject to related mortgage debt encumbering the
Initial Properties of $63.7 million. Upon Closing, the Trust received $426,250
in cash and obtained a controlling interest in a newly formed limited
partnership which acquired direct and indirect ownership interests of the
Initial Properties. In the SSI/TNC Transaction, the Trust issued 775,000 Common
Shares and a six-year warrant exerciseable for an additional 775,000 Common
Shares at a per share exercise price of $6.50. The balance of the consideration
was in the form of limited partnership units of the Operating Partnership issued
or issuable, and convertible, under certain circumstances, up to 1,620,477
Common Shares, subject to certain potential adjustments.
As of June 30, 1996, the Trust's consolidated cash balances were $1.6
million and escrowed cash balances were $0.6 million. On a pro forma basis,
after giving effect to the Trust's acquisitions of the Initial Properties and
the LibertyView Building, the Trust's pro forma consolidated cash balances as of
June 30, 1996 were $1.2 million and escrowed cash balances were $1.1 million.
The decrease in cash balances of $0.4 million is attributable to $1.1 million
utilized in the acquisition of the LibertyView Building offset by the inclusion
of $0.7 million of cash relating to the Initial Properties. The increase in
escrowed cash balances of $0.5 million is attributable to the Initial
Properties' escrowed funds.
On a pro forma basis, after giving effect to the Trust's acquisitions
of the Initial Properties and the LibertyView Building, the Trust's consolidated
cash balances as of June 30, 1996 were $1.2 million and accounts receivable
totaled $0.9 million as compared to accounts payable, accrued expenses, tenant
security deposits and deferred rents aggregating $3.0 million. Such liabilities
include approximately $180,000 of trade payables due beyond a twelve-month
period and approximately $185,000 of tenant improvements and leasing commissions
which costs were funded in July 1996 under current mortgage loan terms. On a pro
forma basis, other available sources of funding are future cash flows from
operations and the application of a working capital loan of up to $0.7 million
to be provided by SSI in connection with the SSI/TNC Transaction.
Management recognizes that following the completion of the SSI/TNC
Transaction, the level of current liabilities of the Trust relative to its
current assets will require the Trust to take steps to increase its working
capital. Such steps will include efforts to improve leasing within the Trust's
portfolio, control and reduce operating expenses and obtain third party debt and
equity investments in the Trust.
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The principal sources of funding of the Initial Properties have
historically been cash flow from operations, proceeds from construction and
permanent debt financing, equity investments and advances from SSI.
The principal requirements of the Initial Properties' capital have
historically been for debt service, capital expenditures and investment in
rental properties in connection with their development program. Management
anticipates that these will continue to be the principal uses of the funds
generated by the Initial Properties after the acquisition by the Operating
Partnership.
Management believes the above-mentioned sources of the Initial
Properties will be sufficient for the next 12 month period to meet anticipated
cash flow requirements, including debt service and capital expenditures.
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Item 7(d). Exhibits.
3.1 Amended and Restated Declaration of Trust
(amended through August 22, 1996)
3.2 Bylaws (amended through August 22, 1996)
10.1 Agreement of Limited Partnership of Brandywine Operating
Partnership, L.P.
10.2 Distribution Support and Loan Agreement between the Operating
Partnership and SSI.
10.3 Agreement among the Company, SSI and Safeguard Scientifics
(Delaware), Inc.
10.4 Registration Rights Agreement Among the Company, SSI, TNC, Turkey
Vulture Fund XIII, Ltd. and certain
other persons.
10.5 Warrant to purchase 775,000 Common Shares issued by the Company to SSI.
10.6 Third Amendment to Brandywine Realty Partners General Partnership
Agreement.
10.7 Form of Warrant issued to executive officers.
10.8 Environmental Indemnity Agreement between the Company and SSI.
10.9 Option Agreement between the Operating Partnership and C/N Horsham
Towne Limited Partnership.
10.10 Articles of Incorporation of Brandywine Realty
Services Corporation.
23.1 Consent of Arthur Andersen LLP
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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: September 6, 1996 By: /s/ Gerard H. Sweeney
--------------------------
Title: President and Chief
Executive Officer
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BRANDYWINE REALTY TRUST
DECLARATION OF TRUST
(Amended and Restated as of August 22, 1996 at the Annual
Meeting of Shareholders by affirmative vote of the
holders of a majority of the outstanding shares
of the Trust pursuant to Section 8-202(c)
of Title 8 of the Maryland Corporations
and Associations Code)
This DECLARATION OF TRUST ("Declaration of Trust" or
"Declaration") is amended and restated as of the date set forth above by the
undersigned Trustees.
WHEREAS, the Trustees desire to create a real estate
investment trust under Title 8 of the Corporations and Associations Article of
the Annotated Code of Maryland, as amended ("Title 8"); and
WHEREAS, the Trustees desire that this trust qualify as a
"real estate investment trust" under the Internal Revenue Code of 1986, as
amended (the "Code"), so long as such qualification, in the opinion of the
Trustees, is advantageous to the Shareholders; and
WHEREAS, the beneficial interest in the Trust shall be divided
into transferable shares of one or more classes evidenced by certificates;
NOW, THEREFORE, the Trustees hereby declare that they will
hold all property which they have or may hereafter acquire as such Trustees,
together with the proceeds thereof, in trust, and manage the Trust Property (as
defined herein) for the benefit of the Shareholders as provided by this
Declaration of Trust.
ARTICLE 1
THE TRUST; DEFINITIONS
SECTION 1.1. Name. The name of the trust (the "Trust") is:
Brandywine Realty Trust
So far as may be practicable, the business of the Trust shall be conducted and
transacted under that name, which name (and the word "Trust" wherever used in
this Declaration of Trust, except where the context otherwise requires) shall
refer to the Trustees collectively but not individually or personally and shall
not refer to the Shareholders or to any officers, employees or agents of the
Trust or of such Trustees.
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Under circumstances in which the Trustees determine that the
use of the name "Brandywine Realty Trust" is not practicable, they may use any
other designation or name for the Trust.
SECTION 1.2. Resident Agent. The name of the resident agent
for service of process of the Trust in the State of Maryland is The Corporation
Trust Incorporated, whose post office address is c/o The Corporation Trust
Incorporated, 32 South Street, Baltimore, Maryland 21202. The Trust may have
such offices or places of business within or without the State of Maryland as
the Trustees may from time to time determine.
SECTION 1.3. Nature of Trust. The Trust is a real estate
investment trust within the meaning of Title 8. The Trust shall not be deemed to
be a general partnership, limited partnership, joint venture, joint stock
company or, except as provided in Section 11.4, a corporation (but nothing
herein shall preclude the Trust from being treated for tax purposes as an
association under the Code).
SECTION 1.4. Powers. The Trust shall have all of the powers
granted to real estate investment trusts generally by Title 8 or any successor
statute and shall have any other and further powers as are not inconsistent with
and are appropriate to promote and attain the purposes set forth in this
Declaration of Trust.
SECTION 1.5. Definitions. As used in this Declaration
of Trust, the following terms shall have the following meanings
unless the context otherwise requires:
"Adviser" means the Person, if any, appointed, employed or
contracted with by the Trust pursuant to Section 4.1.
"Affiliate" or "Affiliated" means, as to any individual,
corporation, partnership, trust or other association (other than the Trust), any
Person (i) that holds beneficially, directly or indirectly, 10% or more of the
outstanding stock or equity interests thereof or (ii) who is an officer,
director, partner or trustee thereof or of any Person which controls, is
controlled by, or is under common control with, such corporation, partnership,
trust or other association or (iii) which controls, is controlled by or under
common control with, such corporation, partnership, trust or other association.
"Book Value Per Share" shall mean an amount equal to the
quotient obtained by dividing (i) the Shareholders' Equity as shown in the
annual or quarterly financial statements of the Trust most recently filed by the
Trust with the Securities and Exchange Commission by (ii) the number of Shares
outstanding as of the date of such financial statements. For purposes of clause
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(ii) of the preceding sentence, "outstanding" Shares shall consist of those
Common Shares then actually issued and outstanding and those Common Shares
issuable upon the exercise or conversion of any then outstanding "in-the-money"
warrants, options or other convertible securities.
"Code" means the Internal Revenue Code of 1986, as amended
from time to time.
"Person" means an individual, corporation, partnership,
estate, trust (including a trust qualified under Section 401(a) or 501(c)(17) of
the Code), a portion of a trust permanently set aside for or to be used
exclusively for the purposes described in Section 642(c) of the Code,
association, private foundation within the meaning of Section 509(a) of the
Code, joint stock company or other entity, or any government or agency or
political subdivision thereof, and also includes a group as that term is used
for purposes of Section 13(d)(3) of the Securities Exchange Act of 1934, as
amended.
"Real Property" or "Real Estate" means land, rights in land
(including leasehold interests), and any buildings, structures, improvements,
furnishings, fixtures and equipment located on or used in connection with land
and rights or interests in land.
"REIT Provisions of the Code" means Sections 856 through 860
of the Code and any successor or other provisions of the Code relating to real
estate investment trusts (including provisions as to the attribution of
ownership of beneficial interests therein) and the regulations promulgated
thereunder.
"Securities" means Shares, any stock, shares or other
evidences of equity or beneficial or other interests, voting trust certificates,
bonds, debentures, notes or other evidences of indebtedness, secured or
unsecured, convertible, subordinated or otherwise, or in general any instruments
commonly known as "securities" or any certificates of interest, shares or
participations in, temporary or interim certificates for, receipts for,
guarantees of, or warrants, options or rights to subscribe to, purchase or
acquire, any of the foregoing, or shares or other securities of any successor in
interest of the Trust.
"Securities of the Trust" means any Securities issued
by the Trust.
"Shareholders" means holders of record of outstanding
Shares.
"Shareholders' Equity" means the total shareholders'
equity of the Trust or, if the Trust has a class of Preferred
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Shares outstanding as of the applicable date, "Shareholders' Equity" means the
total "common" shareholders' equity of the Trust (computed with appropriate
adjustments to reflect any entitlement of Preferred Shares to participate
equally and ratably with the Common Shares in the assets of the Trust upon a
liquidation of the Trust and computed to include amounts payable upon exercise
or conversion of outstanding "in-the-money" warrants, options or other
convertible securities issued by the Trust).
"Shares" means shares of Preferred Shares or Common Shares
(all as defined in Section 6.1).
"Specified Properties" means the four real estate
projects held by Brandywine Realty Partners on the date hereof
and known as: One Greentree Centre; Two Greentree Centre; Three
Greentree Centre; and Twin Forks.
"Trustees" or "Board of Trustees" means, collectively, all
individuals who have been duly elected and qualify as trustees of the Trust
hereunder.
"Trust Property" means any and all property, real, personal or
otherwise, tangible or intangible, which is transferred or conveyed to the Trust
or the Trustees (including all rents, income, profits and gains therefrom),
which is owned or held by, or for the account of, the Trust.
"Voting Shares" means the outstanding Shares entitled to vote
generally in the election of trustees.
ARTICLE 2
TRUSTEES
SECTION 2.1. Number. The number of Trustees shall be four, but
such number may be increased or decreased by the unanimous vote of the Trustees
then in office from time to time; provided, that the total number of Trustees
shall be not fewer than three and not more than 15. No reduction in the number
of Trustees shall cause the removal of any Trustee from office prior to the
expiration of his term.
SECTION 2.2. Initial Board; Term. The Trustees, as of the date
on which this Declaration of Trust has been amended and restated, as set forth
above (the "Initial Trustees"), shall be Anthony A. Nichols, Sr., Joseph L.
Carboni, Richard M. Osborne, Gerard H. Sweeney, Warren V. Musser, Walter
D'Alessio and Charles P. Pizzi, but in each case only for so long as he shall
continue to serve as a Trustee of the Trust hereunder. The term of the Initial
Trustees shall commence on the date hereof and
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shall continue until the annual meeting of Shareholders in 1997 and until their
successors shall have been duly elected and shall have qualified.
The names and addresses of the Initial Trustees who shall
serve until the annual meeting of the Shareholders held in 1997 and until their
successors are duly elected and qualified are:
Name Address
---- -------
Anthony A. Nichols, Sr. 16 Campus Boulevard
Newtown Square, PA 19073
Joseph L. Carboni 212 Haddon Avenue
Westmont, NJ 08108
Richard M. Osborne 7001 Center Street
Mentor, Ohio 44060
Gerard H. Sweeney 16 Campus Boulevard
Newtown Square, PA 19073
Warren V. Musser 800 The Safeguard
Building
435 Devon Park Drive
Wayne, PA 19087
Walter D'Alessio 1735 Market Street
Philadelphia, PA 19103
Charles P. Pizzi 1234 Market Street
Philadelphia, PA 19107
Beginning with the annual meeting of Shareholders in 1996 and
at each succeeding annual meeting of Shareholders, the Trustees will be elected
to hold office for a term expiring at the succeeding annual meeting. Each
Trustee will hold office for the term for which he is elected and until his
successor is duly elected and qualified.
SECTION 2.3. Resignation, Removal or Death. Any Trustee may resign by
written notice to the remaining Trustees, effective upon execution and delivery
to the Trust of such written notice or upon any future date specified in the
notice. A Trustee may be removed from office only at a meeting of the
Shareholders called for that purpose, by the affirmative vote of the holders of
not less than a majority of the Shares entitled to vote in the election of
Trustees; provided, however, that in the case of any Trustees elected solely by
holders of a series of Preferred Shares, such Trustees may be removed by the
affirmative vote of a
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majority of the Preferred Shares of that series then outstanding and entitled to
vote in the election of Trustees, voting together as a single class. Upon the
resignation or removal of any Trustee, or his otherwise ceasing to be a Trustee,
he shall automatically cease to have any right, title or interest in and to the
Trust Property and shall execute and deliver such documents as the remaining
Trustees require for the conveyance of any Trust Property held in his name, and
shall account to the remaining Trustees as they require for all property which
he holds as Trustee. Upon the incapacity or death of any Trustee, his legal
representative shall perform the acts described in the foregoing sentence.
SECTION 2.4. Vacancies. Any vacancy (including a vacancy created by an
increase in the number of Trustees) shall be filled, at any regular or special
meeting of Trustees called for that purpose, by a majority of the Trustees
(although less than a quorum). Any individual so elected as Trustee shall hold
office until the next annual meeting of Shareholders and until his successor has
been duly elected and qualified.
SECTION 2.5. Legal Title. Legal title to all Trust Property shall be
vested in the Trustees, but they may cause legal title to any Trust Property to
be held by or in the name of any Trustee, or the Trust, or any other Person as
nominee. The right, title and interest of the Trustees in and to the Trust
Property shall automatically vest in successor and additional Trustees upon
their qualification and acceptance of election or appointment as Trustees, and
they shall thereupon have all the rights and obligations of Trustees, whether or
not conveyancing documents have been executed and delivered pursuant to Section
2.3 or otherwise. Written evidence of the qualification and acceptance of
election or appointment of successor and additional Trustees may be filed with
the records of the Trust and in such other offices, agencies or places as the
Trustees may deem necessary or desirable.
ARTICLE 3
POWERS OF TRUSTEES
SECTION 3.1. General. Subject to the express limitations herein or in
the bylaws of the Trust (the "Bylaws"), (i) the business and affairs of the
Trust shall be managed under the direction of the Board of Trustees and (ii) the
Trustees shall have full, exclusive and absolute power, control and authority
over the Trust Property and over the business of the Trust as if they, in their
own right, were the sole owners thereof. The Trustees may take any actions that,
in their sole judgment and discretion, are necessary or desirable to conduct the
business of the Trust. This Declaration of Trust shall be construed with a
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presumption in favor of the grant of power and authority to the Trustees. Any
construction of this Declaration of Trust or determination made in good faith by
the Trustees concerning their powers and authority hereunder shall be
conclusive. The enumeration and definition of particular powers of the Trustees
included in this Article 3 shall in no way be limited or restricted by reference
to or inference from the terms of this or any other provision of this
Declaration of Trust or construed or deemed by inference or otherwise in any
manner to exclude or limit the powers conferred upon the Trustees under the
general laws of the State of Maryland as now or hereafter in force.
SECTION 3.2. Specific Powers and Authority. Subject only to the express
limitations herein, and in addition to all other powers and authority conferred
by this Declaration or by law, the Trustees, without any vote, action or consent
by the Shareholders, shall have and may exercise, at any time or times, in the
name of the Trust or on its behalf the following powers and authorities:
(a) Investments. Subject to Section 8.5, to invest in, purchase or
otherwise acquire and to hold real, personal or mixed, tangible or intangible,
property of any kind wherever located, or rights or interests therein or in
connection therewith, all without regard to whether such property, interests or
rights are authorized by law for the investment of funds held by trustees or
other fiduciaries, or whether obligations the Trust acquires have a term greater
or lesser than the term of office of the Trustees or the possible termination of
the Trust, for such consideration as the Trustees may deem proper (including
cash, property of any kind or Securities of the Trust); provided, however, that
the Trustees shall take such actions as they deem necessary and desirable to
comply with any requirements of Title 8 relating to the types of assets held by
the Trust.
(b) Sale, Disposition and Use of Property. Subject to Section 8.5,
to sell, rent, lease, hire, exchange, release, partition, assign, mortgage,
grant security interests in, encumber, negotiate, dedicate, grant easements in
and options with respect to, convey, transfer (including transfers to entities
wholly or partially owned by the Trust or the Trustees) or otherwise dispose of
any or all of the Trust Property by deeds (including deeds in lieu of
foreclosure with or without consideration), trust deeds, assignments, bills of
sale, transfers, leases, mortgages, financing statements, security agreements
and other instruments for any of such purposes executed and delivered for and on
behalf of the Trust or the Trustees by one or more of the Trustees or by a duly
authorized officer, employee, agent or nominee of the Trust, on such terms as
they deem appropriate; to give consents and make contracts relating to the Trust
Property and its use or other property or matters; to develop, improve, manage,
use, alter and otherwise
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deal with the Trust Property; and to rent, lease or hire from others property of
any kind; provided, however, that the Trust may not use or apply land for any
purposes not permitted by applicable law.
(c) Financings. To borrow or in any other manner raise money for
the purposes and on the terms they determine, and to evidence the same by
issuance of Securities of the Trust, which may have such provisions as the
Trustees determine; to reacquire such Securities of the Trust; to enter into
other contracts or obligations on behalf of the Trust; to guarantee, indemnify
or act as surety with respect to payment or performance of obligations of any
Person; to mortgage, pledge, assign, grant security interests in or otherwise
encumber the Trust Property to secure any such Securities of the Trust,
contracts or obligations (including guarantees, indemnifications and
suretyships); and to renew, modify, release, compromise, extend, consolidate or
cancel, in whole or in part, any obligation to or of the Trust or participate in
any reorganization of obligors to the Trust.
(d) Loans. Subject to the provisions of Section 8.5, to lend money
or other Trust Property on such terms, for such purposes and to such Persons as
they may determine.
(e) Issuance of Securities. Subject to the provisions of Article
6, to create and authorize and direct the issuance (on either a pro-rata or a
non-pro-rata basis) by the Trust, in shares, units or amounts of one or more
types, series or classes, of Securities of the Trust, which may have such voting
rights, dividend or interest rates, preferences, subordinations, conversion or
redemption prices or rights, maturity dates, distribution, exchange, or
liquidation rights or other rights as the Trustees may determine, without vote
of or other action by the Shareholders, to such Persons for such consideration,
at such time or times and in such manner and on such terms as the Trustees
determine; to list any of the Securities of the Trust on any securities
exchange; and to purchase or otherwise acquire, hold, cancel, reissue, sell and
transfer any Securities of the Trust.
(f) Expenses and Taxes. To pay any charges, expenses or
liabilities necessary or desirable, in the sole discretion of the Trustees, for
carrying out the purposes of this Declaration of Trust and conducting the
business of the Trust, including compensation or fees to Trustees, officers,
employees and agents of the Trust, and to Persons contracting with the Trust,
and any taxes, levies, charges and assessments of any kind imposed upon or
chargeable against the Trust, the Trust Property, or the Trustees in connection
therewith; and to prepare and file any tax returns, reports or other documents
and take any other appropriate action relating to the payment of any such
charges, expenses or liabilities.
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(g) Collection and Enforcement. To collect, sue for and receive
money or other property due to the Trust; to consent to extensions of the time
for payment, or to the renewal, of any Securities or obligations; to engage or
to intervene in, prosecute, defend, compound, enforce, compromise, release,
abandon or adjust any actions, suits, proceedings, disputes, claims, demands,
security interests, or things relating to the Trust, the Trust Property, or the
Trust's affairs; to exercise any rights and enter into any agreements; and take
any other action necessary or desirable in connection with the foregoing.
(h) Deposits. To deposit funds or Securities constituting part of
the Trust Property in banks, trust companies, savings and loan associations,
financial institutions and other depositories, whether or not such deposits will
draw interest, subject to withdrawal on such terms and in such manner as the
Trustees determine.
(i) Allocation; Accounts. To determine whether moneys, profits or
other assets of the Trust shall be charged or credited to, or allocated between,
income and capital, including whether or not to amortize any premium or discount
and to determine in what manner any expenses or disbursements are to be borne as
between income and capital (regardless of how such items would normally or
otherwise be charged to or allocated between income and capital without such
determination); to treat any dividend or other distribution on any investment
as, or apportion it between, income and capital; in their discretion to provide
reserves for depreciation, amortization, obsolescence or other purposes in
respect of any Trust Property in such amounts and by such methods as they
determine; to determine what constitutes net earnings, profits or surplus; to
determine the method or form in which the accounts and records of the Trust
shall be maintained; and to allocate to the Shareholders equity account less
than all of the consideration paid for Shares and to allocate the balance to
paid-in capital or capital surplus.
(j) Valuation of Property. To determine the value of all or any
part of the Trust Property and of any services, Securities, property or other
consideration to be furnished to or acquired by the Trust, and to revalue all or
any part of the Trust Property, all in accordance with such appraisals or other
information as are reasonable, in their sole judgment.
(k) Ownership and Voting Powers. To exercise all of the rights,
powers, options and privileges pertaining to the ownership of any mortgages,
Securities, Real Estate and other Trust Property to the same extent that an
individual owner might, including without limitation to vote or give any
consent, request, or notice or waive any notice, either in person or by proxy or
power of attorney, which proxies and powers of attorney
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may be for any general or special meetings or action, and may include the
exercise of discretionary powers.
(l) Officers, Etc.; Delegation of Powers. To elect, appoint or
employ such officers for the Trust and such committees of the Board of Trustees
with such powers and duties as the Trustees may determine or the Trust's Bylaws
provide; to engage, employ or contract with and pay compensation to any Person
(including, subject to Section 8.5, any Trustee and any Person who is an
Affiliate of any Trustee) as agent, representative, Adviser, member of an
advisory board, employee or independent contractor (including advisers,
consultants, transfer agents, registrars, underwriters, accountants,
attorneys-at-law, real estate agents, property and other managers, appraisers,
brokers, architects, engineers, construction managers, general contractors or
otherwise) in one or more capacities, to perform such services on such terms as
the Trustees may determine; to delegate to one or more Trustees, officers or
other Persons engaged or employed as aforesaid or to committees of Trustees or
to the Adviser, the performance of acts or other things (including granting of
consents), the making of decisions and the execution of such deeds, contracts or
other instruments, either in the names of the Trust, the Trustees or as their
attorneys or otherwise, as the Trustees may determine; and to establish such
committees as they deem appropriate.
(m) Associations. Subject to Section 8.5, to cause the Trust to
enter into joint ventures, general or limited partnerships, participation or
agency arrangements or any other lawful combinations, relationships, or
associations of any kind.
(n) Reorganizations, Etc. Without limiting the scope of Section
9.2, to cause to be organized or assist in organizing any Person under the laws
of any jurisdiction to acquire all or any part of the Trust Property or carry on
any business in which the Trust shall have an interest; to sell, rent, lease,
hire, convey, negotiate, assign, exchange or transfer all or any part of the
Trust Property to or with any Person in exchange for Securities of such Person
or otherwise; and to lend money to, subscribe for and purchase the Securities
of, and enter into any contracts with, any Person in which the Trust holds, or
is about to acquire, Securities or any other interests.
(o) Reverse Stock Splits. Upon the approval of not less than 80%
of the Trustees, to cause the Shares of the Trust to be recapitalized or
consolidated by effectuating a reverse stock split of one or more series or
classes of Shares based upon a reverse stock split ratio (the "Ratio") approved
by not less than 80% of the Trustees, such that following the consummation of
such reverse stock split, each Share of the series or class(es) of Shares in
question will automatically, without vote of or other action by the
Shareholders, be deemed to be a fewer number
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of Shares computed in accordance with such Ratio; and, if determined by the
Trustees to be appropriate or desirable, to cause any fractional Shares
resulting therefrom to be canceled in exchange for a cash payment equal to (x)
with respect to Common Shares, the "market value" of such Share determined in
accordance with the provisions of ss.3-601 et seq. of the Maryland General
Corporation Law (computed for the period ending on the business day prior to the
effective date of such reverse stock split), or for Shares other than Common
Shares traded on the American Stock Exchange, as determined by the Trustees in
good faith, multiplied by (y) the applicable fraction.
(p) Insurance. To purchase and pay for out of Trust Property
insurance policies insuring the Trust and the Trust Property against any and all
risks, and insuring the Shareholders, Trustees, officers, employees and agents
of the Trust individually against all claims and liabilities of every nature
arising by reason of holding or having held any such status, office or position
or by reason of any action alleged to have been taken or omitted (including
those alleged to constitute misconduct, gross negligence, reckless disregard of
duty or bad faith) by any such Person in such capacity, whether or not the Trust
would have the power to indemnify such Person against such claim or liability.
(q) Executive Compensation, Pension and Other Plans. To adopt and
implement executive compensation, pension, profit sharing, stock option, stock
bonus, stock purchase, stock appreciation rights, savings, thrift, retirement,
incentive or benefit plans, trusts or provisions, applicable to any or all
Trustees, officers, employees or agents of the Trust, or to other Persons who
have benefitted the Trust, all on such terms and for such purposes as the
Trustees may determine.
(r) Distributions. To declare and pay dividends or other
distributions to Shareholders, subject to the provisions of Section 6.4.
(s) Indemnification. Without regard to the indemnification
provided for in Section 8.4, to indemnify any Person, including any Adviser or
independent contractor, with whom the Trust has dealings.
(t) Charitable Contributions. To make donations for the public
welfare or for community, charitable, religious, educational, scientific, civic
or similar purposes, regardless of any direct benefit to the Trust.
(u) Discontinue Operations; Bankruptcy. To discontinue the
operations of the Trust; to petition or apply for relief under any provision of
federal or state bankruptcy, insolvency or reorganization laws or similar laws
for the relief
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of debtors; to permit any Trust Property to be foreclosed upon without raising
any legal or equitable defenses that may be available to the Trust or the
Trustees or otherwise defending or responding to such foreclosure; to confess
judgment against the Trust; or to take such other action with respect to
indebtedness or other obligations of the Trustees, in such capacity, the Trust
Property or the Trust as the Trustees in their discretion may determine.
(v) Trustees. To nominate persons for election as Trustees.
(w) Fiscal Year. Subject to the Code, to adopt, and from time to
time change, a fiscal year for the Trust.
(x) Seal. To adopt and use a seal, but the use of a seal shall not
be required for the execution of instruments or obligations of the Trust.
(y) Bylaws. To adopt, implement and from time to time alter, amend
or repeal Bylaws of the Trust relating to the business and organization of the
Trust which are not inconsistent with the provisions of this Declaration of
Trust.
(z) Accounts and Books. To determine from time to time whether and
to what extent, and at what times and places, and under what conditions and
regulations, the accounts and books of the Trust, or any of them, shall be open
to the inspection of Shareholders.
(aa) Voting Trust. To participate in, and accept Securities issued
under or subject to, any voting trust.
(ab) Proxies. To solicit proxies of the Shareholders at the
expense of the Trust.
(ac) Further Powers. To do all other acts and things and execute
and deliver all instruments incident to the foregoing powers, and to exercise
all powers which they deem necessary, useful or desirable to carry on the
business of the Trust or to carry out the provisions of this Declaration of
Trust, even if such powers are not specifically provided hereby.
SECTION 3.3. Limitations on Powers and Authority. Notwithstanding any
provision hereof to the contrary, in no event shall the Trustees have the power
or authority to cause the Trust to do any of the following without the prior
approval of the Shareholders:
(a) Commodities Contracts. To invest in commodities or commodity
future contracts other than interest rate futures intended to hedge the Trust
against interest rate risk.
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(b) Trading Activities. To engage in trading (as compared with
investment activities) or engage in the underwriting or agency distribution or
sale of securities issued by others.
(c) Certain Holdings. To hold property primarily for sale to
customers in the ordinary course of business; provided, however, that the Trust
may sell properties if necessary, advisable or desirable or if effected pursuant
to an intent to liquidate the Trust.
ARTICLE 4
ADVISER
SECTION 4.1. Appointment. The Trustees are responsible for setting the
general policies of the Trust and for the general supervision of its business
conducted by officers, agents, employees, advisers or independent contractors of
the Trust. However, the Trustees are not required personally to conduct the
business of the Trust, and they may (but need not) appoint, employ or contract
with any Person (including a Person Affiliated with any Trustee) as an Adviser
and may grant or delegate such authority to the Adviser as the Trustees may, in
their sole discretion, deem necessary or desirable. The Trustees may determine
the terms of retention and the compensation of the Adviser and may exercise
broad discretion in allowing the Adviser to administer and regulate the
operations of the Trust, to act as agent for the Trust, to execute documents on
behalf of the Trust and to make executive decisions which conform to general
policies and principles established by the Trustees.
SECTION 4.2. Affiliation and Functions. The Trustees, by resolution or
in the Bylaws, may provide guidelines, provisions or requirements concerning the
affiliation and functions of the Adviser.
ARTICLE 5
INVESTMENT POLICY
The fundamental investment policy of the Trust is to make investments
in such a manner as to comply with the REIT Provisions of the Code and with the
requirements of Title 8, with respect to the composition of the Trust's
investments and the derivation of its income. The Trustees will use their best
efforts to carry out this fundamental investment policy and to conduct the
affairs of the Trust in such a manner as to continue to qualify the Trust for
the tax treatment provided in the REIT Provisions of the Code; however, no
Trustee, officer, employee or
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agent of the Trust shall be liable for any act or omission resulting in the loss
of tax benefits under the Code, except to the extent provided in Section 8.2.
The Trustees may change from time to time, by resolution or in the Bylaws of the
Trust, such investment policies as they determine to be in the best interests of
the Trust, including prohibitions or restrictions upon certain types of
investments.
ARTICLE 6
SHARES
SECTION 6.1. Authorized Shares. The total number of shares of
beneficial interest which the Trust is authorized to issue is 80,000,000, of
which 5,000,000 shares shall be preferred shares, par value $.01 per share
("Preferred Shares"), and 75,000,000 shares shall be common shares, $0.01 par
value per share ("Common Shares").
SECTION 6.2. Common Shares.
(a) Dividend Rights. Subject to the preferential dividend rights
of the Preferred Shares, if any, as may be determined by the Board of Trustees
pursuant to Section 6.3, the holders of Common Shares shall be entitled to
receive such dividends as may be declared by the Board of Trustees.
(b) Rights Upon Liquidation. Subject to the preferential rights of
the Preferred Shares, if any, as may be determined by the Board of Trustees
pursuant to Section 6.3, in the event of any voluntary or involuntary
liquidation, dissolution or winding up of, or any distribution of the assets of,
the Trust, each holder of Common Shares shall be entitled to receive, ratably
with each other holder of Common Shares, that portion of the assets of the Trust
available for distribution to the holders of Common Shares that bears the same
relation to the total amount of such assets of the Trust as the number of Common
Shares held by such holder bears to the total number of Common Shares then
outstanding.
(c) Voting Rights. The holders of the Common Shares shall be
entitled to vote on all matters (for which a common shareholder shall be
entitled to vote thereon) at all meetings of the Shareholders of the Trust, and
shall be entitled to one vote for each Common Share entitled to vote at such
meeting, voting together with the holders of the Preferred Shares who are
entitled to vote (except as otherwise may be determined by the Board of Trustees
pursuant to Section 6.3).
SECTION 6.3. Preferred Shares. With respect to the Preferred Shares,
the Board of Trustees shall have the power from
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time to time (a) to classify or reclassify, in one or more series, any unissued
Preferred Shares and (b) to reclassify any unissued shares of any series of
Preferred Shares, in the case of either (a) or (b) by setting or changing the
number of shares constituting such series and the designation, preferences,
conversion or other rights, voting powers, restrictions, limitations as to
dividends, qualifications and terms and conditions of redemption of such shares
and, in such event, the Trust shall file for record with the State Department of
Assessments and Taxation of Maryland articles supplementary to this Declaration
of Trust in substance and form as prescribed by Title 8.
SECTION 6.4. Dividends or Distributions. The Trustees may from time to
time declare and cause the Trust to pay to Shareholders such dividends or
distributions in cash, property or other assets of the Trust or in Securities of
the Trust or from any other source as the Trustees in their discretion shall
determine. The Trustees shall endeavor to declare and pay such dividends and
distributions as shall be necessary for the Trust to qualify as a real estate
investment trust under the REIT Provisions of the Code; however, Shareholders
shall have no right to any dividend or distribution unless and until declared by
the Trustees. The exercise of the powers and rights of the Trustees pursuant to
this section shall be subject to the provisions of any class or series of Shares
at the time outstanding. The receipt by any Person in whose name any Shares are
registered on the records of the Trust or by his duly authorized agent shall be
a sufficient discharge for all dividends or distributions payable or deliverable
in respect of such Shares and from all liability to see to the application
thereof.
SECTION 6.5. General Nature of Shares. All Shares shall be personal
property entitling the Shareholders only to those rights provided in this
Declaration of Trust or in the resolution creating any class or series of
Shares. The legal ownership of the Trust Property and the right to conduct the
business of the Trust are vested exclusively in the Trustees; the Shareholders
shall have no interest therein other than beneficial interest in the Trust
conferred by their Shares and shall have no right to compel any partition,
division, dividend or distribution of the Trust or any of the Trust Property.
The death of a Shareholder shall not terminate the Trust or give his legal
representative any rights against other Shareholders, the Trustees or the Trust
Property, except the right, exercised in accordance with applicable provisions
of the Bylaws, to receive a new certificate for Shares in exchange for the
certificate held by the deceased Shareholder. Holders of Shares shall not have
any preemptive right to subscribe to any securities of the Trust.
SECTION 6.6. Restrictions on Ownership and Transfer: Exchange For
Excess Shares.
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(a) Definitions. For the purposes of Sections 6.6, 6.7 and 6.8, the
following terms shall have the following meanings:
"Beneficial Ownership" shall mean ownership of Shares either directly
or constructively through the application of Section 544 of the Code, as
modified by Section 856(h)(1)(B) of the Code. The terms "Beneficial Owner,"
"Beneficially Owns" and "Beneficially Owned" shall have the correlative
meanings. Accordingly, for purposes hereof, Beneficial Ownership shall be
calculated for any Person by dividing two numbers, (a) the number that is the
numerator being the sum of (i) such Person's ownership of outstanding Shares
plus (ii) the maximum number of Shares issuable upon the exercise or conversion
of outstanding warrants, preferred stock or other securities exercisable for or
convertible into Shares owned by such Person and (b) the number that is the
denominator being the sum of (i) all outstanding Shares plus (ii) the maximum
number of Shares issuable upon the exercise or conversion of outstanding
warrants, preferred stock or other securities exercisable for or convertible
into Shares owned by such Person; provided that the Board of Trustees shall
retain full authority to adopt such other approach to determining Beneficial
Ownership as it may deem appropriate. Notwithstanding the foregoing, for
purposes of determining compliance with this Section 6.6 by any Person to whom
the Trust issues an option or warrant (or any Shareholder of any such Person),
such option or warrant shall not be deemed to confer upon such Person Beneficial
Ownership or Constructive Ownership of the Shares issuable upon the exercise
thereof, and the Shares issuable upon the exercise thereof shall be excluded
from both the numerator and denominator of the foregoing calculation.
"Beneficiary" shall mean the beneficiary of the Special Trust as
determined pursuant to Section 6.8(e).
"Common Equity Shares" shall mean outstanding Shares that are either
Common Shares or Excess Common Shares.
"Constructive Ownership" shall mean ownership of Shares either directly
or constructively through the application of Section 318(a) of the Code, as
modified by Section 856(d)(5) of the Code. The terms "Constructive Owner,"
"Constructively Owns" and "Constructively Owned" shall have the correlative
meanings. Accordingly, for purposes hereof, Constructive Ownership shall be
calculated for any Person by dividing two numbers, (a) the number that is the
numerator being the sum of (i) such Person's ownership of outstanding Shares
plus (ii) the maximum number of Shares issuable upon the exercise or conversion
of outstanding warrants, preferred stock or other securities exercisable for or
convertible into Shares owned by such Person and (b) the number that is the
denominator being the sum of (i) all outstanding Shares plus (ii) the maximum
number of Shares issuable upon the
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exercise or conversion of outstanding warrants, preferred stock or other
securities exercisable for or convertible into Shares owned by such Person;
provided that the Board of Trustees shall retain full authority to adopt such
other approach to determining Constructive Ownership as it may deem appropriate.
Notwithstanding the foregoing, for purposes of determining compliance with
Sections 6.6(b) and (c) by any Person to whom the Trust issues an option or
warrant (or any Shareholder of any such Person), such option or warrant shall
not be deemed to confer upon such Person Beneficial Ownership or Constructive
Ownership of the Shares issuable upon the exercise thereof, and the Shares
issuable upon the exercise thereof shall be excluded from both the numerator and
denominator of the foregoing calculation.
"Event" shall have the meaning assigned to it in Section 6.6(c).
"Excess Common Shares" shall mean Excess Shares that would, under
Section 6.8(e)(i), automatically be exchanged for Common Shares in the event of
a transfer of an interest in the Special Trust in which such Excess Shares are
held.
"Excess Preferred Shares" shall mean Excess Shares that would, under
Section 6.8(e)(i), automatically be exchanged for Preferred Shares in the event
of a transfer of an interest in the Special Trust in which such Excess Shares
are held.
"Excess Shares" shall mean, as applicable, Excess Common Shares or
Excess Preferred Shares.
"Exempt Parties" shall mean (i) (A) The Richard M. Osborne Trust (the
"Osborne Trust"), (B) Turkey Vulture Fund XIII, Ltd., (C) Richard M. Osborne
("Osborne") and all of the members of Osborne's immediate family, as such term
is defined in Section 544(a)(2) of the Code and (D) any Section 544 Subsidiary
of the entity or the individuals described in (A), (B) or (C), above (the
entities and individuals described in clauses (A), (B), (C) and (D) above being
collectively referred to herein as the "Osborne Affiliates"), (ii) Safeguard
Scientifics, Inc. and any Section 544 Subsidiary thereof (collectively, the "SSI
Affiliates") and (iii) The Nichols Company and any Section 544 Subsidiary
thereof (collectively, the "Nichols Affiliates"). The term "Exempt Party" shall
mean any of the foregoing.
"Market Price" shall mean the last reported sales price reported on the
American Stock Exchange of Shares on the trading day immediately preceding the
relevant date, or if the Shares are not then traded on the American Stock
Exchange, the last reported sales price of Shares on the trading day immediately
preceding the relevant date as reported on any exchange or quotation system over
which the Shares may be traded, or if the Shares are not then traded over any
exchange or quotation system, then the
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market price of the Shares on the relevant date as determined in good faith by
the Board of Trustees of the Trust. The Market Price of the Common Shares shall
be determined separately from the Market Price of any outstanding class of
Preferred Shares.
"Ownership Limit" shall mean 4.16% in value of the outstanding Shares.
"Ownership Limitation Termination Date" shall mean the first day after
the date on which the Board of Trustees determines that it is no longer in the
best interests of the Trust to attempt to, or continue to, qualify as a REIT.
"Permissible Ownership Threshold" shall mean as to the Osborne
Affiliates, the SSI Affiliates and The Nichols Affiliates, respectively, 33.33%,
35.25% and 9.25%; provided that, once an Exempt Party transfers Shares such that
such Exempt Party following such transfer Beneficially Owns and Constructively
Owns less in value than the Ownership Limit, then such Exempt Party's
Permissible Ownership Threshold shall equal the Ownership Limit; provided,
further, however, that the foregoing proviso shall not restrict SSI Affiliates
or Nichols Affiliates from acquiring Shares upon the redemption of Class A Units
issued to them by Brandywine Operating Partnership, L.P. if such acquisition
would not result in such SSI Affiliates or Nichols Affiliates exceeding the
applicable percentage (35.25% or 9.25%) specified above.
"Person" shall mean an individual, corporation, partnership, limited
liability company, estate, trust (including a trust qualified under Section
401(a) or 501(c)(17) of the Code), a portion of a trust permanently set aside
for or to be used exclusively for the purposes described in Section 642(c) of
the Code, association, private foundation within the meaning of Section 509(a)
of the Code, joint stock company or other entity or any government or agency or
political subdivision thereof and also includes a group as that term is used for
purposes of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended,
but does not include an underwriter which participates in a public offering of
Shares for a period of 25 days following the purchase by such underwriter of
those Shares.
"Purported Beneficial Holder" shall mean, with respect to any event
other than a purported Transfer which results in Excess Shares, the person for
whom the Purported Record Holder of the Shares that were, pursuant to Section
6.6(c), automatically exchanged for Excess Shares upon the occurrence of such
event held such Shares.
"Purported Beneficial Transferee" shall mean, with respect to any
purported Transfer which results in Excess Shares, the purported beneficial
transferee for whom the Purported Record
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Transferee would have acquired Shares, if such Transfer had been valid under
Section 6.6(b).
"Purported Record Holder" shall mean, with respect to any event other
than a purported Transfer which results in Excess Shares, the record holder of
the Shares that were, pursuant to Section 6.6(c), automatically exchanged for
Excess Shares upon the occurrence of such event.
"Purported Record Transferee" shall mean, with respect to any purported
Transfer which results in Excess Shares, the record holder of the Shares if such
Transfer had been valid under Section 6.6(b).
"REIT" shall mean a real estate investment trust under Section 856 of
the Code.
"Section 544 Subsidiary" of any individual or entity shall mean any
entity, over 50% of the ownership interest in which is owned, directly or
indirectly (applying the principles of Section 544 of the Code) by the
individual or entity in question.
"Special Trust" shall mean the trust created pursuant to
Section 6.8(a).
"Transfer" shall mean any issuance, sale, transfer, gift, assignment,
devise or other disposition of Shares or capital stock of any Person (including
(i) the granting of any option or entering into any agreement for the sale,
transfer or other disposition of Shares, (ii) the sale, transfer, exercise,
assignment or other disposition of any securities or rights convertible into or
exchangeable for Shares or (iii) the establishment of a put or the granting to a
third party of a call right with respect to Shares), whether voluntary or
involuntary, whether of record or beneficially and whether by operation of law
or otherwise.
"Trustee" shall mean, for purposes of this Article VI only, the Trust,
as trustee for the Special Trust, and any successor trustee appointed by the
Trust.
(b) Restrictions on Ownership and Transfer.
(i) Except as provided in Section 6.6(k), prior to the
Ownership Limitation Termination Date, no Person (other than an Exempt Party)
shall Beneficially Own or Constructively Own any Shares to the extent such
ownership would exceed the Ownership Limit. In addition, except as provided in
Section 6.6(k), prior to the Ownership Limitation Termination Date, no Exempt
Party shall Beneficially Own or Constructively Own any Shares in excess of the
Permissible Ownership Threshold for such Exempt Party.
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(ii) Except as provided in Section 6.6(k), prior to the
Ownership Limitation Termination Date, any Transfer that, if effective, would
result in any Person (other than an Exempt Party) Beneficially Owning or
Constructively Owning Shares in excess of the Ownership Limit shall be void ab
initio as to the Transfer of such Shares which would be otherwise Beneficially
Owned or Constructively Owned by such Person in excess of such Ownership Limit;
and the intended transferee shall acquire no rights in or to such Shares.
(iii) Except as provided in Section 6.6(k), prior to the
Ownership Limitation Termination Date, any Transfer that, if effective, would
result in any Exempt Party Beneficially Owning or Constructively Owning Shares
in excess of the Permissible Ownership Threshold for such Exempt Party shall be
void ab initio as to the Transfer of such Shares which would be otherwise
Beneficially Owned or Constructively Owned by such Exempt Party in excess of the
Permissible Ownership Threshold for such Exempt Party; and such Exempt Party
shall acquire no rights in or to such Shares.
(iv) Prior to the Ownership Limitation Termination Date, any
Transfer that, if effective, would result in Shares being beneficially owned by
less than 100 Persons (determined without reference to any rules of attribution)
shall be void ab initio as to the Transfer of such Shares which would be
otherwise beneficially owned by the transferee; and the intended transferee
shall acquire no rights in such Shares.
(v) Prior to the Ownership Limitation Termination Date, any
Transfer that, if effective, would result in the Trust being "closely held"
within the meaning of Section 856(h) of the Code shall be void ab initio as to
the Transfer of the Shares which would cause the Trust to be "closely held"
within the meaning of Section 856(h) of the Code; and the intended transferee
shall acquire no rights in such Shares.
(vi) The Board of Trustees shall have the authority to select
the Ownership Limitation Termination Date.
(c) Exchange For Excess Stock.
(i) If, notwithstanding the other provisions
contained in this Section 6.6, at any time prior to the Ownership Limitation
Termination Date, there is a purported Transfer such that any Person (other than
an Exempt Party) would Beneficially Own or Constructively Own Shares in excess
of the Ownership Limit, then, except as otherwise provided in Section 6.6(k),
such number of Shares in excess of such Ownership Limit (rounded up to the
nearest whole Share) shall be automatically exchanged for an equal number of
shares of Excess Shares. Such exchange shall be
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effective as of the close of business on the business day prior to the date of
the Transfer.
(ii) If, notwithstanding the other provisions
contained in this Section 6.6, at any time prior to the Ownership Limitation
Termination Date, there is a purported Transfer such that an Exempt Party would
Beneficially Own or Constructively Own Shares in excess of the applicable
Permissible Ownership Threshold, then, except as otherwise provided in Section
6.6(k), such number of Shares in excess of the applicable Permissible Ownership
Threshold (rounded up to the nearest whole Share) shall be automatically
exchanged for an equal number of Excess Shares. Such exchange shall be effective
as of the close of business on the business day prior to the date of the
Transfer.
(iii) If, notwithstanding the other provisions
contained in this Section 6.6, at any time prior to the Ownership Limitation
Termination Date, there is a purported Transfer which, if effective, would cause
the Trust to become "closely held" within the meaning of Section 856(h) of the
Code, then the Shares being Transferred which would cause the Trust to be
"closely held" within the meaning of Section 856(h) of the Code (rounded up to
the nearest whole Share) shall be automatically exchanged for an equal number of
Excess Shares. Such exchange shall be effective as of the close of business on
the business day prior to the date of the Transfer.
(iv) If, notwithstanding the other provisions
contained in this Section 6.6, at any time prior to the Ownership Limitation
Termination Date, an event other than a purported Transfer (an "Event") occurs
which would (i) cause any Person (other than an Exempt Party) to Beneficially
Own or Constructively Own Shares in excess of the Ownership Limit, or (ii) cause
an Exempt Party to Beneficially Own or Constructively Own Shares in excess of
such Exempt Party's applicable Permissible Ownership Threshold, then, except as
otherwise provided in Section 6.6(k), Shares Beneficially Owned or
Constructively Owned by such Person or Exempt Party, as the case may be (rounded
up to the nearest whole Share), shall be automatically exchanged for an equal
number of Excess Shares to the extent necessary to eliminate such excess
ownership. Such exchange shall be effective as of the close of business on the
business day prior to the date of the Event. In determining which Shares are
exchanged, Shares directly held or Beneficially Owned by any Person who caused
the Event to occur shall be exchanged before any Shares not so held are
exchanged. Where several such Persons exist, the exchange shall be pro rata.
(d) Remedies For Breach. If the Board of
Trustees or its designee(s) shall at any time determine that a Transfer has
taken place in violation of Section 6.6(b) or that a Person intends to acquire
or has attempted to acquire beneficial
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ownership (determined without reference to any rules of attribution) of any
Shares that would result in Shares being beneficially owned by less than 100
persons as contemplated by Section 6.6(b)(iv), or in Beneficial Ownership or
Constructive Ownership of any Shares in violation of Section 6.6(b), the Board
of Trustees or its designees shall take such action as it deems advisable to
refuse to give effect to or to prevent such Transfer (or any Transfer related to
such intent), including, but not limited to, refusing to give effect to such
Transfer on the books of the Trust or instituting proceedings to enjoin such
Transfer; provided, however, that any Transfers or attempted Transfers in
violation of Sections 6.6(b)(ii), (iii), (iv) or (v) shall automatically result
in the exchange described in Section 6.6(c), irrespective of any action (or
non-action) by the Board of Trustees or its designees.
(e) Notice of Ownership or Attempted Ownership in
Violation of Section 6.6(b). Any Person who acquires or attempts to acquire
Beneficial Ownership or Constructive Ownership of Shares in violation of Section
6.6(b) shall immediately give written notice to the Trust of such acquisition or
attempted acquisition and shall provide to the Trust such other information as
the Trust may request in order to determine the effect, if any, of such
acquisition or attempted acquisition on the Trust's status as a REIT.
(f) Owners Required to Provide Information.
Prior to the Ownership Limitation Termination Date:
(i) every Beneficial Owner or Constructive Owner
of more than 4.0% in value of the outstanding Shares shall, within 30 days after
January 1 of each year, give written notice to the Trust stating the name and
address of such Beneficial Owner or Constructive Owner, the number of Shares
Beneficially Owned or Constructively Owned, and a description of how such Shares
are held. Each such Beneficial Owner or Constructive Owner shall provide to the
Trust such additional information as the Trust may request in order to determine
the effect, if any, of such Beneficial Ownership or Constructive Ownership on
the Trust's status as a REIT.
(ii) Each Person who is a Beneficial Owner or
Constructive Owner of Shares and each Person (including the shareholder of
record) who is holding Shares for a Beneficial Owner or Constructive Owner shall
provide to the Trust such information as the Trust may request in order to
determine the Trust's status as a REIT or to comply with regulations promulgated
under the REIT provisions of the Code.
(g) Remedies Not Limited. Nothing contained in
this Section 6.6 shall limit the authority of the Board of Trustees to take such
other action as it deems necessary or
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advisable to protect the Trust and the interests of its Shareholders by
preserving the Trust's REIT status.
(h) Ambiguity. In the case of an ambiguity in
the application of any of the provisions of this Article VI including any
definition contained in Section 6.6(a) and any ambiguity with respect to which
Shares are to be exchanged for Excess Shares in a given situation, the Board of
Trustees shall have the authority to determine the application of the provisions
of this Section 6.6 with respect to any situation based on the facts known to
it.
(i) Increase in Ownership Limit. Subject to the
limitations provided in Section 6.6(j), the Board of Trustees may from time to
time increase the Ownership Limit.
(j) Limitations on Modifications.
(i) The Ownership Limit may not be increased if,
after giving effect to such increase, five Beneficial Owners of Shares would
Beneficially Own, in the aggregate, more than 49.9% of the outstanding Shares.
(ii) Prior to an increase in the Ownership Limit
pursuant to Section 6.6(i), the Board of Trustees may require such opinions of
counsel or the Trust's tax accountants, affidavits, undertakings or agreements
as it may deem necessary or advisable in order to determine or ensure the
Trust's status as a REIT.
(k) Exceptions. The Board of Trustees, with a ruling
from the Internal Revenue Service or an opinion of counsel or the Trust's tax
accountants to the effect that such exemption will not result in the Trust being
"closely held" within the meaning of Section 856(h) of the Code, may exempt a
Person from the Ownership Limit or the Permissible Ownership Threshold, as the
case may be, if the Board of Trustees obtains such representations and
undertakings from such Person as the Board of Trustees may deem appropriate and
such Person agrees that any violation or attempted violation of any of such
representations or undertakings will result in, to the extent necessary or
otherwise deemed appropriate by the Board of Trustees, the exchange of Shares
held by such Person for Excess Shares in accordance with Section 6.6(c).
(l) American Stock Exchange Transactions. Nothing in
this Section 6.6 shall preclude the settlement of any transaction entered into
through the facilities of the American Stock Exchange, any successor exchange or
quotation system thereto, or any other exchange or quotation system over which
the Shares may be traded from time to time.
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SECTION 6.7. Legend. (a) Each certificate for Common
Shares hereafter issued shall bear the following legend:
"The Common Shares represented by this certificate
are subject to restrictions on ownership and transfer for the
purpose of the Trust's maintenance of its status as a real
estate investment trust under the Internal Revenue Code of
1986, as amended (the "Code"). No Person may Beneficially Own
or Constructively Own Shares in excess of 4.16% in value (or
such greater percentage as may be determined by the Board of
Trustees) of the outstanding Shares of the Trust (unless such
Person is an Exempt Party). No Person who is an Exempt Party
may Beneficially Own or Constructively Own Shares in excess of
the Permissible Ownership Threshold for such Exempt Party. Any
Person who attempts to Beneficially Own or Constructively Own
Shares in excess of the above limitations must immediately
notify the Trust. All capitalized terms used in this legend
have the meanings set forth in the Declaration of Trust, a
copy of which, including the restrictions on ownership and
transfer, will be sent without charge to each Shareholder who
so requests. If the restrictions on ownership and transfer are
violated, the Common Shares represented hereby will be
automatically exchanged for Excess Shares which will be held
in trust by the Trust."
(b) Each certificate for Preferred Shares
hereafter issued shall bear the following legend:
"The Preferred Shares represented by this certificate
are subject to restrictions on ownership and transfer for the
purpose of the Trust's maintenance of its status as a real
estate investment trust under the Internal Revenue Code of
1986, as amended (the "Code"). No Person may Beneficially Own
or Constructively Own Shares in excess of 4.16% in value (or
such greater percentage as may be determined by the Board of
Trustees) of the outstanding Shares of the Trust (unless such
Person is an Exempt Party). No Person who is an Exempt Party
may Beneficially Own or Constructively Own Shares in excess of
the Permissible Ownership Threshold for such Exempt Party. Any
Person who attempts to Beneficially Own or Constructively Own
Shares in excess of the above limitations must immediately
notify the Trust. All capitalized terms used in this legend
have the meanings set forth in the Declaration of Trust, a
copy of which, including the restrictions on ownership and
transfer, will be sent without charge to each Shareholder who
so requests. If the restrictions on ownership and transfer are
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violated, the Preferred Shares represented hereby will be
automatically exchanged for Excess Shares which will be held
in trust by the Trust."
SECTION 6.8. Excess Shares.
(a) Ownership in Trust. Upon any purported Transfer
or Event that results in an exchange of Shares for Excess Shares pursuant to
Section 6.6(c), such Excess Shares shall be deemed to have been transferred to
the Trust, as Trustee of a Special Trust for the exclusive benefit of the
Beneficiary or Beneficiaries to whom an interest in such Excess Shares may later
be transferred pursuant to Section 6.8(e). Excess Shares so held in trust shall
be issued and outstanding Shares of the Trust. The Purported Record Transferee
or Purported Record Holder shall have no rights in such Excess Shares except as
and to the extent provided in Section 6.8(e).
(b) Dividend Rights. Excess Shares shall not be
entitled to any dividends or distributions. Any dividend or distribution paid
prior to the discovery by the Trust that the Shares with respect to which the
dividend or distribution was made had been exchanged for Excess Shares shall be
repaid to the Trust upon demand.
(c) Rights Upon Liquidation. In the event of any
voluntary or involuntary liquidation, dissolution or winding up of, or any
distribution of the assets of, the Trust, (i) subject to the preferential rights
of the Preferred Shares, if any, as may be determined by the Board of Trustees
pursuant to Section 6.3 and the preferential rights of the Excess Preferred
Shares, if any, each holder of Excess Common Shares shall be entitled to
receive, ratably with each other holder of Common Shares and Excess Common
Shares, that portion of the assets of the Trust available for distribution to
the holders of Common Shares or Excess Common Shares which bears the same
relation to the total amount of such assets of the Trust as the number of Excess
Common Shares held by such holder bears to the total number of Common Shares and
Excess Common Shares then outstanding and (ii) each holder of Excess Preferred
Shares shall be entitled to receive that portion of the assets of the Trust
which a holder of the Preferred Shares that were exchanged for such Excess
Preferred Shares would have been entitled to receive had such Preferred Shares
remained outstanding. The Trust, as holder of the Excess Shares in trust, or if
the Trust shall have been dissolved, any trustee appointed by the Trust prior to
its dissolution, shall distribute ratably to the Beneficiaries of the Special
Trust, when determined, any such assets received in respect of the Excess Shares
in any liquidation, dissolution or winding up of, or any distribution of the
assets of the Trust.
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(d) Voting Rights. The holders of Excess Shares shall
not be entitled to vote on any matters (except as required by law).
(e) Restrictions On Transfer: Designation of
Beneficiary.
(i) Excess Shares shall not be
transferrable. The Purported Record Transferee or Purported Record Holder may
freely designate a Beneficiary of an interest in the Special Trust (representing
the number of Excess Shares held by the Special Trust attributable to a
purported Transfer or Event that resulted in the Excess Shares) if (i) the
Excess Shares held in the Special Trust would not be Excess Shares in the hands
of such Beneficiary and (ii) the Purported Beneficial Transferee or Purported
Beneficial Holder does not receive a price, as determined on a Share-by-Share
basis, for designating such Beneficiary that reflects a price for such Excess
Shares that, (I) in the case of a Purported Beneficial Transferee, exceeds (x)
the price such Purported Beneficial Transferee paid for the Shares in the
purported Transfer that resulted in the exchanges of Shares for Excess Shares,
or (y) if the Purported Beneficial Transferee did not give value for such Shares
(having received such Shares pursuant to a gift, devise or other transaction),
the Market Price of such Shares on the date of the purported Transfer that
resulted in the exchange of Shares for Excess Shares or (II) in the case of a
Purported Beneficial Holder, exceeds the Market Price of the Shares that were
automatically exchanged for such Excess Shares on the date of such exchange.
Upon such a transfer of an interest in the Special Trust, the corresponding
shares of Excess Shares in the Special Trust shall be automatically exchanged
for an equal number of Common Shares or Preferred Shares (depending upon the
type of Shares that were originally exchanged for such Excess Shares) and such
Common Shares or Preferred Shares shall be transferred of record to the
transferee of the interest in the Special Trust if such Common Shares or
Preferred Shares would not be Excess Shares in the hands of such transferee.
Prior to any transfer of any interest in the Special Trust, the Purported Record
Transferee or Purported Record Holder, as the case may be, must give advance
notice to the Trust of the intended transfer and the Trust must have waived in
writing its purchase rights under Section 6.8(f).
(ii) Notwithstanding the foregoing, if a
Purported Beneficial Transferee or Purported Beneficial Holder receives a price
for designating a Beneficiary of an interest in the Special Trust that exceeds
the amounts allowable under Section 6.8(e)(i), such Purported Beneficial
Transferee or Purported Beneficial Holder shall pay, or cause such Beneficiary
to pay, such excess to the Trust.
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(f) Purchase Right in Excess Shares. Excess
Shares shall be deemed to have been offered for sale to the Trust, or its
designee, at a price per share equal to, (I) in the case of Excess Shares
resulting from a purported Transfer, the lesser of (i) the price per share in
the transaction that created such Excess Shares (or, in the case of a gift,
devise or other transaction, the Market Price at the time of such gift, devise
or other transaction) or (ii) the Market Price on the date the Trust, or its
designee, accepts such offer or (II) in the case of Excess Shares created by an
Event, the lesser of (i) the Market Price of the Shares originally exchanged for
the Excess Shares on the date of such exchange or (ii) the Market Price of such
Shares on the date the Trust, or its designee, accepts such offer. The Trust
shall have the right to accept such offer for a period of ninety (90) days after
the later of (i) the date of the purported Transfer or Event which resulted in
an exchange of Shares for such Excess Shares and (ii) the date the Board of
Trustees determines that a purported Transfer or other event resulting in an
exchange of Shares for such Excess Shares has occurred, if the Trust does not
receive a notice of any such Transfer pursuant to Section 6.6(e).
SECTION 6.9. Severability; Agent for Trust. If any provision
of Section 6.6, 6.7 or 6.8 or any application of any such provision is
determined to be invalid by any federal or state court having jurisdiction over
the issues, the validity of the remaining provisions shall not be affected and
other applications of such provision shall be affected only to the extent
necessary to comply with the determination of such court. In any event, to the
extent such court holds the Purported Record Transferee to be the record and
beneficial owner of Shares which, had the provisions of Sections 6.6, 6.7 and
6.8 been enforced, would have been exchanged for Excess Shares, such Purported
Record Transferee shall be deemed, at the option of the Trust, to have acted as
agent on behalf of the Trust in acquiring such transferred Shares and to hold
such Shares on behalf of the Trust.
ARTICLE 7
SHAREHOLDERS
SECTION 7.1. Meetings of Shareholders. There shall be an
annual meeting of the Shareholders, to be held at such time and place as shall
be determined by or in the manner prescribed in the Bylaws at which the Trustees
shall be elected and any other proper business may be conducted. Except as
otherwise provided in this Declaration of Trust, special meetings of
Shareholders may be called in the manner provided in the Bylaws. Special
meetings of Shareholders may be called upon the written request of Shareholders
holding an aggregate of not less than ten
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percent (10%) of the Common Shares. Special meetings of shareholders may also be
called by holders of Preferred Shares to the extent, if any, determined by the
Board of Trustees in connection with the establishment of a class or series of
Preferred Shares. If there are no Trustees, the officers of the Trust shall
promptly call a special meeting of the Shareholders entitled to vote for the
election of successor Trustees. Any meeting may be adjourned and reconvened as
the Trustees determine or as provided in the Bylaws.
SECTION 7.2. Voting Rights of Shareholders. Subject to the
provisions of any class or series of Preferred Shares then outstanding and the
mandatory provisions of any applicable laws or regulations, the Shareholders
shall be entitled to vote only on the following matters: (a) election or removal
of Trustees as provided in Sections 7.1 and 2.3 and Section 8-202 of Title 8 and
the Bylaws; (b) amendment of this Declaration of Trust as provided in Section
9.1; (c) a matter specified in Section 3.3; and (d) a merger of the Trust with
or into another entity as and to the extent required by Section 8-501.1 of Title
8. Except with respect to the foregoing matters, no action taken by the
Shareholders at any meeting shall in any way bind the Trustees.
SECTION 7.3. Shareholder Action to be Taken by Meeting. Any
action required or permitted to be taken by the Shareholders of the Trust must
be effected at a duly called annual or special meeting of Shareholders of the
Trust and may not be effected by any consent in writing of such Shareholders.
Notwithstanding anything contained in this Declaration of Trust to the contrary,
the affirmative vote of at least a majority of the then outstanding Shares
entitled to vote in the election of Trustees, voting together as a single class,
shall be required to amend, repeal, or adopt any provision inconsistent with
this Section 7.3 and the affirmative vote of such number or percentage of the
then outstanding Shares as is specified in this Declaration of Trust or, if not
so specified, in the Bylaws shall be required to take any other action required
or permitted to be taken by the Shareholders.
ARTICLE 8
LIABILITY OF SHAREHOLDERS, TRUSTEES, OFFICERS,
EMPLOYEES AND AGENTS
AND TRANSACTIONS BETWEEN AFFILIATES AND THE TRUST
SECTION 8.1. Limitation of Shareholder Liability. No
Shareholder shall be liable for any debt, claim, demand, judgment or obligation
of any kind of, against or with respect to the Trust by reason of his being a
Shareholder, nor shall any Shareholder be subject to any personal liability
whatsoever, in tort, contract or otherwise, to any Person in connection with the
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Trust Property or the affairs of the Trust. All written contracts to which the
Trust is a party shall include a provision to the effect that the Shareholders
shall not be personally liable thereon.
SECTION 8.2. Limitation of Trustee and Officer Liability. To
the maximum extent that Maryland law in effect from time to time permits
limitation of the liability of trustees and officers of a real estate investment
trust, no Trustee or officer of the Trust shall be liable to the Trust or to any
Shareholder for money damages. Neither the amendment nor repeal of this Section,
nor the adoption or amendment of any other provision of this Declaration of
Trust inconsistent with this Section, shall apply to or affect in any respect
the applicability of the preceding sentence with respect to any act or failure
to act which occurred prior to such amendment, repeal or adoption. In the
absence of any Maryland statute limiting the liability of trustees and officers
of a Maryland real estate investment trust for money damages in a suit by or on
behalf of the Trust or by any Shareholder, no Trustee or officer of the Trust
shall be liable to the Trust or to any Shareholder for money damages except to
the extent that (i) the Trustee or officer actually received an improper benefit
or profit in money, property, or services, for the amount of the benefit or
profit in money, property, or services actually received; or (ii) a judgment or
other final adjudication adverse to the Trustee or officer is entered in a
proceeding based on a finding in the proceeding that the Trustee's or officer's
action or failure to act was the result of active and deliberate dishonesty and
was material to the cause of action adjudicated in the proceeding.
SECTION 8.3. Express Exculpatory Clauses in Instruments.
Neither the Shareholders nor the Trustees, officers, employees or agents of the
Trust shall be liable under any written instrument creating an obligation of the
Trust, and all Persons shall look solely to the Trust Property for the payment
of any claim under or for the performance of that instrument. The omission of
the foregoing exculpatory language from any instrument shall not affect the
validity or enforceability of such instrument and shall not render any
Shareholder, Trustee, officer, employee or agent liable thereunder to any third
party, nor shall the Trustees or any officer, employee or agent of the Trust be
liable to anyone for such omission. No amendment of this Declaration of Trust or
repeal of any of its provisions shall limit or eliminate the limitation of
liability provided to Trustees and officers hereunder with respect to any act or
omission occurring prior to such amendment or repeal.
SECTION 8.4. Indemnification. The Trust shall indemnify (i)
its Trustees and officers, whether serving the Trust or at its request any other
entity, to the full extent
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required or permitted by the general laws of the State of Maryland applicable to
ordinary business corporations now or hereafter in force, including the advance
of expenses under the procedures and to the full extent permitted by such laws,
and (ii) the Shareholders and other employees and agents of the Trust to such
extent as shall be authorized by the Trustees or the Bylaws and as permitted by
law. Nothing contained herein shall be construed to protect any Person against
any liability to the extent such protection would violate Maryland statutory or
decisional law applicable to real estate investment trusts organized under Title
8 or any successor provision. The foregoing rights of indemnification shall not
be exclusive of any other rights to which those seeking indemnification may be
entitled. The Trustees may take such action as is necessary to carry out these
indemnification provisions and are expressly empowered to adopt, approve and
amend from time to time such bylaws, resolutions or contracts implementing such
provisions or such further indemnification arrangements as may be permitted by
law. No amendment of this Declaration of Trust or repeal of any of its
provisions shall limit or eliminate the right of indemnification provided
hereunder with respect to acts or omissions occurring prior to such amendment or
repeal.
SECTION 8.5. Transactions Between the Trust and its Trustees,
Officers, Employees and Agents. Subject to any express restrictions in this
Declaration of Trust or adopted by the Trustees in the Bylaws or by resolution,
the Trust (which, for purposes of this Section 8.5, shall include the Trust and
any of its subsidiaries) may enter into any contract or transaction of any kind
(including without limitation for the purchase or sale of property or for any
type of services, including those in connection with underwriting or the offer
or sale of Securities of the Trust) with any Person, including any Trustee,
officer, employee or agent of the Trust or any Person Affiliated with the Trust
or a Trustee, officer, employee or agent of the Trust, whether or not any of
them has a financial interest in such transaction; provided, however, that the
following contracts and transactions may not be consummated by the Trust unless
first approved by the affirmative vote of a majority of the Trustees who have no
interest in the contract or transaction: any contract or transaction between the
Trust and any Trustee, officer, employee or agent of the Trust or any person
Affiliated with the Trust or a Trustee, officer, employee or agent of the Trust.
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ARTICLE 9
AMENDMENT; REORGANIZATION; MERGER, ETC.
SECTION 9.1. Amendment.
(a) This Declaration of Trust may be amended by
the affirmative vote of the holders of not less than a majority of the Shares
then outstanding and entitled to vote thereon, except that Section 11.5 shall
not be amended or repealed, nor shall provisions inconsistent therewith be
adopted, except by the affirmative vote of the holders of not less than 80% of
the Shares then outstanding and entitled to vote.
(b) An amendment to this Declaration of Trust
shall become effective as provided in Section 11.6.
(c) This Declaration of Trust may not be amended
except as provided in this Section 9.1.
SECTION 9.2. Merger, Consolidation or Sale of Trust Property.
Subject to the provisions of any class or series of Preferred Shares at the time
outstanding and subject to Section 8-501.1 of Title 8, as and to the extent
applicable, the Trustees shall have the power to (i) merge the Trust with or
into another entity, (ii) consolidate the Trust with one or more other entities
into a new entity or (iii) sell or otherwise dispose of all or substantially all
of the Trust Property.
ARTICLE 10
DURATION AND TERMINATION OF TRUST
SECTION 10.1. Duration of Trust. The Trust shall continue
perpetually unless terminated pursuant to Section 10.2 or pursuant to any
applicable provision of Title 8.
SECTION 10.2. Termination of Trust.
(a) Subject to the provisions of any class or
series of Preferred Shares at the time outstanding and subject to Section
8-501.1 of Title 8, as and to the extent applicable, the Trustees shall have the
power to terminate the Trust. Upon the termination of the Trust:
(i) The Trustees shall proceed to wind up the
affairs of the Trust and all of the powers of the Trustees under this
Declaration of Trust shall continue, including the powers to fulfill or
discharge the Trust's contracts, collect its assets, sell, convey, assign,
exchange, transfer or otherwise
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dispose of all or any part of the remaining Trust Property to one or more
Persons at public or private sale for consideration which may consist in whole
or in part of cash, Securities or other property of any kind, discharge or pay
its liabilities and do all other acts appropriate to liquidate its business.
(ii) After paying or adequately providing for
the payment of all liabilities, and upon receipt of such releases, indemnities
and agreements as they deem necessary for their protection, the Trustees may
distribute the remaining Trust Property, in cash or in kind or partly in each,
among the Shareholders according to their respective rights, so that after
payment in full or the setting apart for payment of such preferential amounts,
if any, to which the holders of any Shares (other than Common Shares) at the
time outstanding shall be entitled, the remaining Trust Property available for
payment and distribution to Shareholders shall, subject to any participating or
similar rights of Shares (other than Common Shares) at the time outstanding, be
distributed ratably among the holders of Common Shares at the time outstanding.
(b) After termination of the Trust, the
liquidation of its business, and the distribution to the Shareholders as herein
provided, a majority of the Trustees shall execute and file with the Trust's
records a document certifying that the Trust has been duly terminated, and the
Trustees shall be discharged from all liabilities and duties hereunder, and the
rights and interests of all Shareholders shall cease.
ARTICLE 11
MISCELLANEOUS
SECTION 11.1. Governing Law. This Declaration of Trust is
executed by the undersigned Trustees and delivered in the State of Maryland with
reference to the laws thereof, and the rights of all parties and the validity,
construction and effect of every provision hereof shall be subject to and
construed according to the laws of the State of Maryland without regard to
conflicts of laws provisions thereof.
SECTION 11.2. Reliance by Third Parties. Any certificate shall
be final and conclusive as to any Persons dealing with the Trust if executed by
an individual who, according to the records of the Trust or of any recording
office in which this Declaration of Trust may be recorded, appears to be the
Secretary or an Assistant Secretary of the Trust or a Trustee, and if certifying
to: (i) the number or identity of Trustees, officers of the Trust or
Shareholders; (ii) the due authorization of the execution of any document; (iii)
the action
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or vote taken, and the existence of a quorum, at a meeting of Trustees or
Shareholders; (iv) a copy of this Declaration or of the Bylaws as a true and
complete copy as then in force; (v) an amendment to this Declaration; (vi) the
termination of the Trust; or (vii) the existence of any fact or facts which
relate to the affairs of the Trust. No purchaser, lender, transfer agent or
other Person shall be bound to make any inquiry concerning the validity of any
transaction purporting to be made on behalf of the Trust by the Trustees or by
any officer, employee or agent of the Trust.
SECTION 11.3. Provisions in Conflict with Law or
Regulations.
(a) The provisions of this Declaration of Trust are
severable, and if the Trustees shall determine, with the advice of counsel, that
any one or more of such provisions (the "Conflicting Provisions") are in
conflict with the REIT Provisions of the Code, Title 8 or other applicable
federal or state laws, the Conflicting Provisions shall be deemed never to have
constituted a part of this Declaration of Trust, even without any amendment of
this Declaration pursuant to Section 9.1; provided, however, that such
determination by the Trustees shall not affect or impair any of the remaining
provisions of this Declaration of Trust or render invalid or improper any action
taken or omitted prior to such determination. No Trustee shall be liable for
making or failing to make such a determination.
(b) If any provision of this Declaration of Trust
shall be held invalid or unenforceable in any jurisdiction, such holding shall
not in any manner affect or render invalid or unenforceable such provision in
any other jurisdiction or any other provision of this Declaration of Trust in
any jurisdiction.
SECTION 11.4. Construction. In this Declaration of Trust,
unless the context otherwise requires, words used in the singular or in the
plural include both the plural and singular and words denoting any gender
include all genders. The title and headings of different parts are inserted for
convenience and shall not affect the meaning, construction or effect of this
Declaration. In defining or interpreting the powers and duties of the Trust and
its Trustees and officers, reference may be made, to the extent appropriate and
not inconsistent with the Code or Title 8, to Titles 1 through 3 of the
Corporations and Associations Article of the Annotated Code of Maryland. In
furtherance and not in limitation of the foregoing, in accordance with the
provisions of Title 3, Subtitles 6 and 7, of the Corporations and Associations
Article of the Annotated Code of Maryland, the Trust shall be included within
the definition of "corporation" for purposes of such provisions.
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SECTION 11.5. Business Combinations. The provisions of
Subtitle 6 of Title 3 of the Corporations and Associations Article of the
Annotated Code of Maryland, as such provisions exist as of June 4, 1986, are by
this reference incorporated herein as if here set forth in their entirety. Such
provisions shall be interpreted in a manner consistent with that in which they
would be interpreted pursuant to the above referenced statute as such statute
exists as of June 4, 1986, assuming the validity of such statute and its
applicability to the Trust.
SECTION 11.6. Recordation. This Declaration of Trust and any
amendment hereto shall be filed for record with the State Department of
Assessments and Taxation of Maryland and may also be filed or recorded in such
other places as the Trustees deem appropriate, but failure to file for record
this Declaration or any amendment hereto in any office other than in the State
of Maryland shall not affect or impair the validity or effectiveness of this
Declaration or any amendment hereto. A restated Declaration shall, upon filing,
be conclusive evidence of all amendments contained therein and may thereafter be
referred to in lieu of the original Declaration and the various amendments
thereto.
IN WITNESS WHEREOF, this Amended and Restated Declaration of
Trust has been signed on this 22nd day of August, 1996 by the undersigned
Trustees, each of whom acknowledges, under penalty of perjury, that this
document is his free act and
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deed, and that to the best of his knowledge, information, and belief, the
matters and facts set forth herein are true in all material respects.
-------------------------------
Anthony A. Nichols, Sr.
-------------------------------
Joseph L. Carboni
-------------------------------
Richard M. Osborne
-------------------------------
Gerard H. Sweeney
-------------------------------
Warren V. Musser
-------------------------------
Walter D'Alessio
-------------------------------
Charles P. Pizzi
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BRANDYWINE REALTY TRUST
BYLAWS
ARTICLE I.
OFFICES
Section 1. Principal Office. The principal office of
Brandywine Realty Trust (the "Trust") shall be located at such place or places
as the Trustees may designate.
Section 2. Additional Offices. The Trust may have additional
offices at such places as the Trustees may from time to time determine or the
business of the Trust may require.
ARTICLE II.
MEETINGS OF SHAREHOLDERS
Section 1. Place. All meetings of shareholders shall be held
at the principal place of the Trust or at such other place within the United
States as shall be stated in the notice of the meeting.
Section 2. Annual Meeting. An annual meeting of the
shareholders for the election of Trustees and the transaction of any business
within the powers of the Trust shall be held annually and at the time set by the
Trustees.
Section 3. Special Meetings. Subject to the rights of the
holders of any series of Preferred Shares of Beneficial Interest (as defined in
the Declaration of Trust) to elect additional Trustees under specified
circumstances, special meetings of the shareholders may be called by the
chairman or by a resolution adopted by one-half or more of the total number of
Trustees which the Trust would have if there were no vacancies (the "Whole
Board"). Special meetings of shareholders may also be called upon the written
request of shareholders to the extent permitted in Article 7 of the Declaration
of Trust.
Section 4. Notice. Not less than ten nor more than 90 days
before each meeting of shareholders, the secretary shall give to each
shareholder entitled to vote at such meeting and to each shareholder not
entitled to vote who is entitled to notice of the meeting written or printed
notice stating the time and place of the meeting and, in the case of a special
meeting or as otherwise may be required by statute, the purpose for which the
meeting is called, either by mail or by presenting it to such shareholder
personally or by leaving it at his residence or usual
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place of business. If mailed, such notice shall be deemed to be given when
deposited in the United States mail addressed to the shareholder at his post
office address as it appears on the records of the Trust, with postage thereon
prepaid.
Section 5. Scope of Notice. Any business of the Trust may be
transacted at an annual meeting of shareholders without being specifically
designated in the notice, except such business as is required by statute to be
stated in such notice. No business shall be transacted at a special meeting of
shareholders except as specifically designated in the notice.
Section 6. Quorum. At any meeting of shareholders, the
presence in person or by proxy of shareholders entitled to cast a majority of
all the votes entitled to be cast at such meeting shall constitute a quorum; but
this section shall not affect any requirement under any statute or the
Declaration of Trust for the vote necessary for the adoption of any measure. If,
however, such quorum shall not be present at any meeting of the shareholders,
the shareholders entitled to vote at such meeting, present in person or by
proxy, shall have power to adjourn the meeting from time to time to a date not
more than 120 days after the original record date without notice other than
announcement at the meeting. At such adjourned meeting at which a quorum shall
be present, any business may be transacted which might have been transacted at
the meeting as originally notified.
Section 7. Voting. A plurality of all the votes cast at a
meeting of shareholders duly called and at which a quorum is present shall be
sufficient to elect a Trustee. Shareholders shall not be entitled to cumulate
their votes in the election of Trustees. A majority of the votes cast at a
meeting of shareholders duly called and at which a quorum is present shall be
sufficient to approve any other matter which may properly come before the
meeting, unless more than a majority of the votes cast is required by statute or
by the Declaration of Trust. Unless otherwise provided in the Declaration, each
outstanding share, regardless of class, shall be entitled to one vote on each
matter submitted to a vote at a meeting of shareholders.
Section 8. Proxies. A shareholder may vote the shares owned of
record by him, either in person or by proxy executed in writing by the
shareholder or by his duly authorized attorney in fact. Such proxy shall be
filed with the secretary of the Trust before or at the time of the meeting. No
proxy shall be valid after eleven months from the date of its execution, unless
otherwise provided in the proxy.
Section 9. Voting of Shares by Certain Holders. Shares
registered in the name of a corporation, partnership, trust or other entity, if
entitled to be voted, may be voted by the chief executive officer or a vice
president, a general
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partner or trustee thereof, as the case may be, or a proxy appointed by any of
the foregoing individuals, unless some other person who has been appointed to
vote such shares pursuant to a bylaw or a resolution of the board of directors
of such corporation or other entity presents a certified copy of such bylaw or
resolution, in which case such person may vote such shares. Any trustee or other
fiduciary may vote shares registered in his name as such fiduciary, either in
person or by proxy.
Shares of the Trust directly or indirectly owned by it shall
not be voted at any meeting and shall not be counted in determining the total
number of outstanding shares entitled to be voted at any given time, unless they
are held by it in a fiduciary capacity, in which case they may be voted and
shall be counted in determining the total number of outstanding shares at any
given time.
The Trustees may adopt by resolution a procedure by which a
shareholder may certify in writing to the Trust that any shares registered in
the name of the shareholder are held for the account of a specified person other
than the shareholder. The resolution shall set forth the class of shareholders
who may make the certification, the purpose for which the certification may be
made, the form of certification and the information to be contained in it; if
the certification is with respect to a record date or closing of the share
transfer books, the time after the record date or closing of the share transfer
books within which the certification must be received by the Trust; and any
other provisions with respect to the procedure which the Trustees consider
necessary or desirable. On receipt of such certification, the person specified
in the certification shall be regarded as, for the purposes set forth in the
certification, the shareholder of record of the specified shares in place of the
shareholder who makes the certification.
Section 10. Inspectors. At any meeting of shareholders, the
chairman of the meeting may, or upon the request of any shareholder shall,
appoint one or more persons as inspectors for such meetings. Such inspectors
shall ascertain and report the number of shares represented at the meeting based
upon their determination of the validity and effect of proxies, count all votes,
report the results and perform such other acts as are proper to conduct the
election and voting with impartiality and fairness to all the shareholders.
Each report of an inspector shall be in writing and signed by
him or by a majority of them if there is more than one inspector acting at such
meeting. If there is more than one inspector, the report of a majority shall be
the report of the inspectors. The report of the inspector or inspectors on the
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number of shares represented at the meeting and the results of the voting shall
be prima facie evidence thereof.
Section 11. Reports to Shareholders. Not later than 90 days
after the close of each fiscal year of the Trust, the Trustees shall deliver or
cause to be delivered a report of the business and operations of the Trust
during such fiscal year to the shareholders, containing a balance sheet and a
statement of income and surplus of the Trust, accompanied by the certification
of an independent certified public accountant, and such further information as
the Trustees may determine is required pursuant to any law or regulation to
which the Trust is subject. A signed copy of the annual report and the
accountant's certificate shall be filed by the Trustees with the State
Department of Assessments and Taxation of Maryland, and with such other
governmental agencies as may be required by law and as the Trustees may deem
appropriate.
Section 12. Voting by Ballot. Voting on any question or in any
election may be viva voce unless the presiding officer shall order or any
shareholder shall demand that voting be by ballot.
Section 13. No Shareholder Action by Written Consent. Subject
to the rights of the holders of any series Preferred Shares to elect additional
Trustees under specific circumstances, any action required or permitted to be
taken by the shareholders of the Trust must be effected at an annual or special
meeting of shareholders and may not be effected by any consent in writing by
such shareholders.
Section 14. Exemption of Certain Shares. The common shares of
beneficial interest ("Common Shares") of the Trust now or hereafter owned by
Safeguard Scientifics, Inc., The Nichols Company and any of their current or
future affiliates or associates (the "SSI/TNC Affiliates") are hereby exempted
from the restrictions contained in Subtitle 7 of Title 3 of the Maryland General
Corporation Law, and the Trust shall have no right to exercise the redemption
right with respect to such Common Shares arising under said Subtitle 7. In no
event will any Shareholder of the Trust have any rights under Section 3-708 of
said Subtitle 7 as a result of the ownership by the SSI/TNC Affiliates of Common
Shares as aforesaid. As used herein, the terms "affiliates" and "associates"
have the respective meanings assigned to them in Subtitles 6 and 7,
respectively, of said Title 3.
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ARTICLE III.
TRUSTEES
Section 1. General Powers: Qualifications. The business and
affairs of the Trust shall be managed under the direction of its Board of
Trustees. A Trustee shall be an individual at least 21 years of age who is not
under legal disability.
Section 2. Annual and Regular Meetings. An annual meeting of
the Trustees shall be held immediately after and at the same place as the annual
meeting of shareholders, no notice other than this Bylaw being necessary. The
Trustees may provide, by resolution, the time and place, either within or
without the State of Maryland, for the holding of regular meetings of the
Trustees without other notice than such resolution.
Section 3. Special Meetings. Special meetings of the Trustees
may be called by or at the request of the chairman or chief executive officer or
by one-half or more of the Trustees then in office. The person or persons
authorized to call special meetings of the Trustees may fix any place, either
within or without the State of Maryland, as the place for holding any special
meeting of the Trustees called by them.
Section 4. Notice. Notice of any special meeting shall be
given by written notice delivered personally, transmitted by facsimile,
telegraphed or mailed to each Trustee at his business or residence address.
Personally delivered, facsimile transmitted or telegraphed notices shall be
given at least two days prior to the meeting.
Notice by mail shall be given at least five days prior to the
meeting. If mailed, such notice shall be deemed to be given when deposited in
the United States mail properly addressed, with postage thereon prepaid. If
given by telegram, such notice shall be deemed to be given when the telegram is
delivered to the telegraph company. Neither the business to be transacted at,
nor the purpose of, any annual, regular or special meeting of the Trustees need
be stated in the notice, unless specifically required by statute or these
Bylaws.
Section 5. Quorum. A whole number of Trustees equal to at
least a majority of the Whole Board Trustees shall constitute a quorum for
transaction of business at any meeting of the Trustees, provided that, if less
than a quorum are present at said meeting, a majority of the Trustees present
may adjourn the meeting from time to time without further notice, and provided
further that if, pursuant to the Declaration of Trust or these Bylaws, the vote
of a majority of a particular group of Trustees
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is required for action, a quorum must also include a majority of such group.
The Trustees present at a meeting which has been duly called
and convened may continue to transact business until adjournment,
notwithstanding the withdrawal of enough Trustees to leave less than a quorum.
Section 6. Voting. The action of the majority of the Trustees
present at a meeting at which a quorum is present shall be the action of the
Trustees, unless the concurrence of a greater proportion is required for such
action by applicable statute.
Section 7. Telephone Meetings. Trustees may participate in a
meeting by means of a conference telephone or similar communications equipment
if all persons participating in the meeting can hear each other at the same
time. Participation in a meeting by these means shall constitute presence in
person at the meeting.
Section 8. Informal Action by Trustees. Any action required or
permitted to be taken at any meeting of the Trustees may be taken without a
meeting, if a consent in writing to such action is signed by each Trustee and
such written consent is filed with the minutes of proceedings of the Trustees.
Section 9. Vacancies. If for any reason any or all the
Trustees cease to be Trustees, such event shall not terminate the Trust or
affect these Bylaws or the powers of the remaining Trustees hereunder (even if
fewer than three Trustees remain). Any vacancy (including a vacancy created by
an increase in the number of Trustees) shall be filled, at any regular meeting
or at any special meeting called for that purpose, by a majority of the Trustees
(although less than a quorum). Any individual so elected as Trustee shall hold
office until the next annual meeting of shareholders and until his successor has
been duly elected and qualified.
Section 10. Compensation. Trustees shall not receive any
stated salary for their services as Trustees but, by resolution of the trustees,
fixed sums per year and/or per meeting. Expenses of attendance, if any, may be
allowed to trustees for attendance at each annual, regular or special meeting of
the Trustees or of any committee thereof; but nothing herein contained shall be
construed to preclude any Trustees from serving the Trust in any other capacity
and receiving compensation therefor.
Section 11. Removal of Trustees. The shareholders may, at any
time, remove any Trustee in the manner provided in the Declaration of Trust.
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Section 12. Loss of Deposits. No Trustee shall be liable for
any loss which may occur by reason of the failure of the bank, trust company,
savings and loan association, or other institution with whom moneys or shares
have been deposited.
Section 13. Surety Bonds. Unless required by law, no Trustee
shall be obligated to give any bond or surety or other security for the
performance of any of his duties.
Section 14. Reliance. Each Trustee, officer, employee and
agent of the Trust shall, in the performance of his duties with respect to the
Trust, be fully justified and protected with regard to any act or failure to act
in reliance in good faith upon the books of account or other records of the
Trust, upon an opinion of counsel or upon reports made to the Trust by any of
its officers or employees or by the adviser, accountants, appraisers or other
experts or consultants selected by the Trustees or officers of the Trust,
regardless of whether such counsel or expert may also be a Trustee.
Section 15. Certain Rights of Trustees, Officers, Employees
and Agents. The Trustees shall have no responsibility to devote their full time
to the affairs of the Trust. Any Trustee or officer, employee or agent of the
Trust, in his personal capacity or in a capacity as an affiliate, employee, or
agent of any other person, or otherwise, may have business interests and engage
in business activities similar to or in addition to those of or relating to the
Trust.
ARTICLE IV.
COMMITTEES
Section 1. Number, Tenure and Qualifications. The Trustees
may, by resolution or resolutions passed by a majority of the whole Board,
appoint from among its members an Executive Committee, an Audit Committee and
other committees, composed of two or more Trustees.
Section 2. Powers. The Trustees may delegate to committees
appointed under Section 1 of this Article any of the powers of the Board of
Trustees, provided, however that the Trustees may not delegate to a committee
the power to declare dividends or other distributions, elect Trustees, issue
Shares of Beneficial Interest in the Trust other than as provided in the next
sentence, recommend to the shareholders any action which requires shareholder
approval, amend the Bylaws, or approve any merger or share exchange which does
not require shareholder approval. If the Board of Trustees has given general
authorization for the issuance of Shares of Beneficial Interest in the Trust, a
committee of the board, in accordance with a
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general formula or method specified by the Board by resolution or by adoption of
an option or other plan, may fix the terms of the Shares of Beneficial Interest
subject to classification or reclassification and the terms on which the shares
may be issued, including all terms and conditions required or permitted to be
established or authorized by the Board of Trustees.
Section 3. Committee Procedures. Each Committee may fix rules
of procedure for its business. A majority of the members of a committee shall
constitute a quorum for the transaction of business and the action of a majority
of those present at a meeting at which a quorum is present shall be action of
the committee. In the absence of any member of any committee, the members
thereof present at any meeting, whether or not they constitute a quorum, may
appoint another Trustee to act in the place of such absent member. Any action
required or permitted to be taken at a meeting of a committee may be taken
without a meeting, if a unanimous written consent which sets forth the action is
signed by each member of the committee and filed with the minutes of the
proceedings of such committee. The members of a committee may conduct any
meeting thereof by means of a conference telephone or similar communications
equipment if all persons participating in the meeting can hear each other at the
same time. Participation in a meeting by such means shall constitute presence in
person at the meeting.
Section 4. Emergency. In the event of a state of disaster of
sufficient severity to prevent the conduct and management of the affairs and
business of the Trust by its Trustees and officers as contemplated by the
Declaration of Trust and these Bylaws, any two or more available members of the
then incumbent Executive Committee, if any, shall constitute a quorum of that
Committee for the full conduct and management of the affairs and business of the
Trust in accordance with the provisions of this Article. In the event of the
unavailability, at such time, of a minimum of two members of the then incumbent
Executive Committee, the available Trustees shall elect an Executive Committee
composed of any two members of the Board of Trustees, whether or not they be
officers of the Trust, which two members shall constitute the Executive
Committee for the full conduct and management of the affairs of the Trust in
accordance with the foregoing provisions of this Section. This Section shall be
subject to implementation by resolution of the Board of Trustees passed form
time to time for that purpose, and any provisions of the Bylaws (other than this
Section) and any resolutions which are contrary to the provisions of this
Section or to the provisions of any such implementing resolutions shall be
suspended until it shall be determined by any interim Executive Committee acting
under this Section that it shall be to the advantage of the Trust to resume the
conduct and management of its affairs and business under all the other
provisions of these Bylaws.
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ARTICLE V.
OFFICERS
Section 1. General Provisions. The officers of the Trust may
consist of a chairman of the board, a chief executive officer, one or more vice
presidents, a chief financial officer, a secretary, and one or more assistant
secretaries. In addition, the Trustees may from time to time appoint such other
officers with such powers and duties as they shall deem necessary or desirable.
The officers of the Trust shall be elected annually by the Trustees at the first
meeting of the Trustees held after each annual meeting of shareholders. If the
election of officers shall not be held at such meeting, such election shall be
held as soon thereafter as may be convenient. Each officer shall hold office
until his successor is elected and qualifies or until his death, resignation or
removal in the manner hereinafter provided. Any two or more offices may be held
by the same person. In their discretion, the Trustees may leave unfilled any
office. Election of an officer or agent shall not of itself create contract
rights between the Trust and such officer or agent.
Section 2. Removal and Resignation. Any officer or agent of
the Trust may be removed by a majority of the members of the Whole Board if in
their judgment the best interests of the Trust would be served thereby, but such
removal shall be without prejudice to the contract rights, if any, of the person
so removed. Any officer of the Trust may resign at any time by giving written
notice of his resignation to the Trustees, the chairman of the board, the chief
executive officer or the secretary. Any resignation shall take effect at any
time subsequent to the time specified therein or, if the time when it shall
become effective is not specified therein, immediately upon its receipt. The
acceptance of a resignation shall not be necessary to make it effective unless
otherwise stated in the resignation.
Section 3. Vacancies. A vacancy in any office may be filled by
the Trustees for the balance of the term.
Section 4. Chairman of the Board. The chairman of the board
shall preside over the meetings of the Trustees and of the shareholders at which
he shall be present. The chairman of the board shall perform such other duties
as may be assigned to him by the Trustees. Except where by law the signature of
the chief executive officer is required, the chairman of the board shall possess
the same power as the chief executive officer to sign deeds, mortgages, bonds,
contracts or other instruments.
Section 5. Chief Executive Officer. The Trustees may designate
a chief executive officer from among the elected officers. In the absence of
such designation, the chairman of
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the board shall be the chief executive officer of the Trust. The chief executive
officer shall have general responsibility for implementation of the policies of
the Trust, as determined by the Trustees, and for the management of the business
affairs of the Trust. The chief executive officer shall in general supervise and
control all of the business and affairs of the Trust. He may execute any deed,
mortgage, bond, contract or other instrument, except in cases where the
execution thereof shall be expressly delegated by the Trustees or by these
Bylaws to some other officer or agent of the Trust or shall be required by law
to be otherwise executed; and in general shall perform all duties incident to
the office of chief executive officer and such other duties as may be prescribed
by the Trustees from time to time.
Section 6. Vice Presidents. In the absence of the chief
executive officer or in the event of a vacancy in such office, the vice
president (or in the event there be more than one vice president, the vice
presidents in the order designated at the time of their election or, in the
absence of any designation, then in the order of their election ) shall perform
the duties of the chief executive officer and when so acting shall have all the
powers of and be subject to all the restrictions upon the chief executive
officer; and shall perform such other duties as form time to time may be
assigned to him by the chief executive officer or by the Trustees. The Trustees
may designate one or more vice presidents as executive vice president or as vice
president for particular areas of responsibility.
Section 7. Secretary. The secretary shall (a) keep the minutes
of the proceedings of the shareholders, the Trustees and committees of the
Trustees in one or more books provided for that purpose; (b) see that all
notices are duly given in accordance with the provisions of these Bylaws or as
required by law; (c) be custodian of the trust records and of the seal of the
Trust; (d) keep a register of the post office address of each shareholder which
shall be furnished to the secretary by such shareholder; (e) have general charge
of the share transfer books of the Trust; and (f) in general perform such other
duties as from time to time may be assigned to him by the chief executive
officer or by the Trustees.
Section 8. Chief Financial Officer. The chief financial
officer shall have the custody of the funds and securities of the Trust and
shall keep full and accurate accounts of receipts and disbursements in books
belonging to the Trust and shall deposit all moneys and other valuable effects
in the name and to the credit of the Trust in such depositories as may be
designated by the Trustees.
The chief financial officer shall disburse the funds of the
Trust as may be ordered by the Trustees, taking proper vouchers for such
disbursements, and shall render to the chief
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executive officer and Trustees, at the regular meetings of the Trustees or
whenever they may require it, an account of all his transactions as chief
financial officer and of the financial condition of the Trust.
If required by the Trustees, he shall give the Trust a bond in
such sum and with such surety or sureties as shall be satisfactory to the
Trustees for the faithful performance of the duties of his office and for the
restoration of the Trust, in case of his death, resignation, retirement or
removal from office, all books, papers, vouchers, moneys and other property of
whatever kind in his possession or under his control belonging to the Trust.
Section 9. Assistant Secretaries. The assistant secretaries,
in general, shall perform such duties as shall be assigned to them by the
secretary, or by the chief executive officer or the Trustees.
Section 10. Salaries. The salaries of the officers shall be
fixed from time to time by the Trustees and no officer shall be prevented from
receiving such salary by reason of the fact that he is also a Trustee.
ARTICLE VI.
CONTRACTS, LOANS, CHECKS AND DEPOSITS
Section 1. Contracts. The Trustees may authorize any officer
or agent to enter into any contract or to execute and deliver any instrument in
the name of and on behalf of the Trust and such authority may be general or
confined to specific instances. Any agreement, deed, mortgage, lease or other
document executed by one or more of the Trustees or by an authorized person
shall be deemed valid and binding upon the Trustees and upon the Trust when so
authorized or ratified by action of the Trustees.
Section 2. Checks and Drafts. All checks, drafts or other
orders for the payment of money, notes or other evidences of indebtedness issued
in the name of the Trust shall be signed by such officer or officers, agent or
agents of the Trust and in such manner as shall from time to time be determined
by the Trustees.
Section 3. Deposits. All funds of the Trust not otherwise
employed shall be deposited from time to time to the credit of the Trust in such
banks, trust companies or other depositories as the Trustees may designate.
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ARTICLE VII.
SHARES
Section 1. Certificates. Each shareholder shall be entitled to
a certificate or certificates which shall represent and certify the number of
shares of each class of beneficial interests held by him in the Trust. Each
certificate shall be signed by the chief executive officer or a vice president
and countersigned by the secretary or an assistant secretary or the chief
financial officer or an assistant treasurer and may be sealed with the seal, if
any, of the Trust. The signatures may be either manual or facsimile.
Certificates shall be consecutively numbered; and if the Trust shall, from time
to time, issue several classes of shares, each class may have its own number
series. A certificate is valid and may be issued whether or not an officer who
signed it is still an officer when it is issued. Each certificate representing
shares which are restricted as to their transferability or voting powers, which
are preferred or limited as to their dividends or as to their allocable portion
of the assets upon liquidation or which are redeemable at the option of the
Trust, shall have a statement of such restriction, limitation, preference or
redemption provision, or a summary thereof, plainly stated on the certificate.
In lieu of such statement or summary, the Trust may set forth upon the face or
back of the certificate a statement that the Trust will furnish to any
shareholder, upon request and without charge, a full statement of such
information.
Section 2. Transfers. Certificates shall be treated as
negotiable and title thereto and to the shares they represent shall be
transferred by delivery thereof to the same extent as those of a Maryland stock
corporation. Upon surrender to the Trust or the transfer agent of the Trust of a
share certificate duly endorsed or accompanied by proper evidence of succession,
assignment or authority to transfer, the Trust shall issue a new certificate to
the person entitled thereto, cancel the old certificate and record the
transaction upon its books.
The Trust shall be entitled to treat the holder of record of
any share or shares as the holder in fact thereof and, accordingly, shall not be
bound to recognize any equitable or other claim to or interest in such share on
the part of any other person, whether or not it shall have express or other
notice thereof, except as otherwise provided by the laws of the State of
Maryland.
Section 3. Lost Certificate. The Trustees may direct a new
certificate to be issued in place of any certificate previously issued by the
Trust alleged to have been lost, stolen or destroyed upon the making of an
affidavit of that fact by the
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person claiming the certificate to be lost, stolen or destroyed. When
authorizing the issuance of a new certificate, the Trustees may, in their
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed certificate or his legal representative
to advertise the same in such manner as they shall require and/or to give bond,
with sufficient surety, to the Trust to indemnify it against any loss or claim
which may arise as a result of the issuance of a new certificate.
Section 4. Closing of Transfer Books or Fixing of Record Date.
The Trustees may set, in advance a record date for the purpose of determining
shareholders entitled to notice of or to vote at any meeting of shareholders, or
shareholders entitled to receive payment of any dividend or the allotment of any
other rights, or in order to make a determination of shareholders for any other
proper purpose. Such date, in any case, shall not be prior to the close of
business on the day the record date is fixed and shall be not more than 90 days
and, in the case of a meeting of shareholders not less than ten days, before the
date on which the meeting or particular action requiring such determination of
shareholders is to be held or taken.
In lieu of fixing a record date, the Trustees may provide that
the share transfer books shall be closed for a stated period but not longer than
20 days. If the share transfer books are closed for the purpose of determining
shareholders entitled to notice of or to vote at a meeting of shareholders, such
books shall be closed for at lest ten days before the date of such meeting.
If no record date is fixed and the share transfer books are
not closed for the determination of shareholders, (a) the record date for the
determination of shareholders entitled to notice of or to vote at a meeting of
shareholders shall be at the close of business on the day on which the notice of
meeting is mailed or the 30th day before the meeting, whichever is the closer
date to the meeting; and (b) the record date for the determination of
shareholders entitled to receive payment of a dividend or an allotment of any
other rights shall be the close of business on the day on which the resolution
of the Trustees, declaring the dividend or allotment of rights, is adopted.
When a determination of shareholders entitled to vote at any
meeting of shareholders has been made as provided in this section, such
determination shall apply to any adjournment thereof, except where the
determination has been made through the closing of the transfer books and the
stated period of closing has expired.
Section 5. Share Ledger. The Trust shall maintain at its
principal office or at the office of its counsel, accountants
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or transfer agent, an original or duplicate share ledger containing the name and
address of each shareholder and the number of shareholders of each class held by
such shareholder.
Section 6. Fractional Shares; Issuance of Units. Trustees may
issue fractional shares or provide for the issuance of scrip, all on such terms
and under such conditions as they may determine. Notwithstanding any other
provision of the Declaration or these Bylaws, the Trustees may issue units
consisting of different securities of the Trust. Any security issued in a unit
shall have the same characteristics as any identical securities issued by the
Trust, except that the Trustees may provide that for a specified period
securities of the Trust issued in such unit may be transferred on the books of
the Trust only in such unit.
ARTICLE VIII.
ACCOUNTING YEAR
The Trustees shall have the power, from time to time, to fix
the fiscal year of the Trust by a duly adopted resolution.
ARTICLE IX.
DIVIDENDS
Section 1. Declaration. Dividends upon the shares of the Trust
may be declared by the Trustees, subject to the provisions of law and the
Declaration of Trust. Dividends may be paid in cash, property or shares of the
Trust, subject to the provisions of law and the Declaration.
Section 2. Contingencies. Before payment of any dividends,
there may be set aside out of any funds of the Trust available for dividends
such sum or sums as the Trustees may from time to time, in their absolute
discretion, think proper as the reserve fund for contingencies, for equalizing
dividends, for repairing or maintaining any property of the Trust or for such
other purpose as the Trustees shall determine to be in the best interest of the
Trust, and the Trustees may modify or abolish any such reserve in the manner in
which it was created.
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ARTICLE X.
INVESTMENT POLICY
Subject to the provisions of the Declaration of Trust, the
Trustees may from time to time adopt, amend, revise or terminate any policy or
policies with respect to investments by the Trust as they shall deem appropriate
in their sole discretion.
ARTICLE XI.
SEAL
Section 1. Seal. The Trustees may authorize the adoption of a
seal by the Trust. The seal shall have inscribed thereon the name of the Trust
and the year of its organization. The Trustees may authorize one or more
duplicate seals and provide for the custody thereof.
Section 2. Affixing Seal. Whenever the Trust is required to
place its seal to a document, it shall be sufficient to meet the requirements of
any law, rule or regulation relating to a seal to place the word "(SEAL)"
adjacent to the signature of the person authorized to execute the document on
behalf of the Trust.
ARTICLE XII.
INDEMNIFICATION
To the maximum extent permitted by Maryland law in effect from
time to time, the Trust, without requiring a preliminary determination of the
ultimate entitlement to indemnification, shall indemnify (a) any Trustee,
officer or shareholder or any former Trustee, officer or shareholder (including
among the foregoing, for all purposes of this Article XII and without
limitation, any individual who, while a Trustee and at the request of the Trust,
serves or has served another corporation, partnership, joint venture, trust,
employee benefit plan or any other enterprise as a director, officer, partner or
trustee of such corporation, partnership, joint venture, trust, employee benefit
plan or other enterprise), who has been successful, on the merits or otherwise,
in the defense of a proceeding to which he was made a party by reason of such
status, against reasonable expenses incurred by him in connection with the
proceeding, (b) any Trustee or officer or any former Trustee or officer against
any claim or liability to which he may become subject by reason of such status
unless it is established that
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(i) his act or omission was committed in bad faith or was the result of active
and deliberate dishonesty, (ii) he actually received an improper personal
benefit in money, property or services, or (iii) in the case of a criminal
proceeding, he had reasonable cause to believe that his act or omission was
unlawful and (c) each shareholder or former shareholder against any claim or
liability to which he may be subject by reason of his status as a shareholder or
former shareholder. In addition, the Trust shall pay or reimburse, in advance of
final disposition of a proceeding, reasonable expenses incurred by a Trustee,
officer or shareholder or former Trustee, officer or shareholder made a party to
a proceeding by reason of his status as a Trustee, officer or shareholder
provided that, in the case of a Trustee or officer, the Trust shall have
received (i) a written affirmation by the Trustee or officer of his good faith
belief that he has met the applicable standard of conduct necessary for
indemnification by the Trust as authorized by these Bylaws and (ii) a written
undertaking by or on his behalf to repay the amount paid or reimbursed by the
Trust if it shall ultimately be determined that the applicable standard of
conduct was not met. The Trust may, with the approval of its Trustees, provide
such indemnification and payment or reimbursement of expenses to any Trustee,
officer or shareholder or any former Trustee, officer or shareholder who served
a predecessor of the Trust and to any employee or agent of the Trust or a
predecessor of the Trust. Neither the amendment nor repeal of this Section, nor
the adoption or amendment of any other provision of the Declaration of Trust or
these Bylaws inconsistent with this Section, shall apply to or affect in any
respect the applicability of this paragraph with respect to any act or failure
to act which occurred prior to such amendment, repeal or adoption. Any
indemnification or payment or reimbursement of the expenses permitted by these
Bylaws shall be furnished in accordance with the procedures provided for
indemnification and payment or reimbursement of expenses under Section 2-418 of
the Maryland General Corporation Law (the "MGCL") for directors of Maryland
corporations. The Trust may provide to Trustees, officers and shareholders such
other and further indemnification or payment or reimbursement of expenses as may
be permitted by the MGCL, as in effect from time to time, for directors of
Maryland corporations.
ARTICLE XIII.
WAIVER OF NOTICE
Whenever any notice is required to be given pursuant to the
Declaration of Trust or Bylaws or pursuant to applicable law, a waiver thereof
in writing, signed by the person or persons entitled to such notice, whether
before or after the time stated therein, shall be deemed equivalent to the
giving of such notice. Neither the business to be transacted at nor the purpose
of any
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meeting need be set forth in the waiver of notice, unless specifically required
by statute. The attendance of any person at any meeting shall constitute a
waiver of notice of such meeting, except where such person attends a meeting for
the express purpose of objecting to the transaction of any business on the
ground that the meeting is not lawfully called or convened.
ARTICLE XIV.
AMENDMENT OF BYLAWS
The Trustees shall have the exclusive power to adopt, alter or
repeal any provision of these Bylaws and to make new Bylaws.
The foregoing are certified as the Bylaws of the Trust adopted
by the Trustees as of August 22, 1996.
/s/ Francine M. Haulenbeek
---------------------------------
Secretary
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AGREEMENT OF LIMITED PARTNERSHIP
OF
BRANDYWINE OPERATING PARTNERSHIP, L.P.
<PAGE>
TABLE OF CONTENTS
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BACKGROUND:................................................................. 1
AGREEMENTS.................................................................. 4
ARTICLE I: DEFINITIONS............................................... 4
ARTICLE II: FORMATION OF PARTNERSHIP.................................. 18
Section 2.1 Formation of Partnership......................... 18
Section 2.2 Name, Principal Place of Business and
Registered Office................................ 18
Section 2.3 Purpose.......................................... 19
Section 2.4 Powers........................................... 19
Section 2.5 Term............................................. 20
Section 2.6 Amendment of Certificate......................... 20
Section 2.7 Partnership Assets............................... 20
Section 2.8 Limitation on Liability of Persons
Related to Partners.............................. 21
Section 2.9 Conflicts of Interest and Transactions
with Affiliates.................................. 21
Section 2.10 Statutory Compliance............................. 21
ARTICLE III: PARTNERSHIP INTERESTS..................................... 22
Section 3.1 In General....................................... 22
Section 3.2 Class A, Class B and Class C Limited
Partnership Interests............................ 22
Section 3.3 Creation and Issuance of Additional
Classes of Partnership Interests................. 23
Section 3.4 Other Provisions Relating to All Classes
of Partnership Interests......................... 24
Section 3.5 Register......................................... 24
ARTICLE IV: CONTRIBUTIONS TO CAPITAL AND ISSUANCES OF
PARTNERSHIP INTERESTS..................................... 25
Section 4.1 General Partner and Initial Class B
Limited Partner Capital Contributions............ 25
Section 4.2 Initial Class A Limited Partner Capital
Contributions.................................... 25
Section 4.3 Initial Class C Limited Partner Capital
Contributions.................................... 26
Section 4.4 Option to Acquire Retained Interests in
Title Holding Partnerships....................... 27
Section 4.5 Issuance of Additional Class A and
General Partner Units Upon Achievement
of Mortgage Discounts............................ 28
Section 4.6 Forfeiture of Class A Units Upon Payment
of Certain Mortgage Indebtedness With
Equity Participation Rights...................... 29
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Section 4.7 Forfeiture of Certain Class A Units and
General Partners' Units Upon Payment of
the GECC Equity Participation, and Upon
Foreclosure of GECC Loan......................... 30
Section 4.8 Forfeiture of Certain Class A Units Upon
Payment of Certain Lease Equity
Participations................................... 32
Section 4.9 Capital Contributions Generally.................. 33
Section 4.10 No Third Party Beneficiary....................... 34
Section 4.11 SSI Right of First Refusal....................... 34
ARTICLE V: CAPITAL ACCOUNTS.......................................... 34
Section 5.1 Establishment and Maintenance of Capital
Accounts......................................... 34
Section 5.2 Succession to Capital Accounts................... 35
Section 5.3 Certain Adjustments.............................. 35
ARTICLE VI: DISTRIBUTIONS............................................. 35
Section 6.1 Distributions Prior to Qualified
Offering......................................... 35
Section 6.2 Distributions After Qualified Offering........... 37
Section 6.3 Distributions to Pay Taxes....................... 37
Section 6.4 Distributions upon Liquidation................... 38
Section 6.5 Additional Distribution Rules.................... 38
Section 6.6 Taxes Withheld................................... 39
Section 6.7 In-Kind Distributions............................ 39
Section 6.8 No Other Distributions Permitted................. 40
Section 6.9 Special Distributions............................ 40
ARTICLE 7: ALLOCATIONS...................................... 40
Section 7.1 Allocation of Net Income and Net Loss
Before a Qualified Offering...................... 41
Section 7.2 Allocation of Net Income and Net Loss in
Connection with and After a Qualified
Offering......................................... 42
Section 7.3 Special Allocations.............................. 42
Section 7.4 Tax Allocations.................................. 44
Section 7.5 Additional Special Allocations................... 45
ARTICLE VIII: EXPENSES; RIGHTS, DUTIES AND RESTRICTIONS OF THE
GENERAL PARTNER; VOTING RIGHTS OF CLASS A
PARTNERS......................................... 45
Section 8.1 Expenses Borne by the Partnership................ 45
Section 8.2 Powers and Duties of General Partner............. 47
Section 8.3 Voting Rights.................................... 51
Section 8.4 Proscriptions.................................... 52
Section 8.5 Qualified Offering............................... 53
Section 8.6 Additional Partners.............................. 54
Section 8.7 Compensation of the General Partner.............. 54
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Section 8.8 Waiver and Indemnification..................... 54
Section 8.9 Operation in Accordance with REIT
Requirements................................... 55
Section 8.10 Reliance by Third Parties...................... 55
Section 8.11 Other Matters Concerning the General
Partner........................................ 55
Section 8.12 Meetings of Partners........................... 56
ARTICLE IX: ACCOUNTING AND RECORDS.................................. 58
Section 9.1 Books and Records.............................. 58
Section 9.2 Annual Reports................................. 58
Section 9.3 Tax Returns.................................... 59
Section 9.4 Fiscal Year.................................... 59
Section 9.5 Bank Accounts.................................. 59
ARTICLE X: CHANGES IN GENERAL PARTNERS............................. 60
Section 10.1 Permitted Assignment of General
Partnership Interest; Permitted
Withdrawal by the General Partner.............. 60
Section 10.2 Admission of Additional General
Partners....................................... 60
Section 10.3 Effect of Withdrawal of General Partner........ 60
Section 10.4 Liability of a Withdrawn General
Partner........................................ 61
ARTICLE XI: TRANSFERS OF LIMITED PARTNERSHIP INTERESTS.............. 61
Section 11.1 General Transfer Provisions and Restric-
tions.......................................... 61
Section 11.2 Expenses....................................... 63
Section 11.3 Allocations with Respect to Transferred
Interest....................................... 63
Section 11.4 Section 754 Election........................... 63
Section 11.5 Transferee's Rights............................ 64
ARTICLE XII: ADMISSION OF PARTNERS................................... 64
Section 12.1 Procedure...................................... 64
ARTICLE XIII: DISSOLUTION, LIQUIDATION AND WINDING-UP................. 64
Section 13.1 Events of Dissolution.......................... 64
Section 13.2 Continuation of the Business of the
Partnership After Certain Events of
Dissolution.................................... 65
Section 13.3 Effect of Event of Dissolution................. 65
Section 13.4 Accounting..................................... 66
Section 13.5 Distribution on Dissolution.................... 66
Section 13.6 Timing Requirements............................ 67
Section 13.7 Sale of Partnership Assets..................... 67
Section 13.8 Distributions in Kind.......................... 67
Section 13.9 Documentation of Liquidation................... 68
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Section 13.10 Liability of the Liquidating Trustee............ 68
ARTICLE XIV: RIGHTS AND OBLIGATIONS OF THE LIMITED
PARTNERS................................................. 68
Section 14.1 No Participation in Management.................. 68
Section 14.2 Death, Incompetence, Bankruptcy, Etc............ 69
Section 14.3 No Withdrawal................................... 69
Section 14.4 Power of Attorney............................... 69
Section 14.5 Limited Liability of Limited Partners........... 70
ARTICLE XV: GRANT OF REDEMPTION RIGHTS TO LIMITED
PARTNERS................................................. 70
Section 15.1 Grant of Redemption Rights...................... 70
Section 15.2 General Partner Exchange........................ 70
Section 15.3 Certain Limitations on Redemption
Right........................................... 72
Section 15.4 Adjustments..................................... 72
Section 15.5 Certain Covenants............................... 76
ARTICLE XVI: CONVERSION OF CLASS B UNITS AND CLASS C UNITS
INTO GENERAL PARTNER UNITS............................... 77
Section 16.1 Automatic Conversion of Class C Units
into General Partner Units...................... 77
Section 16.2 Automatic Conversion of Class B Units
into General Partner Units...................... 77
ARTICLE XVII: LIMITED PARTNER REPRESENTATIONS AND
WARRANTIES............................................... 77
Section 17.1 Representations and Warranties of the
Limited Partners................................ 77
ARTICLE XVIII: GENERAL PARTNER REPRESENTATIONS AND
WARRANTIES............................................... 79
Section 18.1 Organization.................................... 79
Section 18.2 Due Authorization; Binding Agreement............ 79
Section 18.3 Consents and Approvals.......................... 79
ARTICLE XIX: INDEMNIFICATION.......................................... 80
Section 19.1 Indemnification................................. 80
Section 19.2 Limitations on Indemnification
Obligations..................................... 80
Section 19.3 Security and Remedies........................... 81
Section 19.4 Restriction on Transfer......................... 82
Section 19.5 No Credit to Capital Accounts................... 83
Section 19.6 Release of Collateral........................... 83
ARTICLE XX ARBITRATION OF DISPUTES.................................. 84
Section 20.1 Settlement of Disputes.......................... 84
Section 20.2 Arbitration..................................... 84
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Section 20.3 Binding Character............................ 85
Section 20.4 Exclusivity.................................. 85
Section 20.5 No Alteration of Agreement................... 85
ARTICLE XXI: ASSUMPTION OF LIABILITIES AND
INDEMNIFICATIONS...................................... 85
Section 21.1 Assumption of Liabilities.................... 85
Section 21.2 Indemnification.............................. 85
ARTICLE XXII: GENERAL PROVISIONS.................................... 86
Section 22.1 Notices...................................... 86
Section 22.2 Successors................................... 86
Section 22.3 Effect and Interpretation.................... 86
Section 22.4 Counterparts................................. 86
Section 22.5 Partners Not Agents.......................... 86
Section 22.6 Entire Understanding; Etc.................... 87
Section 22.7 Amendments................................... 87
Section 22.8 Severability................................. 88
Section 22.9 Trust Provision.............................. 88
Section 22.10 Pronouns and Headings........................ 88
Section 22.11 Assurances................................... 88
EXHIBITS
Exhibit A List of Limited Partners
Exhibit B List of Portfolio A Title Holding Partnerships and
Properties
Exhibit C List of Portfolio C Title Holding Partnerships and
Properties
Exhibit D List of Portfolio B Title Holding Partnerships and
Properties
Exhibit E List of BRT OP Properties
Exhibit F List of Contributed Assets
Exhibit G List of Existing Mortgage Indebtedness Encumbering
Portfolio B and C Properties
Exhibit H List of Existing Mortgage Indebtedness with Equity
Participation Rights Encumbering Portfolio B and C
Properties
Exhibit I List of Retained Interests
Exhibit J Lease Equity Participation Schedule
Exhibit K GECC Participation Payment Schedule
Exhibit L Allocation of Transaction Expenses
Exhibit M List of Permitted Encumbrances
SCHEDULES
Schedule 1 Form of Notice of Redemption
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<PAGE>
AGREEMENT OF LIMITED PARTNERSHIP
OF
BRANDYWINE OPERATING PARTNERSHIP, L.P.
AGREEMENT OF LIMITED PARTNERSHIP dated August 22, 1996 by and
among BRANDYWINE REALTY TRUST, a Maryland real estate investment trust as
general partner (the "General Partner"), and the PERSONS NAMED IN EXHIBIT "A"
attached hereto, as limited partners (together with any other Person who becomes
a limited partner in the Partnership as hereinafter provided, the "Limited
Partners"). The General Partner and the Limited Partners are sometimes referred
to individually as a "Partner" and collectively as the "Partners".
BACKGROUND:
A. Witmer Operating Partnership I, L.P. ("Witmer Partnership") is a
Delaware limited partnership that owns substantially all of the partnership
interests in certain limited partnerships that own office and/or industrial
properties. These partnerships, and the properties owned by them (referred to
herein as the "Portfolio A Properties") are listed on Exhibit "B" attached
hereto. Witmer Partnership also owns in fee the office property known as the
Lawrenceville Office Park, Lawrenceville, New Jersey (the "Lawrenceville
Property").
B. Safeguard Scientifics, Inc., a Pennsylvania corporation
("Safeguard"), owns all of the issued and outstanding shares of BRT Witmer, Inc.
("Witmer GP"), a Pennsylvania corporation that is the sole general partner of
Witmer Partnership, and all of the issued and outstanding shares of SSI Real,
Inc., a Pennsylvania corporation ("SSI Real") that owns all of the Class B
partnership units issued by Witmer Partnership (the "Witmer Class B Units"). The
Nichols Company, a Pennsylvania corporation ("The Nichols Company") and certain
other existing limited partners of Witmer Partnership own the Class A
partnership units issued by Witmer Partnership (the "Witmer Class A Units"), as
shown on Exhibit "B" attached hereto.
C. The Nichols Company and certain other persons own all of the
partnership interests in certain limited partnerships that own office and/or
industrial properties. These partnerships, and the properties owned by them
(referred to herein as the "Portfolio C Properties") are listed on Exhibit "C"
attached hereto. The partnerships owning the Portfolio A Properties and the
Portfolio C Properties and one of the Portfolio B Properties described in
paragraph D below are sometimes referred to herein as the "Title Holding
Partnerships".
<PAGE>
D. Safeguard owns certain office and industrial properties that are
listed on Exhibit "D" attached hereto and referred to herein as the "Portfolio B
Properties" in fee and through a Title Holding Partnership described on Exhibit
"D".
E. Brandywine Realty Trust, a Maryland real estate investment trust
("BRT"), is a real estate investment trust and a general partner of Brandywine
Realty Partners, a general partnership ("BRT OP"), which owns certain office
properties which are described on Exhibit "E" attached hereto (the "BRT OP
Properties").
F. The Portfolio A Properties, Portfolio B Properties and Portfolio C
Properties, and the BRT OP Properties are referred to herein collectively as the
"Properties" and individually as a "Property".
G. This Agreement is being executed as part of a larger transaction, in
which: (i) Safeguard and BRT are entering into a Share and Warrant Purchase
Agreement whereby Safeguard or a wholly-owned subsidiary designated by it will
acquire common stock and warrants to purchase Common Stock of BRT in
consideration for the assignment to BRT of all of the Witmer Class B Units owned
by SSI Real and payment of $426,250, the assignment to a wholly-owned qualified
real estate subsidiary of BRT of all of the general partnership interest of
Witmer Partnership owned by Witmer GP, and the assignment to BRT of all of the
limited partnership interest owned by Witmer GP in certain Title Holding
Partnerships that own Portfolio A Properties; (ii) BRT, The Nichols Company and
Safeguard Scientifics (Delaware), Inc., a wholly-owned subsidiary of Safeguard
("SSI"), will form and organize the Partnership described in paragraph H below
to own, hold, operate and manage the Properties directly or through the Title
Holding Partnerships and BRT OP; (iii) the Partnership will acquire options to
purchase certain properties known as Horsham 11 through 14 from the owners of
such properties; (iv) SSI will enter into a distribution support and loan
agreement with the Partnership whereby SSI will commit to lend the Partnership
certain funds; and (v) The Nichols Company and BRT will execute a bill of sale
and assignment whereby The Nichols Company will transfer to BRT or its designee
substantially all of The Nichols Company's furniture, fixtures and equipment.
H. BRT, The Nichols Company, SSI and the other persons executing this
Agreement as a Partner now desire to form a limited partnership under the law of
the State of Delaware to be known as Brandywine Operating Partnership, L.P. (the
"Partnership"), to which (i) BRT will contribute all of the Witmer Class B Units
of the Witmer Partnership, all of the limited partnership interest that it has
acquired in certain Title Holding Partnerships that own Portfolio A Properties,
$1,000, and the furniture, fixtures and equipment that BRT is
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acquiring on the date hereof from The Nichols Company in return for the issuance
of general partner interests in the Partnership and Class B Units of Limited
Partnership Interest to BRT; (ii) BRT will contribute all its interest (in a
two-step transaction) as general partner of BRT OP to the Partnership in return
for issuance of Class C Units of Limited Partnership Interest to BRT; (iii) The
Nichols Company and the other existing partners of Witmer holding the Witmer
Class A Units will contribute the Witmer Class A Units in return for issuance to
them of Class A Limited Partnership Interests in the Partnership; (iv) Safeguard
will contribute its title to the Portfolio B Properties in return for the
issuance to SSI of Class A Limited Partnership Interests in the Partnership; and
(v) The Nichols Company and certain other persons will contribute partnership
interests, representing 99% of the profits interest and 89% of the capital
interest, in the Title Holding Partnerships owning the Portfolio C Properties to
the Partnership (or in certain cases to a qualified real estate subsidiary
wholly-owned by the General Partner) in return for the issuance to them of Class
A Limited Partnership Interests in the Partnership. Such contributions are being
made by such persons concurrently with the execution of this Agreement pursuant
to that certain Contribution Agreement dated July 31, 1996 between and among
BRT, Safeguard, SSI and The Nichols Company.
I. As a result of the transactions described above, upon the execution
of this Agreement and the simultaneous contributions to the Partnership created
hereby provided for in the Contribution Agreement:
o The Partnership is created with BRT serving as the
Partnership's General Partner and owning all of the
general partnership interest in the Partnership.
o The Partnership owns (i) a portion of BRT's prior
equity interest in BRT OP (and will be entitled to
acquire the balance 12 months and a day after the
date hereof) which in turn owns the BRT OP
Properties; (ii) all of the outstanding limited
partnership interest in Witmer Partnership; (iii)
all of the Portfolio B Properties directly or
through a Title Holding Partnership; and (iv)
substantially all of the outstanding partnership
interests in the Title Holding Partnerships that
own the Portfolio C Properties.
o The Partnership holds options to purchase the
Horsham 11 through 14 Properties.
o The Limited Partners of the Partnership consist of
SSI, The Nichols Company, BRT and the other persons
listed on Exhibit "A" as Limited Partners
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who have contributed property to the Partnership
pursuant to the Contribution Agreement.
Now, the General Partner and the Limited Partners named in
Exhibit "A" hereto wish to organize the Partnership as a limited partnership
formed under the Act with the General Partner as the sole general partner and
such named Limited Partners as the initial limited partners, for the purpose of
owning and operating the business of the Partnership as hereinafter set forth.
AGREEMENTS:
In consideration of the foregoing and the mutual promises
herein contained, and intending to be legally bound, the parties hereto hereby
agree as follows:
ARTICLE I: DEFINITIONS
Except as otherwise herein expressly provided, the following
terms and phrases used in this Agreement and the Exhibits hereto shall have the
meanings set forth below:
"Act" shall mean the Revised Uniform Limited Partnership Act
of the State of Delaware as in effect on the date hereof, and as the same may
hereafter be amended from time to time.
"Adjusted Capital Account Deficit" shall mean, with respect to
any Partner, the deficit balance, if any, in such Partner's Capital Account as
of the end of any relevant fiscal year and after giving effect to the following
adjustments:
(a) credit to such Capital Account any amounts
which such Partner is obligated or treated as obligated to restore with respect
to any deficit balance in such Capital Account pursuant to Section
1.704-1(b)(2)(ii)(c) of the Regulations, or is deemed to be obligated to restore
with respect to any deficit balance pursuant to the penultimate sentences of
Sections 1.704-2(g)(1) and 1.704-2(i)(5) of the Regulations; and
(b) debit to such Capital Account the items
described in Sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6) of the Regulations.
The foregoing definition of Adjusted Capital Account Deficit is intended to
comply with the requirements of the alternate test for economic effect contained
in Section 1.704-1(b)(2)(ii)(d) of the Regulations and shall be interpreted
consistently therewith.
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"Affiliate" shall mean, with respect to any Partner (or as to
any other Person the affiliates of whom are relevant for purposes of any of the
provisions of this Agreement), (a) any member of the Immediate Family of such
Partner; (b) any shareholder, director, officer, trustee, general partner,
shareholder of a general partner or beneficiary of a Partner; (c) any legal
representative, successor, or assignee of any Person referred to in the
preceding clauses (a) and (b); (d) any trustee for the benefit of any Person
referred to in the preceding clauses (a) through (c); or (e) any Entity which
directly or indirectly through one or more intermediaries, Controls, is
Controlled by, or is under common Control with any Person referred to in the
preceding clauses (a) through (d).
"Agreement" shall mean this Agreement of Limited Partnership,
as originally executed and as amended, modified, supplemented or restated from
time to time, as the context requires.
"Assumed Liability" shall have the meaning set forth in
Section 21.1 hereof.
"Audited Financial Statements" shall mean financial statements
(balance sheet, statement of operations, statement of partners' equity and
statement of cash flows) prepared in accordance with generally accepted
accounting principles and accompanied by an independent auditor's report.
"Bankruptcy" shall mean, with respect to any Partner, (a) the
commencement by such Partner of any proceeding seeking relief under any
provision or chapter of the federal Bankruptcy Code, 11 U.S.C. ss.101 et seq.,
as the same may be amended from time to time, or any other federal or state law
relating to insolvency, bankruptcy or reorganization; (b) an adjudication that
such Partner is insolvent or bankrupt; (c) the entry of an order for relief
under the federal Bankruptcy Code with respect to such Partner; (d) the filing
of any such petition or the commencement of any such case or proceeding against
such Partner, unless such petition and the case or proceeding initiated thereby
are stayed or dismissed within ninety (90) days from the date of such filing;
(e) the filing of an answer by such Partner admitting the allegations of any
such petition; (f) the appointment of a trustee, receiver or custodian for all
or substantially all of the assets of such Partner unless such appointment is
stayed, vacated or dismissed within ninety (90) days from the date of such
appointment but not less than five (5) days before the proposed sale of any
assets of such Partner; (g) the insolvency of such Partner or the execution by
such Partner of a general assignment for the benefit of creditors; (h) the
convening by such Partner of a meeting of its creditors, or any class thereof,
for purposes of effecting a moratorium upon or extension or composition of its
debts; (i) the failure of such Partner to pay
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its debts as they mature; (j) the levy, attachment, execution or other seizure
of substantially all of the assets of such Partner where such seizure is not
discharged within thirty (30) days thereafter; (k) the admission by such Partner
in writing of its inability generally to pay its debts as they mature or that it
is generally not paying its debts as they become due; or (l) the taking of any
corporate or partnership action in connection with the foregoing.
"BRT Administrative Expenses" shall mean all those
administrative costs and expenses of BRT described in Section 8.1(c).
"BRT OP" shall mean Brandywine Realty Partners, a general
partnership, which owns the BRT OP Properties.
"BRT OP Properties" shall have the meaning given to such term
in paragraph (E) under the caption "Background" to this Agreement.
"Business Day" shall mean any day other than a Saturday, a
Sunday or a day on which the American or New York Stock Exchange or The NASDAQ
Stock Market is closed.
"Capital Account" shall mean, with respect to any Partner, the
separate "book" account which the Partnership shall establish and maintain for
such Partner in accordance with Section 704(b) of the Code and Section
1.704-1(b)(2)(iv) of the Regulations and such other provisions of Section
1.704-1(b) of the Regulations that must be complied with in order for the
Capital Accounts to be determined in accordance with the provisions of said
Regulations.
"Capital Contribution" shall mean, with respect to any
Partner, the amount of money and assets contributed to the Partnership by such
Partner (net of liabilities to which such contributed assets are subject).
"Cash Amount" shall mean an amount of cash per Class A Unit
equal to the Current Per Share Market Price of the number of shares of Common
Stock issuable in respect of one Class A Unit pursuant to Section 15.2.
"Cash Equivalents" shall mean obligations of the United States
government with a maturity of not more than 60 days and time deposits and
accounts maintained in a national banking association and fully insured by the
federal Deposit Insurance Corporation.
"Certificate" shall mean the Certificate of Limited
Partnership establishing the Partnership, as filed with the office of the
Secretary of State of Delaware, as amended and as
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it may hereafter be amended from time to time in accordance with the terms of
this Agreement and the Act.
"Class A Limited Partnership Interest" shall have the meaning
ascribed to it in Section 3.1.
"Class A Units" shall have the meaning ascribed to it
in Section 3.2.
"Class B Accumulated Preferred Distributions" shall have the
meaning given to such term in Section 6.1(b)(iii).
"Class B Limited Partnership Interest" shall have the
meaning ascribed to it in Section 3.1
"Class B Liquidation Preference" shall mean the sum of (i) the
amount of all then unpaid Class B Accumulated Preferred Distributions, plus (ii)
$3,937,000 (which represents the agreed monetary value of (x) the capital stock
of Witmer GP and (y) the Class B Units in the Witmer Partnership contributed by
BRT to the Partnership) reduced by any return of such capital under Section
6.1(c).
"Class B Preferred Distribution" shall mean the amount that
represents (for the period in respect of which the distribution is being made)
an annualized return of 9.5% on $3.937 million (which $3.937 million represents
the agreed monetary value of (i) the capital stock of Witmer GP and (ii) the
Class B Units in the Witmer Partnership contributed by BRT to the Partnership),
reduced by any return of capital under Section 6.1(c).
"Class B Units" shall have the meaning ascribed to it
in Section 3.2.
"Class C Liquidation Preference" shall mean 100% of the Net
Sale Proceeds realized by the Partnership indirectly through BRT OP from the
sale or other disposition of the BRT Properties in connection with the
dissolution and liquidation of the Partnership.
"Class C Limited Partnership Interest" shall have the meaning
ascribed to it in Section 3.1.
"Class C Units" shall have the meaning ascribed to it
in Section 3.2.
"Closing Price" on any date shall mean the last sale price of
the Common Stock, regular way, or, in case no such sale takes place on such day,
the average of the closing bid and asked prices of the Common Stock, regular
way, in either case as reported in the principal consolidated transaction
reporting
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system with respect to securities listed or admitted to trading on the American
Stock Exchange, or such other national securities exchange or The NASDAQ Stock
Market on which the Common Stock is then listed or admitted to trading.
"Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
"Collateral" shall have the meaning set forth in
Section 19.3(a) hereof.
"Common Stock" shall mean the common shares of beneficial
interest, par value $.01 per share, of BRT.
"Contributed Assets" shall mean, with respect to a Partner,
the real property, personal property, contract rights, contracts, agreements and
other assets contributed by the Partner to the Partnership and shall include the
assets set forth on Exhibit "F" as being contributed to the Partnership on the
date hereof as the initial capital contribution of the Limited Partners named on
Exhibit "F".
"Contribution Agreement" shall mean the Contribution Agreement
among The Nichols Company, BRT, Safeguard and SSI dated July 31, 1996 pursuant
to which the Contributed Assets have been contributed by the Partners to the
Partnership.
"Control" shall mean the ability, whether by the direct or
indirect ownership of shares or other equity interests, by contract or
otherwise, to elect a majority of the directors of a corporation, to select the
managing partner of a partnership, or otherwise to select, or have the power to
remove and then select, a majority of those persons exercising governing
authority over an Entity. In the case of a limited partnership, the sole general
partner, all of the general partners to the extent each has equal management
control and authority, or the managing general partner or managing general
partners thereof shall be deemed to have control of such partnership and, in the
case of a trust, any trustee thereof or any Person having the right to select
any such trustee shall be deemed to have control of such trust.
"Current Per Share Market Price of the Common Stock" on any
date shall mean the average of the Closing Price of the Common Stock for the
five (5) consecutive Trading Days ending on such date.
"Depreciation" shall mean, with respect to any asset of the
Partnership for any fiscal year or other period, the depreciation, depletion or
amortization, as the case may be, allowed or allowable for federal income tax
purposes in respect of such asset for such fiscal year or other period;
provided, however,
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that if there is a difference between the Gross Asset Value and the adjusted tax
basis of such asset, Depreciation shall mean "book depreciation, depletion or
amortization" as determined under Section 1.704-1(b)(2)(iv)(g)(3) of the
Regulations.
"Discount" shall have the meaning ascribed to it in
Section 4.5(c).
"Distribution Support and Loan Agreement" shall mean that
certain Distribution Support and Loan Agreement between the Partnership and
Safeguard Delaware of even date herewith pursuant to which Safeguard Delaware
has committed, on the terms and subject to the conditions set forth in such
agreement, to loan the Partnership funds needed (i) to make certain preferential
distributions to the Limited Partner holding the Class B Units, (ii) to pay
certain closing costs and transfer taxes, and (iii) for working capital for the
operation of the Portfolio B Properties and Portfolio C Properties.
"Economic Capital Account" shall mean, with respect to any
Partner, the balance, if any, in such Partner's Capital Account as of the end of
any relevant period, increased by such Partner's share of Partnership Minimum
Gain and Minimum Gain Attributable to Partner Nonrecourse Debt, and decreased by
the items described in Regulations Sections 1.704-1(b)(2)(ii)(d)(4), (5) and
(6).
"Encumbrance" shall mean any liens, security interests,
mortgages, deeds of trust, charges, claims, encumbrances, pledges, options,
rights of first offer or first refusal and any other rights or interests of
others of any kind or nature, actual or contingent, or other similar
encumbrances of any nature whatsoever.
"Entity" shall mean any general partnership, limited
partnership, corporation, joint venture, limited liability company, trust,
business trust, cooperative or association.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended from time to time (or any corresponding provisions of
succeeding laws).
"Event of Withdrawal" shall mean any event specified in
Section 17-402 of the Act or any corresponding provision of succeeding law.
"Excluded Common Shares" shall mean shares of Common Stock
issued by BRT on or after May 1, 1996, the net proceeds of which are not
contributed to the Partnership.
"Existing Mortgage Indebtedness" shall mean the
mortgage indebtedness on the Portfolio B and Portfolio C
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Properties in the aggregate principal amounts on the date hereof reflected on
Exhibit G hereto.
"Fiscal Year" shall have the meaning ascribed to it in
Section 9.4.
"General Partner" shall mean Brandywine Realty Trust, a
Maryland real estate investment trust, in its capacity as general partner of the
Partnership, its duly admitted successors and assigns and any other person who
is a general partner of the Partnership at the time of reference thereto.
"GECC" shall mean General Electric Capital Corporation,
a New York corporation.
"GECC Loan" shall have the meaning given to such term in
Section 4.7(a).
"GECC Participation Payment" shall have the meaning given to
such term in Section 4.7 hereof.
"General Partnership Interest" shall mean the
Partnership Interest of any General Partner.
"GP Shares Amount" shall mean one share of Common Stock, as
such number may be adjusted pursuant to Section 15.4.
"Gross Asset Value" shall mean, with respect to any asset, the
asset's adjusted basis for federal income tax purposes except as follows:
(1) The initial Gross Asset Value of any asset
contributed by a Partner to the Partnership shall be the gross fair market value
of such asset at the time of such contribution, as agreed to by the Partners;
(2) The Gross Asset Values of all Partnership assets
shall be adjusted to equal their respective gross fair market values, as agreed
to by the Partners, as of the following times: (a) the acquisition of an
additional interest in the Partnership by any new or existing Partner in
exchange for more than a de minimis capital contribution; (b) the distribution
by the Partnership to a Partner of more than a de minimis amount of Partnership
property other than money, unless all Partners receive simultaneous
distributions of undivided interests in the distributed property in proportion
to their respective Percentage Interests; (c) the liquidation of the Partnership
within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g); and (d) the
termination of the Partnership for federal income tax purposes pursuant to
Section 708(b)(1)(B) of the Code; and
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(3) The Gross Asset Value of any Partnership asset
distributed to any Partner shall be the gross fair market value of such asset on
the date of distribution.
If the Gross Asset Value of an asset has been determined or adjusted pursuant to
subparagraph (1) or (2) hereof, such Gross Asset Value shall thereafter be
adjusted by the Depreciation taken into account with respect to such asset for
purposes of computing Net Income and Net Loss.
"Indemnity Notice" shall have the meaning set forth in
Section 19.3(b) hereof.
"Lawrenceville Deficiency" shall have the meaning given to
such term in Section 4.7(b).
"Lawrenceville Property" shall mean the office building
project located in Lawrenceville, New Jersey known as the Lawrenceville Office
Park owned in fee simple title by Witmer Partnership.
"Liabilities" shall have the meaning set forth in
Section 19.1 hereof.
"Limited Partners" shall mean those Persons listed on Exhibit
A hereto in their respective capacities as limited partners of the Partnership,
their permitted successors or assigns as a limited partner hereof, or any Person
who, at the time of reference thereto, is a limited partner of the Partnership.
"Limited Partnership Interest" shall mean any equity interest
in the Partnership held by any person or entity as a Limited Partner.
"Liquidating Trustee" shall mean such individual or Entity as
is selected as the Liquidating Trustee hereunder by the General Partner, which
individual or Entity may include the General Partner or an Affiliate of the
General Partner, provided such Liquidating Trustee agrees in writing to be bound
by the terms of this Agreement. The Liquidating Trustee shall be empowered to
give and receive notices, reports and payments in connection with the
dissolution, liquidation and/or winding-up of the Partnership and shall hold and
exercise such other rights and powers as are necessary or required to permit all
parties to deal with the Liquidating Trustee in connection with the dissolution,
liquidation and/or winding-up of the Partnership.
"Major Decisions" shall have the meaning set forth in
Section 8.3 hereof.
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"Management Company" means Brandywine Realty Services
Corporation, a Pennsylvania corporation, all of whose nonvoting preferred stock
and 5% of whose common stock is owned by the Partnership and whose business is
to manage the Properties.
"Management Contracts" means the various management contracts
assigned to the Management Company on the date hereof by (i) The Nichols Realty
Services Company, an affiliate of The Nichols Company, pursuant to which the
Management Company will manage each of the Portfolio A Properties, Portfolio B
Properties and Portfolio C Properties, and (ii) BRT pursuant to which the
Management Company will manage each of the BRT OP Properties, other than the
Twin Forks Property located in North Carolina.
"Minimum Gain Attributable to Partner Nonrecourse Debt" shall
mean "partner nonrecourse debt minimum gain" as determined in accordance with
Regulation Section 1.704-2(i)(2).
"Mortgage Indebtedness With Equity Participation Rights" shall
mean the Existing Mortgage Indebtedness on certain of the Portfolio B and
Portfolio C Properties in the aggregate principal amounts on the date hereof
reflected on Exhibit H hereto, pursuant to the terms of which the lender has an
equity participation in the cash flow and/or sales proceeds of the Property.
"Net Cash Flow" shall mean, with respect to any fiscal period
of the Partnership, the excess, if any, of "Receipts" over "Expenditures." For
purposes hereof, the term "Receipts" means the sum of all cash receipts of the
Partnership from all sources for such period, excluding Net Sale Proceeds and
Net Financing Proceeds, Capital Contributions, and including any amounts held as
reserves as of the last day of such period which the General Partner reasonably
deems to be in excess of necessary reserves as determined below. The term
"Expenditures" means the sum of (i) all cash expenses of the Partnership for
such period, (ii) the amount of all payments of principal and interest on
account of any indebtedness of the Partnership, or amounts due on such
indebtedness during such period, and (iii) such additional cash reserves as of
the last day of such period as the General Partner deems necessary for any
capital or operating expenditure permitted hereunder.
"Net Financing Proceeds" shall mean the proceeds realized from
any financing or refinancing of a Portfolio A, B, or C Property or group of
Portfolio A, B or C Properties prior to a Qualified Offering, net of the amounts
used to retire any indebtedness existing immediately prior to the transaction,
to pay transaction costs, and to fund reserves established by the General
Partner.
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"Net Income or Net Loss" shall mean, for each Fiscal Year or
other applicable period, an amount equal to the Partnership's net income or
loss for such year or period as determined for federal income tax purposes and
in accordance with Section 703(a) of the Code (for this purpose, all items of
income, gain, loss or deduction required to be stated separately pursuant to
Section 703(a) of the Code shall be included in taxable income or loss), with
the following adjustments: (a) by including as an item of gross income any
tax-exempt income received by the Partnership; (b) by treating as a deductible
expense any expenditure of the Partnership described in Section 705(a)(2)(B) of
the Code (including amounts paid or incurred to organize the Partnership (unless
an election is made pursuant to Code Section 709(b)) or to promote the sale of
interests in the Partnership and by treating deductions for any losses incurred
in connection with the sale or exchange of Partnership property disallowed
pursuant to Section 267(a)(1) or Section 707(b) of the Code as expenditures
described in Section 705(a)(2)(B) of the Code; (c) in lieu of depreciation,
depletion, amortization, and other cost recovery deductions taken into account
in computing total income or loss, there shall be taken into account
Depreciation; (d) gain or loss resulting from any disposition of Partnership
property with respect to which gain or loss is recognized for federal income tax
purposes shall be computed by reference to the Gross Asset Value of such
property rather than its adjusted tax basis; and (e) in the event of an
adjustment of the Gross Asset Value of any Partnership asset which requires that
the Capital Accounts of the Partnership be adjusted pursuant to Regulation
Section 1.704-1(b)(2)(iv)(e), (f) and (m), the amount of such adjustment is to
be taken into account as additional Net Income or Net Loss pursuant to Article
VII hereof.
"Net Sale Proceeds" shall mean the net proceeds realized from
any sale of a Portfolio Property or group of Portfolio Properties prior to a
Qualified Offering, net of amounts used to repay indebtedness and transaction
costs and to fund reserves established by the General Partner.
"Nichols Group" shall mean The Nichols Company and
Anthony A. Nichols.
"Non-Lawrenceville Proceeds" shall have the meaning given to
such term in Section 4.7(b).
"Nonrecourse Deductions" shall have the meaning set
forth in Sections 1.704-2(b)(1) and (c) of the Regulations.
"Nonrecourse Liabilities" shall have the meaning set
forth in Section 1.704-2(b)(3) of the Regulations.
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"Notice of Redemption" shall mean the Notice of Redemption
referred to in Section 15.1 hereof and substantially in the form of Schedule 1
to this Agreement.
"Option Agreements" shall mean those certain Option Agreements
of even date herewith between the Partnership and C/N Horsham Towne Limited
Partnership, a limited partnership, pursuant to which the Partnership has the
right and option to purchase the Option Properties.
"Option Properties" shall mean the office building properties
known as Horsham 11-14 that the Partnership has the right to purchase pursuant
to the Option Agreements.
"Partner Nonrecourse Deductions" shall have the meaning set
forth in Section 1.704-2(i)(2) of the Regulations.
"Partners" shall mean the General Partner and the Limited
Partners, their duly admitted successors or assigns or any Person who is a
partner of the Partnership at the time of reference hereto.
"Partnership" shall mean the limited partnership hereby
constituted, as such limited partnership may from time to time be constituted.
"Partnerships" shall mean the Partnership and the Witmer
Partnership, as they may hereafter from time to time be constituted.
"Partnership Minimum Gain" shall have the meaning set forth in
Section 1.704-2(b)(2) of the Regulations.
"Partnership Interest" shall mean the entire ownership
interest of a Partner in the Partnership at any particular time, including the
right of such Partner to any and all benefits to which a Partner may be entitled
as provided in this Agreement and in the Act, together with the obligations of
such Partner to comply with all of the terms and provisions of this Agreement
and of the Act.
"Partnership Units" shall mean a unit of interest in the
Partnership issued under this Agreement.
"Percentage Interest" shall mean, with respect to any Partner,
(i) prior to a Qualified Offering, the ratio of the number of GP Units, Class A
Units and Class B Units (but not the Class C Units) held by such Partner to the
aggregate number of Units of all such classes (excluding the Class C Units)
outstanding in the Partnership at the time of determination, and (ii) after a
Qualified Offering, the ratio of the number of GP Units and Class A Units held
by such Partner to the aggregate
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number of Units of all such classes outstanding in the
Partnership at the time of determination.
"Permitted Encumbrance" means any liens and security interests
on the Collateral granted on or prior to the date hereof by the owners of the
Collateral as security for repayment of any Existing Mortgage Indebtedness
listed on Exhibit "M", and the liens and security interests granted pursuant to
Section 19.3 hereof.
"Person" shall mean any individual or Entity.
"Portfolio A Properties, Portfolio B Properties, and Portfolio
C Properties" shall have the meanings given to such terms set forth in
paragraphs (A), (C) and (D), respectively, under the caption "Background" to
this Agreement.
"Property" shall mean any real property in which the
Partnership, directly or indirectly, acquires ownership of all or a portion of a
fee or leasehold interest, and shall mean as of the date of this Agreement the
Portfolio A Properties, Portfolio B Properties, Portfolio C Properties, and the
BRT OP Properties.
"Proxy Statement" shall mean the definitive proxy statement
mailed by BRT to the holders of its Common Stock soliciting proxies to be voted
in favor of the approval of the transactions contemplated by the Transaction
Documents at the Annual Shareholders' Meeting of BRT held on August 22, 1996.
"Qualified Offering" shall mean either an offering by BRT of
its Common Stock to the public registered under the Securities Act of 1933, as
amended, or an offering of its securities exempt from such registration, in
which BRT receives either (i) net offering proceeds of at least $35 million at
an offering price per share not less than the net book value of BRT's Common
Stock at the last day of the fiscal quarter immediately preceding the quarter in
which the offering occurs, calculated in accordance with generally accepted
accounting principles, or (ii) net offering proceeds of at least $25 million,
but less than $35 million, at an offering price per share of not less than
$5.50, as adjusted in accordance with customary practice for stock splits, stock
combinations and stock dividends occurring after the date hereof.
"Redeeming Partner" shall have the meaning set forth in
Section 15.1 hereof.
"Redemption Rights" shall have the meaning set forth in
Section 15.1 hereof.
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"Register" shall mean the register established pursuant
to Section 3.5.
"Registered Office" shall mean the location of the principal
office of the Partnership as set forth in filings made by the Partnership
pursuant to the Act.
"Registration Rights Agreement" shall mean the Registration
Rights Agreement by and among BRT, SSI, The Nichols Company, The Richard M.
Osborne Trust, and certain other persons, of even date herewith.
"Regulations" shall mean the final or temporary income tax
regulations promulgated under the Code, as such regulations may be amended and
in affect from time to time (including corresponding provisions of succeeding
regulations).
"Regulatory Allocations" shall have the meaning set
forth in Section 7.3(f).
"REIT" shall mean a real estate investment trust as defined in
Section 856 of the Code.
"REIT Requirements" shall mean the requirements for qualifying
as a real estate investment trust under the Code and Regulations.
"Requesting Party" shall have the meaning set forth in
Section 20.2 hereof.
"Retained Interest" shall mean the 11% capital interest and 1%
profits interest retained by (A) SSI in the Title Holding Partnership that owns
Building 2 of the Meetinghouse Business Center, one of the Portfolio B
Properties, contributed to the Partnership pursuant to Section 4.2 hereof, and
(B) The Nichols Company in (i) the Title Holding Partnerships that own the
Portfolio C Properties contributed to the Partnership pursuant to Section 4.2
hereof, and (ii) the Title Holding Partnerships in which the Witmer Partnership
serves as the sole general partner and owns directly and indirectly 89% of the
capital interest and 99% of the profits interest.
"Safeguard" shall mean Safeguard Scientifics, Inc., a
Pennsylvania corporation.
"Sales Price Threshold" shall have the meaning set
forth in Section 4.8(b).
"Section 704(c) Tax Items" shall have the meaning set forth in
Section 7.4(c).
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"Securities Act" shall mean the Securities Act of 1933,
as amended.
"Specified Redemption Date" shall mean the tenth (10th)
Business Day after receipt by the General Partner of a Notice of Redemption
delivered to the Partnership at any time after a Qualified Offering, or if no
Qualified Offering has then occurred, mailed or otherwise delivered to the
Partnership within five days of the end of any period of 20 consecutive business
days occurring after the second anniversary of the date of this Agreement during
which such 20 business day period the market price of a share of BRT Common
Stock averaged not less than $5.50 per share as adjusted in accordance with
customary practice for stock splits, stock combinations and stock dividends
occurring after the date hereof.
"SSI" means Safeguard Scientifics (Delaware), Inc., a
wholly-owned subsidiary of Safeguard.
"Share and Warrant Purchase Agreement" shall mean the Share
and Warrant Purchase Agreement dated July 31, 1996 between Safeguard and BRT
pursuant to which Safeguard is acquiring Common Stock and Warrants of BRT on the
date hereof as described in
Paragraph G under Background.
"Tax Items" shall have the meaning set forth in
Section 7.4(a).
"Tax Matters Partner" shall have the meaning ascribed
to it in Section 9.3.
"Tax Payment Loan" shall have the meaning ascribed to
it in Section 6.6.
"The Nichols Company" shall mean The Nichols Company, a
Pennsylvania corporation.
"Title Holding Partnership" shall mean any partnership in
which either the Partnership or the Witmer Partnership is the sole general
partner and which holds fee title to either a Portfolio A Property, a Portfolio
B Property, or a Portfolio C Property. The Title Holding Partnerships of the
Partnership as of the date hereof are listed on Exhibits B and C.
"Trading Day" shall mean a day on which the principal national
securities exchange or market on which the Common Stock is listed or admitted to
trading is open for the transaction of business or, if the Common Stock is not
listed or admitted to trading on any national securities exchange, shall mean
any Business Day.
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"Transaction Documents" shall mean the Share and Warrant
Purchase Agreement, the Contribution Agreement, the Option Agreements, and all
documents and certificates executed and delivered by the Partners in connection
with the formation of
the Partnership.
"Transfer" as a noun, shall mean any sale, assignment,
conveyance, pledge, hypothecation, gift, encumbrance or other transfer, and as a
verb, shall mean to sell, assign, convey, pledge, hypothecate, give, encumber or
otherwise transfer.
"Unit" shall have the meaning ascribed to it in
Section 3.1(c).
"Withholding Tax Act" shall have the meaning ascribed
to it in Section 6.6.
"Witmer Class A Units" shall have the meaning ascribed to it
in paragraph (B) under the caption "Background" to this Agreement.
"Witmer Class B Units" shall have the meaning ascribed to it
in paragraph (B) under the caption "Background" to this Agreement.
"Witmer GP" shall mean BRT Witmer, Inc., a Pennsylvania
corporation that serves as the sole general partner of Witmer Partnership.
"Witmer Partnership" shall mean Witmer Operating Partnership
I, L.P., organized pursuant to an Agreement of Limited Partnership dated
November 21, 1995, of which Witmer GP serves as sole general partner, and which
partnership (i) serves as sole general partner of the Title Holding Partnerships
that own the Portfolio A Properties, and (ii) holds fee title to the
Lawrenceville Property.
ARTICLE II: FORMATION OF PARTNERSHIP
Section 2.1 Formation of Partnership.
The Partners hereby agree to form the Partnership as a limited
partnership pursuant to the provisions of the Act for the purposes and upon the
terms and conditions hereinafter set forth. The Partners agree that the rights
and liabilities of the Partners shall be as provided herein, except as otherwise
expressly required by the Act or other applicable law, if any.
Section 2.2 Name, Principal Place of Business and Registered
Office.
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(a) The business of the Partnership shall be conducted under
the name of "BRANDYWINE OPERATING PARTNERSHIP, L.P." or such other name as the
General Partner may select, and all transactions of the Partnership and title to
all of the Partnership's assets, to the extent permitted by applicable law,
shall be carried on and completed in such name.
(b) The principal place of business and registered office of
the Partnership shall be located at Newtown Corporate Campus, 16 Campus
Boulevard, Suite 150, Newtown Square, PA 19073. The General Partner may change
the principal place of business or the registered office of the Partnership at
any time in its sole discretion, and, in such event, shall give written notice
thereof to all Limited Partners and file any required amendments to the
Certificate required by the Act.
Section 2.3 Purpose.
The purpose of the Partnership shall be, directly or
indirectly, to acquire, hold, own, develop, redevelop, construct, improve,
maintain, operate, manage, sell, lease, rent, transfer, encumber, mortgage,
convey, exchange, and otherwise dispose of or deal with real and personal,
tangible and intangible, property of every kind and nature, including without
limitation, the Portfolio A Properties, Portfolio B Properties, Portfolio C
Properties, Option Properties and BRT OP Properties; to act as and exercise all
of the powers of the general partner or a limited partner, as the case may be,
in partnerships or joint ventures in which the Partnership has an interest; to
acquire, own, deal with and dispose of securities and other interests in
partnerships, corporations or joint ventures, including corporations,
partnerships, joint ventures and other associations formed for the acquisition,
development or redevelopment of real and personal property or the provision of
services thereto; to undertake such other activities as may be necessary,
advisable, desirable or convenient to the business of the Partnership; to engage
in such other ancillary activities as shall be necessary or desirable to
effectuate the foregoing purposes; and to otherwise engage in or conduct any
enterprise, business or activity in which a limited partnership may engage in or
conduct under the Act.
Section 2.4 Powers.
The Partnership shall have and exercise all powers now or
hereafter permitted by the State of Delaware to be exercised by a limited
partnership formed under the laws of that state. In connection with (and without
limiting) the foregoing, the Partnership shall have full power and authority,
directly or through its interests in other partnerships, corporations, joint
ventures or other associations, to enter into, perform, and carry out contracts
of any kind, to borrow and lend money and to issue evi-
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dences of indebtedness, whether or not secured by mortgages, trust deeds,
pledges or other liens, and to guaranty, provide security for or cause any
subsidiary joint venture or other association in which the Partnership has an
interest to guaranty or provide security for indebtedness or other obligations
of the Partnership or any subsidiary.
Section 2.5 Term.
The Partnership shall commence existence upon the filing of
the Certificate with the Secretary of the State of Delaware and shall dissolve
at 12:01 a.m. on December 31, 2094, unless sooner dissolved pursuant to law or
this Agreement.
Section 2.6 Amendment of Certificate.
Promptly upon the execution and delivery hereof, the General
Partner shall cause the Certificate to be filed with the Secretary of State of
Delaware and such other elections, notices, instruments, documents or
certificates as may be required by applicable law, including, without
limitation, applications to do business in all jurisdictions where the
Partnership will own property, and which may be necessary to enable the
Partnership to conduct its business, and to own its properties, under the
Partnership's name, to be amended and/or filed or recorded in all appropriate
public offices.
Section 2.7 Partnership Assets.
(a) The Partners shall use the Partnership's credit
and assets solely for the benefit of the Partnership. All real and personal
property owned by the Partnership shall be owned by the Partnership, and the
Partners as such shall have no direct interest therein.
(b) To the extent allowable under applicable law,
title to all or any part of the properties of the Partnership may be held in the
name of the Partnership or any other Person as nominee for the Partnership. Any
such title holder shall perform any and all of its respective functions to the
extent and upon such terms and conditions as may be determined from time to time
by the General Partner.
(c) No Partner shall, either directly or indirectly,
take any action to require partition or appraisement of the Partnership or of
any of its assets or properties or cause the sale of any Partnership property
for other than a Partnership purpose, and notwithstanding any provision of
applicable law to the contrary, each Partner (and its legal representatives,
successors and assigns) hereby irrevocably waives any and all right to maintain
any action for partition or to compel any sale with respect to its Partnership
Interest or with respect to any
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assets or properties of the Partnership, except as expressly
provided in this Agreement.
Section 2.8 Limitation on Liability of Persons Related to
Partners.
Except as otherwise required by applicable law or as expressly
agreed in writing, no director, trustee, officer, shareholder, partner, employee
or agent of any Partner shall be personally liable for the payment of any sums
owing by such Partner to the Partnership or any other Partner under the terms of
this Agreement or for the performance of any other covenant or agreement of such
Partner contained herein.
Section 2.9 Conflicts of Interest and Transactions with
Affiliates.
(a) Subject to the limitations expressly set forth
herein, any Partner and any Affiliate of any Partner may engage in or possess an
interest in any business or activity whatsoever, whether now existing or
hereafter created, without any accountability to the Partnership or any Partner.
This Agreement shall not give the Partnership or any Partner any interest in, or
right to, any such business or activity or any proceeds, income or profit
thereof or therefrom. No Partner shall be obligated to offer any business
opportunity to the Partnership or any other Partner.
(b) Subject to the limitations expressly set forth
herein, the Partnership may enter into any arrangement, contract, agreement or
business venture that is not prohibited under the Act with any Partner or any
Partner's Affiliates. Each Partner understands and acknowledges that the conduct
of the business of the Partnership will involve business dealings with such
other business ventures or undertakings of the Partners and their Affiliates.
Without limiting the generality of the foregoing, the Partnership, at the
discretion of the General Partner, may borrow funds from any Partner or any
Partner's Affiliates. Except to the extent otherwise provided herein, any
material transaction between the Partnership and any Partner or Affiliate of a
Partner shall be on terms reasonably determined by the General Partner to be no
less favorable than the terms which could be obtained from unrelated third
parties.
Section 2.10 Statutory Compliance.
The General Partner has executed and shall promptly cause to
be filed the Certificate in the Office of the Secretary of the State of Delaware
pursuant to the Act and hereafter shall execute such further documents and take
such further action as shall be appropriate to comply with the Act and all other
all requirements of law for the formation and operation of a limited
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partnership in the State of Delaware and all other jurisdictions
in which the Partnership may elect to do business.
ARTICLE III: PARTNERSHIP INTERESTS
Section 3.1 In General.
(a) The Partnership initially shall have four classes
of Partnership Interest: "General Partnership Interests," "Class A Limited
Partnership Interests," "Class B Limited Partnership Interests", and "Class C
Limited Partnership Interests", each of which shall be divided into units as
provided in paragraph (c) below. The Class A Limited Partnership Interests,
Class B Limited Partnership Interests and Class C Limited Partnership Interests
are sometimes referred to herein as "Limited Partnership Interests." The
Partnership may create and issue additional classes of General or Limited
Partnership Interests in accordance with Section 3.3.
(b) Any Person may at the same time hold more than
one class of Partnership Interest and, in such event, shall for the purposes of
this Agreement be separately entitled to the rights afforded a Partner in each
of such classes under this Agreement. If a General Partner contributes to the
capital of the Partnership as a Limited Partner or purchases any Limited
Partnership Interest, it shall be treated in all respects as a Limited Partner
as to such Limited Partnership Interests.
(c) Each class of Partnership Interest issued by the
Partnership shall be divided into units ("Units") with each Unit within a class
representing an equal undivided fractional share of each item of Partnership
income, gain, and loss, and in each distribution of Partnership assets,
allocable to the Units of that class.
Section 3.2 Class A, Class B and Class C Limited Partnership
Interests.
(a) An aggregate of 1,487,509 Class A Units is hereby
authorized for issuance pursuant to Section 4.2. The Class A Units shall be
entitled to the rights of redemption specified in Article XV hereof and such
voting and other rights as may be herein specified. Additional Class A Units are
authorized for issuance in the future to acquire the Retained Interests as
provided in Section 4.4, upon the achievement of Discounts as provided in
Section 4.5, pursuant to the Option Agreements and as otherwise provided for or
contemplated by this Agreement. Otherwise, no additional Class A Units may be
issued.
(b) An aggregate of 715,818 Class B Units is hereby
authorized for issuance pursuant to Section 4.1. The
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Class B Units shall have the preferential distribution and liquidation rights
specifically provided for herein and shall be automatically converted into Class
A Units at the times provided in Article XVI. No additional Class B Units may be
issued after the date hereof.
(c) An aggregate of 1,856,200 Class C Units is hereby
authorized for issuance pursuant to Section 4.3. The Class C Units shall have
the right to a special allocation of all income, gain, profits, losses and cash
flow realized from the ownership, operation and disposition of the BRT OP
Properties, and shall have no rights to allocation of any such items arising
from the ownership, operation or disposition of the Portfolio A Properties,
Portfolio B Properties, Portfolio C Properties or Option Properties. Class C
Units shall be automatically converted into Class A Units at the time provided
in Article XVI. No additional Class C Units may be issued after the date hereof
except as provided in Section 4.3.
Section 3.3 Creation and Issuance of Additional Classes of
Partnership Interests.
(a) Subject only to the limitations expressly set
forth in this Agreement, the General Partner may from time to time solicit and
accept additional Capital Contributions from any Person and/or cause the
Partnership to create and issue such additional classes of Partnership
Interests, rights, options, or warrants exercisable for or convertible into
Partnership Interests, or other securities or instruments of any type or class
whatsoever. Any such Partnership Interests, rights, options, warrants,
securities or instruments may be issued for cash, property, services, or such
other type, form, and amount of consideration (including notes, other evidences
of indebtedness or obligations of the Person acquiring the interest, instrument
or security, as the case may be) as the General Partner may determine to be
appropriate. Each such class of additional Partnership Interest shall have such
rights, privileges and preferences, and be subject to such limitations, as the
General Partner shall specify.
(b) The creation of an additional class of
Partnership Interest permitted hereunder may be made by the General Partner by
setting forth either in an amendment or an addendum to this Agreement the
relative rights, obligations, duties, and preferences of each new class of
Partnership Interests created. A copy of this Agreement as so amended, or the
addendum as so adopted, as the case may be, shall be provided to each other
Partner. All filings necessary to be made under the Act or applicable law in
connection with the creation of such interests shall be made by the General
Partner on behalf of the Partnership.
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(c) Prior to a Qualified Offering, the written
consent of the holders of not less than 75% of the then-outstanding Class A
Units shall be required to take any action otherwise permitted under this
Section 3.3. After a Qualified Offering, no such consent shall be required.
(d) Following a Qualified Offering, if a Capital
Contribution to the Partnership is being made by the General Partner with the
proceeds realized from the sale of additional shares of Common Stock of BRT, the
Partnership shall issue to the General Partner in exchange therefor that number
of GP Units equal to the number of shares of BRT Common Stock the net proceeds
of which are contributed and no other class of Partnership Interest or other
consideration.
Section 3.4 Other Provisions Relating to All Classes of
Partnership Interests.
(a) Fractional Units may be issued, with the amount
of any such fractional interest being rounded to the fourth decimal place.
(b) By executing this Agreement, each Partner
consents and authorizes the Partnership, acting solely through the General
Partner, to issue, subject to the express requirements and limitations hereof,
such interests, instruments and securities upon such terms and conditions as the
General Partner may from time to time determine to be appropriate.
(c) Certificates for Units may be issued, at the
request of the holder of any Units, but no Class A Units comprising Collateral
may be certificated prior to the time such Units cease to be Collateral
hereunder unless the certificates are delivered to the holder of the first
priority security interest thereon, duly endorsed in blank for transfer or
accompanied by duly executed transfer powers.
Section 3.5 Register.
The General Partner shall maintain a Register at the principal
place of business of the Partnership setting forth the names, addresses and
Capital Accounts of the Partners, and the number and class of Partnership
Interests held by each Partner. Upon any adjustment or cancellation of any
Partner's Partnership Interest, the General Partner shall make such adjustment
or cancellation in the Register and send written notice thereof to the Partner
so affected. Upon an assignment by a Partner of all or a part of its Partnership
Interest in the Partnership pursuant to the terms hereof and as permitted
hereby, the General Partner shall register such assignment in the Register. The
General Partner shall note on the Register any restrictions on the
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transfer of any Partner's Partnership Interests and any such Partnership
Interests that are held in escrow hereunder. In the absence of manifest error,
the Register shall constitute conclusive evidence of the interest of each
Partner and other Person in Partnership Units.
ARTICLE IV: CONTRIBUTIONS TO CAPITAL AND ISSUANCES OF
PARTNERSHIP INTERESTS
Section 4.1 General Partner and Initial Class B Limited
Partner Capital Contributions.
(a) Concurrently herewith, pursuant to the
Contribution Agreement, the General Partner shall contribute, or cause to be
contributed, as its initial Capital Contribution to the Partnership as General
Partner the sum of $1,000 cash and the furniture, fixtures and equipment
acquired from The Nichols Company on the date hereof and all other furniture,
fixtures and equipment owned by it, and the Partnership shall issue to and
register in the name of the General Partner on the Register 182 General Partner
Units.
(b) Concurrently herewith, pursuant to the
Contribution Agreement, the General Partner shall contribute, or cause to be
contributed, as its initial Capital Contribution to the Partnership as the Class
B Limited Partner, all of the Class B Units in the Witmer Partnership that it
acquired from SSI on the date hereof and all of the limited partnership interest
in certain Title Holding Partnerships that own Portfolio A Properties that it
acquired from Witmer GP on the date hereof. In return, the Partnership shall
issue to the General Partner, and register in the name of BRT on the Register,
an aggregate of 715,818 Class B Units.
Section 4.2 Initial Class A Limited Partner Capital
Contributions.
(a) Concurrently herewith, pursuant to the
Contribution Agreement, each of the Persons identified on Exhibit "F" as a
Limited Partner shall contribute, or cause to be contributed, as its or his
initial Capital Contribution to the Partnership, all Witmer Partnership Class A
Units owned by it or him and set forth after such Limited Partner's name on
Exhibit "F," and in the case of The Nichols Company that certain Promissory Note
of Witmer Partnership described on Exhibit "F" and the Partnership shall issue
to and register in the name of such Limited Partner on the Register that number
of Class A Units in the Partnership set forth opposite such Limited Partner's
name on Exhibit "F." As shown on Exhibit F, the total number of Class A Units
issued under this paragraph (a) is 882,234, none of which shall be held in
escrow.
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(b) Concurrently herewith, pursuant to the
Contribution Agreement, each of the Persons identified as a Limited Partner on
Exhibit "F" shall contribute, or cause to be contributed, as its or his initial
Capital Contribution to the Partnership, the interest that such Person has as a
partner in the Title Holding Partnerships that hold the Portfolio C Properties
to the extent provided therein (other than any interests shown on Exhibit "F" as
being assigned at the direction of the Partnership by such persons to a
wholly-owned qualified real estate subsidiary of the General Partner), and the
Partnership shall issue to and register in the name of such Limited Partner on
the Register the number of Class A Units in the Partnership set forth opposite
such Limited Partner's name on Exhibit "F," a portion of which Units designed on
Exhibit "F" shall be held in escrow as provided in Section 4.6. As shown on
"Exhibit F," the total number of Class A Units issued under this paragraph (b)
is 211,197 of which 72,231 shall be held in escrow.
(c) Concurrently herewith, pursuant to the
Contribution Agreement, SSI shall contribute, or caused to be contributed, all
of its right, title and interest in six of the Portfolio B Properties identified
on Exhibit "F," and all of its partnership interest other than the Retained
Interest in the Title Holding Partnership that owns the remaining Portfolio B
Property, as its initial Capital Contribution to the Partnership, and the
Partnership shall issue to and register in the name of SSI on the Register the
number of Class A Units in the Partnership set forth on Exhibit "F," a portion
of which Units designated on Exhibit "F" shall be held in escrow as provided in
Section 4.6. As shown on Exhibit "F," the total number of Class A Units issued
under this paragraph (c) is 394,078 Units, of which 227,712 shall be held in
escrow.
(d) At the Partnership's instruction, a Limited
Partner named on Exhibit "F" shall assign to BRT his units of limited
partnership interest in a Title Holding Partnership in lieu of contributing them
to the Partnership, but the amount of interest so assigned shall be limited to a
.1% limited partnership interest.
Section 4.3 Initial Class C Limited Partner Capital
Contributions.
(a) Concurrently herewith, pursuant to the
Contribution Agreement, BRT shall contribute as an additional initial Capital
Contribution to the Partnership, that portion of its interest as general partner
in BRT OP representing a 97% profits interest and a 49% capital interest. BRT
shall contribute the balance of its interest as general partner in BRT OP to the
Partnership on the date which occurs 1 year and 1 day after the date of this
Agreement.
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(b) In return, the Partnership shall issue to BRT,
and register in the name of BRT on the Register, an aggregate of 1,856,200 Class
C Units, of which 1,600,000 shall be issued on the date hereof, and the balance
thereof at the time of the contribution by BRT of the balance of its interest as
general partner in BRT OP as provided in paragraph (a) above.
Section 4.4 Option to Acquire Retained Interests in Title
Holding Partnerships.
(a) Following the contribution by the Class A Limited
Partners of the Contributed Assets to the Partnership, (i) The Nichols Company
will continue to hold the Retained Interests in each of the Title Holding
Partnerships identified on Exhibit "I," that owns a Portfolio A or Portfolio C
Property and SSI will continue to hold the Retained Interest in the Title
Holding Partnership identified on Exhibit "I" that owns a Portfolio B Property.
After giving effect to the capital contributions under Sections 4.1 through 4.3
hereof, all of the Title Holding Partnerships are subsidiaries of either Witmer
Partnership or the Partnership as indicated on Exhibits "B" and "C."
(b)(i) The Nichols Company and Safeguard each hereby
grants to the Partnership the irrevocable right and option with respect to each
Retained Interest owned by it reflected on Exhibit "I" in a Title Holding
Partnership that owns a Portfolio B or Portfolio C Property, to acquire, free
and clear of any Encumbrance, such Retained Interest in exchange for Class A
Units upon written notice to such effect being given by the Partnership to The
Nichols Company or Safeguard, as the case may be, at least five days prior to
the exercise of such option. Such option may be exercised by the Partnership at
any time prior to the first Business Day of the 37th month after the date
hereof. The exercise notice shall contain the agreement of the Partnership to
pay all Pennsylvania real estate transfer taxes that may become payable as a
result of the transfer of such Retained Interest as a result of such option
being exercised prior to the first Business Day of the 37th full month after the
date hereof.
(ii) If the option granted pursuant to the preceding
paragraph has not been exercised prior thereto, then on the first Business Day
of the 37th full month after the date hereof, the Partnership shall acquire from
The Nichols Company and Safeguard, and The Nichols Company and Safeguard shall
each Transfer to the Partnership, all Retained Interests described in paragraph
(b)(i), free and clear of any Encumbrance.
(c)(i) Concurrently with the acquisition of the
Retained Interests pursuant to paragraph (b) above, the
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Partnership shall cause Witmer Partnership or its designee to acquire all of The
Nichols Company's Retained Interest owned by it reflected on Exhibit "I" in each
Title Holding Partnership owning a Portfolio A Property in exchange for Class A
Units of Limited Partnership Interest in Witmer Partnership in accordance with
the provisions of Section 13 of the Agreement of Limited Partnership dated
November 21, 1995 of Witmer Partnership no later than the first Business Day of
the 37th month after the date hereof. The Partnership shall pay, or cause to be
paid, all Pennsylvania real estate taxes that may become payable as a result of
the acquisition of such Retained Interest prior to the first Business Day of the
37th full month after the date hereof.
(ii) Immediately upon Witmer Partnership acquiring
such Retained Interests, the Partnership shall issue to The Nichols Company
Class A Units in exchange for the Class A Units of Limited Partnership Interest
in Witmer Partnership acquired by The Nichols Company in exchange for such
Retained Interests.
(d) The total number of Class A Units to be issued by
the Partnership to acquire all of the Retained Interests and Class A Units of
Witmer Partnership described in paragraphs (b) and (c) above shall be 132,968
Class A Units. At the closing for the Transfer of the Retained Interests and
Class A Units of Witmer Partnership to the Partnership in accordance with the
preceding Sections 4.4(b) and (c), the Partnership shall issue to Safeguard and
The Nichols Company, or to their successors or designees, that number of such
132,968 Class A Units as is indicated opposite their names on Exhibit "I" and
shall pay to each such person the amount, if any, that is equal to the aggregate
amount that would have been distributed in respect of such Units had they been
issued on the date hereof. All such Class A Units shall be, when issued, validly
issued, fully paid, and, except as otherwise required under the Act,
nonassessable.
Section 4.5 Issuance of Additional Class A and General Partner
Units Upon Achievement of Mortgage Discounts.
(a) Exhibit "G" sets forth for the Portfolio B
Properties and Portfolio C Properties identified thereon: (i) the Existing
Mortgage Indebtedness outstanding in respect of such Property; (ii) the
institutional lender that holds such Existing Mortgage Indebtedness; and (iii)
the net equity of the Partnership in the Property at the date hereof (i.e. the
value of the Property ascribed to it by the Partners less the outstanding
principal balance of the Existing Mortgage Debt) as of the date hereof.
(b) If at any time after the date hereof, any such
Existing Mortgage Indebtedness is repaid or otherwise discharged or satisfied at
a Discount, and as a result thereof
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additional net equity in the Property is realized, the Partnership shall issue
the number of additional Class A and General Partner Units that is equal in the
aggregate to (x) the dollar amount of the additional net equity so achieved
divided by (y) $5.50 as adjusted in accordance with customary practice for stock
splits, stock combinations and stock dividends occurring after the date hereof.
Except as otherwise provided in the last sentence of this paragraph (b), (i)
twenty-five percent (25%) of such additional Units shall be General Partner
Units and issued to the General Partner; and (ii) the remaining seventy-five
percent (75%) of such additional Units shall be Class A Units and issued to the
persons identified on Exhibit "G" in the relative proportions indicated thereon.
(c) For purposes of this Section 4.5, the Discount
shall be the amount greater than zero obtained by subtracting from (A) the
outstanding principal balance of such Existing Mortgage Indebtedness immediately
prior to its repayment, (B) the amount of the cash paid, plus the fair value of
any other assets conveyed, to fully discharge the Identified Indebtedness. If
such computation does not result in a number greater than zero, there shall be
no Discount realized in the repayment of such Identified Indebtedness.
(d) For purposes of this Section 4.5, the additional
net equity in a Property realized through the repayment of Mortgage Indebtedness
at a Discount shall be the amount, greater than zero, obtained by (A) if the
original net equity of the Property is positive, (i) adding the amount of the
Discount to the original net equity of the Property shown on Exhibit G, and (ii)
subtracting therefrom the original net equity assigned to the Property on
Exhibit G; or (B) if the original net equity of the Property is negative, by
subtracting from the Discount, the amount of such negative net equity.
(e) Whenever the Partnership shall issue additional
Class A Units to any person under this Section 4.5, it shall pay to each such
person the amount, if any, that is equal to the aggregate amount that would have
been distributed in respect of such Units had they been issued on the date
hereof.
Section 4.6 Forfeiture of Class A Units Upon Payment of
Certain Mortgage Indebtedness With Equity
Participation Rights.
(a) Exhibit H sets forth for the Portfolio B
Properties and Portfolio C Properties identified thereon: (i) the Mortgage
Indebtedness With Equity Participation Rights outstanding in respect of such
Property; (ii) the institutional lender that holds such indebtedness; (iii) the
amount of the lender's equity participation in the cash flow and/or sales
proceeds of the Property; and (iv) the net equity of the
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Partnership in the Property at the date hereof (i.e., the value of the Property
ascribed to it by the Partners less the outstanding principal balance of the
mortgage debt as of the date hereof).
(b) The Partnership will use its best efforts to
obtain the consent of the holder of the Mortgage Indebtedness With Equity
Participation Rights on each such Property to waive its rights under the
mortgage loan documents to receive its equity participation. If despite such
efforts, the Partnership is required at the time the Partnership repays or
otherwise satisfies Mortgage Indebtedness With Equity Participation Rights
encumbering a Property in full to make a payment to the lender in satisfaction
of its equity participation in the Property, then on the date on which such
Mortgage Indebtedness With Equity Participation Rights is paid in full, the
Limited Partners shown on Exhibit H shall forfeit to the Partnership, in the
relative proportions indicated thereon, that number of Class A Units owned by
them which are held in escrow by the Partnership pursuant to paragraph (c) below
that is equal to the amount of the equity participation payment made to the
lender divided by $5.50, as adjusted in accordance with customary practice for
stock splits, stock combinations and stock dividends occurring after the date
hereof. Upon such forfeiture, which shall be made free of all Encumbrances, such
Units will then be cancelled and shall not be available for reissuance.
(c) A total of 299,943 Class A Units issued by the
Partnership under Sections 4.2(b) and 4.2(c) hereof have been deposited in
escrow with the Partnership pending repayment of the Mortgage Indebtedness With
Equity Participation Rights described in this Section, as indicated on Exhibit
F. Such Class A Units, while held in escrow, shall be deemed outstanding for all
purposes and the holders of such Class A Units shall be entitled to receive all
distributions made in respect thereof and to all voting rights associated with
such Class A Units. Each time the Mortgage Indebtedness With Equity
Participation Rights encumbering a particular Portfolio B or C Property is paid
or otherwise discharged in full, the Class A Units escrowed in respect of that
Property shall be cancelled to the extent required under paragraph (b) above,
and the remainder of such Class A Units shall be automatically released from
escrow and thereafter held free of escrow by the Limited Partner that deposited
such Class A Units into escrow.
Section 4.7 Forfeiture of Certain Class A Units and General Partners'
Units Upon Payment of the GECC Equity Participation, and Upon
Foreclosure of GECC Loan.
(a)(i) Witmer Partnership has financed the Portfolio
A Properties owned by it through the Title Holding Partnerships with the
proceeds of a mortgage loan from GECC, the
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outstanding principal balance of which is $31,145,397 date hereof (the "GECC
Loan"). Under the terms of the mortgage loan documents, GECC also has an equity
participation in the Portfolio A Properties under which GECC has the right to
receive certain cash payments from the Witmer Partnership in excess of the
amount required to pay all of the outstanding principal balance of the mortgage
debt. The amount paid by the Witmer Partnership to satisfy the GECC equity
participation at the time of the repayment of the GECC Mortgage is hereinafter
called the "GECC Participation Payment."
(ii) On the date on which the GECC Participation
Payment is paid in full, the Partners identified in paragraph (iii) below shall
transfer to the Partnership that number of Units that is equal to the amount of
the GECC Participation Payment divided by $5.50, as adjusted in accordance with
customary practice for stock splits, stock combinations and stock dividends
occurring after the date hereof. Upon such transfer, which shall be made free of
all Encumbrances, such Units shall be cancelled.
(iii) Of the total Units required to be transferred
to the Partnership pursuant to paragraph (ii) above: (I) the General Partner
shall transfer that number of its General Partner Units equal to the lesser of
(A) 25% of the total number of Units so required to be transferred to the
Partnership, and (B) that number of General Partner Units issued to the General
Partner under Section 4.5 hereof; and (II) the Limited Partners named on Exhibit
K hereto shall transfer, in the relative proportions indicated thereon, that
number of their Class A Units equal to the remaining balance of Units required
to be transferred to the Partnership under paragraph (ii).
(b) The portion of the GECC Loan allocated to the
Lawrenceville Property ($3,200,000) exceeded the value assigned to that property
by the parties as of the date of closing of the GECC Loan ($2,000,000) by
$1,200,000. In the event of a foreclosure of the GECC Loan resulting in an
execution sale of the Portfolio A Properties, the Limited Partners named on
Exhibit K hereto shall transfer, in the relative proportions indicated thereon,
that number of their Class A Units equal to the amount of the Lawrenceville
Deficiency, if any, divided by $5.50, as adjusted in accordance with customary
practice for stock splits, stock combinations and stock dividends occurring
after the date hereof. The term "Lawrenceville Deficiency" shall mean the
difference, if any, between the cash proceeds (net of sales proceeds paid to the
holder of the GECC Loan) which the Partnership would have received upon the
execution sale of the Portfolio A Properties excluding the Lawrenceville
Property assuming the original GECC Loan amount had been reduced by $3,200,000
(the "Non-Lawrenceville Proceeds") and the actual cash proceeds which the
Partnership receives following the sale of the
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entire Portfolio A Properties, including the Lawrenceville Property. In no event
shall the Lawrenceville Deficiency exceed $1,200,000. In the event the
Partnership would not have realized any Non-Lawrenceville Proceeds, then there
will be no Lawrenceville Deficiency.
Section 4.8 Forfeiture of Certain Class A Units Upon Payment
of Certain Lease Equity Participations and Certain
Deferred Leasing Commissions.
(a)(i) An affiliate of a tenant of the Portfolio
A Property known as Newtown Square Corporate Campus, Building 12, 16 Campus
Boulevard, Newtown Square, Pennsylvania, is a special limited partner in the
Title Holding Partnership that owns such Property. Under the terms of the
partnership agreement creating that Title Holding Partnership, such special
limited partner has a 35% profits interest in the Title Holding Partnership
which entitles the special limited partner to participate in distribution of the
Title Holding Partnership's operating cash flow as well as the right to receive
a distribution equal to a 35% participation in the net sales proceeds in excess
of a certain threshold realized by the Title Holding Partnership from the sale
of the Property.
(ii) If (I) the Portfolio Property described in
Section 4.8(a) above shall be sold at any time while the mortgage loan from GECC
to Witmer Partnership in existence on the date hereof is then outstanding, (II)
the sales price of such Portfolio A Property is less than an amount equal to the
sum (such sum, the "Sales Price Threshold") of (x) $6,071,250 plus (y) an amount
representing a 10% per annum return on $261,587, such return to be computed from
the date of this Partnership Agreement through the date of the sale of such
Portfolio A Property, and (III) such special limited partner receives a payment
of a share of the net sales proceeds of such property, then in such event, the
Limited Partners shown on "Exhibit J" shall transfer to the Partnership, in the
relative proportions indicated thereon, that number of Class A Units owned by
them that is equal to the lesser of (A) the amount of the equity participation
payment made to the special limited partner up to a maximum of $271,250 and (B)
the amount of the "Sales Price Threshold" less the actual sales price of the
Property, in either case divided by $5.50, as adjusted in accordance with
customary practice for stock splits, stock combinations and stock dividends
occurring after the date hereof. Upon such transfer, which shall be made free of
all Encumbrances, such Units will then be cancelled.
(iii) The payment of a share of the operating cash
flow or, except as provided in paragraph (ii) above, the payment
of a share of the net sales proceeds of such Property, to the
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special limited partner shall not result in any return of Class A Units by any
of the Class A Limited Partners.
(b) Schedules H and L to the Contribution Agreement
list certain deferred leasing commissions payable by The Nichols Company in the
case of the lessees listed on Schedule H, and by Safeguard in the case of the
leases listed on Schedule L, as and when rents are collected under leases of
certain of the Portfolio A, Portfolio B, or Portfolio C Properties, all of which
leases were executed and became effective prior to the date hereof. Such
deferred leasing commissions are not being assumed by the Partnership and shall
remain obligations of The Nichols Company or Safeguard following the formation
of the Partnership. However, in the event that the Partnership shall pay any of
such deferred leasing commissions following a default in the payment of such
obligations, then Safeguard in the case of the payment of leasing commissions
described on Schedule L, or The Nichols Company in the case of the payment of
leasing commissions described on Schedule H, shall transfer to the Partnership
that number of Class A Units owned by it that is equal to the amount of the
deferred leasing commissions so paid by the Partnership, divided by $5.50, as
adjusted in accordance with customary practice for stock splits, stock
combinations and stock dividends occurring after the date hereof. Upon such
transfer, which shall be made free of all Encumbrances, such Units will then be
cancelled. The Transfer of Units to the Partnership provided for herein shall be
the sole and exclusive remedy of the Partnership against Safeguard and The
Nichols Company for failure to pay such deferred leasing commissions.
Section 4.9 Capital Contributions Generally.
Except as otherwise expressly provided herein or
to the extent that a Partner agrees to make a Capital Contribution to, or to
purchase Partnership Interests from, the Partnership: (i) no Partner shall be
required to contribute any capital to the Partnership; (ii) no Partner may
withdraw any of its capital from the Partnership; (iii) no Partner shall be
required to make any loan to the Partnership; (iv) loans by a Partner to the
Partnership shall not be considered a contribution of capital, shall not
increase the Capital Account of the lending Partner or the lending Partner's
ownership interest in the Partnership and the repayment of such loans by the
Partnership shall not decrease, or result in any adjustment to, the Capital
Account of the Partner making the loans; (v) no interest shall be paid on any
capital contributed to the Partnership by any Partner; (vi) under any
circumstances requiring a return of all or any portion of a Capital
Contribution, no Partner shall have the right to receive property other than
cash; and (vii) no Partner shall be required at any time to restore any deficit
in such Partner's Capital Account.
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Section 4.10 No Third Party Beneficiary.
No creditor or other third party having dealings with the
Partnership shall have the right to enforce the right or obligation of any
Partner to make Capital Contributions or loans or to pursue any other right or
remedy hereunder or at law or in equity, it being understood and agreed that the
provisions of this Agreement shall be solely for the benefit of, and may be
enforced solely by, the parties hereto and their respective successors and
assigns. None of the rights or obligations of the Partners herein set forth to
make Capital Contributions or loans to the Partnership shall be deemed an asset
of the Partnership for any purpose by any creditor or other third party, nor may
such rights or obligations be sold, transferred or assigned by the Partnership
or pledged or encumbered by the Partnership to secure any debt or other
obligation of the Partnership or of any of the Partners.
Section 4.11 SSI Right of First Refusal.
(a) Each time the Partnership shall propose to issue
any additional Partnership Interests for cash at any time after the date hereof
and on or before the fifth anniversary of the date of this Agreement, the
Partnership shall first offer in writing to SSI the right to acquire such
Partnership Interests on terms no less favorable to SSI than those on which the
Partnership proposes to issue such additional Partnership Interests to other
persons. SSI shall have a period of 30 days in which to exercise its right of
first refusal.
(b) This Section shall not apply to Partnership
Interests issued pursuant to or under Article IV or Section 8.5 hereof.
ARTICLE V: CAPITAL ACCOUNTS
Section 5.1 Establishment and Maintenance of Capital Accounts.
(a) A Capital Account shall be established for each
Partner in the amount of such Partner's initial Capital Contribution to the
Partnership. Unless otherwise provided in this Agreement, each Partner's Capital
Account shall be determined and maintained in accordance with the rules of
Regulation Section 1.704-1(b)(2)(iv) (or any corresponding provision of
succeeding law), and all provisions of this Agreement relating to the
maintenance of Capital Accounts shall be interpreted and applied in a manner
consistent with such regulations. If the General Partner shall determine that it
is prudent to modify the manner in which the Capital Accounts, or any debits or
credits thereto, are computed in order to comply with such regulations, the
General Partner shall make such modifications.
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(b) Pursuant to the foregoing accounting rules, a
Partner's Capital Account shall be increased, decreased, adjusted, and
maintained as provided in Article VII.
Section 5.2 Succession to Capital Accounts.
Subject to Section 11.4, in the event of a transfer of any
Partnership Interest permitted herein, the Capital Account of the transferor
Partner that is attributable to the transferred Partnership Interest shall be
carried over to the transferee of such interest and adjusted as provided in the
Regulations under Code section 704.
Section 5.3 Certain Adjustments.
In connection with any Capital Contribution to the Partnership
in consideration for a Partnership Interest, or a distribution by the
Partnership to a Partner in respect of a Partnership Interest, the General
Partner shall be authorized to increase or decrease the Capital Accounts to
reflect a revaluation of Partnership property as provided in Regulation Section
1.704-1(b)(2)(iv)(f). Moreover, upon completion of a Qualified Offering, the
Capital Accounts shall be so adjusted to reflect a revaluation of Partnership
property, and each Partner's Capital Account shall be adjusted so as to be
proportionate to the number of Units held by such Partner at such time.
ARTICLE VI: DISTRIBUTIONS
Section 6.1 Distributions Prior to Qualified Offering.
(a) Distributions to Class C Unit Holders. (i) Prior
to the completion of a Qualified Offering, the Partnership's share of all Net
Cash Flow, Net Sales Proceeds and Net Financing Proceeds realized by BRT OP from
the ownership, operation, sale and refinancing of the BRT OP Properties shall be
distributed by the Partnership only to the holders of the Class C Units, and no
other class of Partnership Interest shall have any rights to share in such
distributions.
(ii) The General Partner shall distribute
the Partnership's share of such Net Cash Flow, Net Sale Proceeds and Net
Financing Proceeds to the Class C Unit holders at such times and in such amounts
as it may determine in its sole discretion.
(b) Class B Preferred Distributions. (i) Until the
completion of a Qualified Offering, the Partnership shall declare and pay
quarterly, to the holders of the Class B Units at the end of the quarter in
respect of which the payment is being made, out of the source of funds described
in clause (ii) below,
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an amount in cash equal to the Class B Preferred Distribution for such quarter,
plus any then unpaid Class B Accumulated Preferred Distribution. Each such
quarterly distribution shall be made within thirty days after the end of the
calendar quarter in respect of which the distribution is being paid.
(ii) The source of funds for the
distributions provided for in this paragraph (b) shall consist of: (A) the
Partnership's share of all cash realized by the Witmer Partnership from the
operation of the Portfolio A Properties that is permitted to be distributed to
the Partnership by the Witmer Partnership under the GECC mortgage loan
documents, plus (B) to the extent needed, Net Cash Flow of the Partnership from
the operation of the Portfolio B and Portfolio C Properties, plus (C) to the
extent needed, funds required to be advanced by SSI for such purpose under the
Distribution Support and Loan Agreement.
(iii) If for any distribution period the
amounts distributed by the Partnership are insufficient to fully discharge the
Partnership's obligations to make cash distributions to the holders of the Class
B Units in an amount equal to their Class B Preferred Distribution pursuant to
Section 6.1(b)(i) and (ii), the deficiency between the amounts distributed and
the amounts distributable pursuant to such Sections shall accumulate, without
interest (any such deficiency, a "Class B Accumulated Preferred Distribution").
(c) Distributions Constituting Return of Capital to
Class B Unit Holders. Any Net Sale Proceeds or Net Financing Proceeds realized
directly or indirectly by the Partnership prior to the completion of a Qualified
Offering from the sale or refinancing of a Portfolio A Property shall be
distributed to the Class B Unit holders first to pay any then unpaid Class B
Accumulated Preferred Distributions and then as a return of the Capital
Contributions made by them in respect of their Class B Units, provided, however,
that the maximum amount distributed to the Class B Unit holders as a return of
their Capital Contributions under this paragraph shall not exceed $3.937
million.
(d) Distributions to General Partner, Class A Unit
Holders and Class B Unit Holders. (i) Prior to the completion of a Qualified
Offering, and provided that (A) all Class B Preferred Distributions then due the
holders of the Class B Units under Section 6.1(b) have been made or provided for
and there is no unpaid Class B Accumulated Preferred Distributions, and (B) all
accrued interest that is then due and payable to SSI under the Distribution
Support and Loan Agreement has been paid in full and no borrowings are then
outstanding under the $700,000 line of credit extended to the Partnership
pursuant to Section 2.1.1 of such Distribution Support and Loan
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Agreement or under Section 2.1.2 of such Distribution Support and Loan Agreement
which provides for advances to pay transaction expenses, the General Partner
may, from time to time, in its discretion, cause the Partnership to make cash
distributions to the General Partner, the Class A Limited Partners and the Class
B Limited Partners pro rata in accordance with their respective Percentage
Interests in the Partnership. The restriction on distributions contained in
clause (B) of the preceding sentence shall be applicable only to distributions
pursuant to this Section 6.1(d) and not to distributions pursuant to Sections
6.1(a), (b) or (c). Such distributions may be made from any source of funds
available to the Partnership, including from Partnership revenues, borrowings or
Capital Contributions, except that no distributions shall be made pursuant to
this paragraph (d) out of funds required to be distributed solely to the Class C
Unit holders pursuant to paragraph (a) above or to the Class B Unit holders
pursuant to paragraph (c) above.
Section 6.2 Distributions After Qualified Offering.
After a Qualified Offering, the General Partner shall cause
the Partnership to declare and pay quarterly distributions to the holders of the
General Partner Units and Class A Units at the end of the quarter in respect of
which the payment is made, out of funds legally available therefor, in such
aggregate amount as the General Partner in its discretion shall determine, and
in the following proportions:
(a) to the holders of the Class A Units, as a group,
an amount equal to the product that results from multiplying the total amount to
be distributed by the ratio of (i) the number of shares of Common Stock then
issuable to the holders of the outstanding Class A Units in redemption of such
Class A Units, assuming redemption of such Class A Units entirely for shares, to
(ii) the number of the shares of Common Stock described in clause (i) plus the
number of outstanding shares of Common Stock of BRT (other than outstanding
Excluded Common Shares); and
(b) the balance to the holder of the General Partner
Units.
Section 6.3 Distributions to Pay Taxes.
(a) Notwithstanding anything to the contrary in
Sections 6.1 and 6.2, if the Partnership has taxable income for any Fiscal Year
(including any taxable gain associated with the sale of section 704(c) property
(as defined in Regulation Section 1.704-3)), the Partnership shall, out of any
funds legally available therefor, distribute to the Partners, on or before the
90th day following the end of the calendar year that includes the last day of
such Fiscal Year, the amount necessary
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for the Partners (and all Persons who are required to pay taxes on the taxable
income of the Partnership by reason of their direct or indirect ownership of any
interest in the Partnership) to pay federal, state and local income taxes with
respect to such taxable income, computed by multiplying such taxable income by
the highest combined federal, state and local income tax rate applicable to any
such Person for the calendar year that includes the last day of the Fiscal Year
in which such taxable income is allocated to such Partner.
(b) The Partnership shall not make a distribution
under this Section 6.3 if it does not have sufficient cash on hand to fund such
distribution, or if after making such distribution the Partnership will need to
borrow funds under the Distribution Support and Loan Agreement for one of the
purposes permitted thereunder.
Section 6.4 Distributions upon Liquidation.
Liquidating distributions shall in all cases be made in
accordance with the provisions of Section 13.5.
Section 6.5 Additional Distribution Rules.
(a) Effective Date. Distributions shall be charged
against the Partners' Capital Accounts as of the date the distributions are
made.
(b) Division Among Limited Partners. Except as may
otherwise be provided herein or in the instruments creating a class of
Partnership Interests, each distribution made to the Limited Partners of a given
class pursuant to this Article VI shall be divided among the Limited Partners of
such class so that each of them shall receive the same proportion thereof as the
Units of such class owned by such Limited Partner bear to all Units of the same
class then owned by all Limited Partners.
(c) Obligation to Repay Distribution. In the absence
of fraud or mistake, or except as otherwise required by law, no Partner shall
have any obligation or responsibility to repay to the Partnership any
distribution made by the Partnership to a Partner pursuant to this Agreement.
(d) Legal Requirements. Notwithstanding anything
contained herein to the contrary, the General Partner may withhold making a
distribution to any Limited Partner, or to any transferee of a Limited Partner,
until the Limited Partner or the transferee has provided the General Partner
with all necessary information and assurances, including an opinion of counsel
satisfactory to the General Partner requested by the General Partner, to
determine that such distribution will be in compliance with all applicable laws.
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Section 6.6 Taxes Withheld.
Unless treated as a Tax Payment Loan (as hereinafter defined),
any amount paid by the Partnership for or with respect to any Partner on account
of any withholding tax or other tax payable with respect to the income, profits
or distributions of the Partnership pursuant to the Code, the Regulations, or
any state or local statute, regulation or ordinance requiring such payment (a
"Withholding Tax Act") shall be treated as a distribution to such Partner for
all purposes of this Agreement, consistent with the character or source of the
income, profits or cash which gave rise to the payment or withholding
obligation. To the extent that the amount required to be remitted by the
Partnership under the Withholding Tax Act exceeds the amount then otherwise
distributable to such Partner, the excess shall constitute a loan from the
Partnership to such Partner (a "Tax Payment Loan") which shall be payable upon
demand and shall bear interest, from the date that the Partnership makes the
payment to the relevant taxing authority, at the federal tax underpayment rate,
under section 6621(a)(2) of the Code, as reported from time to time. So long as
any Tax Payment Loan or the interest thereon remains unpaid, the Partnership
shall make future distributions due to such Partner under this Agreement by
applying the amount of any such distribution first to the payment of any unpaid
interest on all Tax Payment Loans of such Partner and then to the repayment of
the principal of all Tax Payment Loans of such Partner. The General Partner
shall have the authority to take all actions necessary to enable the Partnership
to comply with the provisions of any Withholding Tax Act applicable to the
Partnership and to carry out the provisions of this Section. Nothing in this
Section shall create any obligation on the General Partner to advance funds to
the Partnership or to borrow funds from third parties in order to make any
payments on account of any liability of the Partnership under a Withholding Tax
Act.
Section 6.7 In-Kind Distributions.
If, at the discretion of the General Partner, any assets of
the Partnership other than cash are distributed to the Partners in kind, such
assets shall be valued on the basis of the fair market value thereof as
determined by the General Partner in its reasonable discretion on the date of
distribution. Without limiting the General Partner's discretion to make such a
valuation or requiring that any such appraisal be made, the valuation of any
asset by the General Partner on the basis of the determination of its fair
market value by an independent appraiser shall be deemed to be a reasonable
value for such asset and a reasonable exercise of such discretion. If any
Partnership property other than cash is distributed to a Partner, the Capital
Accounts of the Partners shall be adjusted to reflect the manner in which the
unrealized income, gain, loss or deduction inherent in such property (that has
not previously been reflected in the
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Partners' Capital Accounts) would be allocated among the Partners if there had
been a taxable disposition of such property at its fair market value on the date
of distribution. The Capital Accounts of the Partner receiving a distribution in
kind shall then be reduced by the fair market value of the property distributed.
Subject to the limitations on such distributions in connection with any
distribution of property of the Partnership in kind, including any distribution
in connection with the liquidation of the Partnership, the General Partner need
not distribute each asset ratably to all Partners, so long as all Partners
concurrently receive distributions of cash and other property, valued as
provided above, in the proportion to which they would otherwise be entitled.
Section 6.8 No Other Distributions Permitted.
Prior to a Qualified Offering, no distribution of assets of
the Partnership not provided for under this Agreement, as amended from time to
time, shall be made by the Partnership to any Partner without the prior written
consent of the holders of a majority of the Class A Units then outstanding. This
provision shall not prohibit the payment of principal of and interest on loans
to the Partnership made by a Partner.
Section 6.9 Special Distributions.
Notwithstanding anything to the contrary in Sections 6.1, 6.2
or elsewhere in this Agreement, a portion of any distributions received by the
Partnership from certain partnerships in which it holds interests shall first be
specially allocated and distributed to the Partners other than BRT. The portion
of such distributions that shall be specially allocated and distributed to the
Partners other than BRT shall equal the sum of (i) 1.01% multiplied by R% of any
distributions received by the Partnership from Witmer Partnership, (ii) 2.041%
multiplied by R% of any distributions received by the Partnership from C/N
Oaklands Limited Partnership III and Iron Run Limited Partnership V and (iii) in
the case of any distributions received by the Partnership from BRT OP after a
Qualified Offering but before contribution to the Partnership of BRT's remaining
interest in BRT OP, (a) 42.857% multiplied by R% of any such distributions
received by the Partnership from BRT OP that are attributable to proceeds of any
sale of property of BRT OP, to the extent of the fair market value of such
property as of this date, and (b) 1.031% multiplied by R% of any other such
distributions received by the Partnership from BRT OP, where R% equals the
quotient of (x) 100% minus BRT's Percentage Interest divided by (y) BRT's
Percentage Interest.
ARTICLE 7: ALLOCATIONS
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Section 7.1 Allocation of Net Income and Net Loss Before a
Qualified Offering.
For all periods ending before the completion of a Qualified
Offering, Net Income and Net Loss shall, except as otherwise provided herein, be
allocated as follows:
(a) Net Income and Net Loss Realized by BRT OP. All
Net Income and Net Loss realized by the Partnership on account of BRT OP shall
be allocated to the holders of the Class C Units. No other items shall be
allocated with respect to such Class C Units, and the portion of the Capital
Account of the holder of the Class C Units that is attributable to the Class C
Units shall not be taken into account for the remainder of this Section.
(b) Other Net Income. Except as provided in
subsection (a) above, Net Income shall be allocated
(i) First, to the Partners in proportion to
their deficit Economic Capital Account balances, if any, until such deficit
balances have been eliminated;
(ii) Next, to the holder of the Class B
Units to the extent, if any, that the Class B Liquidation Preference exceeds the
Economic Capital Account balance of the holder of the Class B Units;
(iii) Next, to the Partners in such amounts
as to cause, as quickly as possible, the positive Economic Capital Account
balance of each Partner, or, in the case of the holder of the Class B Units, the
excess of such positive Economic Capital Account balance over the Class B
Liquidation Preference, to be in proportion to their Percentage Interests; and
(iv) Thereafter, the balance of such Net
Income, if any, shall be allocated to the Partners in proportion to their
Percentage Interests.
(c) Other Net Loss. Except as provided in subsection
(a) above, Net Loss shall be allocated
(i) First, to the Partners in such amounts
as to cause, as quickly as possible, the positive Economic Capital Account
balance, if any, of each Partner, or, in the case of the holder of the Class B
Units, the excess of such positive Economic Capital Account balance over the sum
of the Class B Accumulated Preferred Distribution and the Class B Liquidation
Preference, to be in proportion to their Percentage Interests;
(ii) Next, to the Partners with positive
Economic Capital Account balances, in proportion to their
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Percentage Interests, until the Economic Capital Account balances of the
Partners other than the holders of the Class B Units equal zero;
(iii) Next, to the holder of the Class B
Units until its Economic Capital Account balance equals zero; and
(iv) Thereafter, to the Partners in proportion to their
Percentage Interests.
Section 7.2 Allocation of Net Income and Net Loss in
Connection with and After a Qualified Offering.
Any Net Income or Net Loss recognized by reason of the
revaluation of Partnership property pursuant to Regulation Section
1.704-1(b)(2)(iv)(f) upon the completion of a Qualified Offering, and any Net
Income or Net Loss for periods ending after the completion of a Qualified
Offering, shall, except as otherwise provided herein, be allocated among the
Partners as follows:
(a) First, Net Income or Net Loss shall be allocated
to the Partners in such manner as to cause, as quickly as possible, their
Capital Accounts to be proportionate to their Percentage Interests; and
(b) Any remaining Net Income or Net Loss shall be
allocated to the Partners in proportion to their Percentage Interests.
Section 7.3 Special Allocations.
Notwithstanding anything to the contrary contained in this
Agreement:
(a) Minimum Gain Chargeback (Nonrecourse
Liabilities). If there is a net decrease in Partnership Minimum Gain for any
Partnership fiscal year (except as a result of conversion or refinancing of
Partnership indebtedness, certain capital contributions or revaluation of the
Partnership property as further outlined in Regulation Sections 1.704-2(d)(4),
(f)(2) or (f)(3)), each Partner shall be specially allocated items of
Partnership income and gain for each year (and, if necessary, subsequent years)
in an amount equal to that Partner's share of the net decrease in Partnership
Minimum Gain. The items to be so allocated shall be determined in accordance
with Regulation Section 1.704-2(f). This paragraph (a) is intended to comply
with the minimum gain chargeback requirement in said section of the Regulations
and shall be interpreted consistently therewith. Allocations pursuant to this
paragraph (a) shall be made in proportion to the respective amounts required to
be allocated to each Partner pursuant hereto.
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(b) Minimum Gain Attributable to Partner Nonrecourse
Debt. If there is a net decrease in Minimum Gain Attributable to Partner
Nonrecourse Debt during any fiscal year (other than due to the conversion,
refinancing or other change in the debt instrument causing it to become
partially or wholly nonrecourse, certain capital contributions, or certain
revaluations of Partnership property as further outlined in Regulation Section
1.704-2(i)(4)), each Partner shall be specially allocated items of Partnership
income and gain for such year (and, if necessary, subsequent years) in an amount
equal to that Partner's share of the net decrease in the Minimum Gain
Attributable to Partner Nonrecourse Debt. The items to be so allocated shall be
determined in accordance with Regulation Section 1.704-2(i)(4) and (j)(2). This
paragraph (b) is intended to comply with the minimum gain chargeback requirement
with respect to Partner Nonrecourse Debt contained in said section of the
Regulations and shall be interpreted consistently therewith. Allocations
pursuant to this paragraph (b) shall be made in proportions to the respective
amounts required to be allocated to each Partner pursuant hereto.
(c) Qualified Income Offset. In the event a Partner
receives any adjustments, allocations or distributions described in Regulation
Section 1.704-1(b)(2)(ii)(d)(4), (5) or (6), and such Partner has an Adjusted
Capital Account Deficit, items of Partnership income and gain shall be specially
allocated to such Partner in an amount and manner sufficient to eliminate the
Adjusted Capital Account Deficit as quickly as possible. This paragraph (c) is
intended, among other things, to meet the requirements for a "qualified income
offset" under Regulation Section 1.704-1(b)(2)(ii)(d) and shall be interpreted
consistently therewith.
(d) Nonrecourse Deductions. Nonrecourse Deductions
for any fiscal year or other applicable period shall be allocated to the
Partners in accordance with their respective Percentage Interests.
(e) Partner Nonrecourse Deductions. Partner
Nonrecourse Deductions for any fiscal year or other applicable period shall be
specially allocated to the Partner that bears the economic risk of loss for the
debt (i.e., the Partner Nonrecourse Debt) in respect of which such Partner
Nonrecourse Deductions are attributable (as determined under Regulation Section
1.704-2(b)(4) and (i)(1)).
(f) Curative Allocations. The Regulatory Allocations
shall be taken into account in allocating other items of income, gain, loss and
deduction among the Partners so that, to the extent possible, the cumulative net
amount of allocations of Partnership items under Sections 7.1 and 7.2 shall be
equal to the net amount that would have been allocated to each Partner if
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the Regulatory Allocations had not occurred. This paragraph (f) is intended to
minimize to the extent possible and to the extent necessary any economic
distortions which may result from application of the Regulatory Allocations and
shall be interpreted in a manner consistent therewith. For purposes hereof,
"Regulatory Allocations" shall mean the allocations provided under this Section
7.3 (save paragraphs (d) and (f) hereof).
Section 7.4 Tax Allocations.
(a) Generally. Subject to paragraphs (b), (c) and (d)
hereof, items of income, gain, loss, deduction and credit to be allocated for
income tax purposes (collectively, "Tax Items") shall be allocated among the
Partners on the same basis as their respective book items.
(b) Sections 1245/1250 Recapture. If any portion of
gain from the sale of property is treated as gain which is ordinary income by
virtue of the application of Code Sections 1245 or 1250 ("Affected Gain"), then
(i) such Affected Gain shall be allocated among the Partners in the same
proportion that the depreciation and amortization deductions giving rise to the
Affected Gain were allocated and (ii) other Tax Items of gain of the same
character that would have been recognized, but for the application of Code
Sections 1245 and/or 1250, shall be allocated away from those Partners who are
allocated Affected Gain pursuant to clause (i) so that, to the extent possible,
the other Partners are allocated the same amount, and type, of capital gain that
would have been allocated to them had Code Sections 1245 and/or 1250 not
applied. For purposes hereof, in order to determine the proportionate
allocations of depreciation and amortization deductions for each fiscal year or
other applicable period, such deductions shall be deemed allocated on the same
basis as Net Income and Net Loss for such respective period.
(c) Allocations Respecting Section 704(c) and
Revaluations. Notwithstanding paragraph (b) hereof, Tax Items with respect to
Partnership property that is subject to Code Section 704(c) and/or Regulation
Section 1.704-1(b)(2)(iv)(f) (collectively "Section 704(c) Tax Items") shall be
allocated in accordance with said Code section and/or Regulation Section
1.704-1(b)(4)(i), as the case may be. The Partnership shall apply the
"traditional method" for such allocations, as described in Regulation Section
1.704-3(b), and the allocation of Tax Items shall be subject to the ceiling rule
stated in Regulation Section 1.704-3(b)(1).
(d) Precontribution Gain. In the event that, during
any fiscal year or other applicable period, any Title Holding Partnership
allocates to the Partnership Precontribution Gain (as defined below), each
Partner (or its successors in
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interest) who, pursuant to Article IV hereof, contributed to the capital of the
Partnership the Contributed Asset to which a distributive share of
Precontribution Gain is attributable shall be allocated that Precontribution
Gain in accordance with its respective interest in such Precontributed Gain. For
purposes hereof, "Precontribution Gain" shall mean, with respect to each
Property owned by a Title Holding Partnership, that unrealized gain attributable
to the excess of (i) the fair market value of such Property on the date at which
the Contributed Asset is contributed to the capital of the Partnership pursuant
to Article IV hereof, over (ii) the adjusted tax basis of such Property on the
date of such contribution; provided, however, that the amount of any
Precontribution Gain associated with a Property shall be adjusted to account for
allocations made in accordance with the provisions of paragraph (c) of this
Section 7.4 and shall not, in any event, exceed that amount of gain actually
allocated to the Partnership by a Title Holding Partnership as a result of the
sale or other disposition of such Property.
Section 7.5 Additional Special Allocations.
Notwithstanding anything to the contrary in Sections 7.1, 7.2
or elsewhere in this Agreement, a portion of any Net Income or Net Loss
allocable to the Partnership from certain partnerships in which it holds
interests that would otherwise be allocable to the holder of the General Partner
Units shall instead be allocable to the other Partners in proportion to their
Percentage Interests. Such portion shall equal (i) 1.01% multiplied by R% of the
Partnership's Net Income or Net Loss from Witmer Partnership, (ii) 2.041%
multiplied by R% of the Partnership's Net Income or Net Loss from C/N Oaklands
Limited Partnership III and Iron Run Limited Partnership V and (iii) in the case
of any period after a Qualified Offering but before contribution to the
Partnership of BRT's remaining interest in BRT OP, 1.031% multiplied by R% of
the Partnership's Net Income or Net Loss from BRT OP, where R% equals the
quotient of (x) 100% minus BRT's Percentage Interest divided by (y) BRT's
Percentage Interest. Solely for purposes of subsection 7.2(a) above, Capital
Accounts shall be computed as if this Section 7.5 and Section 6.9 were not in
this Agreement.
ARTICLE VIII: EXPENSES; RIGHTS, DUTIES AND RESTRICTIONS OF THE
GENERAL PARTNER; VOTING RIGHTS OF CLASS A
PARTNERS.
Section 8.1 Expenses Borne by the Partnership.
(a) The General Partner estimates that the total
costs and expenses to be incurred by BRT and the Partnership in connection with
the transactions contemplated by this Agreement and the Proxy Statement will
aggregate approximately $1,216,000,
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as more fully set forth on Exhibit "L." Of these amounts, BRT shall pay $707,500
and the Partnership $762,000. If the actual costs and expenses differ from the
estimate, BRT and the Partnership shall pay 58% and 42%, respectively of such
actual costs and expenses. BRT and SSI shall provide the Partnership with the
funds needed to pay the Partnership's share of expenses allocated to the
Partnership under this paragraph (a) as provided in paragraph (e) below.
(b) The Partnership shall pay all fees and other
costs that it incurs for legal and accounting services provided to the
Partnership by third parties after the date hereof, including such costs and
expenses incurred in connection with the preparation and maintenance of the
books and records, financial statements, and tax returns of the Partnership. The
General Partner shall be entitled to reimbursement by the Partnership for any
such expenditures incurred by it on behalf of the Partnership.
(c) Except as otherwise provided in paragraph (d)
below, all fees and other costs that BRT incurs for legal and accounting
services provided to BRT after the date hereof by third parties in connection
with the preparation and maintenance of BRT's books and records, financial
statements, tax returns and reports to stockholders and the Securities and
Exchange Commission (collectively "BRT Administrative Expenses"), shall (i)
prior to a Qualified Offering, be allocated 58% to BRT and 42% to the
Partnership; and (ii) after a Qualified Offering, all such BRT Administrative
Expenses shall be allocated to the Partnership.
(d) In the event that BRT hereafter acquires any
Properties outside of the Partnership or an entity wholly-owned by the
Partnership, the percentage of BRT Administrative Expenses allocated to the
Partnership shall be reduced to an amount that is fair and equitable to the
Partnership under the circumstances, as determined by the General Partner with
the consent of the holders of a majority of the then outstanding Class A Units.
(e) (i) SSI shall advance funds to the Partnership
for the purpose of providing the Partnership with the cash it needs to pay a
portion of the transaction costs allocated to the Partnership under paragraph
(a) above. Such advances shall be made in accordance with the provisions of the
Distribution Support and Loan Agreement. The amount of such expenses to be
funded with loans by SSI shall be the percentage obtained by multiplying the
amount of the Partnership's transaction expenses allocated to it under paragraph
(a) by a fraction, the numerator of which is the number of Class A Units issued
on the date hereof and the denominator of which is the number of Class A Units
and Class B Units so issued.
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(ii) BRT shall pay on behalf of the
Partnership the remaining portion of the Partnership's share of transaction
costs allocated to it under paragraph (a) above.
Section 8.2 Powers and Duties of General Partner.
(a) The General Partner shall be responsible for the
management of the Partnership's business and affairs. Except as otherwise herein
expressly provided, and subject to the limitations contained in Section 8.3
hereof, the General Partner shall have, and is hereby granted, full and complete
power, authority and discretion to take such action for and on behalf of the
Partnership as the General Partner shall, in its sole and absolute discretion,
deem necessary or appropriate to carry out the purposes for which the
Partnership was organized. Except as otherwise expressly provided herein, and
subject to Section 8.3 hereof, the General Partner shall exercise all of the
powers of the Partnership and have specifically, without limiting the foregoing
the right, power and authority:
(i) To manage, control, invest, reinvest,
acquire by purchase, lease or otherwise, sell, contract to purchase or sell,
grant, obtain, or exercise options to purchase, options to sell or conversion
rights, assign, transfer, convey, deliver, endorse, exchange, pledge, mortgage,
abandon, improve, repair, maintain, insure, lease for any term and otherwise
deal with any and all property of whatsoever kind and nature, and wheresoever
situated, in furtherance of the business or purposes of the Partnership;
(ii) To acquire, directly or indirectly,
interests in real estate of any kind and of any type, and any and all kinds of
interests therein and interests in Entities investing therein, and to determine
the manner in which title thereto is to be held; to manage (directly or through
property managers), insure against loss, protect and subdivide any of the real
estate, interests therein or parts thereof; to improve, develop or redevelop any
such real estate; to participate in the ownership and development of any
property; to dedicate for public use, to vacate any subdivisions or parts
thereof, to re-subdivide, to contract to sell, to grant options to purchase or
lease, to sell on any terms; to convey, to mortgage, pledge or otherwise
encumber said property, or any part thereof; to lease said property or any part
thereof from time to time, upon any terms and for any period of time, and to
renew or extend leases, to amend, change or modify the terms and provisions of
any leases and to grant options to lease and options to renew leases and options
to purchase; to partition or to exchange said real property, or any part
thereof, for other real or personal property; to collect all rental and other
income accruing to the Partnership; to grant easements or charges of any kind;
to release, convey or assign any right, title or interest in or about or
easement appurtenant
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to said property or any part thereof; to construct and reconstruct, remodel,
alter, repair, add to or take from buildings on said premises; to insure any
Person having an interest in or responsibility for the care, management or
repair of such property; to direct the trustee of any land trust to mortgage,
lease, convey or contract to convey the real estate held in such land trust or
to execute and deliver deeds, mortgages, notes, and any and all documents
pertaining to the property subject to such land trust or in any matter regarding
such trust; to execute assignments of all or any part of the beneficial interest
in such land trust;
(iii) To employ, engage or contract with or
dismiss from employment or engagement Persons to the extent deemed necessary or
appropriate by the General Partner for the operation and management of the
Partnership business, including but not limited to, contractors, subcontractors,
engineers, architects, surveyors, mechanics, consultants, accountants,
attorneys, insurance brokers, real estate brokers and others;
(iv) To enter into, make, amend, perform and
carry out or cancel and rescind, contracts and other obligations on behalf of
the Partnership and to cause all Administrative Expenses to be paid;
(v) To borrow money, procure loans and
advances from any Person for Partnership purposes, and to apply for and secure,
from any Person, credit or accommodations; to contract liabilities and
obligations, direct or contingent and of every kind and nature (including
interest rate swaps, caps and hedges) with or without security; and to repay,
discharge, settle, adjust, compromise, or liquidate any such loan, advance,
credit, obligation or liability;
(vi) To pledge, hypothecate, mortgage,
assign, deposit; deliver, enter into sale and leaseback arrangements or
otherwise give as security or as additional or substitute security, or for sale
or other disposition any and all Partnership property, tangible or intangible,
including, but not limited to, real estate and beneficial interests in land
trusts, and to make substitutions thereof, and to receive any proceeds thereof
upon the release or surrender thereof; to sign, execute and deliver any and all
assignments, deeds and other contracts and instruments in writing; to authorize,
give, make, procure, accept and receive moneys, payments, property, notices,
demands, vouchers, receipts, releases, compromises and adjustments; to waive
notices, demands, protests and authorize and execute waivers of every kind and
nature; to enter into, make, execute, deliver and receive written agreements,
undertakings and instruments of every kind and nature; to give oral instructions
and make oral agreements; and generally to do any and all other acts and things
incidental to any of the foregoing or with reference
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to any dealings or transactions which the General Partner may deem necessary,
proper or advisable to effect or accomplish any of the foregoing or to carry out
the business and purposes of the Partnership;
(vii) To sell or otherwise dispose of any or
all assets of the Partnership;
(viii) To acquire and enter into any
contract of insurance which the General Partner deems necessary or appropriate
for the protection of the Partnership, for the conservation of the Partnership's
assets or for any purpose convenient or beneficial to the Partnership and to
settle claims under such insurance;
(ix) To conduct any and all banking
transactions on behalf of the Partnership; to adjust and settle checking,
savings, and other accounts with such institutions as the General Partner shall
deem appropriate; to draw, sign, execute, accept, endorse, guarantee, deliver,
receive and pay any checks, drafts, bills of exchange, acceptances, notes,
obligations, undertakings and other instruments for or relating to the payment
of money in, into, or from any account in the Partnership's name; to execute,
procure, consent to and authorize extensions and renewals of the same; to make
deposits and withdraw the same and to negotiate or discount commercial paper,
acceptances, negotiable instruments, bills of exchange and dollar drafts; to pay
all taxes, assessments, rents and other impositions applicable to the assets of
the Partnership and to seek to reduce the same; to invest all monies of the
Partnership;
(x) To demand, sue for, receive, and
otherwise take steps to collect or recover all debts, rents, proceeds,
interests, dividends, goods, chattels, income from property, damages and all
other property, to which the Partnership may be entitled or which are or may
become due the Partnership from any Person; to commence, prosecute or enforce,
or to defend, answer or oppose, contest and abandon all legal proceedings in
which the Partnership is or may hereafter be interested; and to settle,
compromise or submit to arbitration any accounts, debts, claims, disputes and
matters which may arise between the Partnership and any other Person and to
grant an extension of time for the payment or satisfaction thereof on any terms,
with or without security;
(xi) To confess judgment against the
Partnership;
(xii) To make arrangements for financing,
including the taking of all action deemed necessary or appropriate by the
General Partner to cause any approved loans to be closed including, without
limitation, the execution and delivery
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on behalf of the Partnership of notes, mortgages, deeds of trust
and like instruments;
(xiii) To take all reasonable measures
necessary to insure compliance by the Partnership with applicable
arrangements, and other contractual obligations and arrangements entered into by
the Partnership from time to time in accordance with the provisions of this
Agreement, including periodic reports as required to be submitted to lenders and
using all due diligence to insure that the Partnership is in compliance with its
contractual obligations;
(xiv) To maintain the Partnership's books
and records;
(xv) To prepare and deliver, or cause to be
prepared and delivered by the Partnership's accountants, all financial and other
reports with respect to the operations of the Partnership, and all federal and
state tax returns and reports;
(xvi) To act in any state or nation in which
the Partnership may lawfully act, for itself or as principal, agent or
representative for any Person, including the Partnership, with respect to any
business of the Partnership;
(xvii) To become a partner or member in, and
perform the obligations of a partner or member of, any general or limited
partnership or limited liability company;
(xviii) To apply for, register, obtain,
purchase or otherwise acquire trademarks, trade names, labels and designs
relating to or useful in connection with any business of the Partnership, and to
use, exercise, develop and license the use of the same;
(xix) To pay or reimburse any and all actual
fees, costs and expenses incurred in the formation and organization of the
Partnership;
(xx) To do all acts which are necessary,
customary or appropriate for the protection and preservation of the
Partnership's assets, including the establishment of reserves;
(xxi) To exercise all rights, and to perform
all duties, responsibilities and obligations, granted to or required of the
General Partner by this Agreement; and
(xxii) In general, to exercise all of the
general rights, privileges and powers permitted to be had and exercised by the
provisions of the Act.
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(b) Concurrently with the execution and delivery of
this Agreement, the Management Company is acquiring the Management Contracts.
The Management Company shall (i) provide the Partnership with all office space
and administrative services needed by the Partnership in the ordinary course of
its business, and (ii) perform all of its duties under the Management Contracts.
All costs and expenses of the Management Company so incurred, such as for office
rent, telephone, postage, travel and entertainment, and compensation of officers
and employees and other overhead shall be borne by the Management Company out of
the management fees payable under the Management Contracts and shall not be
separately charged back to the Partnership, except for compensation and other
related expenses of property management and maintenance personnel that are
permitted under a Management Contract to be charged against a Property.
(c) The Partnership is authorized to guaranty the
Management Company's payment and performance of the Employment Agreements of
even date herewith between the Management Company and its executive officers
described in the Proxy Statement, and of each amendment thereof and each
successor contract thereto.
Section 8.3 Voting Rights.
(a) Prior to the completion of the Qualified
Offering, the General Partner shall not, without the affirmative consent of the
holders of not less than 75% of the then outstanding Class A Units, take, or
permit or suffer any other person to take, any of the following actions, each of
which shall constitute a Major Decision:
(i) Except as otherwise required by this
Agreement, issue any additional Class A Units, Class B Units, Class C Units or
General Partner Units, or any other class of Partnership Interest;
(ii) Dissolve and liquidate the Witmer
Partnership;
(iii) Cause the Partnership to enter into
any arrangement, contract, agreement or business venture (including, without
limitation, any loans or other arrangement relating to the advancement of funds
to or by the General Partner or any Affiliate thereof) with the General Partner
or any Affiliate of the General Partner involving payments by the Partnership to
the General Partner or any Affiliate thereof of an aggregate of more than
$100,000 unless such transaction (i) is expressly contemplated by this Agreement
or the Transaction Documents, in each case as in effect on the date hereof or
(ii) such transaction involves a loan from the General Partner to the
Partnership on terms and conditions substantially similar to those customarily
comprising commercial loans of similar size and
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credit risk and at an interest rate not exceeding .5% above the General
Partners' internal cost of funds as at the date the loan is made;
(iv) Permit the Partnership to merge with or
into, or consolidate its operations with, any other entity; or
(v) Permit, suffer or cause Witmer
Partnership or Witmer GP to take any affirmative action that would violate this
Agreement or the Agreement of Limited Partnership creating the Witmer
Partnership or that would result in a breach of Witmer Partnership's loan
agreement with GECC.
(b) The Partnership shall not refinance or pay off
(other than payments of principal and interest in accordance with the existing
mortgage amortization schedule) any mortgage indebtedness encumbering a
Portfolio B Property without SSI's consent unless it shall first have given SSI
at least 30 days' prior written notice thereof.
(c) The Net Sales Proceeds or Net Refinancing
Proceeds realized by the Partnership from the sale or refinancing of a Portfolio
A, Portfolio B or Portfolio C Property, or any Option Property, prior to a
Qualified Offering shall be used by the Partnership to pay such outstanding
indebtedness of the Partnership to SSI or its Affiliates as SSI shall designate.
Section 8.4 Proscriptions.
The General Partner shall not have the authority to:
(a) Do any act in contravention of this Agreement or
which would make it impossible to carry on the ordinary business of the
Partnership;
(b) Possess any Partnership property or assign rights
in specific Partnership property for other than Partnership purposes;
(c) Do any act in contravention of applicable law; or
(d) Without the consent of the holders of at least
75% of the then outstanding Class A Units, cause the Partnership to make a
general assignment for the benefit of creditors, or appoint or acquiesce in the
appointment of a custodian, receiver or trustee for all or any part of the
Partnership's assets, or commence any proceeding seeking relief for the
Partnership under any provision of the federal Bankruptcy Code 11 U.S.C. ss.101
et seq. or any other federal or state law relating to insolvency, bankruptcy or
reorganization.
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Nothing herein contained shall impose any obligation
on any Person or firm doing business with the Partnership to inquire as to
whether or not the General Partner has properly exercised its authority in
executing any contract, lease, mortgage, deed or other instrument on behalf of
the Partnership, and any such third Person shall be fully protected in relying
upon such authority.
Section 8.5 Qualified Offering.
(a) The General Partner shall use its reasonable
efforts to complete a Qualified Offering as promptly as practicable after the
date hereof.
(b) Except as provided in paragraph (c), if such
Qualified Offering is completed, the General Partner shall contribute sufficient
proceeds therefrom to the Partnership as shall be necessary to repay or
refinance the mortgage indebtedness which on the date hereof encumbers the
Portfolio A, Portfolio B, and Portfolio C Properties. In exchange for such
contribution, the Partnership shall issue to the General Partner additional GP
Units equal in number to the number of shares of Common Stock of BRT issued in
the Qualified Offering the net proceeds of which are contributed to the
Partnership.
(c) In lieu of contributing the net proceeds of a
Qualified Offering to the Partnership under paragraph (b) above, the General
Partner may instead, at its expense, (i) obtain general releases from the
holders of the mortgage debt releasing the Partners who contributed the
Properties to the Partnership from all liability, however incurred (whether in
the capacity as maker, co-maker, guarantor, surety, indemnitor or accommodation
party under a letter of credit held by the lender) that they or any of them have
to pay or perform all or part of such mortgage indebtedness; or (ii) make other
arrangements satisfactory to such Partners to indemnify them against such
liability. Such releases and/or indemnity agreements shall be satisfactory to
the Partners entitled to the benefit of such releases and/or indemnity
agreements in their sole discretion.
(d) If the Qualified Offering has not occurred by the
fifth anniversary of the date of this Agreement, then the holders of a majority
of the Class A Units shall have the right and option, exercisable by them at any
time prior to the occurrence of the Qualified Offering, to require the
Partnership to utilize its best efforts to sell the Portfolio A Properties,
Portfolio B Properties and Portfolio C Properties of the Partnership, provided
that the Net Sale Proceeds realized from the disposition of such Properties are
sufficient in amount to pay the holders of the Class B Units an amount equal to
their Class B Liquidation Preference. Promptly upon the completion of the sale
of the Portfolio A, Portfolio B, and Portfolio C
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Properties, the General Partner shall distribute the Net Sale Proceeds to the
holders of the GP Units, Class B Units and Class A Units as contemplated by
Section 6.1(c) and Section 6.1(d) hereof.
Section 8.6 Additional Partners.
Additional Partners may be admitted to the Partnership only as
provided in Article XII hereof.
Section 8.7 Compensation of the General Partner.
The General Partner shall not be entitled to any compensation
for services rendered to the Partnership solely in its capacity as General
Partner except with respect to reimbursement for those costs and expenses
pursuant to Section 8.1 hereof including those constituting BRT Administrative
Expenses.
Section 8.8 Waiver and Indemnification.
(a) Except as otherwise provided in Article XIX,
neither the General Partner nor any Person acting on its behalf, pursuant
hereto, shall be liable, responsible or accountable in damages or otherwise to
the Partnership or to any Partner for any acts or omissions performed or omitted
to be performed by it within the scope of the authority conferred upon the
General Partner by this Agreement and the Act, provided that the General
Partner's or such other Person's conduct or omission to act was taken in good
faith and in the belief that such conduct or omission was in the best interests
of the Partnership and, provided further, that the General Partner or such other
Person shall not be guilty of fraud, willful misconduct or gross negligence.
(b) The Partnership shall, and hereby does, indemnify
and hold harmless the General Partner and its Affiliates and any individual
acting on their behalf from any loss, cost or expense, damage, claim or
liability, including, but not limited to, reasonable attorneys' fees and
expenses, incurred by them by reason of any act performed by them for or on
behalf of the Partnership or the General Partner, or omitted to be performed by
them, in accordance with the standards set forth above or in enforcing the
provisions of this indemnity; provided, however, no Partner or any of its
Affiliates shall have any personal liability with respect to the foregoing
indemnification, and any such liability or indemnification shall be satisfied
solely out of the assets of the Partnership.
(c) All rights of any indemnitee hereunder shall
survive the dissolution of the Partnership; provided, however, that a claim for
indemnification under this Agreement must be made by or on behalf of the Person
seeking indemnification prior
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to the time the Partnership is liquidated hereunder. The indemnification rights
contained in this Agreement shall be cumulative of, and in addition to, any and
all other rights, remedies and recourse to which the person seeking
indemnification shall be entitled, whether at law or at equity.
Section 8.9 Operation in Accordance with REIT Requirements.
The Partners acknowledge and agree that the Partnership shall
be operated in a manner that will enable the General Partner to (a) satisfy the
REIT Requirements and (b) avoid the imposition of any federal income or excise
tax liability on either the General Partner or the Partnership. The General
Partner shall not be required to take any action which would result in the
General Partner ceasing to satisfy the REIT Requirements or the imposition of
any federal income or excise tax liability on the General Partner.
Section 8.10 Reliance by Third Parties.
(a) Notwithstanding anything to the contrary in this
Agreement, any Person dealing with the Partnership shall be entitled to assume
that the General Partner has full power and authority to encumber, sell or
otherwise use in any manner any and all assets of the Partnership and to enter
into any contracts on behalf of the Partnership, and such Person shall be
entitled to deal with the General Partner as if it were the Partnership's sole
party in interest, both legally and beneficially.
(b) Each Limited Partner hereby waives any and all
defenses or other remedies which may be available against such Person to
contest, negate or disaffirm any action of the General Partner in connection
with any such dealing. In no event shall any Person dealing with the General
Partner or its representatives be obligated to ascertain that the terms of this
Agreement have been complied with or to inquire into the necessity or expedience
of any act or action of the General Partner or its representatives. Each and
every certificate, document or other instrument executed on behalf of the
Partnership by the General Partner shall be conclusive evidence in favor of any
and every person relying thereon or claiming thereunder that (i) at the time of
the execution and delivery of such certificate, document or instrument, this
Agreement was in full force and effect, (ii) the Person executing and delivering
such certificate, document or instrument was duly authorized and empowered to do
so for and on behalf of the Partnership, and (iii) such certificate, document or
instrument was duly executed and delivered in accordance with the terms and
provisions of this Agreement and is binding upon the Partnership.
Section 8.11 Other Matters Concerning the General Partner.
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(a) The General Partner may rely and shall be
protected in acting or refraining from acting upon any resolution, certificate,
statement, instrument, opinion, report, or other document believed by it to be
genuine and to have been singed or presented by the proper party or parties.
(b) The General Partner may consult with legal
counsel, accountants, appraisers, management consultants, investment bankers and
other consultants and advisers selected by it, and any act taken or omitted to
be taken in reliance upon the opinion of such Persons as to matters which such
General Partner reasonably believes to be within such Person's professional
expertise shall be conclusively presumed to have been done or omitted in good
faith and in accordance with such opinion.
(c) The General Partner shall have the right, in
respect of any of its powers or obligations hereunder, to act through any of its
duly authorized officers and any attorney or attorneys-in-fact duly appointed by
the General Partner; and any Person dealing with the Partnership shall be
entitled to rely on any certificate, document or other instrument executed on
behalf of the Partnership by a duly authorized officer or by a duly authorized
attorney or attorneys-in-fact of the General Partner. Each such attorney-in-fact
shall, to the extent provided by the General Partner in the power of attorney,
have full power and authority to do and perform all and every act and duty which
is permitted or required to be done by the General Partner hereunder.
(d) Notwithstanding any other provisions of this
Agreement or the Act, any action of the General Partner on behalf of the
Partnership or any decision of the General Partner to refrain from acting on
behalf of the Partnership, undertaken in the good faith belief that such action
or omission is necessary or advisable in order (i) to protect or further the
ability of the General Partner to continue to qualify as a REIT or (ii) to avoid
the General Partner incurring any taxes under Section 857 or Section 4981 of the
Code, is expressly authorized under this Agreement and is deemed approved by all
of the Limited Partners. Nothing however in this Agreement shall be deemed to
give rise to any liability on the part of the Limited Partners for the General
Partner's failure to qualify or continue to qualify as a REIT or failure to
avoid incurring any taxes under the foregoing Sections of the Code.
Section 8.12 Meetings of Partners.
(a) Meetings of Partners may be called at any time by
the General Partner to consider, and shall be so called so that the Partners may
act on, any matter on which they are entitled to act under the terms of this
Agreement or the Act. In addition, the General Partner shall call a meeting of
Class A
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Limited Partners when directed to do so by holders of not less than 25% of the
then outstanding Class A Units. Such direction shall be given by delivering to
the General Partner a request in writing stating that such holders desire to
call a meeting and indicating the general or specific purpose for which the
meeting is to be called.
(b) The General Partner may fix a date not more than
60 nor less than five (5) days preceding the date of any meeting of Partners, or
preceding the last day on which the consent of Partners may be effectively
expressed for any purpose without a meeting, as a record date for the
determination of the Partners entitled to notice of, and to vote at, such
meeting or to express such consent. In either such case, such Partners, and only
such Partners as shall be Partners of record on the record date shall be
entitled to notice of, and to vote at, such meeting and any adjournment thereof,
or to express such consent, as the case may be, notwithstanding any transfer of
any Partnership Interest on the Register after any such record date fixed as
aforesaid.
(c) Notice of any meeting at which Partners are
entitled to vote, or of any matter upon which action by written consent of such
Partners is to be taken, shall be given to each Partner of record not less than
five (5) nor more than 60 days prior to the date of such meeting or the date on
which consent must be given, as the case may be. Each such notice will include a
statement setting forth (i) the date, time and place of the meeting or the date
by which such action is to be taken, (ii) a description of the matter on which
such Partners are entitled to vote or of such matter upon which written consent
is sought and (iii) instructions for the delivery of proxies or consents.
(d) Except as otherwise provided by law, at any
meeting of Partners, the holders of a majority of the Units entitled to vote as
such meeting shall constitute a quorum at such meeting. In the absence of a
quorum, the holders of a majority of the Units entitled to vote thereat present
in person or by proxy may adjourn any meeting, from time to time, until a quorum
shall be present. At any such adjourned meeting at which a quorum shall be
present, any business may be transacted which might have been transacted at the
meeting as originally called.
(e) Each Partner entitled to vote at a meeting or to
express consent to Partnership action in writing without a meeting may authorize
another person or persons to act for him by proxy. A proxy acting for any
Partner shall be duly appointed by an instrument in writing subscribed by such
Partner and reasonably acceptable in form and substances to the General Partner.
Except as otherwise provided by law, no vote on any question upon which a vote
of the Partners may be taken need be by ballot unless the General Partner shall
determine that it
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shall be by ballot or the holders of a majority of all Units present in person
or by proxy and entitled to participate in such vote shall so demand. In a vote
by ballot each ballot shall state the Partnership Interests voted and the name
of the Partner or proxy voting. Unless otherwise provided by law or by this
Agreement, all questions shall be decided by the vote of the holders of a
majority of the Units present in person or by proxy at the meeting and entitled
to vote on the question.
(f) Any action required to or which may be taken at a
meeting of Partners may be taken without a meeting, without prior notice and
without a vote, if a consent or consents in writing, setting forth the action so
taken, shall be signed by Partners having not less than the minimum number of
votes that would be necessary to authorize such action at a meeting at which all
Units entitled to vote thereon were present and voted, and shall be delivered to
the Partnership by delivery to the General Partner (who shall have custody of
the books in which proceedings of meetings of Partners are recorded). Prompt
notice of the taking of action without a meeting shall be given to the Partners
entitled to vote who have not consented in writing.
(g) The General Partner, in its sole discretion,
shall establish all other provisions relating to meetings of Partners, in
addition to those expressly provided herein, including notice of the time, place
or purpose of any meeting at which any matter is to be voted on by any Partner,
waiver of any such notice, action by consent without a meeting, the
establishment of a record date, quorum requirements, voting in person or by
proxy or any other matter with respect to the exercise of any such right to
vote, in each case consistent with the terms hereof and in accordance with the
Act.
ARTICLE IX: ACCOUNTING AND RECORDS
Section 9.1 Books and Records.
The General Partner shall keep books of account for the
Partnership in accordance with the method of accounting used for federal income
tax purposes. Upon at least five Business Days' prior notice to the General
Partner, any Limited Partner shall have the right, to the extent provided for in
the Act, to inspect and copy at its own expense the Partnership's books and
records during normal business hours.
Section 9.2 Annual Reports.
(a) Not later than 90 days after the end of each
Fiscal Year (or such earlier date as may be required under the Code) the General
Partner shall deliver to each Partner a report indicating each Partner's share
for federal income tax purposes
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of the Partnership's income, credits and deductions for the immediately
preceding Fiscal Year, together with all other information concerning the
Partnership which may be required by the Code from time to time.
(b) The General Partner shall also cause an annual
report of the operation of the Partnership to be distributed to the Partners
within 120 days after the end of each Fiscal Year together with Audited
Financial Statements reflecting the Partnership's operation during such year.
(c) The General Partner may also furnish the Limited
Partners with such other periodic reports concerning the Partnership's business
and activities as the General Partner considers necessary to advise all Partners
properly about their investment in the Partnership and shall, upon the written
request of any Limited Partner, provide such Partner with:
(i) a copy of any report filed with the
Securities and Exchange Commission by the General Partner pursuant to the
Securities Exchange Act of 1934;
(ii) a copy of the Partnership's federal,
state and local income tax returns for each Fiscal Year;
(iii) a current list of the name and last
known business, residence or mailing address of each Partner; and
(iv) a copy of this Agreement and the
Certificate and all amendments thereto, together with executed copies of all
powers of attorney pursuant to which this Agreement, the Certificate and all
amendments thereto have been executed.
Section 9.3 Tax Returns.
The General Partner shall cause all income and other tax
returns of the Partnership to be prepared and filed in a timely manner. The
General Partner shall be the Tax Matters Partner (as defined in section
6231(a)(7) of the Code) of the Partnership.
Section 9.4 Fiscal Year.
The fiscal year ("Fiscal Year") of the Partnership shall be
the calendar year.
Section 9.5 Bank Accounts.
All funds of the Partnership shall be deposited in such
accounts established in the Partnership's name with such financial institutions
as may be determined from time to time by the
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General Partner. Withdrawals from any such accounts shall be made in the
Partnership's name upon the signature of such officers of the General Partner
and such other signature or signatures, if any, as the General Partner shall
from time to time designate. Funds in such accounts shall not be commingled with
the funds of any Partner.
ARTICLE X: CHANGES IN GENERAL PARTNERS
Section 10.1 Permitted Assignment of General Partnership
Interest; Permitted Withdrawal by the General
Partner.
The General Partner shall not have the right to resign or
withdraw or to Transfer all or any portion of its General Partnership Interest
represented by GP Units, except that the General Partner may assign all or a
portion of its General Partnership Interest represented by outstanding GP Units
to a substitute or additional General Partner permitted under and selected in
accordance with Section 10.2; (b) assign its General Partnership Interest
represented by outstanding GP Units to any Entity that has, by merger,
consolidation or otherwise, acquired substantially all of its assets and
continued its business and has been designated to succeed to its rights and
obligations under this Agreement in accordance herewith; and (c) pledge or grant
a security interest in its right to receive payments and distributions under
this Agreement. In connection with any Transfer described in clauses (a) and(b)
of all the General Partnership Interest, the General Partner may withdraw as
such upon the admission of the assignee. Sections 10.2 and 10.4 shall apply in
the case of a Transfer of all or a portion of a General Partnership Interest.
Section 10.2 Admission of Additional General Partners.
One or more additional or substitute General Partners may be
admitted to the Partnership from time to time by the General Partner in the
circumstances contemplated by Section 10.1, provided the additional or
substitute general partner is reasonably expected, as determined by a majority
of the Board of Trustees of BRT, to be able to fulfill the duties of a general
partner hereunder. Otherwise, no additional General Partner may be admitted to
the Partnership except as provided in Section 13.2. The terms of such assignment
and the nature of the duties of the newly admitted General Partner shall be as
agreed upon between the General Partner and such additional General Partner.
Section 10.3 Effect of Withdrawal of General Partner.
(a) Upon the occurrence of an Event of Withdrawal of
the General Partner (other than one permitted by Sec-
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tion 10.1), the General Partner shall cease to be such, and its Partnership
Interest shall be converted to an undesignated Limited Partnership Interest
entitling the holder thereof to the same share of the Partnership's income,
gain, loss, deduction and distributions as are allocated to the General Partner
hereunder, subject to the Partnership's right to set off (i) any damages caused
to it if the Event of Withdrawal is in violation of this Agreement and (ii) any
obligation of the General Partner under paragraph (b).
(b) Upon the occurrence of an Event of Withdrawal of
the General Partner, the General Partner shall pay to the Partnership in cash
the amount of any deficit balance in its Capital Account unless the Event of
Withdrawal is permitted by Section 10.1.
Section 10.4 Liability of a Withdrawn General Partner.
Any General Partner who shall commit or suffer an Event of
Withdrawal or shall otherwise withdraw from the Partnership shall remain liable
for obligations and liabilities incurred by it as General Partner prior to the
occurrence of such Event of Withdrawal or other withdrawal, but it shall be free
of any such obligation or liability incurred on account of the activities of the
Partnership thereafter.
ARTICLE XI: TRANSFERS OF LIMITED PARTNERSHIP INTERESTS
Section 11.1 General Transfer Provisions and Restrictions.
(a) Subject to Section 11.1(d), any Class A, Class B
or Class C Limited Partner may Transfer all or any portion of, or right in or
to, Class A, Class B or Class C Units of Limited Partnership Interest, without
the consent of the General Partner or any other Partner, except that no Class A
Limited Partner may Transfer Class A Units comprising Collateral in violation of
the provisions of Article XIX below.
(b) Limited Partnership Interests, if any, other than
Class A, Class B or Class C Limited Partnership Interests, shall be subject to
such restrictions on Transfer (in addition to the restrictions set forth in
Section 11.1(c) below) as the General Partner may determine to be appropriate.
(c) Notwithstanding the foregoing,
(i) no Transfer of any Limited Partnership
Interest shall be permitted if, in the opinion of the General Partner based on
the advice of counsel, there is a significant possibility that such Transfer:
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(A) may not be effected without
registration under the Securities Act of 1933, or would result in the violation
of any applicable state securities laws; or
(B) would result in the termination
of the Partnership within the meaning of section 708 of the Code, or would have
a material adverse effect on any Partner for federal income tax purposes; or
(C) would cause the Partnership to
be taxed other than as a partnership for federal income tax purposes or impair
the ability of the Partnership to take advantage of any favorable tax election
or treatment as a result of being taxed as a partnership (whether such
impairment shall arise from the termination of the Partnership for federal tax
purposes or otherwise); or
(D) would cause the Partnership to
become, with respect to any employee benefit plan subject to Title 1 of ERISA, a
"party-in-interest" (as defined in Section 3(14) of ERISA) or a "disqualified
person" (as defined in Section 4975(c) of the Code); or
(E) would cause any portion of the
assets of the Partnership to constitute assets of any employee benefit plan
pursuant to Department of Labor Regulations Section 2510.2-101; and
(ii) No Limited Partner shall effect any
Transfer:
(A) to any person or entity who
lacks the legal right, power or capacity to own Partnership Units;
(B) in violation of any provision
of any mortgage or trust deed (or the note or bond secured thereby) to which the
Partnership is a party or is otherwise bound;
(C) of any component portion of
Partnership Units, such as the Capital Account, or rights to distribution,
separate and apart from all other components of Partnership Units; or
(D) in the event such Transfer
would cause BRT or any successor thereto to cease to comply with the REIT
Requirements.
In furtherance of this subsection, the General Partner and the Partnership shall
in no event recognize any trade of a Limited Partnership Interest in a secondary
market or the substantial
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equivalent thereof and shall take such actions as are necessary so that such
trades are not recognized.
(d) All Transfers of Limited Partnership Interests
shall be by instrument in form and substance reasonably satisfactory to the
General Partner. Any Transfer of Limited Partnership Interests in violation of
this Agreement shall be null and void and shall not operate to vest any rights
in any transferee.
(e) In no event shall the Partnership dissolve or
terminate upon the admission of any Partner to the Partnership or upon any
permitted Transfer of a Partnership Interest by any Partner. Each Partner hereby
waives its right to dissolve, liquidate or terminate the Partnership in such
event. No Transfer of any Limited Partnership Interest in the Partnership shall
constitute a change of Control of the Partnership.
Section 11.2 Expenses.
All expenses of the Partnership and of the Partners occasioned
by a permitted Transfer shall be borne by the Partner effecting such Transfer.
Section 11.3 Allocations with Respect to Transferred Interest.
Upon the permitted Transfer of all or any part of a
Partnership Interest, each item of Partnership income (or loss) and deduction
allocable to such Partnership Interest shall be pro rated (as to the Transferred
Partnership Interest) between the transferor and transferee on the basis of the
number of days in the taxable year of the Partnership preceding (and including)
and succeeding, respectively, the date as of which the assignment is executed.
Unless otherwise agreed by the Transferor and Transferee Partners, gain or loss
from the sale or other taxable disposition of a Partnership capital asset shall
be allocated to the Persons who were Partners at the time such gain or loss was
recognized by the Partnership.
Section 11.4 Section 754 Election.
The General Partner may, in its sole discretion, cause the
Partnership to elect, pursuant to section 754 of the Code, to adjust the basis
of Partnership property as provided in sections 734(b) and 743(b) of the Code.
The General Partner shall be responsible for determining the adjustments
required or permitted by said sections of the Code, except that, in the case of
any adjustment required or permitted under section 743(b) of the Code, the
Transferee Partner or Partners shall be solely responsible for determining the
adjustments required thereunder unless such Partner or Partners provide the
General Partner with all the information necessary for the General Partner to
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determine the adjustments. If any adjustments to the basis of Partnership
property are made pursuant to section 732(d), 734(b) or 743(b), the capital
accounts of the Partners shall be adjusted as specified in Regulation Section
1.704-1(b)(2)(iv)(m).
Section 11.5 Transferee's Rights.
The Transfer of a Limited Partnership Interest in accordance
with this Agreement entitles the transferee to share in such profits and losses,
to receive such distributions, and to receive such allocations of income, gain,
loss, deduction, or credit or similar item to which the transferor Partner was
entitled (to the extent of the interest Transferred) but does not entitle the
transferee to become or to exercise any other rights of a Partner unless and
until the transferor Partner has advised the General Partner that such
transferor Partner is to be admitted as a Partner pursuant to Article XII.
ARTICLE XII: ADMISSION OF PARTNERS
Section 12.1 Procedure.
(a) Substitute or additional General or Limited
Partners may be admitted to the Partnership as a result of a permitted Transfer
of Partnership Interests pursuant to Article X or XI. Additional General or
Limited Partners shall also be admitted to the Partnership as a result of the
issuance of additional Partnership Interests pursuant to Article III. Each
substitute or additional Partner shall sign a supplement to this Agreement at
the time such Partner is admitted confirming the admission of the new Partner
hereunder, and containing such Person's binding agreement to be bound by all of
the terms of this Agreement.
(b) In connection with the admission of any new
Partner to the Partnership, the General Partner shall have the power, right and
authority to amend this Agreement to reflect the rights and obligations of such
new Partner, including without limitation its obligations to contribute to the
capital of the Partnership, rights to distributions, or rights to approve or
consent to Partnership actions.
ARTICLE XIII: DISSOLUTION, LIQUIDATION AND WINDING-UP
Section 13.1 Events of Dissolution.
The occurrence of any of the following shall constitute an
event of dissolution of the Partnership (an "Event of Dissolution"):
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(a) the expiration of the term of the Partnership as
provided herein;
(b) the sale or other disposition in a single
transaction or series of related transactions of all or substantially all of the
assets of the Partnership unless such sale or other disposition involves any
deferred payment of the consideration for such sale or disposition, in which
case the General Partner may elect to defer the dissolution of the Partnership
until the last day of the Fiscal Year during which the Partnership shall receive
the balance of such deferred payment;
(c) subject to Section 13.2, the occurrence of an
Event of Withdrawal with respect to a General Partner;
(d) the acquisition by a single Person of all of the
Partnership Interests;
(e) the issuance of a decree of dissolution by a
court of competent jurisdiction pursuant to the Act; or
(f) the consent of the General Partner and the
holders of at least 75% of the then outstanding Class A Units.
Section 13.2 Continuation of the Business of the Partnership
After Certain Events of Dissolution.
(a) Notwithstanding Section 13.1(c), if, at the time
of an Event of Withdrawal, there shall be one or more General Partners not
affected by the Event of Withdrawal, then such other General Partner or General
Partners shall (and are hereby authorized to) carry on the business of the
Partnership, and if they do so the Partnership shall not be liquidated and its
business wound up.
(b) Notwithstanding Section 13.1(c), at the time of
an Event of Withdrawal to which subsection (a) is not applicable, the
Partnership shall not be liquidated and its business wound up if, within 90 days
after the occurrence of the Event of Withdrawal, Limited Partners owning a
majority of the Units of each class agree in writing to continue the business of
the Partnership and to the appointment of one or more replacement General
Partners who agree to serve as such.
Section 13.3 Effect of Event of Dissolution.
Upon the occurrence of an Event of Dissolution, unless
otherwise provided in Section 13.2, the Partnership shall be dissolved and shall
continue solely for the purposes of winding up its business and liquidating in
accordance with this Article all of its assets and collecting the proceeds from
such
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liquidation, at which time the Partnership shall be wound up. Unless the
business of the Partnership is continued as provided in Section 13.2, after the
occurrence of an Event of Dissolution the Partnership shall engage in no further
business other than as necessary to operate on an interim basis and for the
Partnership to collect its receivables, liquidate its assets and pay or
discharge its liabilities in accordance with this Article.
Section 13.4 Accounting.
In the event of the dissolution, liquidation and winding-up of
the Partnership, a proper accounting (which shall be certified) shall be made of
the Capital Account of each Partner and of the Net Income or Net Losses of the
Partnership from the date of the last previous accounting to the date of
dissolution. Financial statements presenting such accounting shall include a
report thereon of a certified public accountant selected by the Liquidating
Trustee.
Section 13.5 Distribution on Dissolution.
(a) In the event of the dissolution and liquidation
of the Partnership for any reason, the assets of the Partnership shall be
liquidated for distribution and distributed in the following rank and order:
(i) First, for payment of creditors
of the Partnership (other than Partners) in the order of priority as provided by
law;
(ii) Next, for establishment of
reserves as provided by the Liquidating Trustee to provide for contingent
liabilities, if any;
(iii) Next,for payment of debts of
the Partnership to Partners, if any, in the order of priority provided by law;
(iv) Next, for payment of the Class
C Liquidation Preference, if any Class C Units are then outstanding, provided,
however, that such payment shall only be made out of the Net Sale Proceeds
realized from the liquidation of the BRT OP Properties;
(v) Next, for payment of the Class
B Liquidation Preference if any Class B Units are then outstanding; and
(vi) Last, for payment to the
General Partner, to the holders of the Class A Units, and to the holders of the
Class B Units if any are then outstanding, in accordance with the positive
balances in their respective Capital Accounts
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after giving effect to all contributions, distributions and allocations for all
periods, including the period in which such distribution occurs (other than
those adjustments made pursuant to this Section 13.5(a)(vi)).
(b) Whenever the Liquidating Trustee reasonably
determines that any reserves established pursuant to paragraph (a)(ii) above are
in excess of the reasonable requirements of the Partnership, the amount
determined to be excess shall be distributed to the Partners in accordance with
the above provisions.
Section 13.6 Timing Requirements.
In the event that the Partnership is "liquidated" within the
meaning of Section 1.704-1(b)(2)(ii)(g) of the Regulations, any and all
distributions to the Partners pursuant to Section 13.5(a) hereof shall be made
no later than the later to occur of (i) the last day of the taxable year of the
Partnership in which such liquidation occurs, or (ii) ninety (90) days after the
date of such liquidation.
Section 13.7 Sale of Partnership Assets.
In the event of the liquidation of the Partnership in
accordance with the terms of this Agreement, the Liquidating Trustee may sell
Partnership or Title Holding Partnership property if the Liquidating Trustee has
in good faith solicited bids from unrelated third parties before making any such
sale; provided, however, all sales, leases, encumbrances or transfers of
Partnership assets shall be made by the Liquidating Trustee solely on an
"arm's-length" basis, at the best price and on the best terms and conditions as
the Liquidating Trustee in good faith believes are reasonably available at the
time and under the circumstances and on a non-recourse basis to the Limited
Partners. The liquidation of the Partnership shall not be deemed finally
completed until the Partnership shall have received cash payments in full with
respect to obligations such as notes, installment sale contracts or other
similar receivables received by the Partnership in connection with the sale of
Partnership assets and all obligations of the Partnership have been satisfied,
released or assumed by the General Partner. The Liquidating Trustee shall
continue to act to enforce all of the rights of the Partnership pursuant to any
such obligations until such obligations are paid in full or otherwise satisfied.
Section 13.8 Distributions in Kind.
In the event that it becomes necessary to make a distribution
of Partnership property in kind, the Liquidating Trustee may transfer and convey
such property to the distributees as tenants in common, subject to any
liabilities attached thereto, so as to vest in them undivided interests in the
whole of
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such property in proportion to their respective rights to share in the proceeds
of the sale of such property (other than as a creditor) in accordance with the
provisions of Section 13.5 hereof.
Section 13.9 Documentation of Liquidation.
Upon the completion of the dissolution and liquidation of the
Partnership, the Partnership shall terminate and the Liquidating Trustee shall
have the authority to execute and record any and all documents or instruments
required to effect the dissolution, liquidation and termination of the
Partnership.
Section 13.10 Liability of the Liquidating Trustee.
The Liquidating Trustee shall be indemnified and held harmless
by the Partnership from and against any and all claims, demands, liabilities,
costs, damages and causes of action of any nature whatsoever arising out of or
incidental to the Liquidating Trustee's taking of any action authorized under or
within the scope of this Agreement; provided, however, that the Liquidating
Trustee shall not be entitled to indemnification, and shall not be held
harmless, where the claim, demand, liability, cost, damage or cause of action at
issue arose out of:
(a) A matter entirely unrelated to the Liquidating
Trustee's action or conduct pursuant to the provisions of this Agreement; or
(b) The willful misconduct or gross negligence of the
Liquidating Trustee.
ARTICLE XIV: RIGHTS AND OBLIGATIONS OF THE LIMITED PARTNERS
Section 14.1 No Participation in Management.
The Limited Partners shall not take part in the management or
control of the Partnership's business, transact any business in the
Partnership's name, have the power to sign documents for or otherwise bind the
Partnership or except as required by the Act or expressly provided by this
Agreement, have any right to vote on or consent to any matter, provided,
however, that nothing in the foregoing shall be deemed to prohibit or preclude
any Limited Partner or its Affiliates from serving as an officer, trustee,
director or employee of the General Partner or its Affiliates or otherwise
transacting business with the Partnership.
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Section 14.2 Death, Incompetence, Bankruptcy, Etc.
The death, incompetence, Bankruptcy, dissolution or
liquidation of a Limited Partner shall not cause a dissolution of the
Partnership. The rights of such a Limited Partner to share in the income and
losses of the Partnership, to receive distributions and to assign its
Partnership Interest pursuant to this Article, on the happening of such an
event, shall devolve on such Limited Partner's beneficiary or other successor,
executor, administrator, guardian or other legal representative for the purpose
of settling the estate or administering the property of such Limited Partner.
Such successor or personal representative, however, shall be admitted as a
Limited Partner only upon compliance with the requirements set forth in Section
12.1(a).
Section 14.3 No Withdrawal.
No Limited Partner may withdraw from the Partnership without
the prior written consent of the General Partner, other than as expressly
provided in this Agreement.
Section 14.4 Power of Attorney.
(a) Each Limited Partner constitutes and appoints the
General Partner, any Liquidating Trustee, and authorized officers and
attorneys-in-fact of each, and each of those acting singly, in each case with
full power of substitution, as its true and lawful agent and attorney-in-fact,
with full power and authority in its name, place and stead to: execute, swear
to, acknowledge, deliver, file and record in the appropriate public offices (i)
all certificates, documents and other instruments (including, without
limitation, this Agreement and the Certificate and all amendments or
restatements thereof) that the General Partner or the Liquidating Trustee deems
appropriate or necessary to form, qualify or continue the existence or
qualification of the Partnership as a limited partnership (or a partnership in
which the limited partners have limited liability) in the State of Delaware and
in all other jurisdictions in which the Partnership may conduct business or own
property; (ii) all instruments that the General Partner deems appropriate or
necessary to reflect any amendment, change, modification or restatement of this
Agreement in accordance with its terms; (iii) all conveyances and other
instruments or documents that the General Partner deems appropriate or necessary
to reflect the dissolution and liquidation of the Partnership pursuant to the
terms of this Agreement, including, without limitation, a certificate of
cancellation; and (iv) all instruments relating to the admission, withdrawal,
removal or substitution of any Partner pursuant to the provisions of this
Agreement, or the Capital Contribution of any Partner.
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(b) The foregoing power of attorney is irrevocable
and a power coupled with an interest, in recognition of the fact that each of
the Partners will be relying upon the power of the General Partner to act as
contemplated by this Agreement in any filing or other action by it on behalf of
the Partnership, and it shall survive the death, incapacity or incompetency of a
Limited Partner to the effect and extent permitted by law and the Transfer of
all or any portion of such Limited Partner's Partnership Units and shall extend
to such Limited Partner's heirs, distributees, successors, assigns and personal
representatives.
Section 14.5 Limited Liability of Limited Partners.
The Limited Partners shall not be personally liable for any
obligations or debts of the Partnership to third parties, except to the extent
provided in the Act.
ARTICLE XV: GRANT OF REDEMPTION RIGHTS TO LIMITED PARTNERS
Section 15.1 Grant of Redemption Rights.
The Partnership does hereby grant to each Limited Partner
owning Class A Units and each such Limited Partner does hereby accept the right,
but not the obligation (hereinafter such right sometimes referred to as the
"Redemption Right"), to require the Partnership to redeem, for cash, on the
Specified Redemption Date all or any portion of the Class A Units held by such
Limited Partner at a redemption price equal to the Cash Amount. The Redemption
Right of a Limited Partner may be exercised on one or more occasions by the
Limited Partner. The Redemption Right shall be exercised pursuant to a Notice of
Redemption delivered to the Partnership (with a copy to the General Partner) by
the Limited Partner who is exercising the redemption right (the "Redeeming
Partner"). A Limited Partner may not exercise the Redemption Right as to fewer
Class A Units than the number of such Units that is equal to the lesser of (a)
100 Units or (b) all of the Class A Units held by such Limited Partner. Neither
the Redeeming Partner nor any assignee of any Limited Partner shall have any
right with respect to any Class A Units so redeemed to receive any distributions
from the Partnership made after the Specified Redemption Date. The assignee of
any Limited Partner may exercise the rights of such Limited Partner pursuant to
this Section 15.1, and such Limited Partner shall be deemed to have assigned
such rights to such assignee and shall be bound by the exercise of such rights
by such Limited Partner's assignee. In connection with any exercise of such
rights by such assignee on behalf of such Limited Partner, the Cash Amount shall
be paid by the Partnership directly to such assignee and not to such Limited
Partner.
Section 15.2 General Partner Exchange.
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(a) Notwithstanding the provisions of Section 15.1,
if a Limited Partner elects to exercise the Redemption Right, the General
Partner may, in its sole and absolute discretion, elect to assume directly and
satisfy a Redemption Right by paying to the Redeeming Partner either the Cash
Amount or the GP Shares Amount for each Class A Unit redeemed, as elected by the
General Partner (in its sole and absolute discretion) on the Specified
Redemption Date, whereupon the General Partner shall acquire the Class A Units
offered for redemption by the Redeeming Partner and shall be treated for all
purposes of this Agreement as the owner of such Partnership Interests.
(b) In the event that the Partnership shall fail to
pay the Cash Amount to any Redeeming Partner on the Specified Redemption Date
pursuant to Section 15.1, and the General Partner shall not have elected
pursuant to Section 15.2(a) to assume the obligations of the Partnership with
respect thereto, the General Partner shall on the Specified Redemption Date
contribute to the capital of the Partnership in cash (or, at its election, pay
directly to the Redeeming Partner the full Cash Amount or GP Shares Amount) the
full amount necessary to permit the Partnership to satisfy its obligations to
pay to the Redeeming Partner the Cash Amount on the Specified Redemption Date,
and the Partnership shall thereupon immediately pay to such Redeeming Partner
such Cash Amount.
(c) The General Partner shall provide the Redeeming
Partner with at least five days' written notice prior to the Specified
Redemption Date whether the Redemption Right will be redeemed by the Partnership
or the General Partner for the Cash Amount or GP Shares Amount. The Redeeming
Partner may rescind his or its Notice of Redemption at any time prior to the
Specified Redemption Date if the Redemption Right is to be redeemed for the Cash
Amount.
(d) In the event that the General Partner satisfies
the Redemption Right in the manner described in Sections 15.2(a) or (b), each of
the Redeeming Partner, the Partnership, and the General Partner shall treat the
transaction between the General Partner and the Redeeming Partner for federal
income tax purposes as a sale of the Redeeming Partner's Partnership Units to
the General Partner.
(e) Each Redeeming Partner shall execute such
documents as the General Partner may reasonably require in connection with the
issuance of Common Stock upon exercise of the Redemption Right, including,
without limitation, acknowledgement that the shares will be issued without
registration under the Securities Act of 1933, as amended, and may not be resold
unless subsequently registered or an exemption from registration is available.
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(f) If the Redemption Right is satisfied by the
delivery of Common Stock, the Redeeming Partner shall be deemed to become a
holder of Common Stock as of the close of business on the Specified Redemption
Date.
Section 15.3 Certain Limitations on Redemption Right.
Notwithstanding the provisions of Section 15.1, no Limited
Partner shall have the right to require the Partnership to redeem any Class A
Units until such Collateral is required to be released pursuant to the
provisions of Section 19.3, unless the Limited Partner acknowledges and agrees
at the time of conversion that the cash paid or Common Stock issued in
redemption of the Class A Units shall continue to constitute Collateral under
Article XIX.
Section 15.4 Adjustments.
The number of shares of Common Stock comprising the GP Shares
Amount shall be subject to adjustment from time to time upon the occurrence of
certain events, as follows:
(a) Adjustment for Change in Capital Stock. If at any
time after the date of this Agreement, the General Partner:
(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 capital stock other than Common Stock; or
(v) issues by reclassification of
its Common Stock any shares of its capital stock;
then the number of shares of Common Stock comprising the GP Shares Amount shall
be adjusted so that the holder of a Class A Unit may receive in an exchange
therefor pursuant to Section 15.2, the number of shares of capital stock of the
General Partner which the holder of the Class A Unit would have owned
immediately following such action if such Unit had been exchanged immediately
prior thereto.
The adjustment shall become effective immediately after the
record date in the case of a dividend or distribution, and
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immediately after the effective date in the case of a subdivision, combination
or reclassification.
(b) Adjustment for Other Distributions. If at any
time after the date of this Agreement, the General Partner distributes to all
holders of its Common Stock any of its assets or debt securities, the number of
shares of Common Stock comprising the GP Shares Amount that are issuable in
respect of each Class A Unit in an exchange therefor pursuant to Section 15.2
following the record date for such distribution shall be adjusted by multiplying
the GP Shares Amount immediately prior to the distribution by a fraction, the
numerator of which is CMP and the denominator of which is X:
Where X = (CMP x NO) - F
NO
where: NO = Total number of shares of Common Stock
outstanding.
CMP = the Current Per Share Market Price of
Common Stock on the record date of the
distribution.
F = the aggregate fair market value (determined
by the Board of Trustees of the General
Partner) on the record date of the
distribution of the assets or debt securities
being distributed.
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. In the event that such
distribution or issuance is not actually made, the number of shares issuable in
respect of each Class A Unit shall be readjusted to eliminate the effect to the
calculation provided hereby.
This subsection does not apply to (i) ordinary quarterly cash
dividends or cash distributions on the Common Stock paid out of consolidated
current or retained earnings of the General Partner as shown on the books of the
General Partner and paid in the ordinary course of business, or (ii) cash
dividends or cash distributions on the Common Stock paid entirely out of
distributions made by the Partnership on its Class C Units as and to the extent
permitted hereunder.
(c) Adjustment for Common Stock Issue.
(i) If at any time after the date
of this Agreement, the General Partner issues shares of Common Stock for a
consideration per share that is less than 100% (or 95%, or
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such lesser percentage as the holders of the outstanding Class A Units may
consent in writing, in the case of a firm commitment underwritten public
offering) of the Current Market Price per share on the date the General Partner
fixes the offering price of such additional shares, the number of shares of
Common Stock comprising the GP Shares Amount issuable in respect of each Class A
Unit in an exchange therefor pursuant to Section 15.2 shall be adjusted by
multiplying the number of shares of Common Stock issuable in exchange for such
Unit immediately prior to the issuance by a fraction, the numerator of which is
the Current Per Share Market Price immediately prior to such issuance and the
denominator of which is (X) where X =
(O x CMP) + (I x IP)
TO
where: I = the additional shares of Common Stock being
issued.
O = the number of shares outstanding immediately
prior to the issuance of such additional
shares.
IP = the per share consideration received for the
issuance of such additional shares.
CMP = the Current Per Share Market Price of Common Stock
immediately prior to the adjustment.
TO = the number of shares outstanding immediately after
the issuance of such additional shares.
The adjustment shall be made successively whenever any such
issuance is made, and shall become effective immediately after such issuance.
(ii) This subsection 15.4(c) does
not apply to (A) any of the transactions described in subsection (b) of this
Section 15.4, (B) Common Stock issued pursuant to options and warrants
outstanding on the date hereof, (C) Common Stock issued to officers, directors,
trustees or employees of, or consultants to, BRT or the Management Company 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 BRT's Board of Trustees or an appropriate committee of
BRT's Board of Trustees, and (y) have an exercise price not less than 85% of the
Current Market Price of BRT's Common Stock at the time of issuance of such
warrant, right or option, (D) the issuance of Common Stock in redemption of
Class A Units pursuant to Section 15.2, (E) shares of Common Stock issuable to
Anthony A. Nichols, Jack
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Gallagher, Brian F. Belcher, Gerard H. Sweeney, and certain other employees of
the Management Company upon exercise of warrants issued to them on the date
hereof pursuant to their employment agreements with the Management Company or
otherwise, all as described with Proxy Statement, (F) shares of Common Stock
issuable to SSI upon the exercise of Warrants acquired by SSI on the date hereof
under the Common Share and Warrant Purchase Agreement, (G) shares of Common
Stock issuable to Richard M. Osborne and/or the RMO Trust, a trust formed by
Richard M. Osborne, upon the exercise of the warrants acquired them in June 1996
described in the Proxy Statement, and (H) units consisting of shares of BRT
Common Stock, and warrants to purchase Common Stock, issuable to the RMO Trust
in repayment of certain loans from the RMO Trust to BRT, and the shares of
Common Stock issuable upon exercise of such warrants, all as described in the
Proxy Statement.
(d) Adjustment for Convertible Securities Issue. If
at any time after the date hereof, the General Partner issues any securities
convertible into or exchangeable or exercisable for Common Stock for
consideration per share of Common Stock initially deliverable upon conversion,
exchange or exercise of such securities, together with the consideration paid
upon issuance of such securities, less than the Current Per Share Market Price
of the Common Stock, on the date the General Partner fixes the offering price of
such securities, the number of shares of Common Stock comprising the GP Shares
Amount issuable in respect of each Class A Unit in an exchange therefore
pursuant to Section 15.2 shall be adjusted by multiplying the number of shares
of Common Stock issuable in exchange for such Unit immediately prior to the
issuance by a fraction, the numerator of which is the Current Per Share Market
Price of the Common Stock immediately prior to such issuance and the denominator
of which is X ("X") where X equals:
(O x CMP) + (I x IP)
TO
where: O = the number of shares of Common Stock
outstanding immediately prior to the issuance
of such securities.
IP = the consideration per share of Common Stock
received and receivable for the issuance of
such securities, calculated on the basis of
the maximum number of shares of Common Stock
deliverable upon conversion, exchange or
exercise of such securities at the initial
conversion, exchange or exercise rate.
I = the maximum number of shares of Common Stock
deliverable upon conversion, exchange or
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exercise of such securities at the initial
conversion, exchange or exercise rate.
TO = the sum of (1) the number of shares of Common
Stock outstanding immediately prior to the
issuance of such securities, plus (2) the
maximum number of shares of Common Stock
deliverable upon conversion, exchange or
exercise of such securities at the initial
conversion, exchange or exercise rate.
CMP = the Current Per Share Market Price of Common Stock
immediately prior to the adjustment.
The adjustment shall be made successively whenever any such
issuance is made, and shall become effective immediately after such issuance. If
all of the Common Stock deliverable upon conversion, exchange or exercise of
such securities has not been issued when such securities are no longer
outstanding, then the Exercise Price shall promptly be readjusted to the
Exercise Price which would then be in effect had the adjustment upon the
issuance of such securities been made on the basis of the actual number of
shares of Common Stock issued upon conversion, exchange or exercise of such
securities.
This subsection 15.4(d) does not apply to any of the
transactions described in subsections (b) or (c) of this Section 15.4.
(e) When No Adjustment Required. No adjustment need
be made for a change in the par value or no par value of the Common Stock.
Section 15.5 Certain Covenants.
Each Limited Partner covenants and agrees with the General
Partner that all Class A Units delivered for redemption by it pursuant to this
Article XV shall be delivered to the Partnership or the General Partner, as the
case may be, free and clear of all Encumbrances.
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ARTICLE XVI: CONVERSION OF CLASS B UNITS AND CLASS C UNITS INTO
GENERAL PARTNER UNITS
Section 16.1 Automatic Conversion of Class C Units into General
Partner Units.
Simultaneously with the completion of a Qualified Offering by
BRT of shares of its Common Stock, each outstanding Class C Unit shall be
automatically converted into one General Partner Unit, without any action being
required on the part of either the holders of the Class C Units or the
Partnership to effect such automatic conversion.
Section 16.2 Automatic Conversion of Class B Units into General
Partner Units.
(a) Simultaneously with the completion of a Qualified
Offering by BRT of shares of its Common Stock, each outstanding Class B Unit
shall be automatically converted into one General Partner Unit, without any
action being required on the part of either the holders of the Class B Units or
the Partnership to effect such automatic conversion.
(b) At the time of such conversion, the Partnership
shall make a cash distribution to the holders of the Class B Units in an amount
equal to the sum of (i) any then unpaid Class B Preferred Distribution accrued
through the date of conversion, plus (ii) any then unpaid Accumulated Class B
Distributions.
ARTICLE XVII: LIMITED PARTNER REPRESENTATIONS AND WARRANTIES
Section 17.1 Representations and Warranties of the Limited
Partners.
(a) Each of the Limited Partners hereby represents
and warrants, severally and not jointly, to the Partnership and the General
Partner as follows:
(i) That such Partner, if a corporation,
partnership or other entity formed pursuant to any statute or other governmental
authority, is validly formed and in good standing under the laws of the
jurisdiction of its formation.
(ii) That, if such Partner is an Entity, the
execution, delivery and performance of this Agreement by such Partner has been
duly and validly authorized by all necessary corporate, partnership, or other
similar action.
(iii) That this Agreement has been duly
executed and delivered by such Limited Partner, and constitutes
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such Partner's legal, valid and binding obligation, enforceable against it in
accordance with the terms hereof.
(iv) That no consent, waiver, approval or
authorization of, or filing, registration or qualification with, or notice to
any governmental unit or other person is required to be made, obtained or given
by such Limited Partner in connection with the execution, delivery and
performance of this Agreement and the transactions contemplated hereby other
than consents, waivers, approvals or authorizations which have been obtained
prior to the date hereof, or which are disclosed on a Schedule to the
Contribution Agreement.
(v) That such Partner understands that the
Class A Units to be issued hereunder and the shares of Common Stock issuable in
redemption of Class A Units pursuant to Article XV hereof will not be registered
(except pursuant to the Registration Rights Agreement) under the Securities Act,
on the grounds that the issuance of such securities is exempt from registration
pursuant to Section 4(2) of the Securities Act or Regulation D promulgated
thereunder, and that the reliance of the General Partner and the Partnership on
such exemptions is predicated in part on the Limited Partner's representations,
warranties and covenants set forth herein.
(vi) That the Units and any shares of Common
Stock acquired in exchange therefor by such Partner will be acquired for its own
account, not as a nominee or agent, and without a view to resale or other
distribution within the meaning of the Securities Act and the rules and
regulations thereunder and that it will not distribute any such securities in
violation of the Securities Act.
(vii) That such Partner's principal
residence or place of business is as set forth on Exhibit A.
(viii) That such Partner understands that
the Units and Common Stock issued in respect thereof must be held indefinitely
unless subsequently registered under the Securities Act or an exemption from
registration is available, and that any routine sales of Common Stock made under
Rule 144 of the Securities and Exchange Commission under the Securities Act may
be made only in limited amounts and in accordance with the terms and conditions
of that Rule and that Rule 144 will not be available for use in connection with
resales of any shares of Common Stock issued in respect of Units for at least
two years after the date of issuance or for any Units at any time.
(ix) That such Partner is well versed in
financial matters, has had dealings in securities, including "restricted
securities," and is fully capable of understanding
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the type of investment being made in the Units and the Common Stock and the
risks involved in connection therewith.
(x) That such Partner will not sell transfer
or otherwise dispose of any of the Units or the Common Stock acquired in
exchange therefor unless such securities have been registered under the
Securities Act or the holder thereof shall have furnished to the General Partner
such information as the General Partner may reasonably require to the effect
that such securities may be sold without registration thereunder.
(b) Each Limited Partner also agrees that
certificates, if any, representing Units or Common Stock issued to it may
contain a restrictive legend noting the restrictions on transfer described in
this section and required by federal and applicable state securities laws and
that appropriate "stop-transfer" instructions may be given to the transfer agent
for the General Partner and the Partnership.
ARTICLE XVIII: GENERAL PARTNER REPRESENTATIONS AND WARRANTIES
The General Partner represents and warrants to the Partnership
and the Limited Partners as follows:
Section 18.1 Organization.
The General Partner is duly validly existing and in good
standing under the laws of the State of Maryland.
Section 18.2 Due Authorization; Binding Agreement.
The execution, delivery and performance of this Agreement by
the General Partner has been duly and validly authorized by all necessary trust
action of the General Partner. This Agreement has been duly executed and
delivered by the General Partner, and constitutes a legal, valid and binding
obligation of the General Partner, enforceable against the General Partner in
accordance with the terms hereof.
Section 18.3 Consents and Approvals.
No consent, waiver, approval 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 General Partner in
connection with the execution, delivery and performance of this Agreement other
than consents, waivers, approvals or authorizations which have been obtained
prior to the date hereof.
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ARTICLE XIX: INDEMNIFICATION
Section 19.1 Indemnification.
(a) Subject to the provisions of Section 19.2, the
General Partner hereby indemnifies and holds harmless the Partnership and each
Limited Partner against and from any and all liabilities, demands, claims,
actions, causes of action, assessments, losses, fines, penalties, costs, damages
and expenses (including, without limitation, attorneys' and accounting fees and
expenses) (any such item, a "Liability," and collectively "Liabilities")
sustained or incurred by such Limited Partner or the Partnership as a result of
or arising out of (i) any inaccuracy in any representation or warranty made in
this Agreement by the General Partner, or (ii) any inaccuracy in any
representation or warranty made in any Transaction Document by the General
Partner, or (iii) any breach by the General Partner of any of its obligations
under any Transaction Document or this Agreement.
(b) Subject to the provisions of Section 19.2 hereof,
each Limited Partner who is a Pledgor (as defined in Section 19.3(a)), severally
and not jointly, indemnifies and holds harmless the Partnership and the General
Partner against and from all Liabilities sustained or incurred by the
Partnership or the General Partner as a result of or arising out of (i) any
inaccuracy in a representation or warranty made under this Agreement by such
Limited Partner, or (ii) any inaccuracy in any representation or warranty made
in any Transaction Document by such Limited Partner, or (iii) any breach by such
Limited Partner of its obligations hereunder or under any Transaction Document.
Section 19.2 Limitations on Indemnification Obligations.
(a) No indemnified person shall be entitled to
indemnification under Section 19.1 hereof unless the indemnified person shall
have delivered a written notice specifying in reasonable detail the matter
giving rise to such person's right to indemnification to the indemnifying party
on or before the second anniversary of the date hereof.
(b) No person providing indemnification hereunder
shall be liable under Section 19.1 hereof unless the total amount recoverable
from such indemnifying person exceeds, with respect to all indemnities provided
by such indemnifying person hereunder, an aggregate of $75,000 in the case of
SSI, an aggregate of $75,000 in the case of The Nichols Company, and an
aggregate of $75,000 in the case of BRT.
(c) If a claim for indemnification arises from a
third party claim asserted against the Partnership, the indemnifying party shall
have the right, at its own expense, to
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participate in the defense of the claim, action or proceeding which resulted in
the claim for indemnification, and if such right is exercised, the parties shall
cooperate in the defense of such action or proceeding; provided, however, the
indemnified party shall at all times have the right to be in control of such
defense.
(d) Indemnification pursuant to Section 19.1 hereof
and the remedies in respect thereof as set forth in Section 19.3 hereof shall be
the sole and exclusive remedy of the indemnified parties for any matter covered
thereby, including claims for breaches of representations, warranties,
covenants, or other duties or obligations set forth in the Contribution
Agreement or other Transaction Document, regardless of the legal theories on
which the claim for indemnification is based.
Section 19.3 Security and Remedies.
(a) Each of Safeguard and Nichols, on behalf of
themselves and their affiliates (collectively, "Pledgors") hereby grants to the
Partnership a lien upon and continuing security interest in such Pledgor's Class
A Units, and in any shares of Common Stock of BRT issued upon redemption of such
Class A Units pursuant to Article XV (collectively, the "Collateral") which
shall be security for the indemnification obligations of such Pledgor hereunder.
The indemnification obligation of each Pledgor shall be payable out of such
Pledgor's entire Collateral, but only from such Collateral. Any transfer by a
Pledgor of such Pledgor's Class A Units, or shares of Common Stock issued upon
redemption of Class A Units, shall be subject to the lien and security interest
granted hereby. Each Pledgor represents and warrants that his or its Class A
Units constituting Collateral are owned by it free and clear of Encumbrances
other than Permitted Encumbrances, which Permitted Encumbrances are senior in
priority to the lien and security interest created under this Section 19.3.
(b) Any person claiming indemnification hereunder
shall (when the amount claimed is known) deliver written notice (the "Indemnity
Notice") to the party or parties from whom indemnification is claimed describing
in reasonable detail the rationale for the amount for which indemnification is
sought. A Limited Partner shall be entitled to satisfy his indemnification
obligation by directing the Partnership to cancel in the Register that number of
Class A Units included in the Collateral as shall be equal in value (based on
the Current Per Share Market Price of the Common Stock issuable in exchange
therefor pursuant to Section 15.2 as of the date of the Indemnity Notice) to the
amount recoverable from such Limited Partner hereunder. If such indemnification
obligation shall not have been satisfied by any party within thirty (30) days
after its receipt of an Indemnity
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Notice, the matter shall be submitted for binding arbitration in accordance with
the provisions of Article XX below.
(c) In the case of an adverse decision by the
arbitrators in respect of indemnification being provided by any Limited Partner,
if such Limited Partner does not satisfy the obligations within ten (10) days
after the decision is rendered in the arbitration, then the Partnership shall
cancel in the Register, without the payment of any consideration to or the
taking of any action required by the Limited Partner, that number of Class A
Units included in the Collateral as shall be equal in value (based on the
Current Per Share Market Price of the Common Stock issuable in exchange therefor
pursuant to Section 15.2 as of the date of the Indemnity Notice) to the amount
recoverable from such Limited Partner hereunder. Within ten (10) days
thereafter, the General Partner shall deliver notice of such cancellation to the
Limited Partner affected.
(d) The rights of the Partnership and General Partner
to cancel Collateral shall be the sole and exclusive remedy of the General
Partner or the Partnership under this Article XIX and no Limited Partner shall
have any personal liability hereunder, except as otherwise provided in the next
succeeding section.
Section 19.4 Restriction on Transfer.
(a) In connection with the security interests granted
by the Limited Partners to the Partnership under Section 19.3 hereof, except as
provided in paragraph (b), the Limited Partners agree that any Class A Units
owned by such Limited Partners shall not be Transferred, without the consent of
the General Partner until the second anniversary of the date hereof. In
addition, in the event that notice of a claim for indemnification has been duly
given pursuant to Section 19.2(a) but the matter for which indemnification is
sought or the amount of the indemnification required to be paid has not been
finally determined at the second anniversary of the date hereof, Class A Units
having a sufficient value (based on the Current Per Share Market Price at such
date of the Common Stock issuable in exchange therefor pursuant to Section 15.2)
shall remain subject to the restrictions of this Section 19.4(a), until such
time as the matter in question has been finally determined.
(b) Nothing in this Agreement shall prohibit the
following Transfers: (i) transfers of Class A Units to the Partnership under
Sections 4.6, 4.7 and 4.8; (ii) transfers occurring by reason of a Limited
Partner's exercise of his Redemption Rights subject to the pledge of the Common
Stock received upon redemption pursuant to Section 19.3 (a); (iii) transfers by
The Nichols Company of Class A Units to its equity owners; (iv) transfers by a
Limited Partner to his or its
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Affiliates; or (v) transfers in connection with the foreclosure of a Permitted
Encumbrance. In the event of a Transfer permitted under clause (iii) or (iv),
the transferee shall as a condition of such transfer execute an agreement
acknowledging that the Class A Units are Collateral and are being transferred
subject to the Partnership's security interest therein.
(c) Notwithstanding the foregoing, a Limited Partner
may, with the consent of the General Partner exercised by its independent
trustees in their sole and absolute discretion, be relieved of the restrictions
on transferability contained in this Section 19.4 by (i) consenting to personal
liability (by execution and delivery of an agreement to such effect in form and
substance reasonably satisfactory to the General Partner) for any
indemnification obligations secured by the Partnership Units, or (ii) pledging
(by execution and delivery of a pledge agreement in form and substance
reasonably satisfactory to the General Partner) substitute collateral which, in
the reasonable determination of the General Partner, is substantially equivalent
in value to the Class A Units then comprising Collateral. In the event that a
Limited Partner is relieved of the restrictions on transferability in accordance
with the terms of this Section 19.4, the security interest in such Limited
Partner's Class A Units hereunder shall terminate without further action, and
the Partnership, at the request of such Limited Partner, shall promptly execute
and deliver any document or instrument reasonably requested by such Limited
Partner to evidence such termination.
Section 19.5 No Credit to Capital Accounts.
No payments made by a Limited Partner pursuant to this Article
XIX shall be credited to the Capital Account of such Limited Partner.
Section 19.6 Release of Collateral.
The lien and security interest on the Collateral shall
terminate on the second anniversary of the date of this Agreement, except to the
extent provided in the next sentence. In the event that notice of a claim for
indemnification has been duly given pursuant to Section 19.2(a) but the matter
for which indemnification is sought or the amount of the indemnification
required to be paid has not been finally determined at the second anniversary of
the date hereof, Class A Units having a sufficient value (based on the Current
Per Share Market Price at such date of the Common Stock issuable in exchange
therefor pursuant to Section 15.2) shall remain subject to the lien and security
created under Section 19.3, until such time as the matter in question has been
finally determined.
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ARTICLE XX ARBITRATION OF DISPUTES
Section 20.1 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 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
(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). The disputing party shall
give the other party written notice of the Dispute. Within twenty 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 mutually acceptable time and place within thirty 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 sixty days of
the disputing party's notice, or if the party receiving said notice will not
meet within thirty 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.
Section 20.2 Arbitration. (a) If the Dispute has not been resolved
pursuant to the aforesaid mediation procedure within sixty days of the
initiation of such procedure, or if either party will not participate in a
mediation, the Dispute shall be submitted to binding 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 shall be held in Philadelphia, Pennsylvania before a panel of
three (3) arbitrators, one selected by the Partnership, and one selected by the
SSI and The Nichols Company, and the third selected by the arbitrators selected
by the parties. All deadlines specified in this Section may be extended by
mutual agreement.
(b) The arbitration panel shall have the discretion
to include in its decision a direction that all or part of the attorneys' fees
and costs of any party or parties and/or the costs of such arbitration be paid
by any other party or parties. On the application of a party before or after the
initial decision of the arbitration panel, and proof of its attorneys' fees and
costs, the arbitration panel shall order the other party to make any payments
directed pursuant to the preceding sentence.
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Section 20.3 Binding Character.
Any decision rendered by the arbitration panel pursuant to
this Article XX shall be final and binding on the parties hereto, and judgment
thereon may be entered by any state or federal court of competent jurisdiction.
Section 20.4 Exclusivity.
Arbitration shall be the exclusive method available for
resolution of claims, disputes and controversies described in Section 20.1
hereof, and the Partnership and its Partners stipulate that the provisions
hereof shall be a complete defense to any suit, action, or proceeding in any
court or before any administrative or arbitration tribunal with respect to any
such claim, controversy or dispute. The provisions of this Article XX shall
survive the dissolution of the Partnership.
Section 20.5 No Alteration of Agreement.
Nothing contained herein shall be deemed to give the
arbitrators any authority, power or right to alter, change, amend, modify, add
to, or subtract from any of the provisions of this Agreement.
ARTICLE XXI: ASSUMPTION OF LIABILITIES AND INDEMNIFICATIONS
Section 21.1 Assumption of Liabilities.
The Partnership hereby assumes and shall pay, perform and
discharge when due, each of those liabilities and obligations relating to the
Contributed Assets expressly set forth in Section 2.6 of the Contribution
Agreement as being assumed by the Partnership (the "Assumed Liabilities").
Section 21.2 Indemnification.
From and after the date hereof, the Partnership shall
indemnify and hold harmless each of the Limited Partners and its Affiliates
against and from all liability, demands, claims, actions or causes of action,
assessments, losses, fines, penalties, costs, damages and expenses (including,
without limitation, reasonable attorneys' and accountants' fees and expenses)
sustained or incurred by such Limited Partner or Affiliate or any assignee or
successor thereof (including, without limitation, any Substituted Limited
Partner) as a result of or arising out of any Assumed Liability. If a claim for
indemnification is asserted against the Partnership hereunder, the Partnership
shall have the right, at its own expense, to participate in the defense of any
claim asserted against such Limited Partner or its Affiliate which resulted in
the claim for indemnification, and if such
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right is exercised, the parties shall cooperate in the defense of
such action or proceeding.
ARTICLE XXII: GENERAL PROVISIONS
Section 22.1 Notices.
All notices, offers or other communications required or
permitted to be given pursuant to this Agreement shall be in writing and may be
personally served, telecopied, delivered by reputable courier service or sent by
United States mail and shall be deemed to have been given when delivered in
person, upon receipt of telecopy or courier service or three business days after
deposit in United States Mail, registered or certified, postage prepaid, and
properly addressed, by or to the appropriate party. For purposes of this Section
22.1, the addresses of the parties hereto shall be as set forth on Exhibit "A"
hereto. The address of any party hereto may be changed by a notice in writing
given in accordance with the provisions hereof.
Section 22.2 Successors.
This Agreement and all the terms and provisions hereof shall
be binding upon and shall inure to the benefit of all Partners, and their legal
representatives, heirs, successors and permitted assigns, except as expressly
herein otherwise provided.
Section 22.3 Effect and Interpretation.
This Agreement and all of the terms and provisions hereof
shall be governed by and construed in accordance with the law, including the law
on conflicts of law, of the State of Delaware.
Section 22.4 Counterparts.
This Agreement may be executed in counterparts, each of which
shall be an original, but all of which shall constitute one and the same
instrument.
Section 22.5 Partners Not Agents.
Nothing contained herein shall be construed to constitute any
Partner the agent of another Partner, except as specifically provided herein, or
in any manner to limit the Partners in the carrying on of their own respective
businesses or activities. Notwithstanding anything to the contrary contained
herein, no recourse shall be had by the Partnership or any Partner against any
trustee, director, shareholder, officer, employee, agent or attorney of the
General Partner under this Agreement, and none of
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the foregoing shall have any personal liability for or with
respect to any of the foregoing.
Section 22.6 Entire Understanding; Etc.
This Agreement constitutes the entire agreement and
understanding among the Partners and supersedes any prior understandings and/or
written or oral agreements among them respecting the subject matter within.
Section 22.7 Amendments.
(a) Except as provided in Sections 22.7(b) and (c),
the General Partner shall have the power and authority, in its sole discretion
and without the consent of any other Partner, to amend any and all of the
provisions of this Agreement to issue additional Partnership Interests, or to
establish the rights, privileges, duties and obligations of any Partner or class
of Partnership Interest, or otherwise, except that, without the consent of each
existing Partner adversely affected thereby, the General Partner shall not
(except, in each and every case, as may be required to correct plain errors or
ambiguities in this Agreement) amend this Agreement so as to (i) require any
Partner to make any additional contribution to the capital of the Partnership;
or (ii) require any Partner to restore any negative balance in its capital
account or otherwise to contribute any capital to the Partnership, except as
required under the Act, the Code or other applicable laws or as expressly
provided herein. In addition, this Agreement shall not be amended without the
prior written consent of each Partner adversely affected if such amendment would
(i) convert a Limited Partnership Interest in the Partnership into a General
Partnership Interest, or (ii) modify the limited liability of a Limited Partner.
(b) In addition to the foregoing, for so long as any
Class A Units remain outstanding, this Agreement may not be amended unless such
amendment is approved by the holders of 75% of the Class A Units then
outstanding, except to:
(i) add to the obligations of the General
Partner or surrender any right or power granted to the General Partner or any
Affiliate of the General Partner for the benefit of the Limited Partners;
(ii) reflect the issuance of additional
Partnership Interests, and the admission, substitution, termination or
withdrawal of Partners, in each case in accordance with the provisions of this
Agreement;
(iii) record permitted Transfers of
Partnership Units on the books of the Partnership;
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(iv) reflect a change that is of an
inconsequential nature and does not adversely affect the holders of the Class A
Units in any material respect; or
(v) cure any ambiguity or correct plain
errors in this Agreement.
(c) The General Partner will provide notice to the
Limited Partners promptly after any action under Section 22.7(b) if taken.
(d) This Section 22.7 may not be amended except with
the prior written consent of the General Partner and the holders of 75% of the
then outstanding Limited Partnership Units of each class.
Section 22.8 Severability.
If any provision of this Agreement, or the application of such
provision to any person or circumstance, shall be held invalid by a court of
competent jurisdiction, the remainder of this Agreement, or the application of
such provision to persons or circumstances other than those to which it is held
invalid by such court, shall not be affected thereby.
Section 22.9 Trust Provision.
This Agreement, to the extent executed by the trustee of a
trust, is executed by such trustee solely as trustee and not in a separate
capacity. Nothing herein contained shall create any liability on, or require the
performance of any covenant by, any such trustee individually, nor shall
anything contained herein subject the individual personal property of any
trustee to any liability.
Section 22.10 Pronouns and Headings.
As used herein, all pronouns shall include the masculine,
feminine and neuter, and all defined terms shall include the singular and plural
thereof wherever the context and facts require such construction. The headings,
titles and subtitles herein are inserted for convenience of reference only and
are to be ignored in any construction of the provisions hereof. Any references
in this Agreement to "including" shall be deemed to mean "including without
limitation".
Section 22.11 Assurances.
Each of the Partners shall hereafter execute and deliver such
further instruments and do such further acts and things as may be required or
useful to carry out the intent and
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purpose of this Agreement and as are not inconsistent with the
terms hereof.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement or caused this Agreement to be executed as of the date and year first
above written.
GENERAL PARTNER:
BRANDYWINE REALTY TRUST
By: /s/ Gerard H. Sweeney
----------------------------------
Name: Gerard H. Sweeney,
President
CLASS A LIMITED PARTNERS:
Safeguard Scientifics (Delaware), Inc.
By: /s/ Donald R. Caldwell
----------------------------------
Name: Donald R. Caldwell
Title: President
The Nichols Company
By: /s/ Anthony A. Nichols
----------------------------------
Anthony A. Nichols, President
Brian F. Belcher
By: /s/ Anthony A. Nichols
----------------------------------
Anthony A. Nichols,
his attorney-in-fact
Jack R. Loew
By: /s/ Anthony A. Nichols
----------------------------------
Anthony A. Nichols,
his attorney-in-fact
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Craig C. Hough
By: /s/ Anthony A. Nichols
-------------------------------
Anthony A. Nichols,
his attorney-in-fact
Gary C. Bender
By: /s/ Anthony A. Nichols
-------------------------------
Anthony A. Nichols,
his attorney-in-fact
Werner Fricker
By: /s/ Anthony A. Nichols
-------------------------------
Anthony A. Nichols,
his attorney-in-fact
Lotz Designers, Engineers and
Constructors, Inc.
By: /s/ Anthony A. Nichols
-------------------------------
Anthony A. Nichols,
his attorney-in-fact
RDC Institute, Inc.
By: /s/ Anthony A. Nichols
-------------------------------
Anthony A. Nichols,
his attorney-in-fact
CLASS B LIMITED PARTNER:
BRANDYWINE REALTY TRUST
By: /s/ Gerard H. Sweeney
-------------------------------
Gerard H. Sweeney, President
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CLASS C LIMITED PARTNER:
BRANDYWINE REALTY TRUST
By: /s/ Gerard H. Sweeney
-----------------------------------
Gerard H. Sweeney, President
The Management Company joins in this Agreement solely for the
purpose of agreeing to be bound by the provisions of Section 8.2(b) hereof.
BRANDYWINE REALTY SERVICES
CORPORATION
By: /s/ Gerard H. Sweeney
-----------------------------------
Authorized Officer
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DISTRIBUTION SUPPORT AND LOAN AGREEMENT
THIS DISTRIBUTION SUPPORT AND LOAN AGREEMENT (this
"Agreement"), dated as of this 22nd day of August, 1996, between SAFEGUARD
SCIENTIFICS (DELAWARE), INC., a Delaware corporation ("Lender") and BRANDYWINE
OPERATING PARTNERSHIP, L.P., a Delaware limited partnership ("Borrower").
RECITALS:
A. Lender's parent company, Safeguard Scientifics, Inc.
("Safeguard"), has entered into a certain letter of intent with Brandywine
Realty Trust ("BRT") and The Nichols Company ("TNC") dated March 20, 1996 (the
"Letter of Intent") which provides, inter alia, that Lender will advance certain
funds to Borrower.
B. Lender and Borrower now desire to set forth the terms and
conditions of such advances.
NOW, THEREFORE, in consideration of the foregoing Recitals and
the mutual covenants contained herein, Borrower and Lender, intending to be
legally bound, hereby agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.1. Certain Defined Terms. As used in this Agreement,
the following terms shall have the following meanings (such meanings to be
equally applicable to both the singular and plural forms of the terms defined).
Any capitalized terms used but not defined herein shall have the respective
meanings given to such terms in the Operating Partnership Agreement.
"Advance Request" has the meaning given to such term in
Section 2.2.
"Advances" means funds advanced or deemed advanced by Lender
to Borrower under Section 2.1.
"Business Day" means a day other than a Saturday, Sunday or
other day on which federal savings banks located in Pennsylvania are authorized
or required to close.
"Closing Cost Advances" means any Advances made pursuant to
Section 2.1.2.
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"Collateral" has the meaning given to such term in
Section 3.1.
"Event of Default" has the meaning given to such term in
Section 4.1.
"GAAP" means generally accepted accounting principles in
effect from time to time, applied in a consistent manner.
"GECC Letter of Credit" means that certain Letter of Credit
dated November 24, 1995 (LC#100921) in the amount of $1,500,000 issued by
MidLantic Bank, NA in respect of the GECC Loan on which Safeguard is the account
party.
"GECC Loan" means the loan made by GE Capital Corporation to
finance the acquisition of Lawrenceville Office Park, which is one of the
Portfolio A Properties.
"Horsham 6 Tenant Improvement Loan" means the $460,000 loan
advanced by Lender to finance certain tenant improvements to Horsham Business
Center Building 6, Pennsylvania, one of the Portfolio B Properties.
"Letter of Credit Advances" means any Advances made pursuant
to Section 2.1.4.
"Liquidation" means any payment or distribution of assets of
Borrower of any kind or character, whether in cash, property or securities, to
creditors upon any dissolution or winding up or total or partial liquidation or
reorganization of Borrower, whether voluntary or involuntary or in bankruptcy,
insolvency, receivership or other proceeding.
"Loan" has the meaning given to such term in Section 2.1.
"Maturity Date" has the meaning given to such term in Section
2.5.
"Meetinghouse Letter of Credit" means that certain Letter of
Credit dated July 12, 1993 (LC #100148) in the amount of $500,000 issued by
Continental Bank to New England Mutual Life Insurance Company in respect of the
mortgage indebtedness encumbering the Meetinghouse Business Center Properties
1-4, which are part of the Portfolio B Properties, on which Safeguard is the
account party.
"Note" has the meaning given to such term in Section 2.3.
"Operating Partnership Agreement" means the Agreement of
Limited Partnership of Brandywine Operating Partnership, L.P. of even date
herewith.
"Portfolio A Properties" has the meaning given to such term in
the Operating Partnership Agreement.
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"Portfolio B Properties" has the meaning given to such term in
the Operating Partnership Agreement.
"Portfolio C Properties" has the meaning given to such term in
the Operating Partnership Agreement.
"Preferred Equity Position" means BRT's capital contribution
in Borrower of $3,937,000, in exchange for Units of Class B Limited Partnership
Interests in Borrower, as reduced from time to time by distributions treated as
a return of capital as provided in the Operating Partnership Agreement.
"Preferred Return" means BRT's 9.5% annual, cumulative, non-
compounding preferred rate of return on the Preferred Equity Position,
calculated as provided in the Operating Partnership Agreement.
"Preferred Return Advances" means any Advances made pursuant
to Section 2.1.3.
"Prime Rate" means the "prime rate" as reported by the Wall
Street Journal, which presently defines the term as "the base rate on corporate
loans posted by at least 75% of the nation's 30 largest banks." If at any time
the Wall Street Journal ceases to report such prime rate or changes its
definition, Lender shall have the right to select a substituted rate that Lender
determines, in the exercise of its reasonable commercial discretion, to be most
comparable to the prime rate as reported and defined by the Wall Street Journal
today. Such substituted rate shall, upon the sending of written notice to
Borrower, constitute the "Prime Rate."
"Qualified Offering" means the time at which BRT completes a
public or private offering of debt or equity securities generating either: (a)
at least $35,000,000 of net unrestricted cash proceeds at a price per share no
less than the book value of BRT's common stock on the last day of the quarter
immediately preceding the quarter in which the Qualified Offering occurs; or (b)
net unrestricted cash proceeds of at least $25,000,000, but less than
$35,000,000, at a price per share of not less than $5.50, as adjusted in
accordance with customary practice for stock splits, stock combinations and
stock dividends occurring after the date hereof.
"Refinancing" means a refinancing of the Portfolio A
Properties, Portfolio B Properties, and/or Portfolio C Properties of the
Borrower, or any of them, that results in net proceeds sufficient for repayment
of the Loan.
"Transaction Documents" means this Agreement, the Note and
each other document, instrument, certificate, or agreement reflecting the
transactions described in the Operating Partnership Agreement.
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"Working Capital Advances" means any Advances made pursuant to
Section 2.1.1.
"Working Capital Advances Period" has the meaning given to
such term in Section 2.1.1.
SECTION 1.2. Accounting Terms. All accounting terms not
specifically defined herein shall be construed, and all financial data submitted
pursuant to this Agreement shall be prepared, in accordance with GAAP.
ARTICLE II
THE LOAN
SECTION 2.1. The Loan. Subject to the terms and conditions
hereinafter provided, Borrower may request (and in the case of Letter of Credit
Advances shall be deemed to have requested), and Lender shall make (and in the
case of Letter of Credit Advances shall be deemed to have made), advances to
Borrower in such amounts as will not exceed the following amounts (collectively,
the "Loan"):
2.1.1. Working Capital Advances. From time to time
from the date hereof until the earlier to occur of the Maturity Date or
January 31, 1998 (the "Working Capital Advances Period"), up to the
aggregate principal amount of Seven Hundred Thousand Dollars
($700,000), to be used for working capital needs of a Portfolio B
Property or a Portfolio C Property in excess of cash flow and available
reserves for the operation of the relevant Property, as reduced by any
monies advanced by Lender after the date hereof in respect of amounts
drawn under the Meetinghouse Letter of Credit. Borrower may borrow,
repay amounts borrowed and reborrow during the Working Capital Advances
Period.
2.1.2. Closing Cost Advances. From time to time until
December 31, 1996, amounts calculated as provided in the next sentence
to be used to pay the Borrower's 50% share of the transfer taxes on the
Portfolio B Properties contributed to Borrower by Lender on the date
hereof, which share is presently estimated at $172,000, and the other
closing costs incurred by Borrower in acquiring the Portfolio A
Properties, the Portfolio B Properties and the Portfolio C Properties
contributed to Borrower by Lender on the date hereof directly and via
the contribution of partnership interests in the Title Holding
Partnerships that own such Properties. The amount of such expenses to
be funded with loans by Lender under this Section 2.1.2 shall be the
percentage obtained by multiplying the amount of such expenses by a
fraction, the numerator of which is the number of Class A Units issued
on the date hereof under the Operating Partnership Agreement and the
denominator of which is the sum of the number of Class A Units and
Class B Units so issued on the date hereof. Lender's total advances
under this Section 2.1.2 shall not exceed $400,000.
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2.1.3. Preferred Return Advances. From time to time
until the earlier to occur of (i) the completion of a Qualified
Offering (ii) the satisfaction in full of the GECC Loan, (iii) a
Liquidation, or (iv) December 31, 2001, to the extent that Borrower is
unable to distribute fully in any quarter the Preferred Return out of
its other sources of cash available for such purposes under the
Operating Partnership Agreement, up to the amount of such shortfall in
the Preferred Return for such quarter but in no event shall the amount
that Lender is required to advance under this Section 2.1.3 for any
quarter exceed the aggregate amount payable for such quarter, if any,
on the 775,000 common shares of BRT purchased by Safeguard or a
wholly-owned subsidiary of Safeguard on the date hereof.
2.1.4. Letter of Credit Advances. Any and all monies
paid by Lender on or after the date hereof in respect of amounts drawn
under, or costs and expenses incurred in connection with, the GECC
Letter of Credit and the Meetinghouse Letter of Credit (as the same may
be replaced, reinstated or substituted from time to time) shall for all
purposes hereof be treated as additional amounts advanced to Borrower
hereunder which comprise part of the Loan. Lender shall confirm to
Borrower in writing as to the date, amount and types of Letter of
Credit Advances.
SECTION 2.2. Requests and Disbursements; Conditions Precedent.
On or before the date of any proposed Advance other than a Letter of Credit
Advance, Borrower shall submit to Lender a loan advance requisition in the form
of Exhibit 2.2 attached hereto (an "Advance Request"), including a detailed
breakdown of items to be funded. Within seven (7) days after receiving an
Advance Request, Lender shall make such Advance to Borrower by certified or bank
check or by wire transfer of immediately available funds to Borrower's account
at a bank designated by Borrower in the Advance Request; provided, however,
that:
2.2.1. Appraisals. If Lender shall so request, Lender
shall have received at the time of any Working Capital Advance a
written valuation of the Portfolio B Property or the Portfolio C
Property for which such Advance is to be used, prepared by a
Pennsylvania certified appraiser, in form and amount satisfactory to
Lender; and
2.2.2. No Defaults. No Event of Default shall have
occurred and be continuing or will result from the making of the
Advance, and no event shall have occurred and be continuing that with
notice or lapse of time or both would, if unremedied, be an Event of
Default.
SECTION 2.3. Interest. Interest on the Advances shall accrue
at an annual rate equal to the Prime Rate and shall be payable quarterly in
arrears, on the first day of each calendar quarter and on the date on which any
repayment of the outstanding principal amount of an Advance is made pursuant to
this Agreement. Payment of interest shall be subordinated and subject in right
of payment to the prior payment in full of the Preferred
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Return payable through the end of the period in respect of which such interest
is being paid. Computations of interest hereunder shall be made on the basis of
a year of 365 or 366 days, as the case may be, for the actual number of days
(including the first day but excluding the last day) elapsed.
SECTION 2.4. The Note. The obligation of Borrower to repay the
Advances shall be evidenced by the promissory note of Borrower (the "Note"),
dated the date of this Agreement, substantially in the form of Exhibit 2.4
attached hereto.
SECTION 2.5. Repayment of Certain Advances. Subject to the
provisions of Section 2.8, the outstanding amount of any and all Advances other
than the Preferred Return Advances made under the Loan, together with any
accrued but unpaid interest thereon, shall become due and payable on the
earliest to occur of the following (the "Maturity Date"):
(a) The completion of a Qualified Offering;
(b) A Refinancing which generates sufficient funds for
repayment of such Advances with interest and of the Horsham 6 Tenant Improvement
Loan with interest;
(c) A Liquidation;
(d) July 31, 1999, if at such time the Operating Partnership
has sufficient funds for repayment; or
(e) December 31, 2001.
SECTION 2.6. Repayment of Preferred Return Advances. Subject
to the provisions of Section 2.8, the outstanding amount of any and all
Preferred Return Advances made under the Loan, together with any accrued but
unpaid interest thereon, shall become due and payable on the earliest to occur
of (i) the satisfaction in full of the GECC Loan, (ii) a Liquidation, (iii)
December 31, 2001, or (iv) the completion of a Qualified Offering.
SECTION 2.7. Payments. Borrower shall make all payments of
principal and interest on the Loan to Lender by check at its offices at 103
Springer Building, 3411 Silverside Road, Wilmington, Delaware 19803, or at
Lender's option by wire transfer of funds immediately available to Lender to
Lender's account No. 5795135074 with PNC Bank Delaware, ABA No. 031 110 089,
Attention: Michael W. Miles, Assistant Treasurer. Whenever any payment to be
made hereunder shall be stated to be due on a day other than a Business Day,
such payment shall be made on the next succeeding Business Day, and such
extension of time shall in such case be included in the computation of payment
of interest hereunder or under the Note.
SECTION 2.8. Subordination to Preferred Equity Position In
Liquidation. Upon any Liquidation, the then outstanding amount of the Preferred
Equity Position plus any
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then unpaid accrued Preferred Return thereon shall first be made or provided for
in full before any repayment is made on account of the Loan pursuant to Sections
2.5 or 2.6. Repayment of the outstanding balance of the Loan pursuant to
Sections 2.5 or 2.6 is not otherwise subordinate in right of payment to the
Preferred Equity Position.
SECTION 2.9. Maintenance of Letters of Credit. Safeguard shall
cause the GECC Letter of Credit and the Meetinghouse Letter of Credit, as the
same may be replaced, renewed, or substituted for from time to time, to remain
outstanding for the period and in such amounts as and to the extent required by
the governing loan documents as in effect on the date hereof, with such changes
thereto as may be approved by Safeguard, until the earlier of the Maturity Date
or the repayment of the loan secured by such letter of credit.
SECTION 2.10. Required Prepayment. If prior to a Qualified
Offering, the Partnership shall realize any Net Sales Proceeds or Net
Refinancing Proceeds from the sale or refinancing of a Portfolio A Property,
Portfolio B Property, Portfolio C Property or an Option Property, the
Partnership shall use such Net Sales Proceeds or Net Refinancing Proceeds to pay
such outstanding indebtedness of the Partnership to Lender hereunder and/or
under the Horsham 6 Tenant Improvement Loan, all as Lender shall designate.
ARTICLE III
COLLATERAL
SECTION 3.1. Security. (a) BRT and TNC each hereby grant to
Lender, as security for the performance and payment of all of Borrower's
liabilities hereunder and under the Note, a security interest under the Uniform
Commercial Code (i) in all of the Class A Units and Class B Units of Limited
Partnership Interest of the Borrower now owned or hereafter acquired by it, (ii)
in the respective general intangibles consisting of their rights to
distributions under the Operating Partnership Agreement (excluding as collateral
under both clauses (i) and (ii) BRT's rights to receive its Preferred Return and
returns of its Preferred Equity Position and BRT's rights to receive
distributions in respect of its Class C Units of Limited Partnership Interest
issued to it under the Operating Partnership Agreement), and (iii) in all
replacements, proceeds and products of the foregoing (collectively, the
"Collateral").
(b) If the Class A Units and the Class B Units of the
Borrower owned by BRT and TNC are or become evidenced by certificates, BRT and
TNC shall, at Lender's request in order to further perfect the security interest
granted in the Class A Units and Class B Units hereunder, deliver such
certificates to Lender, or an agent for Lender reasonably satisfactory to BRT
and TNC, duly endorsed in blank for transfer, to be held by Lender or its agent
as Collateral hereunder.
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(c) The Borrower consents to the foregoing grants of
security interests in the Collateral by BRT and TNC, agrees to mark its books
and records to reflect such security interests, acknowledges the Lender's rights
in the Collateral, and agrees to be bound by all provisions hereof relating to
the Collateral.
SECTION 3.2. Further Assurances. Each of BRT, TNC, and the
Borrower agree that from time to time, at its expense, it shall promptly execute
and deliver all further instruments and documents, and take all further action,
that may be necessary or desirable, or that Lender may request, in order to
perfect and protect any security interest granted or purported to be granted
hereby or to enable Lender to exercise and enforce its rights and remedies
hereunder with respect to any Collateral. Without limiting the generality of the
foregoing, each of BRT, TNC, and the Borrower shall execute and file such
financing or continuation statements, or amendments thereto, and such other
instruments, notices, and acknowledgements as may be necessary or desirable, or
as Lender may request, in order to perfect and preserve the security interests
granted or purported to be granted hereby.
SECTION 3.3. Financing Statements. Each of BRT and TNC hereby
authorizes Lender to file one or more financing or continuation statements, and
amendments thereto, relative to all or any part of the Collateral without the
signature of BRT or TNC where permitted by law. A carbon, photographic, or other
reproduction of this Agreement or any part thereof shall be sufficient as a
financing statement where permitted by law.
ARTICLE IV
DEFAULT
SECTION 4.1. Events of Default. Each of the following shall be
an event of default (an "Event of Default"):
(a) If Borrower shall fail to pay any principal or interest on
the Loan within ten days of its due date; or
(b) If Borrower shall be in default in any material respect
under any Transaction Document, and shall have failed to cure such default
within 30 days' after Lender has notified Borrower of such default in writing.
SECTION 4.2. Remedies. If any Event of Default shall occur and
be continuing, Lender may, without notice to Borrower except as specified below,
and in addition to other rights and remedies available to Lender, whether
available at law, in equity, under the other Transaction Documents or otherwise,
(a) terminate its obligations to make, and Borrower's ability to receive,
further Advances (except Letter of Credit Advances which are deemed made); (b)
declare the entire unpaid principal amount of all Advances actually made, and
all interest accrued and unpaid to be forthwith due and payable, without
presentment, demand, protest or further action or notice of any kind, all of
which are hereby
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expressly waived by Borrower; (c) exercise all of the rights and remedies of a
secured party under the Uniform Commercial Code or any other applicable laws or
agreements with respect to all of the Collateral; provided, that, Borrower shall
use reasonable efforts to foreclose upon the Collateral in such manner that any
repayment of Loans with the proceeds of the Collateral is pro rated between BRT
and TNC, in accordance with the percentages that the Class A or Class B Units
issued to each such person under the Operating Partnership Agreement on the date
hereof bears to the total number of Class A and Class B Units issued to them
under the Operating Partnership Agreement on the date hereof, and provided
further that, the aggregate dollar amount of loans that Lender shall be entitled
to have repaid with the proceeds of the Collateral shall be equal to that amount
obtained by multiplying (x) the sum of the outstanding principal balance of the
Loan, plus all accrued, unpaid interest thereon and all expenses for which
Lender is entitled to be reimbursed hereunder by (y) a fraction, the numerator
of which is the number of Class A Units and Class B Units of Limited Partnership
Interests issued under the Operating Partnership Agreement on the date hereof to
all persons other than Safeguard and its wholly-owned subsidiaries, and the
denominator of which is the total number of Class A Units and Class B Units of
Limited Partnership Interests issued to all persons under the Operating
Partnership Agreement on the date hereof; and (d) sell the Collateral or any
part thereof in one or more parcels at public or private sale, for cash, on
credit, or for future delivery, and upon such other terms as Lender may deem
commercially reasonable, in connection with which each of BRT, TNC and Borrower
agrees that, to the extent notice of sale shall be required by law, at least
five business days' notice to Borrower of the time and place of any public sale
or the time after which any private sale is to be made shall constitute
reasonably notification. Lender shall not be obligated to make any sale of the
Collateral regardless of notice of sale having been given. Lender may adjourn
any public or private sale from time to time by announcement at the time and
place fixed therefor, and such sale may, without further notice, be made at the
time and place to which it was so adjourned.
SECTION 4.3. Application of Proceeds. All cash proceeds
received by Lender in respect of any sale of, collection from, or other
realization upon all or any part of the Collateral may, in the discretion of
Lender, be held by Lender (without interest) as collateral for, and/or then or
at any time thereafter applied (after payment of any amounts payable to Lender
pursuant to Section 4.4) in whole or in part by Lender against, all or any part
of the Loan in such order as Lender shall elect. Any surplus of such cash or
cash proceeds held by Lender and remaining after payment in full of all the Loan
shall be paid over to whosoever may be lawfully entitled to receive such
surplus.
ARTICLE V
MISCELLANEOUS
SECTION 5.1. No Waiver; Cumulative Remedies. No failure or
delay on the part of Lender in exercising any right, power or remedy hereunder
shall operate as a waiver thereof; nor shall any single or partial exercise of
any such right, power or remedy preclude
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any other or further exercise thereof or the exercise of any other right, power
or remedy hereunder. The rights, powers and remedies herein provided are
cumulative and not exclusive of any rights powers or remedies provided by law or
in equity. No waiver of any provision hereof, nor consent to any departure
therefrom, shall be effective unless the same shall be in writing and signed by
Lender, and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which it was given.
SECTION 5.2. Notices. Unless this Agreement specifically
provides otherwise, all notices and other communications that this Agreement
requires or permits either party to give to the other shall be in writing and
shall be given to such party at its address or facsimile number specified on the
signature pages of this Agreement or at such other address or facsimile number
as shall be designated by such party in a notice to the other party complying
with the terms of this Section 5.2. Unless this Agreement specifically provides
otherwise, all notices and other communications shall be effective (a) if given
by mail, when received, (b) if given by facsimile, when such facsimile is
transmitted to the appropriate facsimile number and the sender receives
confirmation of transmission during normal business hours, or (c) if given by
any other means, when delivered at the appropriate address.
SECTION 5.3. Binding Effect. This Agreement shall become
effective when it shall have been executed by Borrower and Lender and thereafter
shall be binding upon and inure to the benefit of the parties and their
respective successors and permitted assigns, except that Borrower shall not have
the right to delegate its duties hereunder without the prior written consent of
Lender.
SECTION 5.4. Entire Agreement. This Agreement and the Note
represent the entire understanding and agreement of the parties with respect to
the subject matter hereof, and supersede any and all prior agreements and
understandings or representations, whether oral or written, by or between the
parties with respect to the subject matter hereof.
SECTION 5.5. Titles and Captions. All article and section
titles and captions contained in this Agreement are for convenience of reference
only and are not deemed a part of the context hereof.
SECTION 5.6. Interpretation. Except as otherwise indicated,
all agreements defined herein refer to the same as from time to time amended or
supplemented or the terms thereof waived or modified in accordance herewith and
therewith. In this Agreement, in the computation of a period of time from a
specified date to a later specified date, the word "from" means "from and
including" and the words "to" and "until" each means "to but excluding."
SECTION 5.7. Governing Law. This Agreement and the Note shall
be governed in all respects by the law of the Commonwealth of Pennsylvania.
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SECTION 5.8. Indemnity and Expenses. Borrower agrees to
indemnify Lender from and against any and all claims, losses, and liabilities
growing out of or resulting from this Agreement (including, without limitation,
enforcement of this Agreement), except claims, losses, or liabilities resulting
from Lender's gross negligence or willful misconduct. Borrower shall upon demand
pay to Lender the amount of any and all reasonable expenses, including the
reasonable fees and disbursements of its counsel and of any experts and agents,
which Lender may incur in connection with (i) the custody, preservation, or the
sale of, collection from, or other realization upon, any of the Collateral, (ii)
the exercise or enforcement of any of the rights of Lender, or (iii) the failure
by Borrower, BRT or TNC to perform or observe any of the provisions hereof.
SECTION 5.9. Counterparts. This Agreement may be executed in
one or more counterparts, all of which taken together shall constitute one and
the same agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective officers thereunto duly authorized,
as of the date first above written.
BRANDYWINE OPERATING Address:
PARTNERSHIP, L.P. --------
Two Greentree Center, Ste.100
By: BRANDYWINE REALTY Marlton, New Jersey 08053
TRUST, its general partner Facsimile No.: 609-797-0425
Attention: Gerard H. Sweeney
By: /s/ Gerard H. Sweeney
---------------------------------
Name: Gerard H. Sweeney
Title: President
SAFEGUARD SCIENTIFICS Address:
(DELAWARE), INC. --------
103 Springer Building
3411 Silverside Road
By: /s/ Donald R. Caldwell Wilmington, Delaware 19803
---------------------------- Facsimile No.: 302-478-3667
Name: Donald R. Caldwell Attention: Michael W. Miles,
Title: President Assistant Treasurer
Each of the undersigned have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written, for the sole purpose of being bound by the provisions of
Article III and Article IV; provided, however, that no recourse shall be had
against the undersigned, or any of their respective shareholders, trustees,
directors, officers or employees, with respect to any obligation hereunder other
than with respect to the Collateral.
BRANDYWINE REALTY TRUST Address:
--------
Two Greentree Center, Suite 100
By: /s/ Gerard H. Sweeney Marlton, NJ 08953
-------------------------- Facsimile No.: 609-792-0925
Name: Gerard H. Sweeney Attention: Gerard H. Sweeney
Title: President
THE NICHOLS COMPANY Address:
--------
16 Campus Boulevard, Suite 150
Newtown Square, PA 19073
By: /s/ Anthony A. Nichols Facsimile No.: 610-325-5622
-------------------------- Attention: John P. Gallagher
Name: Anthony A. Nichols
Title: President
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The undersigned has executed this Agreement solely for the
purpose of being bound by the provisions of Section 2.9 hereof.
SAFEGUARD SCIENTIFICS, INC. Address
--------
800 The Safeguard Building
By: /s/ Glenn T. Reiger 435 Devon Park Drive
--------------------------- Wayne, PA 19087
Name: Glenn T. Reiger Attention: Glenn Rieger
Title: Vice President
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EXHIBIT 2.2
FORM OF ADVANCE REQUEST
[DATE]
Safeguard Scientifics, Inc.
800 The Safeguard Building
435 Devon Park Drive
Wayne, PA 19087
Attention:
Ladies and Gentlemen:
We hereby request that you advance to us pursuant to Section
2.1 of that certain Loan Agreement to which we are parties dated as of
_____________, 1996 (the "Agreement") the amount of $________.
The undersigned hereby certifies as follows:
1. The amounts and uses of the proposed Advance are more
specifically described on Exhibit A attached hereto.
[2. If the Advance is to be a Working Capital Advance, an
appraisal of the relevant Property has been delivered to you as required by
Section 2.2.1 of the Agreement.]
All capitalized terms used herein and not otherwise defined
shall have the meanings set forth in the Agreement.
Very truly yours,
BRANDYWINE OPERATING PARTNERSHIP, L.P.
By: Brandywine Realty Trust, its
general partner
By:_____________________________,
Authorized Officer
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EXHIBIT A
BREAKDOWN OF PROPOSED ADVANCE
Description Amount
- ----------- ------
A. Working Capital Advances
[Describe working capital advances needed in excess
of cash flow and available reserves] $__________
B. Closing Cost Advances
[Identify transfer tax or other closing cost] $__________
C. Preferred Return Advances
[Cash Shortfall for quarter ending ___________] $__________
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EXHIBIT 2.4
FORM OF NOTE
$_______ ______________, 199_
On or before _____________, the undersigned promises to pay to
the order of _____________________________ ("Lender") the principal sum of
___________________________ Dollars ($_______), in the installments, at the
times, and with interest at the rates provided by a Loan Agreement between the
undersigned and Lender dated of even date herewith, to which this Note is
subject.
BRANDYWINE OPERATING PARTNERSHIP, L.P.
By: Brandywine Realty Trust, its
general partner
By:_____________________________,
Authorized Officer
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AGREEMENT
THIS AGREEMENT is made as of the 22nd day of August, 1996 by
and among Brandywine Realty Trust, a Maryland real estate investment trust (the
"Trust"), Safeguard Scientifics, Inc., a Pennsylvania corporation ("SSI"), and
Safeguard Scientifics (Delaware), Inc. ("Sub"), a Delaware corporation and a
wholly-owned subsidiary of SSI (SSI and Sub are collectively referred to herein
as the "Holder").
WHEREAS, as of the date hereof, Sub is acquiring 775,000
common shares of beneficial interest, par value $.01 per share ("Common
Shares"), of the Trust, warrants exercisable for an additional 775,000 Common
Shares and additional securities convertible under certain circumstances into
Common 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. Nomination of Designees to the Board. During the term
hereof, but only for so long as Richard M. Osborne ("RMO") and the Richard M.
Osborne Trust ("RMO Trust") are collectively the beneficial owners of at least
ten percent (10%) of the outstanding Common Shares, the Holder agrees to vote
its Common Shares for the election of either RMO or, in the discretion of RMO,
any person designated by RMO and who is reasonably acceptable to a majority of
the Board of Trustees of the Trust to the Board of Trustees at each annual
meeting of shareholders of the Trust at which elections to the Board of Trustees
are to be held, provided that such agreement of the Holder shall terminate in
the event (i) of the occurrence of any matter relating to RMO or such designee
that would require disclosure by the Trust in any filing to be made by it with
the Securities and Exchange Commission of any of the events enumerated in Item
401(f) of Regulation S-K, as now in effect or as amended from time to time (an
"Item 401(f) Occurrence") or (ii) RMO or such designee takes any action which
could reasonably be expected to have a material adverse effect on the Trust. For
purposes of this Agreement, beneficial ownership shall be determined in the
manner prescribed by Rule 13d-3 promulgated under the Securities Exchange Act of
1934, as amended (the "Exchange Act"). During the term hereof, but only for so
long as the Holder is the beneficial owner of at least ten percent (10%) of the
outstanding Common Shares, the Company will cause three individuals designated
by the Holder to be nominated for election to the Board of Trustees provided
that (i) no Item 401(f) Occurrence has occurred with respect to any such
individual, (ii) no such individual has taken any action which could reasonably
be expected to have a material adverse effect on the Trust, and (iii) each such
individual is reasonably acceptable to a majority of the Board of Trustees. The
initial
<PAGE>
designees of the Holder are Warren V. Musser, Anthony A. Nichols, Sr. and
Walter D'Allessio.
2. Proxy Solicitations. During the term hereof, without the
consent of a majority of the independent members of 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 change in the Declaration of Trust of the Trust or
(iv) assist any attempt by any other person or entity to do any of the
foregoing. During the term hereof, if the Holder learns of any efforts by any
third party to (i) make or participate in, directly or indirectly, any
solicitation of proxies or become a participant in any election contest with
respect to the Trust, (ii) encourage any third person to vote Common Shares in
opposition to the recommendation of a majority of the Board of Trustees, (iii)
propose any change in the Declaration of Trust or (iv) assist any person or
entity to do any of the foregoing, the Holder will promptly inform the Board of
Trustees.
3. Voting of Common Shares. During the term hereof, and except
as otherwise required by Section 1 hereof, the Holder agrees to vote all Common
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 and (ii) any amendment to the Declaration of
Trust of the Trust which, in the reasonable judgment of a majority of the Board
of Trustees, adversely affects the rights of shareholders. In any event, during
the term hereof, the Holder agrees to vote all Common Shares beneficially owned
by it in favor of any financing for which shareholder approval is sought,
including without limitation, any financing having the terms referenced in
clause (ii) of the first sentence of Section 7(a), provided that the financing
is recommended by a majority of the Board of Trustees.
4. Restrictions on Dispositions. During the term hereof, the
Holder shall not, directly or indirectly, sell, assign, transfer or otherwise
dispose of any Common 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; (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; or (iv) in a merger
or
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<PAGE>
statutory share exchange pursuant to which ownership of the Trust is acquired by
a third party. Notwithstanding the foregoing, during the term hereof, Holder may
transfer up to 52,000 Common Shares to Anthony A. Nichols, Sr. (subject to
adjustment for stock splits, stock dividends and reverse stock splits) so long
as Mr. Nichols holds such Common Shares subject to the same restrictions
applicable to them while they were owned by 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 described in
Section 7a(ii) by the Trust, provided that (i) the duration thereof does not
extend for more than 365 days following the effective date of the applicable
registration statement and (ii) all other holders of in excess of ten percent
(10%) of the Common Shares and all Trustees and executive officers of the Trust
execute a substantially similar letter.
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.
6. Legend. During the term hereof, the Trust may cause any
certificates evidencing Common Shares beneficially owned by the Holder to bear a
legend indicating the existence of this Agreement.
7. Term.
a. The term of this Agreement shall be for a
period ending on the earlier of the (i) third anniversary of the date of this
Agreement or (ii) completion by the Trust of a public or private equity offering
yielding (a) at least $35.0 million of net proceeds to the Trust at a price per
share at least equal to the per share book value of the Common Shares as of the
end of the most recently preceding quarter or (b) at least $25.0 million of net
proceeds, but less than $35.0 million of net proceeds, at a price per share of
at least $5.50.
b. Upon expiration or termination of the term,
all rights and obligations of the parties hereto shall terminate, except for any
rights arising out of the breach by a party hereto of its obligations hereunder.
8. 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
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<PAGE>
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.
9. Expenses. All fees and expenses incurred by any party
hereto shall be borne by the party incurring them; provided 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.
10. 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.
11. 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.
12. 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, if to:
The Trust
---------
Two Greentree Centre
Suite 100
Marlton, NJ 08053
Telecopier No. (609) 797-0425
The Holder
----------
800 The Safeguard Building
435 Devon Park Drive
Wayne, PA 19087
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.
13. Choice of Law. This Agreement shall be governed
by, and construed and enforced in accordance with, the laws of
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<PAGE>
the State of Maryland, without reference to the conflict of laws
principles thereof.
14. 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.
15. 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.
16. 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 to be the agreement or obligation of the
applicable party hereto to the full extent permitted by law.
17. Restriction on Certain Amendments. During the term hereof,
the Trust agrees that it will not make any amendment to that certain Agreement
dated as of March 20, 1996 among the Trust, RMO and the RMO Trust (the "RMO
Agreement") without either making a corresponding amendment to this Agreement or
obtaining the consent of the Holder and the Trust will not make any amendment to
this Agreement without either making a corresponding amendment to the RMO
Agreement or obtaining the consent of RMO.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
BRANDYWINE REALTY TRUST
By:__________________________
President
SAFEGUARD SCIENTIFICS, INC.
By:__________________________
Vice President
[EXECUTIONS CONTINUED]
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<PAGE>
SAFEGUARD SCIENTIFICS
(DELAWARE), INC.
By:__________________________
Vice President
The undersigned hereby acknowledges the provisions of Section
17 hereof.
THE RMO TRUST
By:_________________________
Title: Trustee
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<PAGE>
Exhibit 10.4
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (the "Agreement") made and
entered into as of this 22nd day of August, 1996 by and among BRANDYWINE REALTY
TRUST, a Maryland real estate investment trust (the "Company"), SAFEGUARD
SCIENTIFICS (DELAWARE), INC., a Delaware corporation ("SSI"), THE NICHOLS
COMPANY, a Pennsylvania corporation ("TNC"), and the TURKEY VENTURE FUND XIII,
LTD., an Ohio limited liability company of which Richard M. Osborne is the
manager ("TVF XIII").
BACKGROUND
Pursuant to a Stock and Warrant Purchase Agreement, dated as
of July 31, 1996 (the "SSI Agreement"), by and between the Company and Safeguard
Scientifics, Inc., a Pennsylvania corporation, the Company has issued to SSI
775,000 (the "SSI Shares") of the Company's common shares of beneficial interest
(the "Common Stock") and a Warrant to purchase an additional 775,000 shares of
Common Stock (the "SSI Warrant").
Pursuant to a Loan and Securities Purchase Agreement, dated
June 21, 1996, by and between the Company and TVF XIII (a) the Company has
issued to TVF XIII 59,949 shares (the "Initial TVF XIII Shares") of the
Company's Common Stock and a warrant to purchase an additional 59,949 shares of
Common Stock (the "Initial TVF XIII Warrant") and (b) TVF XIII has made a loan
to the Company that in accordance with the terms of said agreement may be repaid
with additional shares of the Company's Common Stock (the "Additional TVF XIII
Shares" and together with the Initial TVF XIII Shares, the "TVF XIII Shares")
and additional warrants to purchase additional shares of the Company's Common
Stock (the "Additional TVF XIII Warrant" and, together with the Initial TVF XIII
Warrant, the "TVF XIII Warrants") (the TVF XIII Warrants, together with the SSI
Warrant, the "Warrants").
In connection with the SSI Agreement, the Company has
acquired, either directly or indirectly, a general partnership interest in
Brandywine Operating Partnership, L.P., a Delaware limited partnership (the
"Partnership"), and SSI, TNC and certain other persons listed on Schedule A
hereto (the "Other Purchasers") have received units of Class A Limited
Partnership Interest in the Partnership in exchange for certain interests in
real property and other assets contributed by them to the Partnership. These
units are redeemable, on a one-for-one basis, subject to adjustment, for shares
of Common Stock upon the satisfaction of certain conditions, as provided in the
Agreement of Limited Partnership of even date herewith creating the Partnership
(the "Partnership Agreement").
To induce SSI, TNC, the Other Purchasers and TVF XIII to enter
into the foregoing transactions, the Company has agreed to provide them with the
registration rights set forth in this agreement.
<PAGE>
1. CERTAIN DEFINITIONS.
In addition to the other terms defined in this Agreement, the
following terms shall be defined as follows:
"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 New York Stock
Exchange ("NYSE") is open for trading.
"Closing Date" means August 22, 1996.
"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 SSI, TNC, TVF XIII and the Other Purchasers
listed on Schedule A hereto, for so long as (and to the extent that) each owns
any Registrable Securities, and each of their respective successors, assigns,
and direct and indirect transferees who become registered owners of Registrable
Securities or securities exercisable, exchangeable or convertible into
Registrable Securities.
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<PAGE>
"Outstanding" means with respect to any securities as of any
date, all such securities theretofore issued, except any such securities
theretofore converted, exercised or 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.
"Registrable Security(ies)" means (i) the SSI Shares, (ii) the
TVF XIII Shares, (iii) all or any portion of any shares of Common Stock of the
Company that may be issued upon the exercise of, or in exchange for, the
Warrants, (iv) any shares of Common Stock or other equity securities of the
Company that may be issued in redemption of any Units under the Partnership
Agreement, and (v) 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; 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 and to the extent such securities are permitted to be publicly sold
without limitation as to amount pursuant to Rule 144(k) (or any successor
provision to such Rule) under the Securities Act or are otherwise freely
transferrable to the public without further registration under the Securities
Act; or (iii) when such securities shall have ceased to be issued and
outstanding; or (iv) on the tenth anniversary of the date such securities were
issued. In the case of clause (ii) of the foregoing sentence, the Company shall,
if requested by the Holder or Holders thereof, have delivered to such Holder or
Holders the written opinion of independent counsel to the Company to such
effect. 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
Units and the Warrant and any other securities exercisable or exchangeable for,
or convertible into, Registrable Securities. The term Registrable Securities
shall not include the Units or the Warrants.
"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.
"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),
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<PAGE>
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 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 Section 11), (y) any underwriting discounts or commissions
attributable to Registrable Securities, or (z) any SEC registration or filing
fees attributable to Registrable Securities or 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.
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<PAGE>
"Unit" means any unit of Class A Limited Partnership Interest
in the Partnership and any securities which may be issued in respect thereof or
exchange therefor in connection with any combination, consolidation, merger,
recapitalization, or other similar transaction.
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 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 without the written consent of SSI and TVF XIII at any time when SSI or TVF
XIII would be prohibited from selling Registrable Securities pursuant to an
effective registration statement under the Securities Act by the terms of the
Agreement, dated August 22, 1996, between the Company and SSI, or the Agreement,
dated March 20, 1996, among the Company, the Richard M. Osborne Trust and
Richard M. Osborne, as the case may be. 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 of
Registrable Securities and afford them the opportunity of including in the
requested registration statement such of their Registrable Securities 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 requesting registration of (A) the aggregate number of Registrable
Securities proposed to be registered by all Holders, (B) the proposed filing
date of the registration statement, and (C) such other information concerning
the offering as any 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 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 may give written notice to the Company and the managing underwriter
specifying either that (A) Registrable Securities of such 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 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 request for registration.
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<PAGE>
(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 reasonably 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
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 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), except as and to the extent provided by Section 7(b), 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 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 may interfere
with an orderly sale and distribution of or may materially adversely affect the
price of such offering, the aggregate number of Registrable Securities included
by the 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 able to be included in such offering by each Holder shall
be reduced pro rata (in accordance with such Holder's proportionate share of the
Fair Market Value of all Registrable 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), 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. 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 of
Registrable Securities and afford them the opportunity of including in the
requested Shelf Registration Statement such of their Registrable Securities 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
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registration statement to be declared effective within sixty (60) days after its
filing; 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) 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 of Registrable Securities until all securities included in such Shelf
Registration Statement have ceased to be Registrable Securities (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 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 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.
(e) Neither the Company nor any Person other than a 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, 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
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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 of its intention to do so, and upon the written
request of any 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 intended to be disposed of by such 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 which the Company has been so requested to
register by 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 requesting registration and thereupon the Company shall be relieved
of its obligation to register such Registrable 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 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 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, that if an offering of some but not all of the
Registrable Securities requested to be registered by the Holders and all other
Persons having rights to include securities held by them in such registration
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 Registrable Securities and the aggregate number of
Registrable Securities to be included in such offering by each Holder shall be
allocated pro rata among the Holders requesting such registration on the basis
of the percentage of the Registrable Securities held by such Holders which have
requested that such Registrable Securities be included; and
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(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 ten (10) day period prior to, and 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 of the Company and all other
Persons having securities included in such registration) beginning on the
closing date of each underwritten offering made pursuant to 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;
(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
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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) or Article 7 hereto.
(b) Prepare and file with the SEC such amendments,
post-effective amendments and supplements to such registration statement and the
prospectus used in connection therewith as may be 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) or Article 7
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.
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(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 is then listed, if the listing of such Registrable Securities are 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 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
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<PAGE>
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 can not 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.
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.
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<PAGE>
(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. INFORMATION BLACKOUT.
(a) At any time when a registration statement effected
pursuant to Sections 2(a), 2(b) or 3 relating to Registrable Securities is
effective, upon written notice from the Company to the Holders that the Company
has determined in good faith that sale of Registrable Securities pursuant to the
registration statement would require disclosure of non-public material
information not otherwise required to be disclosed under applicable law having a
material adverse effect on the Company (an "Information Blackout"), all Holders
shall suspend sales of Registrable Securities pursuant to such registration
statement until the earlier of:
(i) forty-five (45) days after the Company makes such
good faith determination, and
(ii) such time as the Company notifies the Holders
that such material information has been disclosed to the public or has
ceased to be material or that sales pursuant to such registration
statement may otherwise be resumed (the number of days from such
suspension of sales by the Holders until the day when such sale may be
resumed hereunder is hereinafter called a "Sales Blackout Period").
(b) Any delivery by the Company of notice of an Information
Blackout during the forty-five (45) days immediately following effectiveness of
any registration statement effected pursuant to Section 2(a) hereof shall give
the Holders of a majority in aggregate amount of Registrable Securities being
sold the right, by written notice to the Company within twenty (20) Business
Days after the end of such Sales Blackout Period, to cancel such registration,
in which event the Holders shall have one additional registration right under
the Section pursuant to which such registration was filed in such fiscal year (a
"Blackout Termination Right").
(c) If there is an Information Blackout and the cancellation
right, if any, pursuant to (b) above, is not available or exercised, the time
period set forth in clause (ii) of Section 5(a) shall be extended for a number
of days equal to the number of days in the Sales Blackout Period.
(d) Notwithstanding the foregoing, there shall be no more than
two (2) Information Blackouts during the term of this Agreement and no Sales
Blackout Period shall continue for more than forty-five (45) consecutive days.
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8. 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.
9. 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 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.
10. 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
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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 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 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 10, such Person (the
"indemnified party") shall promptly notify the Person against whom
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such indemnity may be sought (the "indemnifying party") in writing. No
indemnification provided for in Section 10(a) or (b) shall be available to any
person who shall fail to give notice as provided in this Section 10(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 10(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 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 10(a) and by
the Company in the case of parties indemnified pursuant to Section 10(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 10 is
unavailable to or insufficient to hold harmless an indemnified party under
Section 10(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
10(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
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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 10(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 10(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.
(e) The indemnity provided for hereunder shall not inure to
the benefit of any indemnified party to the extent that such indemnified party
failed to comply with the applicable prospectus delivery requirements of the
Securities Act as then applicable to the person asserting the loss, claim,
damage or liability for which indemnity is sought.
11. 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.
12. 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
Section 12, which address initially is, with respect to: (i) SSI, the address
set forth in the SSI Agreement, (ii) TNC, the address set forth in the Agreement
of Limited Partnership for the Partnership, (iii) TVF XIII, 7001 Center Street,
Mentor, Ohio 44060, facsimile number (216) 255-8645, (iv) all other holders, the
address set forth in the register for the applicable security; and (b) if to the
Company, initially at the address set forth in the SSI Agreement and thereafter
at such other address, notice of which is given in accordance with the
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provisions of this Section 12. 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.
13. 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 affected Holder; provided further
that any waiver must be signed by the party entitled to the benefit of the term
or matter being waived.
14. PARAGRAPH HEADINGS.
The paragraph 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.
15. 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.
16. 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.
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17. 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.
18. 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.
19. 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.
20. THIRD PARTY BENEFICIARIES; SUCCESSORS AND ASSIGNS.
The Other Purchasers shall be third party beneficiaries of
this Agreement. This Agreement shall inure to the benefit of and be binding upon
the successors, assigns and transferees of each of the parties hereto and of
each of the Other Purchasers, including, without limitation and without the need
for an express assignment, subsequent Holders; 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 SSI Agreement, the
Warrant, the Units, the Agreement of Limited Partnership of the Partnership 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.
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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.
IN WITNESS WHEREOF, this Agreement has been executed and
delivered as of the date first above written.
BRANDYWINE REALTY TRUST
By: /s/ Gerard H. Sweeney
-----------------------------------
Title: President
SAFEGUARD SCIENTIFICS
(DELAWARE), INC.
By: /s/
-----------------------------------
Title: Assistant Treasurer
THE NICHOLS COMPANY
By: /s/ Anthony A. Nichols
-----------------------------------
Title: President
TURKEY VULTURE FUND XIII, LTD.
By: /s/ Richard M. Osborne
-----------------------------------
Richard M. Osborne, Manager
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Schedule A
OTHER PURCHASERS
Brian F. Belcher
Jack R. Loew
Craig C. Hough
RDC Institute, Inc.
Gary C. Bender
Lotz Designers Engineers and Constructors, Inc.
Werner A. Fricker
C/N Oaklands III, Inc.**
Iron Run V, Inc.**
C/N Iron Run III, Inc.**
C/N Leedom II, Inc.*
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* Wholly-owned subsidiary of Safeguard Scientifics, Inc.
** Wholly-owned subsidiary of The Nichols Company.
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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 August 22, 2002.
BRANDYWINE REALTY TRUST
Warrant Agreement for the Purchase of Shares of Common Stock
No. 1 775,000 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
Safeguard Scientifics (Delaware), Inc. 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 August 22, 2002 (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
or Section 8 hereof) of Six Dollars and 50/100 Cents ($6.50) (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."
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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 the 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. 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 for shares of Common Stock issuable upon exercise
of the Conversion Right shall be delivered to the Holder within fifteen (15)
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 shares of capital stock 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
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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 or blue sky 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 the original Warrant. Any such new Warrant executed and delivered shall
constitute an
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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 Capital Stock. If at any time
after August 22, 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 capital stock other than Common Stock;
or
(v) issues by reclassification of its Common Stock
any shares of its capital stock;
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 capital stock 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 a dividend or distribution, and immediately after the
effective date in the case of a subdivision, combination or reclassification.
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(b) Adjustment for Other Distributions. If at any time after
August 22, 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 Exercise Price immediately prior to the
adjustment.
M = the current market price (as defined in
Section 11 above) 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. 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) Adjustment for Common Stock Issue. (i) If at any time
after August 22, 1996, the Company issues shares of Common Stock for a
consideration per share that is less than the current market price per share
(determined as provided in Section 11 above) on the date the Company fixes the
offering price of such additional shares, the Exercise Price shall be adjusted
in accordance with the following formula:
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E' = Y x [O + (P / E)]
-----------
A
where: E' = the adjusted Exercise Price.
Y = the then current Exercise Price
immediately prior to the adjustment.
O = the number of shares outstanding
immediately prior to the issuance of such
additional shares.
P = the aggregate consideration received for
the issuance of such additional shares.
E = the current market price (determined as
provided in Section 11 above) immediately
prior to the adjustment.
A = the number of shares outstanding
immediately after the issuance of such
additional shares.
The adjustment shall be made successively whenever any such
issuance is made, and shall become effective immediately after such issuance.
(ii) This subsection 6(c) does not apply to (A) any of the
transactions described in subsections (a), (b) and (d) of this Section 6, (B)
Common Stock issued pursuant to options and warrants outstanding on August 22,
1996, (C) Common Stock issued to officers, trustees, directors or employees of,
or consultants to, the Company 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
Company's Board of Trustees or an appropriate committee of the Company's Board
of Trustees, and (y) have an exercise price not less than 85% of the current
market price of the Company's Common Stock at the time of issuance of such
warrant, right or option, (D) Common Stock issued on redemption of Class A units
of limited partnership interest in Brandywine Operating Partnership, L.P. issued
or issuable to the Holder and The Nichols Company ("TNC") and certain other
persons, or their respective affiliates, in connection with the transactions
contemplated by the Contribution Agreement, by and among the Company, the Holder
and TNC, (E) shares of Common Stock issuable to Messrs. Belcher, Gallagher,
Nichols and Sweeney upon exercise of warrants issued to them on the date hereof
pursuant to their employment agreements with Brandywine Realty Services Company,
Inc., (F) up to 236,200 shares of Common Stock reserved for issuance to Richard
M. Osborne, Sr. or to a trust controlled by him ("Osborne") upon the repayment
of unsecured debt issued to or held by Osborne and up to 236,200 shares of
Common Stock 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,
and (G) any securities sold to the public in connection with an underwritten
public offering of the Company's securities.
(d) Adjustment for Convertible Securities Issue. If at any
time after August 22, 1996, the Company issues for consideration any securities
convertible into or
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exchangeable or exercisable for Common Stock for consideration per share of
Common Stock initially deliverable upon conversion, exchange or exercise of such
securities, together with the consideration paid upon issuance of such
securities, less than the current market price per share (determined as provided
in Section 11 above) on the date of issuance of such securities, the Exercise
Price shall be adjusted in accordance with this formula:
E' = Y x [O + (P / E)]
------------
O + D
where: E' = the adjusted Exercise Price.
Y = the then current Exercise Price
immediately prior to the adjustment.
O = the number of shares outstanding
immediately prior to the issuance of such
securities.
P = the aggregate consideration received and
receivable for the issuance of such
securities.
E = the current market price (determined as
provided in Section 11 above).
D = the maximum number of shares deliverable
upon conversion, exchange or exercise of
such securities at the initial conversion,
exchange or exercise rate.
The adjustment shall be made successively whenever any such
issuance is made, and shall become effective immediately after such issuance. If
all of the Common Stock deliverable upon conversion, exchange or exercise of
such securities has not been issued when such securities are no longer
outstanding, then the Exercise Price shall promptly be readjusted to the
Exercise Price which would then be in effect had the adjustment upon the
issuance of such securities been made on the basis of the actual number of
shares of Common Stock issued upon conversion, exchange or exercise of such
securities.
This subsection does not apply to any of the transactions
described in subsections (a), (b) and (c)(ii)(B), (C), (D), (E), (F) and (G)
above.
(e) Adjustment to Number of Warrant Shares. Upon each
adjustment to the Exercise Price pursuant to Section 6(c) or (d), the number of
Warrant Shares purchasable hereunder at that Exercise Price shall be adjusted,
to the nearest one hundredth of a whole share, to the product obtained by
multiplying such number of shares purchasable immediately prior to such
adjustment in the Exercise Price by a fraction, the numerator of which shall be
the Exercise
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Price immediately prior to such adjustment and the denominator of which shall be
the Exercise Price immediately thereafter.
(f) 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 capital
stock of the Company, if any, issuable upon such exercise over and above the
shares of Common Stock or other capital stock 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.
(g) When No Adjustment Required. No adjustment need be made
for a change in the par value or no par value of the Common Stock.
(h) 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 capital stock
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 of 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 of 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
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(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.
(i) 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.
(j) 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.
(k) 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.
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<PAGE>
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 stock and other securities and property
(including cash) receivable upon such reclassification, 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 stock 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 and any warrants issued upon repayment of unsecured
debt issued to or held by Osborne (collectively, the "Osborne Warrant"), 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 Osborne
Warrant 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.
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<PAGE>
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 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 among the Holder, the Company, TNC, Osborne and certain other holders of the
Company's Shares.
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 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 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 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
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<PAGE>
Warrant, determined in such reasonable manner as may be prescribed in good faith
by the Board of Trustees of the Company.
Section 12. Classification of the Company for Tax Purposes. In
the event that the issuance of shares of Common Stock upon the exercise of this
Warrant would result in the Company being "closely held" within the meaning of
Section 856(h) of the Internal Revenue Code of 1986, as amended (the "IRC"), or
would bring the number of shares of Common Stock beneficially held by the Holder
in excess of the Ownership Limit (as such term is defined in Section 6.6 of the
Declaration of Trust of the Company) applicable to the Holder, the Company,
notwithstanding anything herein to the contrary, shall have no obligation to
issue such shares and instead the Company shall pay to the Holder, on account of
each share of Common Stock as to which exercise would cause such a
classification, an amount in cash equal to the excess, if any, of the "current
market price" (as defined in Section 11 hereof) of a share of Common Stock over
the Exercise Price. Moreover, if the U.S. Internal Revenue Service asserts, in
an appropriate proceeding, that the issuance of this Warrant would, but for this
provision, result in the Company being "closely held" within the meaning of
Section 856(h) of the IRC, the Company shall have the right to terminate this
Warrant and replace it with a stock appreciation right pursuant to which the
Company would have the option, upon the exercise thereof, either: (i) to deliver
cash in an amount equal to the Spread (as defined below), or (ii) to deliver
shares of Common Stock having an aggregate current market price (as defined in
Section 11 hereof) equal to the Spread. As used herein, the term "Spread" shall
mean, as of a given date, the current market price (as defined in Section 11
hereof) of a share of Common Stock on such date over the Exercise Price. The
stock appreciation right issued in replacement of this Warrant shall cover the
same number of shares of Common Stock covered by this Warrant immediately prior
to its termination and have the same term as this Warrant.
Section 13. 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 hereof.
Section 14. Notices. Any notice, request or other document
required or permitted to be given or delivered to the holder hereof 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 15. 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 accordance with, and the rights of
the parties shall be governed by, the laws of the State of Maryland.
Section 16. 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
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<PAGE>
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 17. 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 August 22,
1996.
BRANDYWINE REALTY TRUST
By: /s/ Gerard H. Sweeney
-----------------------------------
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<PAGE>
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________________________
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<PAGE>
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_____________________
-15-
<PAGE>
THIRD AMENDMENT TO
GENERAL PARTNERSHIP AGREEMENT
OF BRANDYWINE REALTY PARTNERS
(formerly Linpro Income Fund I Partnership)
Effective as of August 22, 1996
This Third Amendment (this "Amendment") to the General
Partnership Agreement of Brandywine Realty Partnership, a Pennsylvania general
partnership (the "Partnership"), is made and entered into effective as of August
22, 1996, by and between Brandywine Realty Trust, a Maryland real estate
investment trust ("BRT"), and Brandywine Operating Partnership, L.P., a Delaware
limited partnership ("BOP").
RECITALS
WHEREAS, the Partnership was formed pursuant to that General
Partnership Agreement, dated as of April 2, 1986, as the same was amended as of
July 27, 1993, to change the name of the Partnership, and as further amended by
the Second Amendment to the General Partnership Agreement effective as of
January 1, 1994 (the "Partnership Agreement"). Capitalized terms used but not
otherwise defined in this Amendment shall have the meanings ascribed to them in
the Partnership Agreement; and
WHEREAS, on the Admission Date, as defined herein, BRT desires
to transfer to BOP a portion of its interest in the Partnership, and, on the
Withdrawal Date, as defined herein, to transfer the balance of its interest in
the Partnership in accordance with this Amendment and thereupon to withdraw from
the Partnership.
WHEREAS, pursuant to Section 22.3 of the Partnership Agreement
the Class A Partner has the power to amend any provision of the Partnership
Agreement without obtaining the consent of the Class B Partner, provided the
amendment neither has the effect of requiring any capital contributions by the
Class B Partner not otherwise required prior to such amendment nor affects any
of the rights of the Class B Partner to receive cash or property distributions
or allocations of taxable income, gain, or loss under the Partnership Agreement;
WHEREAS, BRT has determined that the amendments contained
herein will not have the affect of requiring any capital contributions by the
Class B Partner, not otherwise required, nor will it affect the rights to
receive cash or property distributions, or allocations of taxable income, gain,
or loss of the Class B Partner, and, therefore, pursuant to Section 22.3 of the
Partnership Agreement, such amendments do not require the consent of the Class B
Partner;
<PAGE>
WHEREAS, BRT, pursuant to its authority under Section 22.3 of
the Partnership Agreement, is executing this Amendment for the purposes of
amending the Partnership Agreement as hereinafter provided, and BRT and BOP are,
in addition, executing this Amendment to effectuate the transfers of BRT's
interests in the Partnership as set forth herein:
NOW, THEREFORE, it is hereby agreed as follows:
1. On the Admission Date, BRT transfers (the "First Transfer")
a portion of its Percentage Interest in the Partnership to BOP, such portion
consisting of a forty-nine percent (49%) Percentage Interest in the Partnership
and a 97% interest in Net Cash Flow of the Partnership.
2. BRT agrees to transfer to BOP on the Withdrawal Date the
remaining portion of its Percentage Interest in the Partnership ("Second
Transfer" and together with the First Transfer, the "Transfers") such that as a
result of the Transfers and as of the Withdrawal Date, BOP will own all of BRT's
Interest in the Partnership and BRT will own no Interest in the Partnership.
3. On the Withdrawal Date, BRT agrees to withdraw from the
Partnership.
4. By execution of this Amendment and pursuant to the
Transfers, BOP becomes a Partner in the Partnership entitled to all of the
rights and powers set forth in the Partnership Agreement, as amended by this
Amendment, and subject to the duties and obligations therein.
5. The Partnership Agreement is hereby amended as follows:
a. Section 6.15 of the Partnership Agreement is
hereby amended to read in its entirety as follows:
For the period commencing on the Admission Date and
ending on the Withdrawal Date, the relative interest of the
Partners in the Partnership, expressed as a percentage of the
whole, shall be as follows:
Class B Partner 30%
Class A Partner 70%
The interest of the Class A Partner set forth in this Section
6.15 shall be allocated twenty-one percent (21%) to BRT and
forty-nine percent (49%) to BOP.
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<PAGE>
After the Withdrawal Date, the relative interest of
the Partners in the Partnership, expressed as a percentage of
the whole, shall be as follows:
Class B Partner 30%
Class A Partner 70%
b. The second sentence of Section 7.1(a) of the
Partnership Agreement is hereby deleted and replaced with the following
sentence:
BRT shall be the Administrative Partner until the Withdrawal
Date. On the Withdrawal Date, BOP, as the sole Class A
Partner, shall be the Administrative Partner.
c. Section 9.1(a)(iii) of the Partnership
Agreement is amended by: (i) substituting the term "Class A Partner" for the
term "Class A Limited Partner" and by (ii) adding the following sentence at the
end of Section 9.1(a)(iii):
For the period commencing on the Admission Date and ending on
the Withdrawal Date, the ninety-eight percent (98%) interest
of the Class A Partner in Net Cash Flow of the Partnership
shall be allocated one percent (1%) to BRT and ninety-seven
percent (97%) to BOP. On and after the Withdrawal Date, the
ninety eight percent (98%) interest of the Class A Partner in
Net Cash Flow shall be allocated to the Class A Partner.
d. Section 13.3 of the Partnership Agreement is
amended as follows to add the following new Subsection 13.3(iii):
(iii) The Transfer by BRT to BOP of: 1) a forty-nine (49%)
Percentage Interest in the Partnership and a ninety-seven
(97%) interest in Net Cash Flow, on the Admission Date, and 2)
a twenty-one (21%) Percentage Interest in the Partnership and
a one (1%) interest in Net Cash Flow, which constitutes BRT's
remaining interest in the Partnership and in Net Cash Flow, on
the Withdrawal Date.
e. The first paragraph of Section 13.5 of the
Partnership Agreement is amended to read in its entirety as follows:
13.5 Substitute Partners. Except as provided in
Section 6.2(d), and except in the case of the transfers
described in Section 13.3(iii) of this Amendment (in
which case the transferee thereunder shall be a
Substitute Partner without satisfying the conditions
hereunder), no transferee of all or part of the
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<PAGE>
Partnership interest of any Partner shall have the right to
become a Substitute Partner, unless all of the following
conditions are satisfied:
f. The following definitions are hereby
substituted in Section XXI of the Partnership Agreement:
"Administrative Partner" shall mean and refer to BRT,
until the Withdrawal Date, at which date
"Administrative Partner" shall mean and refer to BOP.
"Class A Partner": shall mean and refer, commencing
on the Admission Date and ending on the Withdrawal
Date, to BRT and BOP to the extent of their
respective Percentage Interests in the Partnership
and in Net Cash Flow as set forth in Sections 6.15
and 9.1(a)(iii) of the Partnership Agreement. After
the Withdrawal Date, "Class A Partner" shall mean and
refer solely to BOP.
"Percentage Interest of the Partners" shall mean the
interest of the Partners in the capital of the
Partnership expressed as a percentage of the whole,
as set forth in Section 6.15 hereof, and "Percentage
Interest" shall mean the Percentage Interest of the
Partners of a particular Partner.
g. The following definitions are added in the
appropriate place in Section XXI of the Partnership Agreement:
"Admission Date" shall mean the effective date of
this Third Amendment.
"Interest" with respect to a Partner shall mean a
Partner's interest in the Partnership, including
without limitation its Percentage Interest, its
rights, powers, duties and obligations, and its
rights to allocations and distributions of Net Cash
Flow, all as set forth herein.
"Withdrawal Date" shall mean the date which is twelve
months and one day after the Admission Date.
h. The following definition is amended in the
appropriate place in Section XXI of the Partnership Agreement:
The definition of "Unrecovered Capital of the Class A Partner"
is amended to add the following sentence at the end of the definition:
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<PAGE>
During the period that there is more than one Class A
Partner, the Unrecovered Capital of the Class A Partner shall
be determined in accordance with the Class A Partner's
Percentage Interest.
-5-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Third
Amendment effective as of the day and year first written above.
Brandywine Realty Trust, a Maryland real
estate investment trust, by
By:______________________________
Title:___________________________
Brandywine Operating Partnership, L.P.,
a Delaware limited partnership, by
By:______________________________
Title:___________________________
Brandywine Realty Trust, a Maryland real
estate investment trust, as General
Partner
By:______________________________
Title:___________________________
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<PAGE>
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 August 22, 2002.
BRANDYWINE REALTY TRUST
Warrant Agreement for the Purchase of Shares of Common Stock
No. ___ _______ Shares
FOR VALUE RECEIVED, BRANDYWINE REALTY TRUST, a Maryland real
estate investment trust (the "Company"), with its principal office at Two
Greentree Centre, Suite 100, Marlton, New Jersey 08053, hereby certifies that
____________________ or his 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 August 22, 2002 (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
or Section 8 hereof) of Six Dollars and 50/100 Cents ($6.50) (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."
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
<PAGE>
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 the 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. 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 for shares of Common Stock issuable upon exercise
of the Conversion Right shall be delivered to the Holder within fifteen (15)
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 shares of capital stock 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
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<PAGE>
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 his
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 or blue sky 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 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.
-3-
<PAGE>
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 Capital Stock. If at any time
after August 22, 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 capital stock other than Common Stock;
or
(v) issues by reclassification of its Common Stock
any shares of its capital stock;
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 capital stock 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 a dividend or distribution, and immediately after the
effective date in the case of a subdivision, combination or reclassification.
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<PAGE>
(b) Adjustment for Other Distributions. If at any time after
August 22, 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 Exercise Price immediately prior to the
adjustment.
M = the current market price (as defined in
Section 11 above) 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. 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) Adjustment for Common Stock Issue. (i) If at any time
after August 22, 1996, the Company issues shares of Common Stock for a
consideration per share that is less than the current market price per share
(determined as provided in Section 11 above) on the date the Company fixes the
offering price of such additional shares, the Exercise Price shall be adjusted
in accordance with the following formula:
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<PAGE>
E' = Y x [O + (P / E)]
------------
A
where: E' = the adjusted Exercise Price.
Y = the then current Exercise Price
immediately prior to the adjustment.
O = the number of shares outstanding
immediately prior to the issuance of such
additional shares.
P = the aggregate consideration received for
the issuance of such additional shares.
E = the current market price (determined as
provided in Section 11
above) immediately prior to the adjustment.
A = the number of shares outstanding
immediately after the issuance of such
additional shares.
The adjustment shall be made successively whenever any such
issuance is made, and shall become effective immediately after such issuance.
(ii) This subsection 6(c) does not apply to (A) any of the
transactions described in subsections (a), (b) and (d) of this Section 6, (B)
Common Stock issued pursuant to options and warrants outstanding on August 22,
1996, (C) Common Stock issued to officers, trustees, directors or employees of,
or consultants to, the Company 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
Company's Board of Trustees or an appropriate committee of the Company's Board
of Trustees, and (y) have an exercise price not less than 85% of the current
market price of the Company's Common Stock at the time of issuance of such
warrant, right or option, (D) Common Stock issued on redemption of Class A units
of limited partnership interest in Brandywine Operating Partnership, L.P. issued
or issuable to Safeguard Scientifics (Delaware), Inc. ("SSI") and The Nichols
Company ("TNC") and certain other persons, or their respective affiliates, in
connection with the transactions contemplated by the Contribution Agreement, by
and among the Company, SSI and TNC, (E) shares of Common Stock issuable to
Messrs. Belcher, Gallagher, Nichols and Sweeney upon exercise of warrants issued
to them on the date hereof pursuant to their employment agreements with
Brandywine Realty Services Company, Inc., (F) up to 236,200 shares of Common
Stock reserved for issuance to Richard M. Osborne, Sr. or to a trust controlled
by him ("Osborne") upon the repayment of unsecured debt issued to or held by
Osborne and up to 236,200 shares of Common Stock 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, and (G) any securities sold to the
public in connection with an underwritten public offering of the Company's
securities.
(d) Adjustment for Convertible Securities Issue. If at any
time after August 22, 1996, the Company issues for consideration any securities
convertible into or
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<PAGE>
exchangeable or exercisable for Common Stock for consideration per share of
Common Stock initially deliverable upon conversion, exchange or exercise of such
securities, together with the consideration paid upon issuance of such
securities, less than the current market price per share (determined as provided
in Section 11 above) on the date of issuance of such securities, the Exercise
Price shall be adjusted in accordance with this formula:
E' = Y x [O + (P / E)]
------------
O + D
where: E' = the adjusted Exercise Price.
Y = the then current Exercise Price
immediately prior to the adjustment.
O = the number of shares outstanding
immediately prior to the issuance of such
securities.
P = the aggregate consideration received and
receivable for the issuance of such
securities.
E = the current market price (determined as
provided in Section 11 above).
D = the maximum number of shares deliverable
upon conversion, exchange or exercise of
such securities at the initial conversion,
exchange or exercise rate.
The adjustment shall be made successively whenever any such
issuance is made, and shall become effective immediately after such issuance. If
all of the Common Stock deliverable upon conversion, exchange or exercise of
such securities has not been issued when such securities are no longer
outstanding, then the Exercise Price shall promptly be readjusted to the
Exercise Price which would then be in effect had the adjustment upon the
issuance of such securities been made on the basis of the actual number of
shares of Common Stock issued upon conversion, exchange or exercise of such
securities.
This subsection does not apply to any of the transactions
described in subsections (a), (b) and (c)(ii)(B), (C), (D), (E), (F) and (G)
above.
(e) Adjustment to Number of Warrant Shares. Upon each
adjustment to the Exercise Price pursuant to Section 6(c) or (d), the number of
Warrant Shares purchasable hereunder at that Exercise Price shall be adjusted,
to the nearest one hundredth of a whole share, to the product obtained by
multiplying such number of shares purchasable immediately prior to such
adjustment in the Exercise Price by a fraction, the numerator of which shall be
the Exercise
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<PAGE>
Price immediately prior to such adjustment and the denominator of which shall be
the Exercise Price immediately thereafter.
(f) 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 capital
stock of the Company, if any, issuable upon such exercise over and above the
shares of Common Stock or other capital stock 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.
(g) When No Adjustment Required. No adjustment need be made
for a change in the par value or no par value of the Common Stock.
(h) 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 capital stock
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 of 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 of 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
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<PAGE>
(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.
(i) 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.
(j) 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.
(k) 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.
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<PAGE>
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 stock and other securities and property
(including cash) receivable upon such reclassification, 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 stock 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 and any warrants issued upon repayment of unsecured
debt issued to or held by Osborne (collectively, the "Osborne Warrant"), 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, the Warrant held by
SSI and the Osborne Warrant 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.
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<PAGE>
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 under the Act or may
be freely sold to the public pursuant to Rule 144 (or any successor rule
thereto) or otherwise.
(b) The Company shall cause, within 60 days after the date
this Warrant is originally issued, the Warrant Shares to be registered under the
Act on a Form S-8 (which shall include an S-3 reoffer prospectus if appropriate)
or such other form as is required by the rules and regulations of the Securities
and Exchange Commission to effect such registration and to permit the Holder to
sell such registered Warrant Shares publicly without regard to the volume and
other limitations of Rule 144.
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 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 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 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
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<PAGE>
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. Classification of the Company for Tax Purposes. In
the event that the issuance of shares of Common Stock upon the exercise of this
Warrant would result in the Company being "closely held" within the meaning of
Section 856(h) of the Internal Revenue Code of 1986, as amended (the "IRC"), or
would bring the number of shares of Common Stock beneficially held by the Holder
in excess of the Ownership Limit (as such term is defined in Section 6.6 of the
Declaration of Trust of the Company) applicable to the Holder, the Company,
notwithstanding anything herein to the contrary, shall have no obligation to
issue such shares and instead the Company shall pay to the Holder, on account of
each share of Common Stock as to which exercise would cause such a
classification, an amount in cash equal to the excess, if any, of the "current
market price" (as defined in Section 11 hereof) of a share of Common Stock over
the Exercise Price. Moreover, if the U.S. Internal Revenue Service asserts, in
an appropriate proceeding, that the issuance of this Warrant would, but for this
provision, result in the Company being "closely held" within the meaning of
Section 856(h) of the IRC, the Company shall have the right to terminate this
Warrant and replace it with a stock appreciation right pursuant to which the
Company would have the option, upon the exercise thereof, either: (i) to deliver
cash in an amount equal to the Spread (as defined below), or (ii) to deliver
shares of Common Stock having an aggregate current market price (as defined in
Section 11 hereof) equal to the Spread. As used herein, the term "Spread" shall
mean, as of a given date, the current market price (as defined in Section 11
hereof) of a share of Common Stock on such date over the Exercise Price. The
stock appreciation right issued in replacement of this Warrant shall cover the
same number of shares of Common Stock covered by this Warrant immediately prior
to its termination and have the same term as this Warrant.
Section 13. 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 hereof.
Section 14. Notices. Any notice, request or other document
required or permitted to be given or delivered to the holder hereof or the
Company shall be delivered or shall be sent by certified mail, postage prepaid,
or by overnight courier to each such holder at his 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 15. 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 accordance with, and the rights of
the parties shall be governed by, the laws of the State of Maryland.
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<PAGE>
Section 16. 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 17. 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 August 22,
1996.
BRANDYWINE REALTY TRUST
By: /s/ Gerard H. Sweeney
-----------------------------------
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<PAGE>
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________________________
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<PAGE>
ASSIGNMENT FORM
Dated:__________________
FOR VALUE RECEIVED,__________________hereby sells, assigns and
transfers unto_______________________________________________(the "Assignee"),
(please type or print in block letters)
______________________________________________________________________________
(insert address)
his 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___________________________
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<PAGE>
ENVIRONMENTAL INDEMNITY AGREEMENT
THIS AGREEMENT is made this 22nd day of August, 1996, by and between
BRANDYWINE OPERATING PARTNERSHIP, L.P., a Delaware limited partnership ("BOP"),
and SAFEGUARD SCIENTIFICS, INC., a Pennsylvania corporation ("SSI")
(collectively the "Parties").
WITNESSETH:
A. WHEREAS, this Environmental Indemnity Agreement (the "Agreement") is
being executed as part of a larger transaction involving, inter alia, BOP and
SSI, the terms and conditions of which are set forth in a Contribution Agreement
dated July 31 1996, to which this Agreement is attached as an Exhibit.
B. WHEREAS, as part of that larger transaction, SSI is contributing to
BOP certain properties specified in the Contribution Agreement, including
certain office and industrial properties owned by SSI which are listed on
Exhibit "B" to the Contribution Agreement, and which are referred to therein as
the "B Properties."
C. WHEREAS, one of the "B Properties" to be contributed by
SSI to BOP is real property known as 110 Summit Drive, which is
located in the Whiteland Business Park, West Whiteland Township,
Chester County, Pennsylvania, and upon which is constructed a
commercial office building of approximately 43,622 sq. ft. (the
"Summit Drive Property"). The Summit Drive Property is further
described on Exhibit "B" to the Contribution Agreement.
D. WHEREAS, SSI has provided to BOP a Phase I Environmental Site
Assessment relating to the Summit Drive Property dated June 10, 1996, which was
prepared by Pennoni Associates Inc. in conformance with the ASTM E 1527 Standard
Practice for Environmental Site Assessments (the "Phase I Report").
E. WHEREAS, the Parties desire to set forth separately certain
agreements with respect to environmental matters relating to the Summit Drive
Property.
TERMS AND CONDITIONS
NOW, THEREFORE, in consideration of the promises and the mutual
representations, warranties, covenants and agreements contained herein, and
other good and valuable consideration the receipt and sufficiency of which are
hereby acknowledged, the Parties hereto, intending to be legally bound, agree as
follows:
Section I - DEFINITIONS
1.1 For purposes of this Agreement, the following
terms shall have the following meanings:
<PAGE>
"Known Environmental Conditions" means (1) the waste disposal
area identified in the Phase I Report which is present on the Summit Drive
Property immediately adjacent to the north side of the office building, together
with any soil and groundwater contamination directly related to the waste
disposal area (the "Disposal Area Conditions"); and (2) the presence of methane
gas in the office building and in the area surrounding the office building on
the Summit Drive Property, together with all existing systems, equipment and
procedures for monitoring, collecting and venting that gas, including, without
limitation, the vapor collection trench, the monitoring well vents and all
associated vent pipes and equipment (the "Methane Gas Conditions").
"Unknown Environmental Conditions" means all other
environmental conditions related to the Summit Drive Property which are not
"Disposal Area Conditions" or "Methane Gas Conditions."
"Environmental Claim" means any written or oral demand, order,
claim, suit, lien, action, cost, expense, cause of action, investigation or
notice asserted by any person or entity against BOP alleging actual or potential
liability under Environmental Laws (including, without limitation, potential or
actual liability for investigatory costs, cleanup costs, governmental response
costs, natural resources damages, property damages, personal injuries, or
penalties).
"Environmental Law" means any common law, or any federal,
state, or local statute, regulation, or ordinance relating to pollution or
protection of human health or the environment (including, without limitation,
ambient air, surface water, groundwater, land surface, or subsurface strata).
Section 2 - INDEMNIFICATION
2.1 Except as limited in Section 3 below, SSI hereby agrees to
defend, indemnify, save, and hold harmless BOP from and against any and all
Environmental Claims asserted against BOP arising out of or relating to Disposal
Area Conditions.
Section 3 - LIMITATIONS
3.1 Voluntary Acts. Prior to the Termination Date set forth in
the following Section 3.2, BOP agrees that it will not voluntarily initiate any
removal, remedial or other cleanup actions at the Summit Drive Property relating
to Disposal Area Conditions. Should BOP voluntarily initiate any removal,
remedial or other cleanup actions at the Summit Drive Property relating to
Disposal Area Conditions prior to the Termination Date, SSI shall not be
required to defend, indemnify, save, and hold harmless BOP from and against any
and all Environmental Claims asserted against BOP arising out of or relating to
Disposal Area Conditions.
<PAGE>
3.2 Time Period. SSI's indemnification obligation under
Section 2.1 of this Agreement shall terminate five (5) years after the "Closing
Date" as defined in Section 6.1 of the Contribution Agreement ("Termination
Date"). Any Environmental Claim received by BOP prior to the Termination Date,
and for which notice is provided in conformance with Section 4.1 of this
Agreement, shall remain subject to and covered by this Agreement, and SSI's
defense and indemnification obligations to BOP with respect thereto shall
continue unimpaired.
3.3 Monetary Cap. The total liability of SSI under
Section 2.1 of this Agreement shall be Two Million Eighteen
Thousand Dollars ($2,018,000.00).
3.4 Excluded Matters. The indemnity contained in Section 2.1
of this Agreement does not extend to any Environmental Claim unrelated to the
Disposal Area Conditions, including but not limited to, Environmental Claims
arising out of or relating to Methane Gas Conditions.
3.5 Third-Party Recoveries. All amounts for which BOP
seeks indemnification under Section 2.1 of this Agreement shall
be computed net of:
A. Any insurance coverage proceeds received by BOP with
respect thereto; and
B. Any amounts recovered by BOP from any third parties
based on claims BOP may have against such third parties
which reduce the costs or damages that would otherwise
be sustained; and
C. The Parties hereto agree to use their best efforts to pursue
any claims or rights they may have against any insurance
company or third party which would reduce the amount of
damages otherwise incurred. BOP may satisfy the "best efforts"
obligation of the preceding sentence by assigning its rights
under insurance policies or claims against other parties, if
any, to SSI.
3.6 Sole Remedy. BOP hereby acknowledges and agrees that its
sole remedy against SSI for any and all Environmental Claims arising out of or
relating to Disposal Area Conditions shall be under Section 2.1 of this
Agreement, as limited by Sections 3.1 through 3.6 of this Agreement, and BOP
expressly waives all other rights and causes of action, at law, by statute or in
equity that it had, now has or may have in the future against SSI arising out of
or relating to Disposal Area Conditions. BOP further expressly waives all rights
and causes of action, at law, by statute or in equity that it had, now has or
may have in the future against SSI arising out of or relating to Methane Gas
Conditions. Nothing in this Agreement is intended or shall be construed to
waive, limit or otherwise affect any statutory, legal, equitable or other
rights, claims or defenses
<PAGE>
that the Parties may have with respect to Unknown Environmental Conditions, all
such rights, claims and defenses being hereby specifically reserved.
Section 4 - PROCEDURES
4.1 Notices. Within thirty (30) days after receiving written
notice or information that an Environmental Claim or proceeding has been or may
be commenced or initiated against BOP which may give rise to any liability on
the part of SSI under Section 2.1 of this Agreement, BOP shall provide written
notice to SSI. BOP's failure to provide such notice within thirty (30) days
shall not relieve SSI of its obligations under this Agreement unless SSI was
materially prejudiced by the failure to provide such notice within such period.
The notice shall contain all information reasonably available to BOP, including
but not limited to, copies of all notices, orders or other communications
received by BOP from any governmental agency, the caption or other
identification of the claim or proceeding, the nature of the claim or
proceeding, the date such claim or proceeding was commenced or filed and the
parties to the claim or proceeding. SSI shall assume BOP's defense within ten
(10) calendar days after receipt of notice under this section of an
Environmental Claim or proceeding that has been or may be commenced or initiated
against BOP which may give rise to any liability on the part of SSI under
Section 2.1 of this Agreement ("Assumption Date"). During the time period
between the date notice is received by SSI under this section and the Assumption
Date, the Parties agree to use their best efforts to provide cooperation,
assistance, and consultation to each other.
4.2 Control. SSI shall have the right to control, manage and
direct all discussions, proceedings, remediations and other activities regarding
the satisfaction or discharge of any Environmental Claim which is assumed by it
under this Agreement or any liability or obligation that such a claim seeks to
impose on SSI under this Agreement, except that no such discussions,
proceedings, remediations or activities shall unreasonably interfere with BOP's
lawful and reasonable use of the Summit Drive Property. SSI shall have the right
to select legal counsel, consultants, and contractors related to the foregoing,
subject to BOP's prior approval, which approval shall not be unreasonably
withheld.
4.3 Cleanup Standards. If any Environmental Law requires BOP
to take action with respect to the Disposal Area Conditions, and such actions
are within the scope of the SSI indemnification contained in Section 2.1 of this
Agreement, SSI shall have the sole right to select the cleanup approach and
standards applicable to any such action under Pennsylvania's Act 2 legislation,
Act of May 19, 1995, P.L. (currently uncodified). BOP agrees that SSI shall be
entitled to select any cleanup approach or standards available under Act 2 that
are consistent with the current use of the Summit Drive Property as a
<PAGE>
commercial office building, including, without limitation, the use of
non-residential risk assessment methods and cleanup standards; the use of
background, statewide health or site- specific cleanup standards; and the use of
reasonable deed notices and restrictions; all of the foregoing at SSI's sole
discretion; provided, however, that SSI shall not take any action that is not
acceptable to and approved by the Pennsylvania Department of Environmental
Protection. If BOP desires a more protective cleanup approach or more protective
cleanup standards than those selected by SSI, BOP shall be solely responsible
for all additional costs related to attaining the more protective approach or
standards.
4.4 Access and Cooperation. In order to assist the Parties in
fulfilling their respective obligations under this Agreement, BOP will afford
SSI, its employees, agents and contractors, upon reasonable notice to BOP,
reasonable access to the Summit Drive Property (including, but not limited to,
the right to enter upon, photograph, investigate, drill wells, take soil
borings, excavate, monitor, test, cap and use available land for the testing and
implementation of remedial technologies), employees and all relevant documents
and records regarding any matter as to which an Environmental Claim is asserted;
provided that such access may be conditioned or restricted as may be reasonably
necessary to protect the normal course the business operations at the Summit
Drive Property and to protect confidential or privileged information. To
effectuate the intent of this Agreement, and consistent with the terms hereof,
the Parties agree to provide all other cooperation, assistance and consultation
to each other that is reasonably requested with respect to matters covered by
this Agreement.
Section 5 - MISCELLANEOUS PROVISIONS
5.1 Confidentiality. The Parties acknowledge and agree that
the terms and conditions of this Agreement shall remain confidential and shall
not be disclosed to any person or firm except as may be required by law or upon
the express prior written approval of all other Parties. Such approval shall not
be unreasonably withheld or delayed.
5.2 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 BOP, to:
Brandywine Operating Partnership, L.P.
Suite 100, Two Greentree Center
Marlton, NJ 08053
Attention: Gerard H. Sweeney
<PAGE>
With a required copy to:
Pepper, Hamilton & Scheetz
3000 Two Logan Square
18th & Arch Streets
Philadelphia, PA 19103-2799
Attention: Michael H. Friedman, Esquire
If to SSI, to:
Safeguard Scientifics, Inc.
800 Safeguard Building
435 Devon Park Drive
Wayne, PA 19087
Attention: James A. Ounsworth, Esquire
With a required copy to:
Drinker Biddle & Reath
Suite 300, 1000 Westlakes Drive
Berwyn, PA 19312
Attention: Robert H. Strouse, Esquire
5.3 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.
5.4 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.
5.5 Amendment, Modifications and Waiver. The Parties may amend
or modify this Agreement in any respect. Any such amendment or modification must
be in writing, executed by the Parties. 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.
5.6 Severability. If any provision or part of this
Agreement shall be held by any court of competent jurisdiction to
be illegal or unenforceable, such provision shall be of no force
<PAGE>
and effect, but the illegality or unenforceability of such provision shall not
affect the other provisions or parts hereof, and this Agreement shall be
construed in all respects as if such illegal or unenforceable provisions or
parts were omitted.
5.7 Non-Admission. This Agreement is for the sole benefit of
the Parties only and nothing contained in this Agreement shall be construed as
an admission by any of the Parties on any issue of law, fact or liability,
including, without limitation, any admission of law, fact or liability by any of
the Parties pertaining to Known or Unknown Environmental Conditions relating to
the Summit Drive Property.
5.8 Assignment. Neither Party shall assign or transfer this
Agreement or any rights or obligations hereunder without the prior written
consent of the other Party, provided that in the event that BOP sells the Summit
Drive Property, or any interest therein, prior to the Termination Date, SSI's
defense and indemnification obligations to BOP under this Agreement shall
continue unimpaired.
IN WITNESS WHEREOF, each of the Parties hereto has executed this
Agreement, all as of the date first written above.
SAFEGUARD SCIENTIFICS, INC.
By:__________________________
Title:_______________________
BRANDYWINE OPERATING
PARTNERSHIP, L.P.
By:__________________________
Title:_______________________
<PAGE>
Exhibit 10.9
OPTION AGREEMENT
THIS OPTION AGREEMENT (the "Agreement") is made as of this
22nd day of August, 1996, by and between C/N HORSHAM TOWNE LIMITED PARTNERSHIP,
a Pennsylvania limited partnership, having an address c/o The Nichols Company,
16 Campus Boulevard, Newtown Square, PA 19073 (hereinafter called "Optionor"),
and BRANDYWINE OPERATING PARTNERSHIP, L.P., a Delaware limited partnership,
having an address c/o Brandywine Realty Trust, Suite 100, Two Greentree Center,
Marlton, NJ 08053 (hereinafter called "Optionee").
Background
A. Optionor is the owner of all those certain tracts or
parcels of ground, and all improvements thereon, located at 255, 355, 455 and
555 Business Center Drive, Horsham, Pennsylvania, as more fully described on
Exhibit "A" (collectively, the "Property").
B. Pursuant to a Contribution Agreement dated as of July 30,
1996 (the "Contribution Agreement") by and among Safeguard Scientifics, Inc.
("SSI"), The Nichols Company ("TNC") and Brandywine Realty Trust ("BRT"), SSI,
TNC and BRT have today conveyed certain properties to Optionee in exchange for
the issuance of units of Class A limited partnership interests in Optionee (the
"LP Units"). Optionor is an affiliate of TNC. Optionor desires to grant to
Optionee and Optionee desires to receive an option to acquire the Property from
Optionor upon the terms and conditions contained herein.
Agreement
The parties hereto, in consideration of the sum of Ten Dollars
($10.00), the receipt and sufficiency of which are hereby acknowledged, and the
mutual covenants and agreements contained herein and intending to be legally
bound hereby, agree as follows:
1. Grant of Option. Optionor does hereby grant to Optionee the
right and option (the "Option") to acquire the Property in exchange for issuance
of LP Units based on the Exchange Price (as defined below) and otherwise upon
the terms and conditions set forth herein. The Optionee may exercise the Option
by delivering written notice to the Optionor and New England Mutual Life
Insurance Company (the "Lender") in accordance with Section 16 of this Agreement
at any time during the Option Period (as defined below) or during any extension
thereof.
<PAGE>
2. Term of Option. The Option may be exercised by Optionee at
any time during the term commencing on the date hereof and continuing thereafter
for a period of twenty-four (24) months (the "Option Period"). If the Option is
not exercised by Optionee within the Option Period, or is exercised by Optionee
and Optionee thereafter fails to close title in accordance with the terms of
this Agreement, then, except as hereinafter otherwise provided, the Option shall
terminate without liability to Optionee. The Optionor and Optionee understand
and agree that the price of the Option is Ten Dollars ($10.00), which sum,
together with the execution of the Contribution Agreement and all related
documentation, constitute adequate consideration for the Option.
3. Extension of Option Period. Optionee may extend the Option
Period for two (2) additional periods of twelve (12) months each. Optionee may
extend the Option Period by delivering to Optionor written notice to that effect
prior to, as applicable, the expiration of the Option Period or the first
extension thereof in accordance with Section 16 hereof. Except as forth in this
Section, Optionee shall have no right to extend the Option Period.
4. Exchange Price and Issuance of Units.
(a) Determination of the Exchange Price. The Exchange
Price for the Property (the "Exchange Price") shall equal (i) the Net Operating
Income of the Property divided by .11; less (ii) all sums due and owing under
the note, mortgage and any other loan document evidencing or securing the loan
encumbering the Property at the time the Option is exercised. The Exchange Price
shall be determined at the time of the exercise of the Option. For purposes of
such determination, "Net Operating Income" shall be determined in the same
manner as net operating income was determined for each of the properties
contributed by SSI and TNC to Optionee pursuant to the Contribution Agreement
for purposes of determining the number of LP Units in Optionee issued to
Optionor with respect to such properties. In the event the Exchange Price is a
negative number, Optionee's exercise of its option to purchase the Property
shall be deemed withdrawn, but this Agreement, including, but not limited to,
Sections 2 and 3 above, shall remain in full force and effect.
(b) Issuance of Units. The Exchange Price shall be
payable to Optionor in the form of LP Units. Optionee shall issue that number of
LP Units to Optionor equal to the quotient obtained by dividing the Exchange
Price by $5.50. The $5.50 divisor in the preceding formula shall be
proportionately adjusted in the event there is a split or reverse split of BRT's
stock or a dividend payable in BRT stock after the date hereof and prior to the
Closing.
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<PAGE>
5. Exclusive Option. Except (i) in the event of a foreclosure
or the tender of a deed-in-lieu of foreclosure or (ii) the lease of space in the
ordinary course of business, at no time during the term of the Option shall
Optionor convey, transfer, sell, lease, option or otherwise dispose of the
Property or any part thereof. No such sale, transfer or other disposition shall
be effective unless the Option shall have first expired or been terminated.
6. Condition to Exercise of Option. The Option granted by this
Agreement and Optionor's obligations hereunder are specifically conditioned upon
either (a) Optionor obtaining the consent of the holder of the mortgage on the
Property for conveyance of the Property to Optionee under and subject to the
mortgage encumbering the Property or (b) Optionee paying to the holder of the
mortgage, at Closing, such sums as are necessary to pay off and satisfy such
mortgage. In the event Optionor is unable to satisfy the conditions set forth in
this Section 6, Optionee's exercise of its option to purchase the Property shall
be deemed withdrawn, but this Agreement, including, but not limited to, Sections
2 and 3 above, shall remain in full force and effect.
7. Title. Optionor shall convey title to the Property to
Optionee at Closing by Special Warranty Deed (the "Deed"), free and clear of (a)
all liens, restrictions, easements and other encumbrances, except for those set
forth on the attached Exhibit "B", and (b) any additional liens, restrictions,
easements or other encumbrances created after the date hereof with Optionee's
prior consent (the "Permitted Encumbrances"). At Closing (as defined below), the
title conveyed by Optionor shall be good and marketable and insurable as such by
any reputable title insurance company selected by the Optionee, at such
company's regular rates, pursuant to a standard ALTA owner's form of policy,
free of all exceptions, other than the Permitted Encumbrances.
8. Closing. The closing of the transaction contemplated herein
("Closing") shall take place at 10:00 a.m. on the thirtieth (30th) day following
the date Optionee gives notice of its exercise of the Option, or sooner by
mutual agreement of the parties hereto (the "Closing Date"). If said thirtieth
(30th) day shall not be a business day, then the Closing shall occur on the
first business day thereafter. In the event of a casualty loss on the Property,
Optionor may, but is not obligated to, extend the Closing Date, by written
notice to Optionee, for up to ninety (90) days to permit the repair of the
damage caused by such casualty. For purposes hereof, a "business day" shall mean
any day other than a day on which commercial banks in the Commonwealth of
Pennsylvania are required or permitted by law to close. The Closing shall occur
at the offices of Drinker Biddle & Reath, The Philadelphia National Bank
Building, 1345 Chestnut
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<PAGE>
Street, Philadelphia, PA 19107-3496, or at such other location as the parties
may mutually agree.
9. Transfer Taxes. All Commonwealth and county, township or
municipal real property transfer taxes shall be apportioned equally between the
Optionor and the Optionee.
10. Adjustments. Closing adjustments shall be made in
accordance with Section 7 of the Contribution Agreement.
11. Representations and Warranties of Optionor. Optionor makes
the representations and warranties as of the date of this Agreement as set forth
on the attached Exhibit "C." As a condition precedent to Closing, Optionor shall
deliver to Optionee a certification stating that all of Optionor's
representations and warranties as set forth on the attached Exhibit "C" are true
and correct in all material respects as of the Closing Date. In the event that
Optionor's representations and warranties as set forth on the attached Exhibit
"C" are not true and correct in all material respects as of the Closing Date,
Optionee may withdraw Optionee's exercise of the Option, in which event
Optionee's right to acquire the Property shall continue in accordance with the
terms of this Agreement.
12. Representations of Optionee. Optionee represents and
warrants as of the date of this Agreement as follows:
(a) Optionee has full power and authority to enter
into this Agreement and to perform all obligations hereunder.
(b) The performance by Optionee of Optionee's
obligations under this Agreement will not violate any law, result in any breach,
constitute a default under, or require any consent pursuant to any contract or
other agreement, lease, license or permit to which Optionee is a party, or
require Optionee to obtain the consent of any person, entity or governmental
authority.
13. Representations Limited. All representations and
warranties made by the parties in this Agreement shall survive the execution of
this Agreement and the consummation of the transactions contemplated hereunder
for a period of two (2) years from the Closing Date, and claims made prior to
the expiration of such two (2) year period shall survive if not resolved within
such two (2) year period. Any claim made after Closing alleging
misrepresentation or breach of any of such representations and warranties shall
be made solely pursuant to the indemnification provisions provided in the
Agreement of Limited Partnership dated as of August 22, 1996 by and among
Optionor, TNC and BRT.
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<PAGE>
14. Condition of Premises. Optionee shall be afforded the
opportunity to inspect the Property and Optionee, if it exercises the Option,
shall automatically and without further action, be deemed to have released
Optionor from all responsibility and liability regarding the condition or
utility of the Property and any personal property located thereon. OPTIONEE
SHALL PURCHASE THE PROPERTY IN "AS IS - WHERE IS" CONDITION, SUBJECT TO
REASONABLE USE, WEAR AND TEAR AND NORMAL DEPRECIATION BETWEEN THE DATE HEREOF
AND CLOSING. Optionor shall not be obligated to make any alterations, repairs or
improvements to the Property or any personal property located thereon and shall
not be obligated to remove any items of personal property from the Property on
the Closing Date.
15. Brokers. Optionor and Optionee each represent and affirm
to the other that neither Optionor nor Optionee has made any agreement or taken
any action which may cause any broker or finder to become entitled to a
commission as a result of the transaction contemplated by this Agreement. Each
of the parties hereto agrees to indemnify, defend and hold the other harmless
against any claims, demands, suits, judgments or liabilities which arise by
reason of a breach of the foregoing representation. The provisions of this
Section shall survive the Closing or other termination of this Agreement.
16. Notices. All notices, requests and other communications
under this Agreement, to be effective, shall be in writing and shall be sent by
certified mail, return receipt requested or by overnight delivery by recognized
courier, addressed as follows:
If to Optionor:
Anthony A. Nichols, Sr.
The Nichols Company
16 Campus Boulevard, Suite 150
Newtown Square, PA 19073
With a copy to:
John W. Fischer, Esq.
Drinker Biddle & Reath
1000 Westlakes Drive
Suite 300
Berwyn, PA 19312
-5-
<PAGE>
If to Optionee:
Gerard Sweeney
President
Brandywine Realty Trust
Suite 100
Two Greentree Center
Marlton, NJ 08053
With a copy to:
Michael H. Friedman, Esq.
Pepper, Hamilton & Scheetz
3000 Two Logan Square
18th & Arch Streets
Philadelphia, PA 19103-2799
If to Lender: New England Mutual Life
Insurance Company
501 Boylston Street
Boston, MA 02116-3700
Attention: Law Department Mortgage Group
With a copy to:
or such other person or address which Optionor or Optionee shall have given
notice as herein provided.
17. Loans for Capital Improvements. During the term of this
Agreement, Optionor shall have the right to fund the costs incurred by Optionor
with respect to new leases for space in the Property (including but not limited
to costs of tenant improvements, brokerage commissions and legal fees) through
loans made by Optionor or an affiliate for such purpose ("Capital Improvement
Loans"). All such Capital Improvement Loans shall bear interest at the prime
rate and shall be payable out of cash flow from the Property remaining after
payments of third party debt. Upon exercise by Optionee of the Option, Optionor
shall advise Optionee if any Capital Improvement Loans will remain outstanding
at Closing hereunder. Any Capital Improvement Loans (included accrued but unpaid
interest) that are outstanding at Closing shall (i) reduce the Exchange Price on
a dollar for dollar basis and (ii) shall be payable by Optionee on a pari-passu
basis with any loans made by Optionor to Optionee pursuant
-6-
<PAGE>
to that certain Distribution Support and Loan Agreement of even date herewith
between Optionor and Optionee. Optionee shall assume all obligations under any
such Capital Improvement Loan outstanding at Closing and shall indemnify and
hold Optionor harmless from any obligations accruing under any such Loan after
the date of Closing. Anything herein to the contrary notwithstanding, from and
after this date, Optionor shall not assume or incur additional indebtedness for
capital improvements to the Property without the prior written consent of
Optionee, which consent shall not be unreasonably withheld, conditioned or
delayed.
18. Recording. At the request of either party this Agreement
or a memorandum thereof may be recorded in the Office of the Recorder of Deeds
for the county in which the Property is located.
19. Miscellaneous.
(a) Entire Agreement; Merger. This Agreement together
with the Exhibits attached hereto embodies and constitutes the entire
understanding between the parties with respect to the transactions contemplated
herein, and all prior or contemporaneous agreements, understandings,
representations and statements, oral or written, are merged into this Agreement.
Neither this Agreement nor any provision hereof may be waived, modified,
amended, discharged or terminated except by an instrument in writing signed by
the party against which the enforcement of such waiver, modification, amendment,
discharge or termination is sought, and then only to the extent set forth in
such instrument.
(b) Time of the Essence. Time is of the essence as to
the performance of all terms and conditions of this Agreement.
(c) Governing Law. This Agreement shall be governed
by and construed in accordance with the laws of the Commonwealth of
Pennsylvania.
(d) Successors and Assigns. This Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective heirs, executors, administrators, legal representatives, successors
and assigns.
(e) Headings. All headings are for convenience only,
and shall not be used in construing any of the provisions of this Agreement.
(f) Counterparts. This Agreement may be executed in
multiple counterparts, each of which shall be deemed an original.
-7-
<PAGE>
(g) Non-Recourse. No recourse shall be had for any
obligation of Optionee hereunder, or for any claim based thereon or otherwise in
respect thereof, against any past, present or future trustee, shareholder,
officer or employee of Optionee, 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 Optionor. In the event Optionee
exercises its option to purchase the Property and thereafter fails to complete
Closing by reason of the default of Optionee hereunder, Optionor shall have the
right to terminate this Agreement, in which event Optionee's right to acquire
the Property shall lapse. In the event Optionee exercises its option to purchase
the Property and thereafter fails to complete Closing for a cause other than the
default of Optionee hereunder, including but not limited to a title defect or
casualty loss, Optionee may withdraw Optionee's exercise of the Option, in which
event Optionee's right to acquire the Property shall continue in accordance with
the terms of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed,sealed and
delivered this Agreement the day and year first above written.
OPTIONOR:
C/N HORSHAM TOWNE LIMITED
PARTNERSHIP, acting by and through
its general partner, C/N HORSHAM
TOWNE, INC.
By: /s/ Anthony A. Nichols
----------------------------------
Name:
Title:
[Corporate Seal]
OPTIONEE:
BRANDYWINE OPERATING PARTNERSHIP, L.P.
By: BRANDYWINE REALTY TRUST, its
general partner
By: /s/ Gerard H. Sweeney
----------------------------------
Name: Gerard H. Sweeney
Title: President
[Corporate Seal]
-8-
<PAGE>
The address of the above named Optionee is:
c/o Brandywine Realty Trust
Suite 100
Two Greentree Center
Marlton, New Jersey 08053
By: /s/ Gerard H. Sweeney
----------------------------------
On behalf of the Optionee
-9-
<PAGE>
ARTICLES OF INCORPORATION
OF
BRANDYWINE REALTY SERVICES CORPORATION
(as amended and restated on August 19, 1996)
In compliance with the requirements of Section 1306 of the
Pennsylvania Business Corporation Law of 1988, as amended, (15 Pa. C.S.A.
ss.1306), the undersigned, desiring to be incorporated as a business
corporation, hereby certifies that:
Article I
The name of the corporation (which is hereinafter referred to
as the "Corporation") shall be Brandywine Realty Services Corporation.
Article II
The address of the Corporation's initial registered office in
the Commonwealth of Pennsylvania is 16 Campus Boulevard, Newtown Square, PA
19073.
Article III
The Corporation is incorporated under the Pennsylvania
Business Corporation Law of 1988, as amended (the "BCL"), and shall have
unlimited power to engage in all lawful business for which corporations may be
incorporated under the BCL.
Article IV
A. Number of Shares.
The aggregate number of shares that the Corporation shall have
authority to issue is Ten Thousand (10,000), Five Hundred Twenty Seven (527)
shares of which shall be Common Stock, par value $.01 per share ("Common Stock")
and Nine Thousand Four Hundred Seventy Three (9,473) shares of which shall be
Non-Voting Preferred Stock, stated value $.01 per share ("Preferred Stock").
B. Voting Rights.
Except as may be provided in these Articles of Incorporation,
the holders of shares of Common Stock shall have the exclusive right to vote on
all matters at all meetings of the shareholders of the Corporation, and shall be
entitled to one vote for each share of Common Stock entitled to vote at such
meeting. Except as may be provided in these Articles of
<PAGE>
Incorporation, and as may be provided by applicable law, the shares of Preferred
Stock shall not be entitled to vote.
C. Dividends.
The holders of shares of the Preferred Stock and Common Stock
shall be entitled to receive dividends out of funds legally available therefor,
at such times and in such amounts as may be determined by the Board of
Directors, provided that the amount per share payable on the Common Stock shall
be equal to the amount per share payable on the Preferred Stock and the amount
per share payable on the Preferred Stock shall be equal to the amount per share
payable on the Common Stock.
Article V
No director of the Corporation shall be personally liable, as
such, for monetary damages for any action taken, or any failure to take any
action, except to the extent that by law a director's liability for monetary
damages may not be limited.
Article VI
In lieu of any statutory standard of care that would otherwise
be applicable in the absence of the provisions of this article, each officer of
the Corporation shall perform his duties as an officer in good faith, in a
manner he reasonably believes to be in the best interests of the Corporation and
with such care, including reasonable inquiry, skill and diligence, as a person
of ordinary prudence would use under similar circumstances, except that
notwithstanding the foregoing no officer shall be personally liable for monetary
damages (other than under criminal statutes and under federal, state and local
laws imposing liability on officers for the payment of taxes) unless his conduct
constitutes self-dealing, willful misconduct or recklessness. In performing his
duties, each officer shall be entitled to rely on others, to consider all
factors deemed by him to be pertinent, and to be presumed to be acting in the
best interests of the Corporation, in each case to the same extent as directors
of the Corporation are so entitled under the BCL.
Article VII
Without the affirmative approval (at a meeting of shareholders
duly called in accordance with the BCL) of the holder(s) of a majority of the
issued and outstanding shares of Preferred Stock, the Corporation shall not (a)
change, alter or amend any provision of these Articles of Incorporation, (b)
reclassify, combine, or split any shares of its capital stock,
-2-
<PAGE>
(c) issue or authorize for issuance any shares of its capital stock, or (d)
directly or indirectly, retire, redeem, purchase or otherwise acquire any shares
of Preferred Stock.
Article VIII
The name and post office address of the incorporator is as
follows:
NAME ADDRESS
---- -------
Jacqueline Y. Eastridge Pepper, Hamilton & Scheetz
3000 Two Logan Square
18th and Arch Streets
Philadelphia, PA 19103
IN TESTIMONY WHEREOF, the sole incorporator has signed these
Articles of Incorporation this 19th day of August, 1996.
------------------------------
Jacqueline Y. Eastridge
Sole Incorporator
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<PAGE>
ARTHUR ANDERSEN LLP
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this Form 8-K of our report dated March 4, 1996 included in
Brandywine Realty Trust's Form 10-K/A for the year ended December 31, 1995 and
to all references to our firm included in this Form 8-K.
/s/ Arthur Andersen LLP
-----------------------------------
Arthur Andersen LLP
Philadelphia, Pa.,
September 4, 1996
