<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
x Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
----- Exchange Act of 1934
For the quarterly period ended June 30, 1996
or
Transition Report Pursuant to Section 13 or 15(d) of the Securities
----- Exchange Act of 1934 (No Fee Required)
For the transition period from to
---------------- ----------------
Commission file number 1-9106
----------------------------------------------
Brandywine Realty Trust
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Maryland 23-2413352
- ----------------------- ---------------------------------------
(State of Organization) (I.R.S. Employer Identification Number)
Two Greentree Centre, Suite 100, Marlton, New Jersey 08053
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(609) 797-0200
- -------------------------------
(Registrant's telephone number)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days. Yes [ X ] No [ ]
A total of 1,916,149 Shares of Beneficial Interest were outstanding as of
August 8, 1996.
<PAGE>
BRANDYWINE REALTY TRUST
TABLE OF CONTENTS
-----------------
PART I - FINANCIAL INFORMATION
Item I. Financial Statements
Consolidated Balance Sheets as of June 30, 1996 (unaudited)
and December 31, 1995
Consolidated Statements of Operations for the three months
ended June 30, 1996 and June 30, 1995 (unaudited)
Consolidated Statements of Operations for the six months ended
June 30, 1996 and June 30, 1995 (unaudited)
Consolidated Statements of Cash Flow for the six months ended
June 30, 1996 and June 30, 1995 (unaudited)
Notes to Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities -- Not applicable
Item 3. Defaults Upon Senior Securities - Not applicable
Item 4. Submission of Matters to a Vote of Security Holders -
Not applicable
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
Signatures
2
<PAGE>
PART 1 - FINANCIAL INFORMATION
Item 1: Financial Statements
BRANDYWINE REALTY TRUST
CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
June 30, 1996 December 31, 1995
------------- ------------------
(Unaudited)
<S> <C> <C>
ASSETS
REAL ESTATE INVESTMENTS
Operating properties, at adjusted cost $ 21,082 $ 21,823
Accumulated depreciation (7,330) (8,114)
--------- --------
13,752 13,709
CASH AND CASH EQUIVALENTS 1,643 840
ESCROWED CASH 629 1,155
DEFERRED COSTS net of accumulated amortiza-
tion of $474 in 1996 and $507 in 1995 1,411 1,027
ACCOUNTS RECEIVABLE AND OTHER ASSETS 732 374
--------- --------
Total assets $ 18,167 $ 17,105
========= =========
LIABILITIES AND BENEFICIARIES' EQUITY
MORTGAGE NOTE PAYABLE $ 8,878 $ 8,931
NOTE PAYABLE TO SHAREHOLDER 992 --
ACCRUED INTEREST PAYABLE 78 60
TENANT SECURITY DEPOSITS AND DEFERRED
RENTS 235 250
ACCOUNTS PAYABLE AND ACCRUED EXPENSES 412 427
DISTRIBUTIONS PAYABLE -- 93
--------- --------
Total liabilities 10,595 9,761
--------- --------
MINORITY INTEREST
COMMITMENTS AND CONTINGENCIES
BENEFICIARIES' EQUITY
Shares of beneficial interest, $0.01 par value,
5,000,000 preferred shares
authorized, none outstanding; 15,000,000
common shares authorized,
1,916,149 and 1,856,200 shares
issued and outstanding at June 30,
1996 and December 31, 1995,
respectively 19 19
Additional paid-in capital 17,068 16,772
Stock warrants 42 --
Cumulative deficit (3,085) (3,086)
Cumulative distributions (6,472) (6,361)
--------- --------
Total beneficiaries' equity 7,572 7,344
--------- --------
Total liabilities and beneficiaries'
equity $ 18,167 $ 17,105
========= =========
</TABLE>
The accompanying notes and management's discussion and analysis of financial
condition and results of operations are an integral part of these statements.
3
<PAGE>
BRANDYWINE REALTY TRUST
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30, 1996 AND 1995
(in thousands, except per share information)
(unaudited)
<TABLE>
<CAPTION>
1996 1995
---------- -----------
<S> <C> <C>
REVENUE:
Rents and tenant reimbursements $ 968 $ 876
Other income 14 3
---------- -----------
Total revenue 982 879
EXPENSES:
Interest 209 220
Depreciation and amortization 223 517
Utilities 128 119
Real estate taxes 98 98
Maintenance 175 127
Other operating expenses 18 21
Administrative expenses 137 147
---------- -----------
Total expenses 988 1,249
INCOME (LOSS) BEFORE MINORITY INTEREST (6) (370)
MINORITY INTEREST IN INCOME (LOSS) OF
BRANDYWINE REALTY PARTNERS 3 --
---------- -----------
NET INCOME (LOSS) $ (9) $ (370)
========== ===========
PER SHARE DATA:
Earnings (loss) per share of beneficial interest $ 0.00 $ (0.20)
========== ===========
Weighted average number of shares outstanding
including share equivalents 1,906,529 1,874,295
========== ===========
</TABLE>
The accompanying notes and management's discussion and analysis of financial
condition and results of operations are an integral part of these statements.
4
<PAGE>
BRANDYWINE REALTY TRUST
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1995
(in thousands, except per share information)
(unaudited)
<TABLE>
<CAPTION>
1996 1995
---------- -----------
<S> <C> <C>
REVENUE:
Rents and tenant reimbursements $ 1,975 $ 1,783
Other income 52 23
---------- -----------
Total revenue 2,027 1,806
EXPENSES:
Interest 416 396
Depreciation and amortization 465 799
Utilities 261 249
Real estate taxes 197 195
Maintenance 382 264
Other operating expenses 41 49
Administrative expenses 259 294
---------- -----------
Total expenses 2,021 2,246
INCOME (LOSS) BEFORE MINORITY INTEREST 6 (440)
MINORITY INTEREST IN INCOME (LOSS) OF
BRANDYWINE REALTY PARTNERS 5 --
---------- -----------
NET INCOME (LOSS) $ 1 $ (440)
========== ===========
PER SHARE DATA:
Earnings (loss) per share of beneficial interest $ 0.00 $ (0.23)
========== ===========
Weighted average number of shares outstanding
including share equivalents 1,888,923 1,875,247
========== ===========
</TABLE>
The accompanying notes and management's discussion and analysis of financial
condition and results of operations are an integral part of these statements.
5
<PAGE>
BRANDYWINE REALTY TRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1995
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME (LOSS) 1 $ (440)
ADJUSTMENTS TO RECONCILE NET INCOME (LOSS) TO
NET CASH PROVIDED BY OPERATING ACTIVITIES:
Minority interest in income of Brandywine Realty Partners 5 --
Depreciation and amortization 465 799
Changes in assets and liabilities
Decrease (increase) in accounts receivable (33) 70
Decrease (increase) in other assets (19) (137)
(Decrease) increase in other liabilities (25) (99)
------- -------
Net cash provided by operating activities 394 193
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures and leasing commissions paid (633) (340)
Decrease (increase) in escrowed cash 526 (553)
------- -------
Net cash used in investing activities (107) (893)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of stock and warrants 338 --
Distributions paid to shareholders (204) (2,042)
Minority Partner distributions (5) --
Proceeds from note payable to shareholder 992 --
Proceeds from mortgage notes payable -- 9,000
Repayment of mortgage notes payable (53) (6,916)
Costs associated with new ventures (560) -
Costs associated with refinancing transaction -- (250)
Tenant security deposits and other financing activities 8 (20)
------- -------
Net cash provided by (used in) financing activities 516 (228)
------- -------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 803 (928)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 840 1,766
------- -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,643 $ 838
======= =======
</TABLE>
The accompanying notes and management's discussion and analysis of financial
condition and results of operations are an integral part of these statements.
6
<PAGE>
BRANDYWINE REALTY TRUST
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996
1. ORGANIZATION AND NATURE OF OPERATIONS:
--------------------------------------
Brandywine Realty Trust (the "Trust"), was formed on February 26, 1986 as a real
estate investment trust. On July 31, 1986, the Trust sold through an initial
public offering 1,856,200 shares of beneficial interest, the net proceeds of
which were $17,168,000. On July 31, 1986, the Trust acquired a 68% general
partner interest in Brandywine Realty Partners ("Brandywine"), at a total cost
of $16,787,000. As of June 30, 1996, the partners of Brandywine and their
percentage ownership were as follows:
% Ownership
-----------
Brandywine Realty Trust,
a Maryland real estate investment trust 70%
Brandywine Specified Property
Investors Limited Partnership ("BSPI"), a
Pennsylvania limited partnership 30%
----
100%
====
At June 30, 1996, the Trust's portfolio was comprised of four commercial real
estate projects (the "Specified Projects"). The Specified Projects are leased
for office purposes. As of June 30, 1996 and December 31, 1995, the overall
occupancy rate of the Specified Projects was 96% and 97%, respectively. As of
June 30, 1996, existing leases totaling 47,000 square feet or 18% of the total
square feet, were scheduled to expire during the remaining six months of 1996.
The Specified Projects are located in the greater Philadelphia, Pennsylvania and
Raleigh, North Carolina metropolitan areas. Each of these markets is
competitive, with the principal methods of competition consisting in each case
of rental rates (including rental concessions such as initial periods of free
occupancy), location, level of leasehold improvements and building amenities.
The Specified Projects compete for tenants with other properties which may have
competitive advantages.
On July 19, 1996, the Trust acquired a seven-story, 122,000 square foot office
building (the "LibertyView Building") in Cherry Hill, New Jersey. (See Note 8).
On August 2, 1996, the Trust executed (i) a Contribution Agreement dated as of
July 31, 1996 (the "Contribution Agreement") with Safeguard Scientifics, Inc.
("SSI") and The Nichols Company ("TNC") and (ii) a Share and Warrant Purchase
Agreement dated as of July 31, 1996 (the "Share Purchase Agreement") with SSI.
In addition, on August 2, 1996, a newly-formed subsidiary of the Trust entered
into employment agreements with each of Anthony A. Nichols, Sr., Gerard H.
Sweeney, Brian Belcher and John P. Gallagher. Such employment agreements provide
for annual compensation aggregating $513,000 for a two year period. Further, in
connection with these agreements, six-year warrants are to be issued for an
aggregate of 700,000 Common Shares at a per share price of $6.50. The employment
agreements become effective only upon closing of the below-referenced SSI/TNC
Transaction.
The transactions contemplated by the Contribution Agreement and the Share
Purchase Agreement (collectively, the "SSI/TNC Transaction") are subject to
customary closing conditions, including receipt of shareholder approval. The
Trust's Annual Meeting of Shareholders is scheduled to be held on August 22,
1996, at which meeting the SSI/TNC Transaction will be considered and voted on.
7
<PAGE>
The SSI/TNC Transaction involves the formation by the Trust of a limited
partnership (the "Operating Partnership") in order to acquire 19 properties (the
"Initial Properties") in exchange for common shares of beneficial interest
("Common Shares"), warrants exercisable for additional Common Shares and limited
partnership interests redeemable under certain circumstances for additional
Common Shares. The acquisition will be accompanied by a consolidation of the
managements of the Trust and TNC and the expansion of the Trust's Board of
Trustees to include designees of SSI and TNC. In short, the SSI/TNC Transaction
will involve a substantial change in the business of the Trust; a substantial
increase in the number of properties indirectly owned by the Trust; and, given
the mortgage debt encumbering the Initial Properties, a substantial increase in
the Trust's indebtedness.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
-------------------------------------------
The financial statements have been prepared by the Trust without audit, pursuant
to the rules and regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in the financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and regulations, although
the Trust believes that the disclosures are adequate to make the information
presented not misleading. In the opinion of the Trust, all adjustments
(consisting of normal recurring adjustments) necessary to present fairly the
financial position of the Trust as of June 30, 1996, and the results of its
operations for the three and six months ended June 30, 1996 and 1995 and its
cash flows for the six months ended June 30, 1996 and 1995 have been included.
The results of operations for such interim periods are not necessarily
indicative of the results for the full year. For further information, refer to
the Trust's consolidated financial statements and footnotes thereto included in
the Annual Report on Form 10-K/A for the year ended December 31, 1995.
Principles of Consolidation
- ---------------------------
The Trust consolidates the accounts of Brandywine with the Trust and reflects
the BSPI investment as Minority Interest. All significant intercompany accounts
and transactions have been eliminated in consolidation.
Capitalization of Costs
- -----------------------
As of June 30, 1996 and December 31, 1995, the Trust had incurred $738,000 and
$357,000, respectively, in costs associated with its pursuit of potential
acquisitions of additional real estate and third party equity and debt
investments. Such costs are included in deferred costs on the Trust's balance
sheets as of June 30, 1996 and December 31, 1995. Further, in connection with
these efforts as of June 30, 1996 and December 31, 1995, the Trust had deposited
$395,000 and $95,000, respectively, with several unrelated parties. Such
deposits are included in accounts receivable and other assets on the balance
sheets as of June 30, 1996 and December 31, 1995. At June 30, 1996, $300,000 of
the total deposits represented deposits associated with the Trust's acquisition
on July 19, 1996 of the LibertyView Building (See Note 8).
During the first six months of 1996, the Trust retired fully amortized deferred
assets totaling $119,000.
Earnings (Loss) Per Share
- -------------------------
Earnings (loss) per share is calculated based upon the weighted average shares
outstanding which were 1,888,923 and 1,875,247 for the six months ended June 30,
1996 and 1995, respectively. Earnings per share for 1996 and 1995 have been
computed by considering any share equivalents applying the "treasury stock"
method and assuming that all options and warrants were exercised on date of
issue. The proceeds obtained from the exercise of any options or warrants would
be utilized to purchase outstanding shares at the average market price for the
primary earnings per share calculation and at the higher of the average market
price or the closing market price as of June 30, 1996 and June 30, 1995,
respectively, for the fully diluted earnings per share calculation. No such
options or warrants have been exercised as of June 30, 1996. If these options or
warrants had been exercised, the per share results would not be materially
different from the primary earnings per share presented.
8
<PAGE>
Statements of Cash Flows
- ------------------------
For purposes of reporting cash flows, cash and cash equivalents include cash on
hand and short-term investments with original maturities of 90 days or less. At
June 30, 1996 and December 31, 1995, cash and cash equivalents totaling
$1,643,000 and $840,000, respectively included tenant escrow deposits of
$203,000 and $198,000, respectively.
Reclassifications
- -----------------
Certain 1995 amounts have been reclassified to conform to the current year
presentation.
3. REAL ESTATE INVESTMENTS:
------------------------
Real estate investments are carried at the lower of adjusted cost or estimated
net realizable value. During the first six months of 1996, the Trust retired
fully depreciated assets totaling $1,167,000.
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 Trust 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, the Trust
should estimate 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 Trust adopted this statement. There was no effect from
adopting this statement on the Trust's financial position or results of
operations.
4. MORTGAGE NOTES PAYABLE:
-----------------------
On April 21, 1995, the Trust refinanced its then existing mortgage loan with
proceeds of mortgage loans totaling $6,250,000 and $2,750,000, respectively, and
providing for a fixed rate of interest. The mortgage loans are
cross-collateralized by the Specified Projects. The mortgage loans are due on
April 15, 2001, and the lender has the right to call the loans at par on April
15, 1998. Monthly payments of interest and principal are due based on a 25 year
amortization schedule for the period April 21, 1995 through April 15, 1998.
After April 15, 1998, monthly payments of interest and principal are due based
on a 22 year amortization schedule. The interest rate is set at 8.75% through
April 15, 1996, 9.0% for the period from April 16, 1996 through October 15, 1996
and 9.31% for the period from October 16, 1996 through April 15, 1998.
The loan is generally nonrecourse to the Trust as to interest and principal,
except, among other factors, in the event of a sale or encumbrance of the
mortgaged premises, or in the event of fraud or willful misrepresentation in
connection with the loan.
The lender is entitled to hold escrow cash reserves for real estate taxes and
capital requirements. On April 21, 1995, an initial deposit of $1,559,000 was
made into this account. Deposits to the real estate tax escrow account are
required to be made on a monthly basis. Ongoing deposits to the capital escrow
account are required of $25,000 per month over the remainder of the term of the
loans. Amounts held in the capital escrow account may be advanced, from time to
time and subject to certain conditions, to pay for capital improvements, tenant
improvements and leasing commissions associated with the Projects and
distributions to Shareholders of the Trust. The capital escrow account held by
the lender does not constitute additional collateral for the mortgage loans. At
June 30, 1996 and December 31, 1995, the capital and real estate tax escrow
accounts totaled $629,000 and $1,155,000, respectively.
9
<PAGE>
5. ISSUANCE OF STOCK AND WARRANTS AND NOTE PAYABLE TO SHAREHOLDER:
---------------------------------------------------------------
On June 21, 1996, an entity (the RMO Fund") controlled by Richard M. Osborne, a
shareholder and Trustee of the Trust, made an investment in the Trust in the
aggregate amount of $1,330,000 (the "Aggregate Investment"). The Trust issued
59,949 units (each consisting of one common share of beneficial interest, par
value $0.01 per share ("Common Stock"), and one warrant exercisable for six
years for an additional share of Common Stock at an initial exercise price of
$6.50) in exchange for $338,000 of the Aggregate Investment. Of the $338,000
total equity investment, the stock warrants totaled $42,000 and were recorded
based on a $0.70 per warrant value (based on a modified Black Scholes
calculation). Of the Aggregate Investment, the balance of $992,000 was made in
the form of a loan (the "Loan") that will be subject to prepayment, under
certain circumstances, through the issuance by the Trust of additional units.
Proceeds of the investment were used by the Trust in its acquisition of the
LibertyView Building on July 19, 1996. (See Note 8.)
The Loan is unsecured and under its terms, the principal sum outstanding from
time to time will bear interest at an annual rate equal to the prime rate of
interest, and interest will be payable quarterly in arrears, provided that the
Trust will have the right to have such accrued interest added to the principal
balance of the Loan. Principal and accrued interest will be payable in full on
the third anniversary of the date of the Loan. Under certain circumstances, the
Trust will be required to repay principal plus accrued interest on the Loan by
delivering to the RMO Fund additional units at $5.63 per unit, each unit
comprised of one share of Common Stock and an additional six-year warrant
exercisable for an additional share of Common Stock with an initial exercise
price of $6.50.
6. BENEFICIARIES' EQUITY:
----------------------
For the year ended December 31, 1995, the Trust declared distributions totaling
$0.55 per share. On May 1, 1996, the Trust declared a distribution of $0.06 per
share payable on May 15, 1996 to shareholders of record as of May 10, 1996.
Subsequent to June 30, 1996, on July 11, 1996, the Trust declared a distribution
of $0.06 per share payable on July 31, 1996 to shareholders of record as of July
26, 1996.
7. STOCK OPTIONS:
--------------
On August 8, 1994, subject to shareholder approval which was received at the
Annual Meeting of Shareholders on October 11, 1994, the Board of Trustees
adopted a stock option compensatory plan benefiting an executive officer of the
Trust covering 140,000 common shares of beneficial interest. The plan includes
options exercisable for 100,000 shares at an exercise price of $6.50. Of the
remaining 40,000 shares subject to options, options covering 20,000 shares
vested on August 8, 1995 and options covering 20,000 shares vested on August 8,
1996. The exercise price of the 40,000 options was set at $3.80. The per share
exercise price of the options covering all 140,000 shares is subject to
reduction as proceeds from the sale of, or refinancing of debt secured by, any
Specified Projects are distributed by the Trust to shareholders by an amount
equal to the amount so distributed, from time to time, on account of each share.
Accordingly, the per share exercise prices of the options have been reduced to
$4.77 and $2.07, respectively, as a result of distributions to shareholders from
proceeds of 1994 property sales and the April 21, 1995 mortgage refinancing.
During the six months ended June 30, 1996 and the year ended December 31, 1995,
there were no options exercised, canceled or expired.
On January 1, 1996, the Trust adopted Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation", which establishes
financial accounting and reporting standards for stock-based employee
compensation plans. The statement encourages all entities to adopt a new method
of accounting to measure compensation cost of all employee stock compensation
plans based on the estimated fair value of the award at the date it is granted.
Companies are, however, allowed to continue to measure compensation cost for
those plans using the intrinsic value based method of accounting, which only
requires footnote disclosures concerning this new accounting pronouncement.
Management of the Trust has adopted the pro forma method of disclosure as
described above.
10
<PAGE>
8. SUBSEQUENT EVENT:
-----------------
On July 19, 1996, the Trust acquired the LibertyView Building, a seven-story,
122,000 square foot office building in Cherry Hill, New Jersey, from UM Real
Estate Investment Company, LLC ("UM") for a cash price of $10.6 million, of
which $9.6 million was paid at the closing. The balance is payable to UM, in
installments, as outlined below:
Due Date Amount
--------- ------
July 31, 1997 $100,000
August 31, 1997 $100,000
September 31, 1997 $100,000
October 31, 1997 $100,000
November 31, 1997 $100,000
December 31, 1997 $500,000
The amount of the purchase price was determined through arm's-length negotiation
between the Trust and UM.
The LibertyView Building was completed in 1990 and, as of June 30, 1996, the
occupancy level was approximately 67%. A single tenant, HIP Health Plan of NJ,
an HMO provider, occupies 37,515 square feet under a lease expiring in 2007. No
other tenant occupies more than 10% of the building. Rentals of another tenant,
Shapiro and Kreisman, a law firm, comprise approximately 15.4% of the total
current base rents for the property. Other tenants in the LibertyView Building
include a regional bank, big six accounting firm and several Philadelphia-based
law firms.
The Trust financed its acquisition of the LibertyView Building through a
combination of term financing ($9,777,140), from a commercial bank (Summit Bank,
formerly known as United Jersey Bank), and proceeds from a recent investment in
the Trust by an affiliate of Richard M. Osborne, a shareholder and a Trustee of
the Trust. The acquisition portion of the bank loan ($8,480,000) bears interest
at a fixed rate of 8% per annum and matures on January 1, 1999. The bank loan
provides for additional funding of an amount not to exceed $1.3 million, which
will be advanced for tenant finishing and leasing commissions on currently
vacant space. The additional funding will be repayable at prime plus 1% and will
mature on January 1, 1999.
The bank loan is secured by a first mortgage on the LibertyView Building, and is
generally non-recourse to the Trust, except that the Trust guaranteed completion
of tenant improvements for any new leases, and up to $3 million of principal of
the bank loan plus the amount of principal and interest unpaid as of the date of
acceleration of the bank loan in the event of a default thereunder. The bank has
reserved the right to approve of any material change in the ownership of the
Trust, including a change resulting from the contemplated SSI/TNC Transaction,
and in the event the Bank does not approve of any such ownership change, the
loan, at the bank's option, will become repayable without penalty upon 120 days
notice. If the bank were to withhold approval of the SSI/TNC Transaction and
require repayment of its loan, the Trust would be required to seek replacement
financing and there can be no assurance that the Trust could obtain such
replacement financing or that any such replacement financing would be on terms
acceptable to the Trust. If the Trust were unable to refinance the loan, the
LibertyView Building could be transferred to the bank with a consequent loss of
income and asset value to the Trust.
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 July 19, 1996 acquisition of the LibertyView Building by the Trust had been
consummated on June 30, 1996, for balance sheet purposes and January 1, 1995 for
purposes of the statements of operations. Further, this pro forma information
11
<PAGE>
presents the June 21, 1996 investment by the RMO Fund of $1,330,000 in debt and
equity securities of the Trust as if the transaction had been consummated on
January 1, 1995 for purposes of the statements of operations. This unaudited pro
forma condensed consolidating financial information should be read in
conjunction with the historical financial statements of the Trust and
LibertyView and the related notes thereto. In management's opinion, all
adjustments necessary to reflect the effects of the consummated transactions
have been made.
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.
12
<PAGE>
BRANDYWINE REALTY TRUST
PRO FORMA CONDENSED CONSOLIDATING BALANCE SHEET
AS OF JUNE 30, 1996 (Notes 1 and 2)
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Brandywine
Realty Trust Pro Forma
Historical Adjustments
Consolidated Pro Forma
(A) (B) Consolidated
------------ ----------- ------------
<S> <C> <C> <C>
Assets:
Real estate investments, net $13,752 $10,600 (B) $24,352
Cash and cash equivalents 1,643 (1,120) (B) 523
Escrowed cash 629 -- 629
Deferred costs, net 1,411 300 (B) 1,711
Other assets 732 (300) (B) 432
-------- ------- -------
Total assets $ 18,167 $ 9,480 $27,647
======== ======= =======
Liabilities:
Mortgages and notes payable $ 9,870 $ 9,480 (B) $19,350
Other liabilities 725 -- 725
-------- ------- -------
Total liabilities 10,595 9,480 20,075
-------- ------- -------
Minority Interest -- -- --
Shareholders' Equity:
Common shares of beneficial interest 19 -- 19
Additional paid-in capital 17,068 -- 17,068
Stock warrants 42 -- 42
Accumulated equity (deficit) (9,557) -- (9,557)
-------- ------- -------
Total shareholders' equity 7,572 -- 7,572
-------- ------- -------
Total liabilities and
shareholders' equity $ 18,167 $ 9,480 $27,647
======== ======== =======
</TABLE>
The accompanying notes and management assumptions are an integral
part of these statements.
13
<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 Liberty
Realty Trust View
Historical Building
Consolidated Historical Pro Forma Pro Forma
(A) (B) Adjustments Consolidated
------------ ----------- ----------- ------------
<S> <C> <C> <C> <C>
Revenue:
Base rents and
tenant reimbursements $ 3,583 $ 1,654 $ -- $ 5,237
Other 83 -- -- 83
--------- ------- ------ ---------
Total revenue 3,666 1,654 -- 5,320
--------- ------- ------ ---------
Operating expenses:
Interest 793 -- 762 (D)(F) 1,555
Depreciation and
amortization 1,402 -- 459 (C)(E) 1,861
Other expenses 2,290 798 -- 3,088
--------- ------- ------ ---------
Total operating
expenses 4,485 798 1,221 6,504
--------- ------- ------ ---------
Income (loss) before
minority interest (819) 856 (1,221) (1,184)
Minority interest in
income (loss) 5 -- -- 5
--------- ------- ------ ---------
Income (loss) before
extraordinary items $ (824) $ 856 $ (1,221) $ (1,189)
========= ======= ======== =========
Earnings per share of
beneficial interest $ (0.44) $ (0.62)
========= =========
Weighted average
number of shares
outstanding including
share equivalents 1,874,372 59,949 (G) 1,934,321
========= ======== =========
</TABLE>
The accompanying notes and management assumptions are an
integral part of these statements.
14
<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 Liberty
Realty Trust View
Historical Building
Consolidated Historical Pro Forma Pro Forma
(A) (B) Adjustments Consolidated
------------ ----------- ----------- ------------
<S> <C> <C> <C> <C>
Revenue:
Base rents and
tenant reimbursements $ 1,975 $ 846 $ -- $ 2,821
Other 52 -- -- 52
--------- ------- ------- --------
Total revenue 2,027 846 -- 2,873
--------- ------- ------- --------
Operating expenses:
Interest 416 -- 379 (D)(F) 795
Depreciation and
amortization 465 -- 230 (C)(E) 695
Other expenses 1,140 368 -- 1,508
--------- ------- ------- --------
Total operating
expenses 2,021 368 609 2,998
--------- ------- ------- --------
Income (loss) before
minority interest 6 478 (609) (125)
Minority interest in
income (loss) 5 -- -- 5
--------- ------- ------- --------
Income (loss) before
extraordinary items $ 1 $ 478 $ (609) $ (130)
========= ======= ======== ========
Earnings per share of
beneficial interest $ 0.00 $ (0.07)
========= ========
Weighted average
number of shares
outstanding including
share equivalents 1,888,923 56,993 (G) 1,945,916
========= ====== =========
</TABLE>
The accompanying notes and management assumptions are an integral
part of these statements.
15
<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. The Trust owns 4 properties as of June 30, 1996 and on July 19, 1996
acquired the LibertyView Office Building (the "LibertyView Building") from an
unrelated party. The LibertyView Building has an aggregate net leasable area of
approximately 122,000 square feet and is 63% leased as of December 31, 1995 and
67% leased as of June 30, 1996.
These pro forma financial statements should be read in conjunction with the
historical financial statements and notes thereto of the Trust and the
LibertyView Building, as previously filed. In management's opinion, all
adjustments necessary to reflect the effects of the acquisition of 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 Trust's acquisition of the LibertyView Building as of June
30, 1996, based upon the purchase price of $10,600,000 acquired with
cash of $1,420,000 (net of $300,000 in related deposits as of June 30,
1996), 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 installments through December 1997 with no interest
payable. Deferred financing costs of $300,000 related to the mortgage
note payable have been capitalized.
3. ADJUSTMENTS TO PRO-FORMA CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS:
-------------------------------------------------------------------------
(A) Reflects the historical consolidated operations of the Trust.
(B) 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.
(C) Reflects depreciation totaling $339,000 and $170,000, respectively, of
the LibertyView Building using a 25-year depreciable life for the year
ended December 31, 1995, and the six-month period ended June 30, 1996.
(D) Reflects the increase in interest expense of $678,000 and $339,000,
respectively, related to the 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.
16
<PAGE>
(E) Reflects the amortization of deferred financing costs related to the
LibertyView Building of $120,000 and $60,000, respectively, for the year
ended December 31, 1995 and the six-month period ended June 30, 1996.
(F) Reflects the increase in interest expense of $84,000 related to the note
payable to the RMO Fund (which bears interest at prime), assuming a
prime rate of 8.25% for the year ended December 31, 1995. For the
six-month period ended June 30, 1996, the increase in interest expense
was $40,000.
(G) Reflects the increase in weighted average number of shares outstanding
related to the shares issued to the RMO Fund on June 21, 1996. The
increase is related to the pro forma period January 1, 1995 through June
20, 1996.
17
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
----------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
The Trust's consolidated net income for the period from January 1, 1996 to June
30, 1996 was $1,000 or $0.00 per share as compared to a consolidated net loss of
($440,000) or ($0.23) per share for the period January 1, 1995 to June 30, 1995.
In comparing the first six months of 1996 to the same period for 1995, rental
revenue increased by $192,000 or 11% primarily due to improved overall occupancy
levels of the Specified Projects. Depreciation and amortization expenses for
1996 decreased by $334,000 or 42% as compared to 1995 primarily as a result of
the non-recurring write off of $254,000 in deferred loan costs associated with
the April 21, 1995 refinancing transaction. Maintenance expenses increased by
$118,000 or 45% primarily due to snow removal costs incurred during the winter
of 1996 and increased janitorial and payroll costs associated with higher
occupancy levels. Non-maintenance operating expenses remained consistent with
prior year increasing by $6,000 or 1%. Administrative expenses decreased by
$35,000 or 12% due primarily to reduced payroll and office costs.
As of June 30, 1996 and December 31, 1995, the overall occupancy level of the
Specified Projects was 96% and 97%, respectively. During the first six months of
1996, 14,000 square feet of new leases and 45,000 square feet of renewals were
obtained representing 23% of the total space in the Specified Projects. Further,
approximately 16,000 square feet or 6% of the total space in the Specified
Projects was vacated. As of June 30, 1996, approximately 47,000 square feet or
18% of the total space in the Specified Projects represents leases expiring on
or before December 31, 1996.
FUNDS FROM OPERATIONS
---------------------
The Trust's funds from operations for the six months ended June 30, 1996 totaled
$450,000 or $0.24 per share. Management generally considers Funds from
Operations to be a useful financial performance measure of the operating
performance of an equity REIT because, together with net income and cash flows,
Funds from Operations provides investors with an additional basis to evaluate
the ability of a REIT to service debt and to fund acquisitions and other capital
expenditures. Funds from Operations does not represent net income or cash flows
from operations as defined by generally accepted accounting principles (GAAP)
and does not necessarily indicate that cash flows will be sufficient to fund
cash needs. It should not be considered as an alternative to net income as an
indicator of the Trust's operating performance or to cash flows as a measure of
liquidity. Funds from Operations does not measure whether cash flow is
sufficient to fund all of the Trust's cash needs, including principal
amortization, capital improvements and distributions to shareholders. Funds from
Operations as disclosed by other REITs may not be comparable to the Trust's
calculation of Funds from Operations. In 1996, the Trust adopted the new
definition of Funds from Operations. The new definition of Funds from Operations
is calculated as net income (loss) adjusted for depreciation expense
attributable to real property, amortization expense attributable to capitalized
leasing costs, tenant allowances and improvements, gains on sales of real estate
investments and extraordinary and non recurring items. All prior periods have
been adjusted to reflect the change to the new definition. The following table
identifies the calculation of Funds from Operations (in thousands):
18
<PAGE>
<TABLE>
<CAPTION>
Six months Six months Six months
ended ended ended
June 30, 1996 June 30, 1995 June 30, 1995
(new) (new) (as previously
(definition) (definition) reported)
------------- ------------- --------------
<S> <C> <C> <C>
Net income (loss) $ 1 $ (440) $ (440)
Add back:
Depreciation expense attributable
to real property 384 451 451
Amortization expense attributable
to capitalized leasing costs and
tenant allowances and improvements 65 64 64
Amortization expense attributable
to capitalized loan costs -- -- 30
Write off of deferred loan costs in
connection with refinancing -- 254 254
----- ------ ------
Funds From Operations $ 450 $ 329 $ 359
===== ====== ======
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
As of June 30, 1996, the Trust's primary asset is its 70% general partner
interest in Brandywine which owns and operates the Specified Projects. The
Trust's principal source of liquidity consists of the distributions it receives
from the operation of the Specified Projects.
As of June 30, 1996, the Trust's consolidated cash balances were $1,643,000 as
compared to $840,000 as of December 31, 1995. In addition, escrowed cash
balances at June 30, 1996 and December 31, 1995 totaled $629,000 and $1,155,000,
respectively.
During the first six months of 1996, net cash provided by operating activities
totaled $394,000. Costs paid in connection with the Trust's pursuit of potential
acquisitions of additional real estate and third party equity and debt
investments totaled $560,000 for the first six months of 1996. Additionally,
during this same period, the Trust paid $204,000 in distributions to
shareholders, of which $93,000 represented distributions declared by the Trust
in 1995. Tenant improvements and leasing commissions paid during the first six
months of 1996 relative to the Specified Projects totaled $633,000. For the
first six months of 1996, the net decrease in lender escrow funds amounted to
$526,000.
Additionally, on June 21, 1996, an entity (the RMO Fund") controlled by Richard
M. Osborne, a shareholder and Trustee of the Trust, made an investment in the
Trust in the aggregate amount of $1,330,000. The Trust issued 59,949 units (each
consisting of one common share of beneficial interest, par value $0.01 per share
("Common Stock"), and one warrant exercisable for six years for an additional
share of Common Stock at an initial exercise price of $6.50) in exchange for
$338,000, and the balance of $992,000 was made in the form of a loan. Proceeds
of the investment were used by the Trust in its acquisition of a seven-story,
122,000 square foot office building (the "LibertyView Building") in Cherry Hill,
New Jersey on July 19, 1996.
19
<PAGE>
On a pro forma basis, after giving effect to the acquisition of the LibertyView
Building, the Trust's consolidated cash balances as of June 30, 1996 were
$523,000 and accounts receivable totaled $294,000 as compared to accounts
payable, accrued expenses, tenant security deposits and deferred rents
aggregating $725,000. Such pro forma balances include costs incurred in
connection with the SSI/TNC Transaction (discussed below), totaling $738,000 as
of June 30, 1996. At the contemplated closing of the SSI/TNC Transaction, the
Trust, among various other events, will receive $426,000 in cash.
During 1996, the Trust declared distributions as follows:
Declaration Date Record Date Payment Date Amount per Share
---------------- ------------ ------------ ----------------
May 1,1996 May 10, 1996 May 15, 1996 $ 0.06
July 11, 1996 July 26, 1996 July 31, 1996 $ 0.06
The Trust believes that it qualifies for federal income tax purposes as a real
estate investment trust and intends to remain so qualified.
FACTORS THAT MAY AFFECT FUTURE OPERATING RESULTS AND FINANCIAL CONDITION
------------------------------------------------------------------------
The Specified Projects are located in the greater Philadelphia, Pennsylvania and
Raleigh, North Carolina metropolitan areas. Each of these markets is
competitive, with the principal methods of competition consisting in each case
of rental rates (including rental concessions such as initial periods of free
occupancy), location, level of leasehold improvements and building amenities.
The Specified Projects compete for tenants with other properties which may have
competitive advantages.
The Trustees have considered, and expect to continue to consider, potential
acquisitions by the Trust of additional real estate and real estate-related
interests and potential third party equity and debt investments in the Trust. At
the current time the Trust is actively pursuing the potential acquisition of
additional real estate and evaluating third party equity and debt investments in
the Trust. The Trust's business plan contemplates a focus on office and
industrial projects in the greater Philadelphia, Pennsylvania area. However,
there can be no assurance that the Trust will make an acquisition of additional
real estate or real estate-related interests or that any such acquisitions will
produce satisfactory returns for the Trust. Similarly, there can be no assurance
that the Trust will consummate any third party equity or debt investments in the
Trust or that any investments that might be made in the Trust would enable the
Trust to generate greater returns for the Shareholders.
On March 20, 1996 the Trust entered into a letter of intent to form a limited
partnership (the "Operating Partnership") with Safeguard Scientifics, Inc.
("SSI") (NYSE-SFE), an investor in emerging growth technology companies, and
SSI's real estate affiliate, and The Nichols Company ("TNC"), a leading private
real estate development company operating in the greater Philadelphia,
Pennsylvania area, to acquire 19 properties currently owned by SSI, TNC and
their affiliates (collectively, the "SSI/TNC Transaction"). The proposed
transaction is subject to customary closing conditions, including receipt of
shareholder approval. The Trust's Annual Meeting of Shareholders is scheduled to
be held on August 22, 1996, at which meeting the SSI/TNC Transaction will be
considered and voted on. (See Item 5). The SSI/TNC Transaction will be recorded
under the purchase method of accounting. The 19 properties will be recorded at a
$75,494,000 fair market value subject to related mortgage debt assumed of
$63,281,000. The Trust will acquire certain other net assets of $784,000 of SSI
and TNC. The Trust will
20
<PAGE>
issue, for a total equity value of $3,397,000, 775,000 Common Shares and a
warrant exercisable for six years for an additional 775,000 Common Shares at a
price per share of $6.50. As part of the SSI/TNC Transaction, the Trust will
receive $426,000 in cash. The Trust will also cause the Operating Partnership to
issue limited partnership units in exchange for the remaining net equity of the
19 properties and such units will be exchangeable under certain circumstances
for shares of common stock of the Trust (See Item 5).
In contemplation of, and subject to the closing of, the SSI/TNC Transaction, the
Trust has entered into 2-year employment agreements with four key executives at
an aggregate annual cash value of $513,000 together with 6-year warrants
totaling 700,000 Common Shares at a price per share of $6.50.
Upon consummation of the SSI/TNC Transaction, the Trust will own, directly or
indirectly, 24 properties in 3 states with an aggregate of 1.3 million square
feet of rentable office and industrial space. The Trust believes that the
expected consolidated revenues will provide sufficient liquidity to service the
existing indebtedness on the properties and result in positive cash flow from
operations. The Trust expects the Operating Partnership to obtain working
capital financing from SSI to assist the Operating Partnership in meeting its
current and future operating needs and to fund capital requirements for leasing
and tenant improvements. The Trust will consider other financing sources
including, debt and equity capital in the private and public markets.
On a pro forma basis, for the year ended December 31, 1995, assuming (a) the
SSI/TNC Transaction had occurred and (b) the LibertyView Building acquisition
had not occurred, the Trust would have approximately $15,010,000 in consolidated
revenues, $6,761,000 of consolidated interest expense and $6,822,000 of
consolidated other operating expenses, excluding depreciation and amortization
expense. The resulting $1,427,000 of pro forma consolidated net operating income
would be available to shareholders and limited partners in the Operating
Partnership. The pro forma consolidated financial information is unaudited and
does not purport to represent the future results of operations or cash flows of
the Trust.
On July 19, 1996, the Trust acquired the LibertyView Building, a seven-story,
122,000 square foot office building in Cherry Hill, New Jersey from an unrelated
party for a cash price of $10.6 million. The Trust financed its acquisition
through a combination of proceeds from its recent investments by the RMO Fund
aggregating approximately $1.3 million, term financing from a commercial bank,
initially funding approximately $8.5 million and seller financing totaling $1.0
million.
21
<PAGE>
Part II. Other Information
Item 1. Legal Proceedings
-----------------
Neither the Trust nor Brandywine is a party to any material pending legal
proceedings as of June 30, 1996 nor as of the date of this Form 10-Q.
Item 5. Other Information
-----------------
On August 2, 1996, the Trust executed (i) a Contribution Agreement dated as of
July 31, 1996 (the "Contribution Agreement") with Safeguard Scientifics, Inc.
("SSI") and The Nichols Company ("TNC") and (ii) a Share and Warrant Purchase
Agreement dated as of July 31, 1996 (the "Share Purchase Agreement") with SSI.
In addition, on August 2, 1996, a newly-formed subsidiary of the Trust entered
into employment agreements with each of Anthony A. Nichols, Sr., Gerard H.
Sweeney, Brian Belcher and John P. Gallagher. The employment agreements become
effective only upon closing of the below-referenced SSI/TNC Transaction.
The transactions contemplated by the Contribution Agreement and the Share
Purchase Agreement (collectively, the "SSI/TNC Transaction") are subject to
customary closing conditions, including receipt of shareholder approval. The
Trust's Annual Meeting of Shareholders is scheduled to be held on August 22,
1996, at which meeting the SSI/TNC Transaction will be considered and voted on.
The SSI/TNC Transaction involves the formation by the Trust of a limited
partnership (the "Operating Partnership") in order to acquire 19 properties (the
"Initial Properties") in exchange for common shares of beneficial interest
("Common Shares"), warrants exercisable for additional Common Shares and limited
partnership interests redeemable under certain circumstances for additional
Common Shares. The acquisition will be accompanied by a consolidation of the
managements of the Trust and TNC and the expansion of the Trust's Board of
Trustees to include designees of SSI and TNC. In short, the SSI/TNC Transaction
will involve a substantial change in the business of the Trust; a substantial
increase in the number of properties indirectly owned by the Trust; and, given
the mortgage debt encumbering the Initial Properties, a substantial increase in
the Trust's indebtedness.
The summary below describes the principal features of the SSI/TNC
Transaction:
o The issuance by the Trust to SSI of 775,000 Common Shares and a
warrant exercisable for six years for an additional 775,000 Common
Shares at a price per share of $6.50 in exchange for $426,250 in
cash and SSI's indirect ownership interest in eight of the Initial
Properties (the "SSI Ownership Interest"). The SSI Ownership
Interest consists of the entire general partnership interest in a
limited partnership (the "Witmer Partnership") that owns such eight
Initial Properties (the "Witmer Properties") and SSI's entire
limited partnership interest in the Witmer Partnership.
o The contribution by the Trust to the capital of the Operating
Partnership of (i) $1,000 cash and furniture, fixtures and equipment
to be acquired by the Trust from TNC for $25,000 in exchange for the
entire general partnership interest (which shall be comprised of
units ("GP Units")) in the Operating Partnership (the "General
Partnership Interest") and (ii) substantially all of the SSI
Ownership Interest in exchange for Class B limited partnership
interests in the Operating Partnership ("Class B Units"). The Class
B Units will entitle the Trust to receive an annual preferential
cumulative return in an amount equal to 9.5% of $3,937,000 (the
"Preferential Return") and a liquidation preference over the Class A
Units in the amount of $3,937,000 plus the amount of any accrued but
unpaid Preferential Return. Payment by the Operating Partnership of
the Preferential Return will be subject to restrictions contained in
the GECC loan documents (collectively, the "GECC Loan Documents")
22
<PAGE>
relating to the loan secured by the Witmer Properties held by the
Witmer Partnership and will be subject to reduction as and to the
extent the Trust receives a distribution of proceeds from the sale
of, or refinancing of debt secured by, any of the Witmer Properties.
Following completion by the Trust of a Qualified Offering (as
defined below), the Class B Units will automatically convert into an
equal number of GP Units and will cease to be entitled to receive
any further accrual of the Preferential Return or a liquidation
preference. The term "Qualified Offering" means a public or private
sale of equity securities generating at least $35 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 Trust's
most recently completed quarter preceding the sale or at least $25
million of net proceeds, but less than $35 million of net proceeds,
at a price per share of at least $5.50 (subject to adjustment in the
event of stock dividends, stock splits or reverse stock splits).
o The sale to the Operating Partnership (i) by TNC, SSI and certain
other persons of (a) all of the limited partnership interests (the
"Witmer Limited Partnership Interests") in the Witmer Partnership
owned by TNC and the Other Owners, and (b) substantially all of the
partnership interests of the limited partnerships that own certain
of the Initial Properties and (ii) by SSI of fee title to six
Initial Properties, all of the foregoing in exchange for an
aggregate of approximately 1,515,499 Class A Units that may be
redeemed, after completion of a Qualified Offering or on any
Redemption Eligibility Date (as defined below), for cash or up to
approximately 1,515,499 Common Shares (subject to increase based on
the occurrence of certain events, including repayment of certain
indebtedness at a discount, subject to forfeiture upon the
occurrence of certain events, including payment of participations to
lenders holding mortgages on certain of the Initial Properties, and
subject to customary antidilution adjustments). The Witmer Limited
Partnership Interests to be sold to the Operating Partnership by
TNC, SSI and the other persons, together with the additional limited
partnership interests in the Witmer Partnership included within the
SSI Ownership Interest and to be contributed to the Operating
Partnership by the Trust, will constitute all of the limited
partnership interests in the Witmer Partnership. The term
"Redemption Eligibility Date" means any 20 consecutive trading-day
period, occurring after the second anniversary of the Closing Date,
for which the average closing price of a Common Share equals or
exceeds $5.50 (subject to adjustment to reflect stock splits, stock
dividends and reverse stock splits). The number of Class A Units
reflected herein as to be issued were calculated as if the SSI/TNC
Transaction had closed on March 31, 1996. At the closing of the
SSI/TNC Transaction, the calculation will be performed using the
principal amount of indebtedness then outstanding and secured by
each of the Initial Properties. Thus, the number of Class A Units
actually issued at the closing will differ from the numbers used
herein, although the amount of such difference is not expected to be
material.
o The agreement by the Operating Partnership to acquire certain
retained interests (the "Residual Interests") in the Initial
Properties on or before the first day of the 37th full month
following the Closing Date in exchange for an aggregate of
approximately 131,854 Class A Units that may be redeemed, after
completion of a Qualified Offering or on any Redemption Eligibility
Date, for cash or up to approximately 131,854 Common Shares (subject
to forfeiture upon the occurrence of certain events, including
payment of participations to lenders holding mortgages on certain of
the Initial properties, and subject to customary antidilution
adjustments).
o The contribution to the Operating Partnership of the Trust's general
partnership interest in BRP (the "BRP Partnership Interest") in
exchange for an aggregate of 1,856,200 Units of Class C limited
partnership interests ("Class C Units") in the Operating
Partnership. 1,600,000 of these Class C Units will be issued to the
23
<PAGE>
Trust at Closing in exchange for a majority of the Trust's BRP
Partnership Interest, and approximately one year following the
Closing 256,200 Class C Units (or GP Units, if by such time, a
Qualified Offering has occurred) will be issued to the Trust in
exchange for the balance of the BRP Partnership Interest.
Specifically, on the Closing Date, the Trust will contribute to the
Operating Partnership a 97% profits interest and a 49% capital
interest in BRP (thereby retaining until approximately one year
after the Closing Date a 1% profits interest and a 21% capital
interest in BRP). Prior to a Qualified Offering, the Class C Units
will be specially allocated all income, gain, profits, losses and
cash flow realized by the Operating Partnership from its ownership
of the BRP Partnership Interest and will, upon the occurrence of a
Qualified Offering, automatically convert into an equal number of GP
Units. Prior to a Qualified Offering, the Class C Units will not be
allocated any income, gain, profits, losses or cash flow relating to
the ownership, operations or disposition of any of the Properties.
After a Qualified Offering, the special allocation theretofore
applicable to the Class C Units will no longer be operative.
o The execution by the Operating Partnership of agreements (the
"Option Agreements") which provide the Operating Partnership an
option to acquire from TNC and certain of the Other Owners
substantially all of the ownership interests in the Option
Properties in exchange for additional Class A Units that may be
redeemed, after completion of a Qualified Offering or on any
Redemption Eligibility Date, for cash or Common Shares. The number
of Class A Units that would be issuable by the Operating Partnership
upon the exercise of its option to acquire an Option Property would
be equal to the agreed upon value of such Option Property, minus
debt secured thereby, divided by $5.50 (subject to adjustment to
reflect stock splits, stock dividends and reverse stock splits of or
on Common Shares). The agreed upon value of each such Option
Property would be based upon the annual net operating income of such
property, as determined by the Operating Partnership and the
applicable Owner at or prior to the option exercise. The Option
Agreements will provide that the only condition precedent to the
Operating Partnership's right to acquire each such Option Property
will be the consent of the mortgage lender of such Option Property.
As of the date hereof, no such consent has been requested, and no
determination to seek such consent has been made. The Trust does not
believe the acquisition of the Option Properties is probable as of
the date hereof for the following reasons: (i) the Trust has made no
decision to acquire any of the Option Properties; (ii) although the
Trust, SSI and TNC have agreed upon a methodology for computing the
purchase price for each of the Option Properties, no values have
been agreed upon pursuant to such methodology; (iii) no lender
consent for the transfer of any of the Option Properties has been
requested or received; and (iv) the Trust has not conducted a due
diligence assessment of any of the Option Properties.
o A commitment by SSI to loan the Operating Partnership funds for the
benefit of the Trust to subsidize the Trust's distributions to its
Shareholders to the extent the Trust does not receive a full
distribution of the Preferential Return on its Class B Units,
subject to certain limitations (the "SSI Subsidy"). In no event will
SSI's payment obligations under the SSI Subsidy for any quarter
exceed the aggregate amount of distributions paid or payable for
such quarter by the Trust on the 775,000 Common Shares to be issued
by the Trust to SSI as part of the SSI/TNC Transaction. SSI's
obligation to provide the SSI Subsidy will terminate upon the
earlier of the repayment of the GECC Loan (which matures on November
30, 2000) and a Qualified Offering.
o A commitment by SSI to loan up to $700,000 to the Operating
Partnership to fund its working capital requirements, subject to
certain limitations. SSI's commitment will remain in effect until
the earlier of: (i) January 31, 1998; (ii) a Qualified Offering;
(iii) a refinancing by the Operating Partnership of indebtedness
24
<PAGE>
secured by one or more of the Initial Properties which results in
net proceeds sufficient to repay amounts loaned to the Operating
Partnership by SSI; and (iv) a liquidation of the Operating
Partnership.
o A loan by SSI to the Operating Partnership of funds that will be
used by the Operating Partnership to pay a portion of the expenses
incurred by the Operating Partnership in connection with the SSI/TNC
Transaction.
o The contribution by TNC of its management and leasing operations to
Brandywine Realty Services Company (the "Management Company"), a
newly-formed corporation, all of the preferred stock and five
percent (5%) of the common stock of which will be owned by the
Operating Partnership. The balance of the common stock of the
Management Company will be owned by a partnership formed by officers
of the Trust to hold such stock.
o The expansion of the Board of Trustees from five to seven members,
and the election to the Board of Anthony A. Nichols, Sr., Warren V.
Musser and Walter D'Alessio, three individuals associated with or
designated by SSI and TNC, and the election to the Board of Charles
P. Pizzi, an individual jointly designated by SSI, TNC and the
Trust. Two current members of the Board (Messrs. DiLullo and Jerome)
will not be standing for re-election.
o The execution by the Management Company of two-year employment
agreements with three individuals who are currently executives of
TNC (the "TNC Executives") and who are expected to become executive
officers of the Trust and the issuance to such executives of
warrants ("Executive Warrants") exercisable during the six-year
period following the date of their issuance for an aggregate of
360,000 Common Shares at a per share exercise price of $6.50. The
balance of the Executive Warrants (exercisable for 40,000 Common
Shares) will be issued to approximately 10 TNC employees who are
expected to become employees of the Management Company. In addition,
warrants having the same terms as the Executive Warrants and
exercisable for 30,000 Common Shares will be awarded to John
Adderly, a current executive of the Trust.
o The execution by the Management Company of a two-year employment
agreement with Gerard H. Sweeney, the current President and Chief
Executive Officer of the Trust, replacing Mr. Sweeney's current
employment agreement with the Trust and providing for the issuance
to Mr. Sweeney of warrants exercisable during the six-year period
following their date of issuance for an aggregate of 300,000 Common
Shares at a per share exercise price of $6.50.
o The taking of action by the Board of Trustees: (i) to exempt SSI,
TNC and their affiliates from the operation of two Maryland
"antitakeover" statutes and (ii) to exempt the current President and
Chief Executive Officer of the Trust from the operation of one of
such statutes.
o The execution by SSI of a "standstill" agreement generally requiring
SSI to vote its Common Shares in accordance with the recommendations
of a majority of the Board of Trustees; requiring SSI to vote its
Common Shares in favor of the reelection to the Board of Trustees of
Richard M. Osborne or his designee; and restricting SSI's ability to
sell its Common Shares except under specified circumstances. The
agreement is for a period of three years but is subject to early
termination in the event the Trust completes a Qualified Offering.
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In certain instances, actions described herein as actions to be taken by SSI may
be taken by SSI directly or by a wholly-owned subsidiary of SSI.
The SSI/TNC Transaction involves certain risks to the Trust and its
Shareholders, including the following:
o Continuation of Historic Losses. The Properties have, in the
aggregate, historically operated at a significant loss. For the year
ended December 31, 1995, the aggregate net loss before extraordinary
items on the Initial Properties was $3,379,000 and the aggregate net
loss on the Option Properties was approximately $1,064,000. No
assurance can be provided that, following the consummation of the
SSI/TNC Transaction, these losses will not continue in the future.
o Possible Decline in Common Share Trading Price. The SSI/TNC
Transaction will also result in a pro forma increase in the Trust's
net loss for the year ended December 31, 1995 from ($824,000) ($.44
per share) to ($3.332 million) ($1.21 per share). There can be no
assurance that, as a result of this or other factors relating to the
SSI/TNC Transaction, the trading price of the Common Shares
following consummation of the SSI/TNC Transaction will not be less
than the current market price for the Common Shares.
o Limitation on Ability to Fund Preferential Return; Impact on Future
Distributions. The GECC Loan Documents permit the Witmer Partnership
to distribute to its partners a nine percent (9%) non-compounding
return on its equity of $3,805,400 (plus draws made on a $1,500,000
letter of credit posted by SSI as additional collateral for the GECC
Loan), but only so long as (i) space currently occupied by a
designated tenant in one of the Witmer Properties has been re-leased
to such designated tenant or to another tenant on terms approved by
GECC, (ii) the Adjusted Net Operating Income (calculated without
regard to the revenues or expenses of the Witmer Property located in
Lawrenceville, New Jersey and referred to herein as the
"Lawrenceville Premises") and the Debt Service Coverage Ratio
(calculated both inclusive of the Lawrenceville Premises and
exclusive of the Lawrenceville Premises), as such terms are defined
in the GECC Loan Documents, all meet certain thresholds. As of this
date, the condition referenced in clause (i) of the preceding
sentence has been satisfied but the conditions referenced in clause
(ii) have not been satisfied. In the event the Witmer Partnership is
unable to satisfy the conditions referenced in clause (ii) above,
then, provided the condition referenced in clause (i) above has been
satisfied, the Witmer Partnership nevertheless has a one-time right
to distribute to its partners a 6% return on its equity. The
Preferential Return to which the Trust would be entitled prior to a
Qualified Offering as a result of its ownership of Class B Units
will be dependent upon the income generated by all of the Initial
Properties, including the Witmer Properties. There can be no
assurance either that the Witmer Partnership will be able to make
distributions to the Operating Partnership, or that the Operating
Partnership will be able to pay (rather than accrue) the
Preferential Return. Failure of the Operating Partnership to pay the
Preferential Return may adversely affect the Trust's ability to make
distributions on its Common Shares.
o Substantial Debt Obligations. As of March 31, 1996, the principal
amount of the Trust's outstanding long-term debt was approximately
$8.9 million (which matures in April 2001 subject to the lender's
right to require payment in April 1998), and its ratio of long-term
debt to total market capitalization was approximately 47%. If the
SSI/TNC Transaction is consummated (and giving effect to the Trust's
acquisition of the LibertyView Building on July 19, 1996 and the
additional indebtedness incurred in connection therewith), the
Trust's pro forma outstanding long-term debt would be approximately
$82 million (of which approximately $5.5 million matures prior to
1998), and the Trust's ratio of long-term debt to total market
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capitalization (based on (i) the number of Common Shares outstanding
on March 31, 1996, (ii) an additional 1,647,353 Common Shares that
would be outstanding if the 1,647,353 Class A Units to be issued on
the Closing Date and within 37 months thereafter had been redeemed
for an equal number of Common Shares, (iii) the 775,000 Common
Shares issuable to SSI pursuant to the SSI/TNC Transaction and (iv)
59,949 Common Shares issued to the RMO Fund in connection with its
investment in the Trust on June 21, 1996) would be approximately
78%. In the event the Trust is unable to refinance a portion of such
debt through an equity offering and thereby reduce the higher
leverage ratio, the Trust believes its ability to make additional
acquisitions will be impaired. There can be no assurance that the
Trust will be able to effect any such refinancing through an equity
offering or that any equity offering which the Trust might effect
will be on attractive terms.
o Inability to Pay Debt Service or Refinance Indebtedness. The
approximately $30.7 million of mortgage indebtedness secured by the
Witmer Properties as of March 31, 1996 and the approximately $32.6
million of mortgage indebtedness secured by the other Initial
Properties as of March 31, 1996 require aggregate payments of
principal and interest of approximately $6.9 million in 1997, $12.8
million in 1998 and $4.0 million, in 1999. For purposes of the
foregoing sentence, interest rates in effect on March 31, 1996 have
been assumed to remain unchanged. While the Operating Partnership's
cash available from operations is anticipated to be sufficient to
make the required payments on such indebtedness, there can be no
assurance that such cash available from operations will not decrease
as the result of tenant delinquencies, a higher than expected level
of future vacancies, an increase in interest rates or other
circumstances and, as a result, render the Operating Partnership
unable to make debt service payments when due. Moreover, even if
cash available from operations is sufficient to make regular debt
services payments when due, there can be no assurance that the
Operating Partnership will be able to refinance the indebtedness at
maturity. An inability to make regular debt service payment when due
or to refinance indebtedness when due could cause the applicable
lender to foreclose on its mortgage, which could have a material
adverse effect on the Trust.
o Multiple Properties Securing Individual Loans. The approximately
$30.7 million mortgage indebtedness owed by the Witmer Partnership
as of March 31, 1996 is secured by mortgages held by GECC on each of
the Witmer Properties. These mortgages are cross-collateralized with
one another. The approximately $6.5 million mortgage indebtedness
owed to Fidelity Bank, N.A. as of March 31, 1996 (and referred to
herein as "Fidelity I") is secured by a single mortgage lien
encumbering Oaklands Corporate Center Buildings 45 and 50. The
approximately $13.5 million mortgage indebtedness owed to New
England Mutual Life Insurance Company ("NEMLICO") as of March 31,
1996 (and referred to herein as "NEMLICO I") is secured by a single
mortgage lien encumbering Meetinghouse Buildings 1, 2, 3 and 4.
Under "cross-collateralization" provisions, the lender would be
entitled to foreclose against any property subject to such
provisions in order to recover obligations owed with respect to
another one of the subject properties.
o Debt Financing Risks Generally. Required payments on mortgage debt
incurred to fund a substantial portion of the cost of the Properties
is not reduced if the economic performance of any of the Properties
declines. If such decline occurs, the revenues of the Operating
Partnership and the funds available for distribution to the Trust
and its Shareholders could be adversely affected. The Operating
Partnership will be subject to risks associated with debt financing
generally, including the risk that its revenues will not be
sufficient to meet required payments of principal and interest, the
risk that indebtedness on the Properties, which in many cases will
not have been fully amortized at maturity, will not be able to be
refinanced or that the terms of such refinancing will not be as
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favorable as the terms of existing indebtedness, and the risk that
necessary capital expenditures for such purposes as renovations and
reletting space will not be able to be financed on favorable terms,
or at all. If the Operating Partnership or its subsidiary
partnerships are unable to meet a mortgage payment, the Property
which is mortgaged to secure such payments could be transferred to
the mortgagee with a consequent loss of income and asset value to
the Operating Partnership and consequently the Trust.
o Insufficient Working Capital. The Initial Properties other than the
Witmer Properties consist of 11 Properties which secure an aggregate
of approximately $32.6 million of mortgage indebtedness as of March
31, 1996. This amount of mortgage indebtedness will require the
Operating Partnership to use substantially all of the cash available
from operations generated by these Properties to service such
indebtedness and to establish reserves for maintenance and
improvements. Therefore, these Properties are not expected to
generate excess funds which the Operating Partnership could use for
general working capital purposes. In addition, the GECC Loan
Documents restrict the ability of the Witmer Partnership holding the
Witmer Properties to make distributions to the Operating
Partnership. Although SSI has agreed, subject to certain conditions,
to loan the Operating Partnership up to $700,000 for working capital
purposes during the 18-month period following the Closing Date,
immediately following consummation of the SSI/TNC Transaction, the
Operating Partnership will have no other third-party source of
funding for working capital purposes. Accordingly, unless the
mortgage indebtedness encumbering the Initial Properties is
refinanced, the Operating Partnership may have insufficient funds to
meet its working capital needs, and may have insufficient funds to
pay the full amount of the Preferential Return to the Trust. The
Trust can make no assurances that any such refinancing will occur,
or that the Operating Partnership will develop any additional
sources of funding for working capital purposes.
o Absence of Independent Appraisals. The Trust has not obtained
independent appraisals of the Properties being contributed to the
Operating Partnership in connection with the SSI/TNC Transaction.
Accordingly, there can be no assurance that the value of the Class A
Units to be received by the Owners in exchange for their
contribution will accurately reflect the value of the assets
contributed by them.
o Potential Acceleration of Certain Indebtedness. In accordance with
the bank loan in the approximate amount of $9.8 million that
financed the acquisition by the Trust of the LibertyView Building,
the bank reserved the right to approve of any material changes in
the ownership of the Trust, including a change resulting from the
SSI/TNC Transaction, and in the event the bank does not approve of
any ownership change, the loan, at the bank's option, will become
repayable without penalty upon 120 days notice. If the bank were to
withhold approval of the SSI/TNC Transaction and require repayment
of its loan, the Trust would be required to seek replacement
financing and there can be no assurance that the Trust could obtain
such replacement financing or that any such replacement financing
would be on terms acceptable to the Trust. If the Trust were unable
to refinance the loan, the LibertyView Building could be transferred
to the bank with a consequent loss of income and asset value to the
Trust.
o Dilution of Current Shareholders. The ownership of Shares by the
current Shareholders (computed without regard to the issuance of
Common Shares upon the exercise of options and warrants presently
outstanding or the warrants to be issued as part of the SSI/TNC
Transaction) will decline from 100% to 45.5% in the event that the
maximum number of Class A Units issuable for the Initial Properties
are issued and converted into Common Shares (computed (i) without
regard to the additional Class A Units that are issuable in the
event any of the Option Properties are acquired or in the event that
indebtedness encumbering certain of the Properties is repaid at a
discount or at the time the Residual Interests are acquired and (ii)
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without regard to the potential forfeiture of Class A Units at the
time equity participations of lenders holding indebtedness
encumbering certain of the Initial Properties is satisfied). The
ownership of Shares by the current Shareholders will decline from
100% to 33.5% if, in addition to the decline caused by the
conversion of Class A Units into Shares (computed without regard to
the issuance of Common Shares upon the exercise of options and
warrants presently outstanding), the SSI Warrant, the Executive
Warrants and the Warrants to be issued to Messrs. Sweeney and
Adderly were to be exercised in full. As a result, the ability of
the current Shareholders, as a group, to determine the outcome any
matter submitted to a vote of the Shareholders, such as the election
of Trustees, will be diminished substantially.
o Concentration of Ownership. SSI, TNC and their affiliates, certain
of whom will be executive officers and/or trustees of the Trust,
will own in the aggregate 3,465,499 Common Shares on a fully diluted
basis following consummation of the SSI/TNC Transaction, assuming
1,515,499 Class A Units are issued for the Initial Properties (which
number has been computed (i) without regard to the additional Class
A Units that are issuable in the event any of the Option Properties
are acquired or in the event that indebtedness encumbering certain
of the Properties is repaid at a discount or at the time the
Residual Interests are acquired and (ii) without regard to the
potential forfeiture of Class A Units at the time equity
participations of lenders holding indebtedness encumbering certain
of the Initial Properties is satisfied). Such fully diluted
ownership consists of (i) the 775,000 Common Shares to be issued to
SSI by the Trust on the Closing Date, (ii) the 1,175,000 Common
Shares issuable upon the exercise of the SSI Warrant and the
Executive Warrants and (iii) the Common Shares issuable in
redemption of the Class A Units, assuming all Class A Units are
redeemed for Common Shares. In addition, Richard M. Osborne
beneficially owns, as of the date hereof, 658,698 Common Shares
(including 59,949 Common Shares issuable upon exercise of warrants)
or approximately 33.3% of the Common Shares presently outstanding.
As a result, each of SSI, TNC and Mr. Osborne will have the ability
to exert significant influence over the affairs of the Trust. One of
the amendments proposed to be made to the Trust's Declaration of
Trust at the Annual Meeting of Shareholders will, if adopted, except
from the 4.16% ownership limitation to be established thereby each
of SSI, TNC and Richard M. Osborne, as well as entities controlled
by Mr. Osborne. This proposed amendment, which is being submitted
for approval of Shareholders to protect the Trust's REIT status,
will have the effect of further solidifying the control SSI, TNC and
Mr. Osborne will have over the Trust.
o Ownership Limitation. One of the amendments proposed to be made to
the Trust's Declaration of Trust at the Annual Meeting of
Shareholders will, if adopted, limit any person from acquiring in
excess of 4.16% in value of the Trust's Shares. Certain attribution
rules will apply for purposes of determining compliance with this
ownership limitation. This proposed amendment is being submitted for
approval of Shareholders to protect the Trust's REIT status.
Although the Trust is unaware of any Shareholder who will,
immediately following consummation of the SSI/TNC Transaction, own
in excess of such ownership limitation (other than SSI, TNC and
Richard M. Osborne and their affiliates, each of which will be
subject to a separate, higher ownership limitation), any Shares
owned by any other Shareholders in excess of such ownership
limitation will automatically be deemed to have been transferred to
the Trust, as trustee of a special trust for the benefit of a person
to whom the Shares may be transferred without violating the
ownership limitation. While held in such a trust, such Shares will
not be entitled to dividends or distributions and will not be
entitled to vote on any matters.
o Liability of Trust as General Partner. As part of the SSI/TNC
Transaction, the Trust will become the general partner in the
Operating Partnership and will contribute substantially all of its
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assets to the Operating Partnership. As the general partner, the
Trust will have unlimited liability for all the liabilities of the
Operating Partnership other than liabilities under certain of the
mortgage loans secured by Properties which will be non-recourse to
the Operating Partnership.
o Integration of Properties and Operations. The SSI/TNC Transaction
contemplates the acquisition of a substantial number of properties,
personnel and business operations. Following completion of the
SSI/TNC Transaction, the Trust will have increased the number of
persons it employs, directly and through the Management Company,
from 5 to approximately 22, and will have increased the number of
properties that it owns or controls from 4 to 27. As such, the
SSI/TNC Transaction may involve potential difficulties in
integrating the operations of TNC with those of the Trust.
Consequently, no assurance can be given as to the effect of the
SSI/TNC Transaction on the Trust's business or results of
operations.
o Special Allocation of Certain Debt Discounts. In the event that
additional equity in any of the Initial Properties (other than the
eight Witmer Properties) is refinanced at a discount, the Trust has
agreed that 75% of the additional equity thereby created will be
allocated to the person contributing such Property through the
issuance of additional Class A Units.
o Conflicts of Interest. The Operating Partnership's ownership of the
Properties will result in certain conflicts of interest between the
Trust and the holders of Class A Units. Holders of Class A Units and
the Trust may have different objectives regarding the appropriate
pricing and timing of any sale of Properties since, prior to the
exchange of Class A Units for Common Shares, holders of such Units
will suffer different and more adverse tax consequences than the
Trust upon the sale of any of the Properties. Therefore, holders of
Class A Units, including the individuals who will constitute three
of the Trust's seven Trustees, may be opposed to the sale of a
Property even though such sale might otherwise be in the interest of
the Trust. In addition, prior to a Qualified Offering, the Operating
Partnership Agreement will restrict the ability of the Trust, as the
Operating Partnership's general partner, to take certain actions
without the consent of holders of at least 75% of the outstanding
Class A Units. To the extent such holders and the Trust have
different objectives with respect to any of these actions, such
holders will be able to prevent the Trust from taking any such
action. The Operating Partnership's ability to sell or refinance
debt secured by any of the Properties will not, however, be subject
to the approval or consent of holders of Class A Units.
o Tax Risks. The SSI/TNC Transaction will subject the Trust to
additional risks that it may lose its status as a REIT.
- Required Distributions; Potential Requirement to Borrow. To
obtain the favorable tax treatment associated with qualification
as a REIT, the Trust generally will be required each year to
distribute to its Shareholders at least 95% of its net taxable
income. The Trust intends to make distributions to its
Shareholders to comply with the distribution provisions of the
Internal Revenue Code of 1986, as amended (the "Code") and to
avoid income and other taxes. Differences in timing between the
receipt of income and the payment of expenses in arriving at
taxable income (of the Trust or the Operating Partnership) and
the effect of required debt amortization payments, as well as the
limitations imposed by the GECC Loan Documents on the Witmer
Partnership's ability to make distributions to the Operating
Partnership, could require the Trust, on its own behalf or
through the Operating Partnership, to borrow funds on a
short-term basis to meet the distribution requirements that are
necessary to achieve the tax benefits associated with qualifying
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as a REIT. In such instances, the Trust, in order to avoid
adverse tax consequences, might need to (i) borrow funds even if
management believed that then prevailing market conditions
generally were not favorable for such borrowings or that such
borrowings would not be advisable in the absence of such tax
considerations and/or (ii) liquidate investments on adverse
terms.
- Ownership Limits. In order to maintain its qualification for
Federal income tax purposes as a REIT, not more than 50% in value
of the outstanding Shares of the Trust may be owned, directly or
indirectly, by five or fewer individuals (as defined in the Code
to include certain entities) in the last half of any taxable
year. To ensure that the Trust will not fail to qualify as a REIT
under this test, amendments proposed to be made to the Trust's
Declaration of Trust will, if approved by Shareholders, limit any
person or entity from owning in excess of a specified percentage
in value of Shares. The Trust believes, on the basis of facts
known to it as of the date hereof and advice from its tax
advisors, that ownership of the Shares on the date hereof and on
a pro forma basis giving effect to the Shares to be issued in the
SSI/TNC Transaction, will not cause the Trust to fail to comply
with the foregoing requirement. If the Internal Revenue Service
("IRS") successfully were to challenge the Trust's compliance
with such requirement, the Trust's REIT status, and the favorable
tax treatment relating to such status, could be lost.
- Consequences of Failure of the Operating Partnership (or the
Witmer Partnership or a Title Holding Partnership) To Be Treated
as a Partnership. The Operating Partnership, the Witmer
Partnership and other subsidiary partnerships ("Title Holding
Partnerships") of the Operating Partnership are intended to be
treated as partnerships (or other pass-through entities) for
Federal income tax purposes. If the IRS successfully were to
challenge the tax status of the Operating Partnership, the Witmer
Partnership or any Title Holding Partnership as a partnership (or
other pass-through entity) for Federal income tax purposes, the
Operating Partnership, the Witmer Partnership or the affected
Title Holding Partnership would be taxable as a corporation. In
such event, since the value of the Trust's ownership interest in
the Operating Partnership would exceed, and the value of the
Operating Partnership's ownership interest in the Witmer
Partnership, or in any Title Holding Partnership could exceed, 5%
of the Trust's assets, the Trust would cease to qualify as a REIT
for Federal income tax purposes.
- Consequences of the Management Company Corporate Structure. A
requirement for REIT qualification is that the value of any one
issuer's securities held by the Trust not exceed 5% of the value
of the Trust's total assets on certain testing dates. In
addition, the Trust may not own more than 10% of any one issuer's
outstanding securities (excluding securities of a qualified REIT
subsidiary or another REIT). The Operating Partnership will own
5% of the voting common stock and all of the preferred stock of
the Management Company, a corporation that is taxable as a
regular corporation. The Management Company will perform
management, development and leasing services for the Operating
Partnership and other real estate owned in whole or in part by
third parties. A portion of the income earned by and taxed to the
Management Company would be nonqualifying income if earned
directly by the Trust. As a result of the corporate structure,
the income will be earned by and taxed to the Management Company
and will be received by the Trust only indirectly as dividends
and interest that qualify under the 95% gross income test. The
Trust believes that its indirect interest in the securities of
the Management Company will not exceed 5% of the value of the
Trust's total assets. In addition, the Trust will not own
directly or indirectly more than 10% of the voting securities of
the Management Company. If the Trust were to fail to satisfy the
5% value requirement or the 10% voting securities test described
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above, or otherwise were to fail to qualify as a REIT, it
generally would be subject to Federal income tax (including any
applicable alternative minimum tax) on its taxable income at
regular corporate rates. In addition, unless entitled to relief
under certain statutory provisions, the Trust would be
disqualified from treatment as a REIT for the four taxable years
following the year during which qualification is lost. The
additional tax would significantly reduce the Funds from
Operations available for distributions to Shareholders.
- Real Estate Transfer Taxes. The transfer to the Operating
Partnership of certain of the Initial Properties (the "Interests
Transfer Properties") has been structured as transfers of 89% of
the capital interests and 99% of the cash flow and profit
interests in the limited partnerships ("Title Holding
Partnerships") owning such Properties with the remaining
interests (the "Residual Interests") to be acquired by the
Operating Partnership on the first business day of the 37th month
following the initial transfer. This transaction structure is
intended to comply with non-binding informal advice provided by
the Pennsylvania Department of Revenue to the effect that such
transfers are not subject to Pennsylvania real estate transfer
taxes. If the informal advice from the Department of Revenue were
ultimately determined to be incorrect, or the Department of
Revenue changes its position, the Operating Partnership could be
required to pay real estate transfer taxes at a time when it
might not have funds available for such purposes. Moreover, if
the Trust desired or were required, for financing purposes or
otherwise, to cause the Operating Partnership to acquire such
Residual Interests prior to the first business day of the 37th
month after such initial transfer, the Operating Partnership
could be required to pay real estate transfer taxes. The transfer
of six of the Initial Properties to the Operating Partnership
will result in fee title thereto being acquired by the Operating
Partnership and will result in an immediate real estate transfer
tax.
o Possible Environmental Liability. Under various Federal, state and
local laws, ordinances and regulations, an owner of real estate is
liable for the costs of removal or remediation of certain hazardous
or toxic substances on or in such property. Such laws often impose
such liability without regard to whether the owner knew of, or was
responsible for, the presence of such hazardous or toxic substances.
The presence of such substances, or the failure to properly
remediate such substances, may adversely affect the owner's ability
to sell or rent such property or to borrow using such property as
collateral. All of the Properties have been subjected to Phase 1 or
similar environmental audits (which involve inspection without soil
sampling or ground water analysis) by independent environmental
consultants. Except as indicated below with respect to the
Whitelands Business Park in Exton, Pennsylvania (the "Whitelands
Property"), these environmental audit reports (all of which have
been performed or updated within the preceding 12 months) have not
revealed any significant environmental liability, nor is the Trust
aware of any environmental liability with respect to the Properties
that the Trust's management believes would have a material adverse
effect on the Trust's business, assets or results of operations. An
environmental assessment has identified environmental contamination
of potential concern with respect to the Whitelands Property.
Petroleum products, solvents and heavy metals were detected in the
groundwater. These contaminants are believed to be associated with
debris deposited by others in a quarry formerly located on the
Whitelands Property. The quarry previously appeared on the
Comprehensive Environmental Response Compensation and Liability
Information System List, a list maintained by the United States
Environmental Protection Agency (the "EPA") of abandoned, inactive
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or uncontrolled hazardous waste sites which may require cleanup. The
EPA conducted a preliminary assessment in 1984 with the result that
no further action was taken. Subsequently, the quarry was removed
from the list. While the Trust believes it is unlikely that the
Operating Partnership will be required to undertake remedial action
with respect to such contamination, there can be no assurance in
this regard. If the Operating Partnership were required to undertake
remedial action on the Whitelands Property, it will be indemnified,
as part of the SSI/TNC Transaction, against the cost of such
remediation by the seller, SSI, subject to a ceiling of $2,018,000.
The duration of SSI's indemnity agreement is five years. Were SSI
unable to fulfill its obligations under its indemnity agreement or
were the Operating Partnership required to undertake remedial action
after the expiration of the five-year term of the agreement, no
assurances can be given that the costs associated with any
remediation would not be material to the financial condition and
results of operations of the Operating Partnership and the Trust.
Because the Trust does not believe that any remediation at the
Whitelands Property is probable, no amounts have been accrued for
any such potential liability.
No assurance can be given that existing environmental studies with
respect to the Properties reveal all environmental liabilities or
that any prior owner of any such property did not create any
material environmental condition not known to the Trust. Moreover,
no assurance can be given that (i) future laws, ordinances or
regulations will not impose any material environmental liability or
(ii) the current environmental condition of the Properties will not
be affected by tenants and occupants of the Properties, by the
condition of properties in the vicinity of the Properties (such as
the presence of underground storage tanks) or by third parties
unrelated to the Trust, SSI or TNC.
o Limited Geographic Diversification. Each of the Initial Properties
is located in the Greater Philadelphia Region. The Trust's strategy
for growth is predominantly based upon expansion within this area
and into adjacent areas through acquisitions. This limited
geographic diversification will leave the Trust vulnerable to a
downturn in the economy of such region.
o Risk of Future Vacancies. Each year a significant portion of the
leases may expire at one or more of the Initial Properties. During
1996, 17 leases covering approximately 99,000 square feet (or 10.31%
of the rentable square feet of the Initial Properties) are scheduled
to expire at the Initial Properties. During 1997, five leases
covering approximately 75,000 square feet (or 7.81% of the rentable
square feet of the Initial Properties) are scheduled to expire at
the Initial Properties. If existing tenants do not renew their
leases upon expiration, the rental space will have to be re-leased,
and there can be no assurance that the vacated space will be
re-leased at the rents paid under the expired leases. Replacement
leases typically require the landlord to incur tenant improvements,
other tenant inducements and leasing commissions, in each case which
may be higher than for renewal leases.
o Financial Condition of Tenants. In the event of a default by a
tenant under its lease at any of the Properties, the Operating
Partnership may experience delays in enforcing its rights as lessor
and may incur substantial costs in protecting its investment. At any
time a tenant may seek the protection of the bankruptcy laws, which
could result in the rejection and termination of such tenant's lease
and thereby reduce the cash available for distribution by the
Operating Partnership to the Trust and by the Trust to its
Shareholders.
o Dependence on Key Tenants. As of March 31, 1996, 10 tenants occupied
in excess of 30,000 square feet each at the Properties. A loss of
any one such significant tenant could have an adverse effect on the
Operating Partnership and the Trust.
33
<PAGE>
o Competition; General Factors. The Trust competes with a number of
real estate developers, operators and institutions for tenants and
acquisition opportunities. Many of these competitors have
significantly greater resources than the Trust. No assurances can be
given that such competition will not adversely affect the Trust's
revenues and funds available for distribution to Shareholders.
Income from the Properties may also be adversely affected by the
general economic climate, local economic conditions where the
Properties are located, the attractiveness of the Properties to
tenants, competition from other available space, the ability to
provide for adequate maintenance and insurance and increased
operating expenses. Income and real estate values may also be
adversely affected by such factors as applicable laws, interest rate
levels and the availability of financing. In addition, real estate
investments are relatively illiquid and, therefore, the Operating
Partnership's ability to vary its portfolio promptly in response to
change in economic or other conditions will be limited.
o Rights of Third Parties With Respect to Certain of the Initial
Properties. Certain of the Initial Properties are subject to, or
burdened by, rights of third parties to either purchase such Initial
Properties, or participate in the sale proceeds upon the transfer of
such Initial Properties, or both. Such rights of first refusal and
first offer may adversely affect the Operating Partnership's ability
to sell these Properties. Such participation rights diminish the
economic benefits that the Operating Partnership can obtain from
ownership of such Properties.
o Limited Indemnities. Although SSI and TNC will make customary
representations and warranties, on a several basis, in favor of the
Trust and the Operating Partnership in connection with the SSI/TNC
Transaction, in the event that the Trust or the Operating
Partnership were to suffer a loss as a result of the inaccuracy of
any such representations and warranties, the recourse of the Trust
and the Operating Partnership against them will be limited to the
Class A Units issued to them. Approximately 797,665 of the Class A
Units to be issued to TNC will be subject to a prior pledge to
secure obligations of TNC to GECC and therefore may be unavailable
to secure indemnification obligations of TNC in favor of the Trust.
Under certain circumstances, the Trust or the Operating Partnership
could be required to make a cash payment to a third party and be
limited, in its indemnity claim relating to such payment, to
recovery of certain of the Class A Units.
34
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
Exhibits:
99.1 Contribution Agreement among the Trust, SSI and TNC.
99.2 Share and Warrant Purchase Agreement between the Trust and
SSI.
99.3 Employment Agreement between Brandywine Realty Services
Corporation (the "Management Company") and Anthony A. Nichols,
Sr.
99.4 Employment Agreement between the Management Company and
Gerard H. Sweeney.
99.5 Employment Agreement between the Management Company and
Brian Belcher.
99.6 Employment Agreement between the Management Company and
John P. Gallagher.
Reports on Form 8-K:
The Trust filed a report on Form 8-K dated June 21, 1996 regarding the
investment made on that date aggregating $1,330,000 made by an entity controlled
by Richard M. Osborne, a shareholder and Trustee of the Trust, in exchange for
debt and securities in the Trust.
The Trust filed a report on Form 8-K dated July 19, 1996 regarding the Trust's
acquisition, on that date, of a seven-story, 122,000 square foot office building
in Cherry Hill, New Jersey.
35
<PAGE>
BRANDYWINE REALTY TRUST
-----------------------
SIGNATURES OF REGISTRANT
------------------------
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
BRANDYWINE REALTY TRUST
(Registrant)
Date: August 9, 1996 By: /s/ Gerard H. Sweeney
------------------------------- ------------------------------
Gerard H. Sweeney, President
and Chief Executive Officer
(Principal Executive Officer)
Date: August 9, 1996 By: /s/ Francine M. Haulenbeek
------------------------------- -------------------------------
Francine M. Haulenbeek,
Vice President - Finance
and Secretary
(Principal Financial and
Accounting Officer)
36
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
Section 1. Agreement to Form Partnership.............................................................. 3
1.1 Formation of Partnership............................................................. 3
1.2 Definitions.......................................................................... 3
Section 2. Contributions.............................................................................. 3
2.1 By BRT............................................................................... 3
2.2 By TNC............................................................................... 3
2.3 By SSI............................................................................... 4
2.4 Certain Adjustments and Restricted Units............................................. 5
2.5 Included and Excluded Assets......................................................... 5
2.6 Assumption of Liabilities............................................................ 6
Section 3. Representations and Warranties............................................................. 7
3.1 By BRT............................................................................... 7
3.2 By TNC............................................................................... 14
3.3 By SSI............................................................................... 21
3.4 Survival of Representations and Warranties........................................... 27
Section 4. Conditions................................................................................. 28
4.1 Conditions Precedent to BRT Obligations on the
Closing Date......................................................................... 28
4.2 Conditions Precedent To TNC and SSI Obligations on
the Closing Date..................................................................... 30
4.3 Mutual Conditions Precedent of the Parties on the
Closing Date......................................................................... 30
Section 5. Operations Prior to Transfer............................................................... 32
5.1 Property Operations.................................................................. 32
5.2 Casualty or Condemnation............................................................. 33
Section 6. Closing; Closing Deliveries; Transfer
Deliveries........................................................................... 34
6.1 Closing.............................................................................. 34
6.2 Closing Documents.................................................................... 34
Section 7. Closing Adjustments and Expenses........................................................... 35
7.1 Adjustments.......................................................................... 35
7.2 Expenses............................................................................. 36
Section 8. General Provisions......................................................................... 36
8.1 Notices.............................................................................. 36
8.2 Confidentiality...................................................................... 37
8.3 Entire Agreement..................................................................... 38
8.4 Counterparts......................................................................... 38
8.5 Governing Law........................................................................ 38
8.6 Section Headings, Captions and Defined Terms......................................... 38
8.7 Amendments, Modifications and Waiver................................................. 38
8.8 Severability......................................................................... 39
8.9 Liability of Trustees, etc........................................................... 39
</TABLE>
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CONTRIBUTION AGREEMENT
THIS AGREEMENT is made as of the 31st day of July, 1996 by and among
BRANDYWINE REALTY TRUST, a Maryland real estate investment trust ("BRT"),
SAFEGUARD SCIENTIFICS, INC., a Pennsylvania corporation ("SSI"), and THE NICHOLS
COMPANY, a Pennsylvania corporation ("TNC").
RECITALS
A. Witmer Operating Partnership I, L.P. ("Witmer") 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 "A
Properties") are listed on Exhibit "A" attached hereto. Witmer also owns in fee
the office property known as the Lawrenceville Office Park, Lawrenceville, New
Jersey (the "Lawrenceville Property").
B. TNC owns all of the issued and outstanding shares of BRT Witmer,
Inc., a Pennsylvania corporation that is the sole general partner of Witmer
("Witmer GP"), subject to a pledge in favor of SSI securing a loan made by SSI
to TNC, which pledge gives SSI the right to acquire all the issued and
outstanding shares of Witmer GP in satisfaction of such debt. SSI, through its
wholly owned subsidiary, SSI Real, Inc., owns all the Class B partnership units
issued by Witmer (the "Witmer Class B Units"). TNC and certain other Existing
Partners (hereinafter defined) own all the Class A partnership units issued by
Witmer (the "Witmer Class A Units").
C. TNC, either directly or through subsidiaries, 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 "C Properties") are listed on Exhibit "C"
attached hereto. The partnerships owning the A Properties and the C Properties
and the partnership owning one of the B Properties are sometimes referred to
herein as the "Project Partnerships".
D. SSI, either directly or through a limited partnership in which it
and a subsidiary are the only partners, owns certain office and industrial
properties that are listed on Exhibit "B"
<PAGE>
attached hereto and referred to herein as the "B Properties." The A Properties,
B Properties, C Properties and Lawrenceville are referred to herein collectively
as the "Properties" and individually as a "Property."
E. BRT is a real estate investment trust and general partner of
Brandywine Realty Partners, a general partnership ("BRT OP"), which owns certain
office properties.
F. This Agreement is being executed as part of a larger transaction, in
which (i) SSI and BRT are entering into a purchase agreement whereby SSI, or a
wholly owned subsidiary of SSI, will acquire common stock and a warrant of BRT
in consideration for the assignment to a wholly-owned qualified real estate
subsidiary of BRT of all of the partnership interests owned by Witmer GP in
Witmer, and SSI's assignment to BRT of the Witmer Class B Units and payment to
BRT of $426,250 in cash, (ii) TNC will cause an affiliated partnership to grant
an option to the Partnership to acquire certain properties commonly known as
Horsham 11 through 14 in exchange for the issuance of Class A LP Units, (iii)
Safeguard Scientifics (Delaware), Inc., a wholly owned subsidiary of SSI ("SSI
Delaware") will enter into a distribution support and loan agreement with the
Partnership whereby SSI Delaware will commit to lend the Partnership certain
funds and (iv) TNC will transfer to the Partnership or its management company
affiliate substantially all of TNC's property management assets.
G. BRT, TNC and SSI 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 $1,000 in cash, the
furniture, fixtures and equipment BRT is to acquire from TNC for $25,000 on the
Closing Date, the Witmer Class B Units and BRT's interest in BRT OP (in a two
stage transaction) in return for issuance of general partner interests and Class
B and Class C limited partner interests in the Partnership (collectively, the
"BRT Units"), (ii) the Existing Partners holding the Witmer Class A Units will
contribute the Witmer Class A Units to the Partnership in return for issuance of
Class A limited partner interests in the Partnership (the "Class A LP Units"),
and (iii) SSI, TNC and the applicable Existing Partners will contribute, as
applicable, the B Properties and interests in the Project Partnerships owning C
Properties and one B Property to the Partnership in return for issuance of Class
A LP Units to SSI Delaware, TNC and the other Existing Partners.
-2-
<PAGE>
TERMS AND CONDITIONS
NOW THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants and agreements contained herein, the
parties hereto, intending to be legally bound, agree as follows:
Section 1. Agreement to Form Partnership
1.1 Formation of Partnership. Subject to the terms and conditions of
this Agreement, TNC, SSI and BRT agree to form the Partnership (or, if the
Partnership has been previously formed by BRT, continue the Partnership) by
executing and delivering (in the case of SSI, causing SSI Delaware to execute
and deliver) at the Closing the Agreement of Limited Partnership in the form
attached hereto as Exhibit "D" (the "Partnership Agreement").
1.2 Definitions. For purposes of this Agreement, the terms used herein
shall have the definitions specified or referred to in this Agreement.
Section 2. Contributions
2.1 By BRT. On the Closing Date, BRT will contribute to the Partnership
$1,000 in cash, the furniture, fixtures and equipment BRT is to acquire from TNC
on the Closing Date, a portion of its interest in BRT OP (constituting a 97%
profits interest and a 49% capital interest in BRT OP) and the Witmer Class B
Units in return for the issuance of a portion of the BRT Units to BRT. One year
and one day following the Closing Date BRT shall contribute its remaining
interest in BRT OP to the Partnership in return for the issuance of the
remaining BRT Units to BRT. Exhibit "E" attached hereto lists the number of
units of general partner interests, Class B limited partner interests and Class
C limited partner interests that collectively constitute the BRT Units, and
notes which of those Units are to be issued at Closing and which are to be
issued upon contribution to the Partnership of BRT's remaining interest in BRT
OP.
2.2 By TNC. On the Closing Date, TNC will (a) assign to the Partnership
that certain undated agreement and note in the principal amount of $1,201,746
issued by Witmer in favor of TNC in connection with the formation of Witmer (the
"Witmer Note"), which will then be cancelled, and (b) cause all of the Witmer
Class A Units and all of the partnership interests in the Project
-3-
<PAGE>
Partnerships owning the C Properties (the "Project Partnership Interests") to be
conveyed to the Partnership, other than (i) the Newtech III Interest referred to
below and (ii) an 11% capital interest and a 1% profits interest in each of such
Project Partnerships other than Fifteen Horsham, L.P. (the "Retained
Interests"), which shall be retained by TNC subject to the put and call
provisions contained in the Partnership Agreement. In consideration for the
assignment of the Witmer Note and conveyance of the Witmer Class A Units and
such Project Partnership Interests to it, the Partnership shall issue to the
partners holding Witmer Class A Units and the partners in the C Property Project
Partnerships as of the date hereof (collectively, the "Existing Partners") Class
A LP Units in the Partnership, subject to cancellation of a portion of such
units and the issuance of additional Class A LP Units in certain circumstances,
as more particularly provided in the Partnership Agreement. Exhibit "G" attached
hereto lists the Class A LP Units to be issued to the Existing Partners with
respect to the A and C Properties at Closing and the Class A LP Units to be
issued to TNC upon the transfer to the Partnership of the Retained Interests. A
35% profits interest in Newtech III Limited Partnership was granted to N.E.
Leasing Company in connection with the leasing of space in the Property known as
Newtown 12 to New England Mutual Life Insurance Company, as more particularly
described in the agreement of limited partnership for Newtech III Limited
Partnership (the "Newtech III Interest"); the Newtech III Interest will not be
conveyed to the Partnership.
2.3 By SSI.
(a) On the Closing Date, SSI will convey fee simple title to
each of the B Properties other than Meetinghouse 2 to the Partnership.
(b) Meetinghouse 2 is owned by C/N Leedom Limited Partnership
II ("Leedom II"), a partnership in which a corporation wholly owned by SSI is
the general partner and SSI is the limited partner. On the Closing Date, SSI
will cause all of the partnership interests in Leedom II (the "Leedom
Partnership Interests") to be conveyed to the Partnership other than an 11%
capital interest and a 1% profits interest in Leedom II (the "Leedom Retained
Interests"), which shall be retained by SSI subject to the put and call
provisions contained in the Partnership Agreement.
(c) In consideration for the conveyance of the B Properties
(other than Meetinghouse 2) and the transfer of the Leedom Partnership
Interests, on the Closing Date the Partnership shall issue to SSI Delaware
386,162 Class A LP Units (of which 215,607 Class A LP Units shall be issued in
escrow as provided in the Partnership Agreement), subject to cancellation of a
portion of such units and the issuance of additional Class A LP Units in
-4-
<PAGE>
certain circumstances as provided in the Partnership Agreement. An additional
9,444 Class A LP Units shall be issued to SSI Delaware upon conveyance of the
Leedom Retained Interests to the Partnership.
2.4 Certain Adjustments and Restricted Units. The number of Class A LP
Units to be issued to the Existing Partners and SSI Delaware will be adjusted at
Closing to reflect any differences in mortgage debt balances between the
balances used by the parties to calculate the number of Units noted on Exhibit G
(with respect to the Existing Partners) and in Section 2.3 (with respect to SSI
Delaware) and the actual debt balances as of the Closing Date, at the rate of
one additional (or less) Class A LP Unit for each $5.50 by which mortgage debt
on the Closing Date is less (or greater) than the debt balances used in the
original calculations. In addition, Units issued with respect to a Property
where the mortgage lender is entitled to receipt of a participation interest
(whether of profits, sale or refinancing proceeds or calculated based on fair
market value) shall be held in escrow until determination of the participation
due such lender as provided in the Partnership Agreement. The number of Class A
LP Units equal to the amount of the participation payment actually made divided
by $5.50 (subject to adjustment for stock splits, reverse splits and stock
dividends) shall be transferred to the Partnership and cancelled, with the
balance released from escrow to the person or persons entitled thereto, all as
more particularly provided in the Partnership Agreement.
2.5 Included and Excluded Assets. References in this Agreement to a
Property shall include not only the applicable owner's interest in the land and
buildings and other improvements erected thereon, but also all right, title and
interest of such owner to any land lying in the bed of any street, open or
proposed, in front of or abutting or adjoining such land and all right, title
and interest of such owner in and to the leases and other occupancy agreements
with respect to all or any part of such land, building and improvements and the
fixtures, equipment, supplies, machinery, appliances, furniture, furnishings and
other personal property, tangible and intangible, attached or appurtenant to, or
located in or on, such land, building and improvements. The conveyance of the
Project Partnership Interests by the Existing Partners and the Leedom
Partnership Interests by SSI shall convey all of their respective right, title
and interest in and to the Project Partnerships and Leedom II, respectively.
Only the assets of BRT, TNC and SSI specifically identified in this Agreement as
being contributed to the Partnership are being so contributed. Without limiting
the generality of the foregoing, TNC shall retain its interests in the
partnership owning the Option Properties, its limited partnership interest in
LC/N Horsham Partnership II and its general partnership interest in LC/N Keith
Valley Partnership II.
-5-
<PAGE>
2.6 Assumption of Liabilities.
(a) At the Closing, pursuant to Article XXI of the Partnership
Agreement, the Partnership shall assume and agree to pay, perform and discharge,
when due, each of the following obligations and liabilities of SSI, TNC and/or
their affiliates relating to the business, assets and properties to be
contributed to the Partnership (the "Assumed Liabilities"):
(i) the liabilities and obligations of the
SSI/TNC Contributing Parties to be performed or discharged after the Closing
pursuant to the Significant Agreements described in Sections 3.2(j) and 3.3(h)
hereof;
(ii) the liabilities and obligations of the
SSI/TNC Contributing Parties to be performed or discharged after the Closing
pursuant to the TNC Leases, SSI Leases, the management contracts and other
contracts or instruments described in Sections 3.2(j), 3.2(l), 3.3(h), 3.3(j),
and 4.3(e) hereof, other than those liabilities and obligations noted on any of
Exhibits H, I, L or M as liabilities or obligations not to be assumed by the
Partnership;
(iii) all accounts payable and other current
liabilities of the Initial Properties that are reflected on the combined Balance
Sheet of the Initial Properties at December 31, 1995, less those paid or
otherwise discharged prior to Closing, plus those accounts payable and other
current liabilities of the Initial Properties incurred since the date of such
Balance Sheet in the ordinary course of business, consistent with the past
practice and not paid prior to Closing.
(b) Transfers Subject To Indebtedness. The Partnership shall
acquire ownership of each of the Properties directly or by acquiring ownership
of partnership interests in each of the Project Partnerships, under and subject
to the mortgage indebtedness in existence on the date hereof encumbering such
Properties. The Partnership shall not be required by this Agreement to assume
such mortgage indebtedness or to guaranty repayment of such mortgage
indebtedness.
(c) Excluded Liabilities. Except as expressly provided in this
Agreement, the Partnership shall not assume or be responsible for any
liabilities or obligations of SSI, TNC or their respective affiliates of any
nature whatsoever, whether or not relating to the A Properties, B Properties or
C Properties or other assets acquired by the Partnership pursuant to this
Agreement. SSI, TNC and their respective affiliates, as applicable, shall remain
responsible for such excluded liabilities and obligations.
-6-
<PAGE>
(d) Definitions. For purposes hereof, the SSI/TNC Contributing
Parties means SSI and its affiliates, and TNC, The Nichols Realty Services
Company and their respective affiliates.
Section 3. Representations and Warranties
3.1 By BRT. BRT hereby represents and warrants that, except as
disclosed in the Proxy Statement or any exhibit to this Agreement:
(a) Organization; Authority. BRT and BRT OP are (i) in the
case of BRT, a real estate investment trust duly formed, validly existing and in
good standing under the laws of the state of Maryland with all the necessary
trust power and authority to own, lease or operate its properties and assets and
to carry on its business as now conducted, and (ii) in the case of BRT OP, a
general partnership validly existing under the laws of the State of Pennsylvania
with full power and authority to own, lease and operate its properties and to
carry on its business as now conducted. BRT and BRT OP, as applicable, is duly
qualified to do business and is in good standing as a foreign business trust or
partnership in each jurisdiction where the character of its properties or assets
and the nature of its business requires it to be so qualified. BRT has the
requisite trust authority to enter into and perform this Agreement and all other
documents and agreements to be executed by it in connection with the
transactions contemplated by this Agreement.
(b) Due Authorization; Binding Agreement. Except for the
approval of BRT's shareholders as contemplated by subsection 4.3(c) hereof, the
execution, delivery and performance of this Agreement and all other documents
and agreements to be executed by BRT in connection with the transactions
contemplated by this Agreement have been duly and validly authorized by all
necessary action of BRT. This Agreement and all other documents and agreements
to be executed by BRT in connection with the transactions contemplated by this
Agreement have been and will be duly executed and delivered by BRT and, subject
to receipt of the approval of BRT's shareholders as contemplated by subsection
4.3(c) hereof, constitute the legal, valid and binding obligations of BRT
enforceable against BRT in accordance with their respective terms.
(c) Consents and Approvals. Except as contemplated by
subsections 4.3(a) and (c) hereof and related filings with the SEC, Blue Sky
administrators, and American Stock Exchange, no consent, waiver, approval,
license or authorization of, or filing, registration or qualification with, or
notice to, any governmental unit or any other person is required to be made,
obtained or given by BRT in connection with the execution, delivery and
performance of this Agreement or any other documents
-7-
<PAGE>
and agreements to be executed by BRT in connection with the transactions
contemplated by this Agreement that has not been heretofore obtained. As
contemplated by the Proxy Statement, BRT expects to file an amendment to its
Declaration of Trust with the Maryland Department of Assessment and Taxation.
(d) No Violation. None of the execution, delivery or
performance of this Agreement or any other document or agreement to be executed
by BRT in connection with the transactions contemplated by this Agreement does
or will, with or without the giving of notice, lapse of time or both, violate,
conflict with or constitute a default under any term or provision of the
organizational documents of BRT or any other agreement to which BRT is a party
or by which it is bound or any term or provision of any judgment, decree, order,
statute, injunction, rule or regulation of a governmental unit applicable to
BRT, or by which it or its assets or properties are bound or result in the
creation of any lien or other encumbrance upon the assets or properties of BRT.
(e) Compliance with Laws and Recorded Declarations. BRT and
each of its subsidiaries has complied with all laws (including, without
limitation, the Americans with Disabilities Act of 1990) and requirements of
insurance bodies applicable to the ownership, leasing, use and operation of its
or their properties (collectively, the "BRT Properties"), including, without
limitation, parking and building setback requirements, and has performed all
work and secured all required consents and approvals and obtained and fully paid
for all licenses, permits, certificates, entitlements, grants of right and any
other items and documents required by applicable law, by contract, or as a
condition of any approval granted by the applicable municipal authority,
required of BRT or its subsidiaries for the completion, ownership, leasing, use
and occupancy of its or their properties, including but not limited to final
certificates of occupancy for each of the current tenancies at such properties
(other than where construction of tenant improvements for new tenancies is not
yet completed or applications remain pending), except where the failure to so
comply or obtain would not have a material adverse effect on BRT or its
subsidiaries. Such licenses, permits, certificates, entitlement, grants of right
and other items and documents are in full force and effect. Neither BRT or any
of its subsidiaries have taken any action that would (or failed to take any
action, the omission of which would) result in the revocation or suspension of
such licenses, permits, certificates, entitlements, grants of right and other
items and documents, and neither BRT nor any of its subsidiaries have received
any notice of any violation from any federal, state or municipal entity or
notice of an intention by any such governmental entity to revoke any certificate
of occupancy or other certificate, license, permit, entitlement or grant of
right issued by it in connection with the ownership, use and occupancy
-8-
<PAGE>
of any of its or their properties that in each case has not been cured or
otherwise resolved to the satisfaction of such governmental entity. To the best
of BRT's knowledge, (i) any and all charges (including condominium fees, to the
extent applicable) and other assessments under declarations and like agreements
to which any of the BRT Properties are subject have been paid and no special
assessments thereunder against any of the BRT Properties are pending, and (ii)
all consents and approvals required to be obtained under such declarations and
like agreements with respect to the BRT Properties have been obtained.
(f) Litigation. There are no claims, actions, suits,
proceedings or investigations pending or, to the best of BRT's knowledge,
threatened before any court, governmental unit or any mediator or arbitrator
with respect to BRT, its subsidiaries or its or their properties, except for
litigation arising in the ordinary course of business, which litigation,
individually or in the aggregate, would not have a material adverse effect upon
the Partnership or upon BRT, its subsidiaries or its or their properties taken
as a whole.
(g) Brokers. No brokers or finders have been employed or
engaged by BRT or any of its subsidiaries with respect to the transactions
contemplated by this Agreement or any other document or agreement to be executed
in connection with the transactions contemplated by this Agreement.
(h) SEC Reports. Since January 1, 1995, BRT and its
subsidiaries have timely filed all forms, reports, schedules, statements and
other documents required to be filed with the Securities and Exchange Commission
(the "SEC") pursuant to the Securities Exchange Act of 1934, as amended (the
"Exchange Act") or the Securities Act of 1933, as amended (the "1933 Act"),
including without limitation (i) all Annual Reports on Form 10-K, (ii) all
Quarterly Reports on Form 10-Q, (iii) all reports on Form 8-K and (iv) all proxy
statements relating to meetings of stockholders (whether annual or special) and
(v) all information incorporated by reference into any of the foregoing
(collectively, as amended to date, referred to herein as the "Company SEC
Reports"). The Company SEC Reports were prepared in all material respects in
accordance with and complied in all material respects with the requirements of
applicable law, including the Exchange Act and the 1933 Act and the applicable
rules and regulations of the SEC thereunder, and the Company SEC Reports did not
at the time they were filed and do not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. BRT has not filed any
registration statements with the SEC at any time within the last three years.
BRT has delivered to TNC and SSI prior to the date hereof true and correct
copies of all Company SEC Reports
-9-
<PAGE>
and any other reports and documents filed with the SEC since January 1, 1995.
(i) Financial Statements. Each of the consolidated financial
statements (including, in each case, any related notes thereto) contained in the
Company SEC Reports (i) have been prepared in all material respects in
accordance with the published rules and regulations of the SEC and generally
accepted accounting principles applied on a consistent basis throughout the
periods involved (except in the case of the unaudited financial statements, as
permitted by Form 10-Q of the SEC), (ii) comply as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto and (iii) fairly present in all
material respects the consolidated financial position of BRT and its
subsidiaries as of the respective dates thereof and the consolidated results of
operations and cash flows for the periods indicated (subject, in the case of
unaudited consolidated financial statements for interim periods, to year-end
adjustments (consisting only of normal recurring accruals)), except that any pro
forma financial statements contained in such consolidated financial statements
are not necessarily indicative of the consolidated financial position of BRT and
its subsidiaries as of the respective dates thereof and the consolidated results
of operations and cash flows for the periods indicated. Since December 31, 1995,
the Company has not made any material change in the accounting practices or
policies applied in the preparation of its financial statements.
(j) Environmental Matters. Neither BRT or its subsidiaries
have (a) caused any substance or waste that is listed or defined as hazardous or
toxic under applicable environmental laws or petroleum products (collectively,
"Hazardous Materials") to be improperly maintained or disposed of on, under or
at any of its or their properties, or any part thereof in a manner which
violates, or could give rise to liability under, applicable environmental laws,
or (b) failed to remediate, alter, mitigate or abate any condition required to
be remediated, altered, mitigated or abated under such environmental laws, to
the extent BRT or its subsidiaries have been notified of the existence of a
condition required to be remediated, altered, mitigated or abated. Except as set
forth in the environmental site assessments provided by BRT to SSI and TNC or
disclosed in the Company SEC Reports: (1) to the best of BRT's knowledge, each
of its properties, and the properties of its subsidiaries, is in compliance, and
has heretofore complied, with all environmental laws in all material respects,
(2) to the best of BRT's knowledge, there has been no discharge of Hazardous
Materials by any tenant of any property of BRT or its subsidiaries, or by any
other person or property in, to or under any property of BRT or its
subsidiaries, in either case in quantities requiring response, remediation or
removal, and (3)
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BRT has not received any written notice from any governmental unit or other
person that it or its subsidiaries, or any of its or their properties or
operations conducted thereon, are not or have not been in compliance with the
environmental laws.
(k) Absence of Undisclosed Liabilities and Contractual
Obligations. Except for (i) liabilities disclosed in the financial statements
referred to in subsection 3.1(i), (ii) liabilities described or disclosed in the
Proxy Statement, (iii) liabilities arising in the ordinary course of business
which, if material (individually or in the aggregate), are disclosed in Exhibit
"X" attached hereto (the "BRT Disclosure Schedule"), (iv) liabilities at the
date hereof which are specifically disclosed or otherwise reflected in the
Exhibits attached to this Agreement and (v) current liabilities incurred in the
ordinary course of business after the date hereof, no BRT Property is subject to
liabilities of any nature, whether matured or unmatured, fixed or contingent,
which could reasonably be expected to have, individually or in the aggregate, a
material adverse effect upon such property. There are no Significant Agreements
relating to the BRT Properties, or their operations other than as set forth in
the BRT Disclosure Schedule. None of the BRT Properties are cross-defaulted
and/or cross-collateralized with any other properties other than among the BRT
Properties. For purposes hereof, "Significant Agreement" means and includes any
of the following by which any of the BRT Properties may otherwise be subject or
bound, in each such case as amended and currently in effect, inclusive of any
waivers relating thereto:
(A) all agreements, instruments and documents
(excluding tenant leases referred to in subsection 3.1(l) of this Agreement and
easements and documents providing for the assessment of common charges or
related fees that are included in the Permitted Exceptions) evidencing, securing
or pertaining to contractual obligations that relate to the ownership or
operation of any of the BRT Properties; and
(B) all mortgages.
(l) Tenant Leases. The rent rolls attached hereto as Exhibit
"Y" (the "BRT Rent Rolls") list each of the leases currently in effect with
respect to the BRT Properties as the same have been amended or modified (the
"BRT Leases"); there are no leases, licenses or other rights of occupancy
affecting any of the BRT Properties except for the BRT Leases. BRT has made
available to TNC and SSI complete copies of all of the documents that constitute
the BRT Leases. The BRT Leases are in full force and effect and, except as set
forth on the applicable BRT Rent Roll, (A) to the best of BRT's knowledge, no
uncured Event of Default (as defined in such Leases), has occurred and is
continuing under any such Lease, no tenant has asserted a defense to, offset or
claim against its rent or the performance of its
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obligations under its Lease and no tenant has asserted a default on the part of
the landlord which would give it the right to terminate its Lease or set off
against rent, (B) there are no rights of first refusal on, or options to
purchase, any of the BRT Properties, or any right to a participation interest
(whether of profits, sale or refinancing proceeds, or calculated based on fair
market value) with respect to any such property, in favor of any tenant, (C) no
proposed modifications to any BRT Lease that would reduce (i) the space leased
to any tenant, (ii) the amount of any tenant's rent or (iii) the term of any
lease, (D) no free rent or other rent concession is due any tenant under the BRT
Leases for periods after the Closing Date, (E) no landlord under a BRT Lease is
required to provide tenant improvements or refurbishments with respect thereto
after the Closing Date (other than any tenant improvements that the landlord may
be required to construct if an expansion option provided in a BRT Lease is
exercised), and (F) no tenant under a BRT Lease has the option to terminate its
lease prior to the stated expiration date. Except for (i) security deposits or
(ii) the first full month's rent, whether or not the term of a Lease has
commenced, no prepayments of rent more than thirty (30) days in advance have
been made under the BRT Leases. All decorating, repairs, alterations or other
work performed by the landlord under each of the BRT Leases prior to the date
hereof, or the cost of any such work performed by the tenant and to be
reimbursed by the landlord prior to the date hereof, has been performed or
reimbursed, as applicable. No rent or security deposits under the BRT Leases
have been assigned or encumbered, except as security for the mortgages noted in
the BRT Disclosure Schedule, and there are no agreements or understandings,
written or oral, with any of the tenants other than as set forth in the BRT
Leases or otherwise set forth on the BRT Rent Rolls. All brokerage commissions
and other compensation and fees payable by reason of the BRT Leases have been
paid in full, except as set forth in the BRT Disclosure Schedule.
(m) Reassessments. Each of the BRT Properties has been fully
assessed and is not subject to abatement. To the best of BRT's knowledge, there
are no proposed reassessments of any of the BRT Properties by any taxing
authority and there are no threatened or pending special assessments or other
actions or proceedings (other than county-wide reassessments and/or the usual
increases in mileage rates that may be under consideration by the taxing
authorities in the jurisdictions where the BRT Properties are located) that
could reasonably be expected to give rise to an increase in real property taxes
or assessments against any of the BRT Properties.
(n) Property Improvements. Except as disclosed in any
engineering studies or reports obtained by or delivered to TNC and SSI in
connection with this transaction prior to the date hereof, the improvements at
the BRT Properties are in good condition and repair, ordinary wear and tear
excepted, and have
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not suffered any casualty or other material damage which has not been repaired
in all material respects. To the best of BRT's knowledge, there is no material
latent or patent structural, mechanical or other significant defect, soil
condition or deficiency in the improvements included in the BRT Properties, or
any other defects, soil conditions or deficiencies which, in the aggregate,
would materially adversely affect the value of such properties taken as a whole.
(o) Condemnation or Governmental Proceedings. No eminent
domain, condemnation, incorporation, annexation or moratorium or similar
proceeding has been commenced or, to the best of BRT's knowledge, threatened by
an authority having the power of eminent domain to condemn any part of the BRT
Properties. To the best of BRT's knowledge, there are no pending or threatened
governmental rules, regulations, plans, studies or efforts, or court orders or
decisions, which do or could adversely effect the use or value of the BRT
Properties for their present use.
(p) Insurance. Exhibit "Z" attached hereto lists the insurance
policies relating to the BRT Properties or any part thereof carried by BRT; all
such policies are in full force and effect, and will be continued or renewed
with the existing coverages and policy limits until the Closing Date, and all
premiums thereunder have been paid to the extent due, and will be paid until the
Closing Date; and no notice of cancellation has been received with respect
thereto and, to the best knowledge of BRT, no cancellation is threatened.
(q) FIRPTA. BRT is neither a "foreign person" within the
meaning of Section 1445(f) of the Code nor a "foreign partner" within the
meaning of Section 1446 of the Code.
(r) Taxes. BRT (i) has filed or has had filed on its behalf
all Tax Returns (as defined below) on a timely basis which are required to be
filed as of the date hereof, and such Tax Returns are correct and complete, (ii)
has paid or has had paid on its behalf on a timely basis all Taxes (as defined
below) shown to be due on such Tax Returns and (iii) with respect to any period
for which Tax Returns have not yet been filed, or for which Taxes are not yet
due or owing, has made due and sufficient current accruals for such Taxes in its
books and records in accordance with generally accepted accounting principles.
For purposes of this subsection, "Tax" shall mean any Federal, state or local
tax of any kind whatsoever, including any interest or penalty, and "Tax Return"
shall mean any return, declaration, report, claim for refund, information
return, statement or other similar document relating to Taxes.
(s) No Defaults. All payments of principal and interest on all
mortgage indebtedness respecting the BRT
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<PAGE>
Properties are current as of the date hereof. Neither BRT nor BRT OP is in
default of any loan secured by any of the BRT Properties or any other
Significant Agreement and, to the best of BRT's knowledge, no event has occurred
which with the giving of notice or passage of time would become a default under
any such loan or under any such Significant Agreement.
(t) Ownership of BRT Properties. The properties constituting
the BRT Properties are listed on Exhibit "AA" attached hereto. BRT OP owns the
BRT Properties in fee simple and, to the best of BRT's knowledge, title thereto
is subject only to the Permitted Exceptions relating to the BRT Properties.
3.2 By TNC. TNC hereby represents and warrants that, except as
disclosed in the Proxy Statement or any exhibit to this Agreement:
(a) Organization; Authority. TNC, Witmer GP, Witmer and each
of the Project Partnerships, is either (i) in the case of TNC and Witmer GP,
duly incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation and has full corporate power and authority to own,
lease and operate its properties and to carry on its business as presently
conducted, or (ii) in the case of Witmer and the Project Partnerships, duly
formed, validly existing and in good standing under the laws of its jurisdiction
of formation and has full partnership power and authority to own, lease and
operate its properties and to carry on its business as now conducted. TNC,
Witmer GP, Witmer and each of the Project Partnerships, as applicable, is duly
qualified to do business and is in good standing as a foreign corporation or
partnership in each jurisdiction where the character of its properties or assets
and the nature of its business requires it to be so qualified. TNC has the
requisite authority to enter into and perform this Agreement.
(b) Due Authorization; Binding Agreement. The execution,
delivery and performance of this Agreement and all other documents and
agreements to be executed by TNC in connection with the transactions
contemplated by this Agreement have been duly and validly authorized by all
necessary action of TNC. This Agreement and all other documents and agreements
to be executed by TNC in connection with the transactions contemplated by this
Agreement have been and will be duly executed and delivered by TNC and
constitute the legal, valid and binding obligations of TNC enforceable against
TNC in accordance with their respective terms.
(c) Consents and Approvals. Except as contemplated by
subsection 4.3(d) below and any securities law filing to be made by TNC or any
of its affiliates in connection therewith, no consent, waiver, approval, license
or authorization of, or
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filing, registration or qualification with, or notice to, any governmental unit
or any other person is required to be made, obtained or given by TNC in
connection with the execution, delivery and performance of this Agreement or any
other documents and agreements to be executed by TNC in connection with the
transactions contemplated by this Agreement that has not been heretofore
obtained.
(d) No Violation. None of the execution, delivery or
performance of this Agreement or any other document or agreement to be executed
by TNC in connection with the transactions contemplated by this Agreement does
or will, with or without the giving of notice, lapse of time or both, (i)
violate, conflict with or constitute a default under any term or provision of
(a) the organizational documents of TNC or any Project Partnership or any other
agreement to which TNC or any Project Partnership is a party or by which it is
bound or (b) any term or provision of any judgment, decree, order, statute,
injunction, rule or regulation of a governmental unit applicable to TNC or any
Project Partnership, or by which it or they or its or their assets or properties
are bound or (ii) result in the creation of any lien or other encumbrance upon
the assets or properties of TNC or any Project Partnership, other than in favor
of the Partnership.
(e) Ownership of the A and C Properties. Exhibits "A" and "C"
are true and correct lists of the Project Partnerships that own each of the A
and C Properties. The A and C Properties are owned by their respective Project
Partnerships in fee simple and, to the best of TNC's knowledge, title thereto is
subject only to the Permitted Exceptions.
(f) Ownership of the Project Partnership Interests.
(i) Exhibit "G" attached hereto is a true and
correct list of all Existing Partners of Witmer and each Project Partnership
owning a C Property as shown on the books of Witmer and such Project
Partnerships. To the best of TNC's knowledge, each Existing Partner is the sole
owner of the Witmer Class A Units and/or Project Partnership Interests to be
contributed by him or it to the Partnership and has good, valid and marketable
title to such Witmer Class A Units and/or Project Partnership Interests, free
and clear of all liens, except for those liens created by the partnership
agreements of Witmer or the Project Partnerships, as the case may be. The Witmer
Class A Units and the Project Partnership Interests have been issued in
compliance with the partnership agreements (as then in effect) of Witmer and
each of the Project Partnerships, as applicable, and such interests were not
issued in violation of any federal or state securities laws.
(ii) There are no rights, subscriptions, warrants,
options, rights of first refusal, conversion rights or
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<PAGE>
agreements of any kind outstanding to purchase or to otherwise acquire any
securities or obligations of any kind convertible into any partnership interest
or other equity interests or participation interests of any kind in Witmer, any
of the Project Partnerships or the A or C Properties (or any part thereof),
except for (A) those rights, subscriptions, warrants, options, rights of first
refusal, conversion rights or agreements that will not survive the assignment to
the Partnership of the Witmer Class A Units and Project Partnership Interests,
(B) the Newtech III Interests, (C) the participation interest and right of first
refusal granted New England Mutual Life Insurance Company with respect to Iron
Run 3 and the participation interest granted such lender with respect to
Meetinghouse 1 through 4, and (D) the participation interest and right of first
refusal granted to General Electric Capital Corporation ("GECC") in connection
with the GECC mortgage loan to Witmer, Lawrenceville and the A Property Project
Partnerships (the "GECC Loan"). BRT acknowledges that, as additional security
for the GECC Loan, the partnership interests in the Project Partnerships owning
the A Properties were collaterally assigned to GECC.
(g) Compliance with Laws and Recorded Declarations. TNC,
Witmer and each of the Project Partnerships has complied with all laws
(including, without limitation, the Americans with Disabilities Act of 1990) and
requirements of insurance bodies applicable to the ownership, leasing, use and
operation of the A and C Properties, including, without limitation, parking and
building setback requirements, and has performed all work and secured all
required consents and approvals and obtained and fully paid for all licenses,
permits, certificates, entitlements, grants of right and any other items and
documents required by applicable law, by contract, or as a condition of any
approval granted by the applicable municipal authority, required of TNC or the
Project Partnerships for the completion, ownership, leasing, use and occupancy
of the A and C Properties, including but not limited to final certificates of
occupancy for each of the current tenancies at such Properties (other than where
construction of tenant improvements for new tenancies is not yet completed or
applications remain pending), except where the failure to so comply or obtain
would not have a material adverse effect on the applicable Property. Such
licenses, permits, certificates, entitlement, grants of right and other items
and documents are in full force and effect. None of TNC, Witmer or any of the
Project Partnerships have taken any action that would (or failed to take any
action, the omission of which would) result in the revocation or suspension of
such licenses, permits, certificates, entitlements, grants of right and other
items and documents, and none of TNC, Witmer or any of the Project Partnerships
have received any notice of any violation from any federal, state or municipal
entity or notice of an intention by any such governmental entity to revoke any
certificate of occupancy or other certificate, license, permit, entitlement or
grant of right
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issued by it in connection with the ownership, use and occupancy of any of the A
or C Properties that in each case has not been cured or otherwise resolved to
the satisfaction of such governmental entity. To the best of TNC's knowledge,
(i) any and all charges (including condominium fees, to the extent applicable)
and other assessments under declarations and like agreements to which any of the
A or C Properties are subject have been paid and no special assessments
thereunder against any of the A or C Properties are pending, and (ii) all
consents and approvals required to be obtained under such declarations and like
agreements with respect to the A and C Properties have been obtained.
(h) Financial Statements. The combined balance sheets of the
Initial Properties 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, and for the calendar quarter ending
March 31, 1996, together with the notes thereto, included in the proxy statement
to be sent to BRT shareholders in connection with this transaction (the "Proxy
Statement"), 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 and for the quarter ended March 31, 1996, in conformity with
generally accepted accounting principles. For purposes hereof, the Initial
Properties means the Properties and the property management, leasing and
development operations of The Nichols Realty Services Company, an affiliate of
TNC.
(i) Intentionally Deleted.
(j) Absence of Undisclosed Liabilities and Contractual
Obligations. Except for (i) liabilities disclosed in the financial statements
referred to in subsection 3.2(h), (ii) liabilities described or disclosed in the
Proxy Statement, (iii) liabilities arising in the ordinary course of business
which, if material (individually or in the aggregate), are disclosed in Exhibit
"H" attached hereto (the "TNC Disclosure Schedule"), (iv) liabilities at the
date hereof which are specifically disclosed in the Exhibits attached to this
Agreement and (v) current liabilities incurred in the ordinary course of
business after the date hereof, none of Witmer, the Project Partnerships,
Lawrenceville or any A or C Property is subject to liabilities of any nature,
whether matured or unmatured, fixed or contingent, which could reasonably be
expected to have, individually or in the aggregate, a material adverse effect
upon Witmer or such Project Partnership or Property. There are no Significant
Agreements of Witmer or the Project Partnerships or relating to Lawrenceville or
the A or C Properties, or their operations other than as set forth in the TNC
Disclosure Schedule. The Class A Properties and Lawrenceville are
cross-defaulted and cross-
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collateralized with each other. Oaklands 45 and 50 are also cross-defaulted and
cross-collateralized with each other. Otherwise, none of the A or C Properties
are cross-defaulted and/or cross-collateralized with other properties. For
purposes hereof, "Significant Agreement" means and includes any of the following
to which Witmer or a Project Partnership is a party or by which it or any of its
assets or Lawrenceville or any of the A or C Properties may otherwise be subject
or bound, in each such case as amended and currently in effect, inclusive of any
waivers relating thereto:
(A) all agreements, instruments and documents
(excluding tenant leases referred to in subsection 3.2(l) of this Agreement and
easements and documents providing for the assessment of Common Charges or
related fees that are included in the Permitted Exceptions) evidencing, securing
or pertaining to contractual obligations that relate to the ownership or
operation of Lawrenceville or any of the A or C Properties; and
(B) all mortgages.
(k) Environmental Matters. None of TNC, Witmer or any of the
Project Partnerships have (a) caused any Hazardous Materials to be improperly
maintained or disposed of on, under or at the A or C Properties or
Lawrenceville, or any part thereof in a manner which violates, or could give
rise to liability under, applicable environmental laws, or (b) failed to
remediate, alter, mitigate or abate any condition required to be remediated,
altered, mitigated or abated under such environmental laws, to the extent TNC,
Witmer or any Project Partnership has been notified of the existence of a
condition required to be remediated, altered, mitigated or abated. Except as set
forth in the environmental site assessments provided by TNC to BRT pursuant to
their due diligence investigation or the TNC Disclosure Schedule: (1) to the
best of TNC's knowledge, each A and C Property and Lawrenceville, and Witmer and
each Project Partnership is in compliance, and has heretofore complied, with all
environmental laws in all material respects, (2) to the best of TNC's knowledge,
there has been no discharge of Hazardous Materials by any tenant of the A or C
Properties or Lawrenceville or by any other person in, to or under any of the A
or C Properties or Lawrenceville, in either case in quantities requiring
response, remediation or removal, and (3) neither TNC, Witmer nor any Project
Partnership has received any written notice from any governmental unit or other
person that it or any of the A or C Properties or operations conducted thereon
are not or have not been in compliance with the environmental laws.
(l) Tenant Leases. The rent rolls attached hereto as Exhibit
"I" (the "TNC Rent Rolls") list each of the leases currently in effect with
respect to the A and C Properties and Lawrenceville as the same have been
amended or modified (the "TNC
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Leases"); there are no leases, licenses or other rights of occupancy affecting
any of the A or C Properties or Lawrenceville except for the TNC Leases. TNC has
made available to BRT complete copies of all of the documents that constitute
the TNC Leases. The TNC Leases are in full force and effect and, except as set
forth on the applicable TNC Rent Roll, (A) to the best of TNC's knowledge, no
material uncured Event of Default (as defined in such Leases), has occurred and
is continuing under any such Lease, no tenant has asserted a defense to, offset
or claim against its rent or the performance of its obligations under its Lease
and no tenant has asserted a default on the part of the landlord which would
give it the right to terminate its Lease or set off against rent, (B) there are
no rights of first refusal on, or options to purchase, any of the A or C
Properties or Lawrenceville or any right to a participation interest (whether of
profits, sale or refinancing proceeds, or calculated based on fair market value)
with respect to any such Property, in favor of any tenant, (C) there are no
proposed modifications to any TNC Lease that would reduce (i) the space leased
to any tenant, (ii) the amount of any tenant's rent or (iii) the term of any
lease, (D) no free rent or other rent concession is due any tenant under the TNC
Leases for periods after the Closing Date, (E) no landlord under a TNC Lease is
required to provide tenant improvements or refurbishments with respect thereto
after the Closing Date (other than any tenant improvements that the landlord may
be required to construct if an expansion option provided in a TNC Lease is
exercised), and (F) no tenant under a TNC Lease has the option to terminate its
lease prior to the stated expiration date. Except for (i) security deposits or
(ii) the first full month's rent, whether or not the term of a Lease has
commenced, no prepayments of rent more than thirty (30) days in advance have
been made under the TNC Leases. All decorating, repairs, alterations or other
work required to be performed by the landlord under each of the TNC Leases prior
to the date hereof, or the cost of any such work performed by the tenant and to
be reimbursed by the landlord prior to the date hereof, has been performed or
reimbursed, as applicable. No rent or security deposits under the TNC Leases
have been assigned or encumbered, except as security for the mortgages noted on
the TNC Disclosure Schedule, and there are no agreements or understandings,
written or oral, with any of the tenants other than as set forth in the Leases
or otherwise set forth on the TNC Rent Roll. All brokerage commissions and other
compensation and fees payable by reason of the TNC Leases have been paid in
full, except as set forth in the TNC Disclosure Schedule (and other than any
commissions that may be due if a tenant takes expansion space or renews its
lease).
(m) Litigation. There are no claims, actions, suits,
proceedings or investigations pending or, to the best of TNC's knowledge,
threatened before any court, governmental unit or any mediator or arbitrator
with respect to Witmer, any of the Project
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Partnerships or Lawrenceville or the A or C Properties, except for litigation
listed on Exhibit "J" hereto, which litigation and any projected liability
resulting therefrom is covered by insurance.
(n) Reassessments. Each of the A and C Properties and
Lawrenceville has been fully assessed and is not subject to abatement. To the
best of TNC's knowledge, there are no proposed reassessments of any of the A or
C Properties or Lawrenceville by any taxing authority and there are no
threatened or pending special assessments or other actions or proceedings (other
than county-wide reassessments and/or the usual increases in millage rates that
may be under consideration by the taxing authorities in the jurisdictions where
the A and C Properties and Lawrenceville are located) that could reasonably be
expected to give rise to an increase in real property taxes or assessments
against any of the A or C Properties or Lawrenceville.
(o) Partnership Employees. There are no employees of Witmer or
any Project Partnership.
(p) Property Improvements. Except as disclosed in any
engineering studies or reports obtained by or delivered to BRT in connection
with this transaction prior to the date hereof, the improvements at the A and C
Properties and Lawrenceville are in good condition and repair, ordinary wear and
tear excepted, and have not suffered any casualty or other material damage which
has not been repaired in all material respects. To the best of TNC's knowledge,
there is no material latent or patent structural, mechanical or other
significant defect, soil condition or deficiency in the improvements included in
the A and C Properties or Lawrenceville, or any other defects, soil conditions
or deficiencies which, in the aggregate, would materially adversely affect the
value of such Properties taken as a whole.
(q) Condemnation or Governmental Proceedings. No eminent
domain, condemnation, incorporation, annexation or moratorium or similar
proceeding has been commenced or, to the best of TNC's knowledge, threatened by
an authority having the power of eminent domain to condemn any part of the A or
C Properties or Lawrenceville. To the best of TNC's knowledge, there are no
pending or threatened governmental rules, regulations, plans, studies or
efforts, or court orders or decisions, which do or could adversely affect the
use or value of the A or C Properties or Lawrenceville for their present use.
(r) Insurance. Exhibit "K" attached hereto lists the insurance
policies relating to the A and C Properties and Lawrenceville or any part
thereof carried by TNC or any Project Partnership. All such policies are in full
force and effect, and will be continued or renewed with the existing coverages
and policy limits until the Closing Date, and all premiums thereunder
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have been paid to the extent due, and will be paid until the Closing Date; and
no notice of cancellation has been received with respect thereto and, to the
best knowledge of TNC, no cancellation is threatened.
(s) FIRPTA. None of TNC, Witmer or the Project Partnerships is
a "foreign person" within the meaning of Section 1445(f) of the Code or a
"foreign partner" within the meaning of Section 1446 of the Code.
(t) Brokers. No brokers or finders have been employed or
engaged by TNC or any of the Project Partnerships with respect to the
transactions contemplated by this Agreement or any other document or agreement
to be executed in connection with the transactions contemplated by this
Agreement.
(u) Taxes. Each of the Project Partnerships, Witmer, Witmer GP
and TNC (i) has filed or has had filed on its behalf all Tax Returns (as defined
below) on a timely basis which are required to be filed as of the date hereof,
and such Tax Returns are correct and complete, (ii) has paid or has had paid on
its behalf on a timely basis all Taxes (as defined below) shown to be due on
such Tax Returns and (iii) with respect to any period for which Tax Returns have
not yet been filed, or for which Taxes are not yet due or owing, has made due
and sufficient current accruals for such Taxes in its books and records in
accordance with generally accepted accounting principles. For purposes of this
subsection, "Tax" shall mean any Federal, state or local tax of any kind
whatsoever, including any interest or penalty, and "Tax Return" shall mean any
return, declaration, report, claim for refund, information return, statement or
other similar document relating to Taxes.
(v) No Defaults. All payments of principal and interest on all
mortgage indebtedness respecting Lawrenceville and the A and C Properties are
current as of the date hereof. Neither TNC, Witmer nor any Project Partnership
is in default of any loan or any other Significant Agreement to which it is a
party and, to the best of the knowledge of TNC or any Project Partnership, no
event has occurred which with the giving of notice or passage of time would
become a default under any such loan or under any such Significant Agreement.
(w) Business of TNC. None of the Project Partnerships has
engaged in any business other than owning the properties that are being
transferred hereunder.
3.3 By SSI. SSI hereby represents and warrants that, except as
disclosed in the Proxy Statement or any exhibit to this Agreement:
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(a) Organization; Authority. SSI is duly incorporated, validly
existing and in good standing under the laws of the Commonwealth of Pennsylvania
and has full corporate power and authority to own, lease and operate its
properties and to carry on its business as presently conducted. SSI is duly
qualified to do business and is in good standing as a foreign corporation in
each jurisdiction where the character of its properties or assets and the nature
of its business requires it to be so qualified. SSI has the requisite authority
to enter into and perform this Agreement and all other documents and agreements
to be executed by it in connection with the transactions contemplated by this
Agreement.
(b) Due Authorization; Binding Agreement. The execution,
delivery and performance of this Agreement and all other documents and
agreements to be executed by SSI in connection with the transactions
contemplated by this Agreement have been duly and validly authorized by all
necessary action of SSI. This Agreement and all other documents and agreements
to be executed by SSI in connection with the transactions contemplated by this
Agreement have been and will be duly executed and delivered by SSI and
constitute the legal, valid and binding obligations of SSI enforceable against
SSI in accordance with their respective terms.
(c) Consents and Approvals. Except as contemplated by
subsection 4.3(d) below, no consent, waiver, approval, license or authorization
of, or filing, registration or qualification with, or notice to, any
governmental unit or any other person is required to be made, obtained or given
by SSI in connection with the execution, delivery and performance of this
Agreement or any other documents and agreements to be executed by SSI in
connection with the transactions contemplated by this Agreement that has not
been heretofore obtained.
(d) No Violation. None of the execution, delivery or
performance by SSI of this Agreement or any other document or agreement to be
executed by SSI in connection with the transactions contemplated by this
Agreement does or will, with or without the giving of notice, lapse of time or
both, (i) violate, conflict with or constitute a default under any term or
provision of (a) the organizational documents of SSI or any other agreement to
which SSI is a party or by which it is bound or (b) any term or provision of any
judgment, decree, order, statute, injunction, rule or regulation of a
governmental unit applicable to SSI, or by which it or its assets or properties
are bound or (ii) result in the creation of any lien or other encumbrance upon
the assets or properties of SSI, other than in favor of the Partnership.
(e) Compliance with Laws and Recorded Declarations. SSI has
complied with all laws (including, without limitation, the Americans with
Disabilities Act of 1990) and requirements of
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insurance bodies applicable to the ownership, leasing, use and operation of the
B Properties, including, without limitation, parking and building setback
requirements, and has performed all work and secured all required consents and
approvals and obtained and fully paid for all licenses, permits, certificates,
entitlements, grants of right and any other items and documents required by
applicable law, by contract, or as a condition of any approval granted by the
applicable municipal authority, to be required of SSI for the completion,
ownership, leasing, use and occupancy of the B Properties, including but not
limited to final certificates of occupancy for each of the current tenancies of
such Properties (other than where construction of tenant improvements for new
tenancies is not yet completed or applications are pending), except where the
failure to so comply or obtain would not have a material adverse effect on the
applicable Property. Such licenses, permits, certificates, entitlement, grants
of right and other items and documents are in full force and effect. SSI has not
taken any action that would (or failed to take any action, the omission of which
would) result in the revocation or suspension of such licenses, permits,
certificates, entitlements, grants of right and other items and documents, and
SSI has not received any notice of any violation from any federal, state or
municipal entity or notice of an intention by any such governmental entity to
revoke any certificate of occupancy or other certificate, license, permit,
entitlement or grant of right issued by it in connection with the ownership, use
and occupancy of any of the B Properties that in each case has not been cured or
otherwise resolved to the satisfaction of such governmental entity. To the best
of SSI's knowledge, (i) any and all charges (including condominium fees, to the
extent applicable) and other assessments under declarations and like agreements
to which any of the B Properties are subject have been paid and no special
assessments thereunder are pending against any of the B Properties, and (ii) all
consents and approvals required to be obtained under such declarations and like
agreements with respect to the B Properties have been obtained.
(f) Financial Statements. The combined balance sheets of the
Initial Properties 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, and for the calendar quarter ending
March 31, 1996, together with the notes thereto, included in the Proxy
Statement, 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 and for the quarter ended March 31, 1996, in conformity with
generally accepted accounting principles.
(g) Intentionally Deleted
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(h) Absence of Undisclosed Liabilities and Contractual
Obligations. Except for (i) liabilities disclosed in the financial statements
referred to in subsection 3.3(f), (ii) liabilities described or disclosed in the
Proxy Statement, (iii) liabilities arising in the ordinary course of business
which, if material (individually or in the aggregate), are disclosed in Exhibit
"L" attached hereto (the "SSI Disclosure Schedule"), (iv) liabilities at the
date hereof which are specifically disclosed in the Exhibits attached to this
Agreement and (v) current liabilities incurred in the ordinary course of
business after the date hereof, no B Property is subject to liabilities of any
nature, whether matured or unmatured, fixed or contingent, which could
reasonably be expected to have, individually or in the aggregate, a material
adverse effect upon such Property. There are no Significant Agreements relating
to the B Properties, or their operations other than as set forth in the SSI
Disclosure Schedule. The mortgage loans on the four Meetinghouse Properties are
cross-defaulted and cross-collateralized. Otherwise, none of the B Properties
are cross- defaulted and/or cross-collateralized with any other properties. For
purposes hereof, "Significant Agreement" means and includes any of the following
by which any of the B Properties may otherwise be subject or bound, in each such
case as amended and currently in effect, inclusive of any waivers relating
thereto:
(A) all agreements, instruments and documents
(excluding tenant leases referred to in subsection 3.3(j) of this Agreement and
easements and documents providing for the assessment of common charges or
related fees that are included in the Permitted Exceptions) evidencing, securing
or pertaining to contractual obligations that relate to the ownership or
operation of any of the B Properties; and
(B) all mortgages.
(i) Environmental Matters. SSI has not (a) caused any
Hazardous Materials to be improperly maintained or disposed of on, under or at
any of the B Properties or any part thereof in a manner which violates, or could
give rise to liability under, applicable environmental laws, or (b) failed to
remediate, alter, mitigate or abate any condition required to be remediated,
altered, mitigated or abated under such environmental laws, to the extent that
SSI has been notified of the existence of a condition required to be remediated,
altered, mitigated or abated. Except as set forth in the environmental site
assessments provided by TNC to BRT pursuant to its due diligence review or the
SSI Disclosure Schedule: (1) to the best of SSI's knowledge, each B Property is
in compliance, and has heretofore complied, with all environmental laws in all
material respects, (2) to the best of SSI's knowledge, there has been no
discharge of Hazardous Materials by any tenant of the B Properties or by any
other person or property in, to or under any B Property, in
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either case in quantities requiring response, remediation or removal, and (3)
SSI has not received any written notice from any governmental unit or other
person that it or any of the B Properties or operations conducted thereon are
not or have not been in compliance with the environmental laws.
(j) Tenant Leases. The rent rolls attached hereto as Exhibit
"M" (the "SSI Rent Rolls") list each of the leases currently in effect with
respect to the B Properties as the same have been amended or modified (the "SSI
Leases"); there are no leases, licenses or other rights of occupancy affecting
any of the B Properties except for the SSI Leases. SSI has made available to BRT
complete copies of all of the documents that constitute the SSI Leases. The SSI
Leases are in full force and effect and, except as set forth on the applicable
SSI Rent Roll, (A) to the best of SSI's knowledge, no uncured Event of Default
(as defined in such Leases), has occurred and is continuing under any such
Lease, no tenant has asserted a defense to, offset or claim against its rent or
the performance of its obligations under its Lease and no tenant has asserted a
default on the part of the landlord which would give it the right to terminate
its Lease or set off against rent, (B) there are no rights of first refusal on,
or options to purchase, any of the B Properties, or any right to a participation
interest (whether of profits, sale or refinancing proceeds, or calculated based
upon fair market value) with respect to any such Property, in favor of any
tenant, (C) no proposed modifications to any SSI Lease that would reduce (i) the
space leased to any tenant, (ii) the amount of any tenant's rent or (iii) the
term of any lease, (D) no free rent or other rent concession is due any tenant
under the SSI Leases for periods after the Closing Date, (E) no landlord under
an SSI Lease is required to provide tenant improvements or refurbishments with
respect thereto after the Closing Date (other than any tenant improvements that
the landlord may be required to construct if an expansion option provided in an
SSI Lease is exercised), and (F) no tenant under an SSI Lease has the option to
terminate its lease prior to the stated expiration date. Except for (i) security
deposits or (ii) the first full month's rent, whether or not the term of a Lease
has commenced, no prepayments of rent more than thirty (30) days in advance have
been made under the SSI Leases. All decorating, repairs, alterations or other
work performed by the landlord under each of the SSI Leases prior to the date
hereof, or the cost of any such work performed by the tenant and to be
reimbursed by the landlord prior to the date hereof, has been performed or
reimbursed, as applicable. No rent or security deposits under the SSI Leases
have been assigned or encumbered, except as security for the mortgages noted in
the SSI Disclosure Schedule, and there are no agreements or understandings,
written or oral, with any of the tenants other than as set forth in the SSI
Leases or otherwise set forth on the SSI Rent Rolls. All brokerage commissions
and other compensation and fees payable by reason of the SSI Leases
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have been paid in full, except as set forth in the SSI Disclosure
Schedule.
(k) Litigation. There are no claims, actions, suits,
proceedings or investigations pending or, to the best of SSI's knowledge,
threatened before any court, governmental unit or any mediator or arbitrator
with respect to SSI or the B Properties, except for litigation listed on Exhibit
"N", which litigation and any projected liability resulting therefrom is covered
by insurance.
(l) Reassessments. Each of the B Properties has been fully
assessed and is not subject to abatement. To the best of SSI's knowledge, there
are no proposed reassessments of any of the B Properties by any taxing authority
and there are no threatened or pending special assessments or other actions or
proceedings (other than county-wide reassessments and/or the usual increases in
mileage rates that may be under consideration by the taxing authorities in the
jurisdictions where the B Properties are located) that could reasonably be
expected to give rise to an increase in real property taxes or assessments
against any of the B Properties.
(m) Partnership Employees; Labor Matters. There are no
employees of SSI or Leedom who, by reason of transfer of the B Properties to the
Partnership, shall become employees of the Partnership.
(n) Property Improvements. Except as disclosed in any
engineering studies or reports obtained by or delivered to BRT in connection
with this transaction prior to the date hereof, the improvements at the B
Properties are in good condition and repair, ordinary wear and tear excepted,
and have not suffered any casualty or other material damage which has not been
repaired in all material respects. To the best of SSI's knowledge, there is no
material latent or patent structural, mechanical or other significant defect,
soil condition or deficiency in the improvements included in the B Properties,
or any other defects, soil conditions or deficiencies which, in the aggregate,
would materially adversely affect the value of such Properties taken as a whole.
(o) Condemnation or Governmental Proceedings. No eminent
domain, condemnation, incorporation, annexation or moratorium or similar
proceeding has been commenced or, to the best of SSI's knowledge, threatened by
an authority having the power of eminent domain to condemn any part of the B
Properties. To the best of SSI's knowledge, there are no pending or threatened
governmental rules, regulations, plans, studies or efforts, or court orders or
decisions, which do or could adversely effect the use or value of the B
Properties for their present use.
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(p) Insurance. Exhibit "O" attached hereto lists the insurance
policies relating to the B Properties or any part thereof carried by SSI; all
such policies are in full force and effect, and will be continued or renewed
with the existing coverages and policy limits until the Closing Date, and all
premiums thereunder have been paid to the extent due, and will be paid until the
Closing Date; and no notice of cancellation has been received with respect
thereto and, to the best knowledge of SSI, no cancellation is threatened.
(q) FIRPTA. SSI is neither a "foreign person" within the
meaning of Section 1445(f) of the Code nor a "foreign partner" within the
meaning of Section 1446 of the Code.
(r) Brokers. No brokers or finders have been employed or
engaged by SSI with respect to the transactions contemplated by this Agreement
or any other document or agreement to be executed in connection with the
transactions contemplated by this Agreement.
(s) Taxes. SSI (i) has filed or has had filed on its behalf
all Tax Returns (as defined below) on a timely basis which are required to be
filed as of the date hereof, and such Tax Returns are correct and complete, (ii)
has paid or has had paid on its behalf on a timely basis all Taxes (as defined
below) shown to be due on such Tax Returns and (iii) with respect to any period
for which Tax Returns have not yet been filed, or for which Taxes are not yet
due or owing, has made due and sufficient current accruals for such Taxes in its
books and records in accordance with generally accepted accounting principles.
For purposes of this subsection, "Tax" shall mean any Federal, state or local
tax of any kind whatsoever, including any interest or penalty, and "Tax Return"
shall mean any return, declaration, report, claim for refund, information
return, statement or other similar document relating to Taxes.
(t) No Defaults. All payments of principal and interest on all
mortgage indebtedness respecting the B Properties are current as of the date
hereof. SSI is not in default of any loan secured by any of the B Properties or
any other Significant Agreement and, to the best of SSI's knowledge, no event
has occurred which with the giving of notice or passage of time would become a
default under any such loan or under any such Significant Agreement.
(u) Ownership of B Properties. Leedom II owns Meetinghouse 2
in fee simple and SSI owns the remaining B Properties in fee simple and, to the
best of SSI's knowledge, title thereto is subject only to the Permitted
Exceptions.
3.4 Survival of Representations and Warranties. All representations and
warranties made by the parties in this
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Agreement shall survive the execution of this Agreement for the period and to
the extent set forth in Article XIX of the Partnership Agreement. Any claims by
a party against any other party for breach of any representation, warranty or
covenant set forth herein shall only be made pursuant to and in accordance with,
and shall be subject to all of the limitations expressed in, Article XIX of the
Partnership Agreement, including the limitation that the liability of SSI and
TNC hereunder shall be restricted to their interests in the Collateral pledged
under Section 19.3 of the Partnership Agreement. The remedies set forth in
Article XIX of the Partnership Agreement for breaches of this Agreement shall be
the sole and exclusive remedies available to the parties hereto for claims made
after Closing for breach of this Agreement.
Section 4. Conditions
4.1 Conditions Precedent to BRT Obligations on the Closing Date. The
obligations of BRT to effect the transactions contemplated under this Agreement
at the Closing are subject to the fulfillment on or prior to the Closing of the
following conditions, any one or more of which may be waived in whole or in part
by BRT in writing:
(a) Title Insurance. Title to the Properties shall be good and
marketable and insurable as such by Commonwealth Land Title Insurance Company
free and clear of all liens, restrictions, easements, encroachments, exceptions
and other encumbrances other than Permitted Exceptions. For purposes of this
Agreement "Permitted Exceptions" means (i) for each of the Properties, the
existing leases with respect thereto and the mortgages, liens, restrictions,
easements, encroachments, exceptions and other encumbrances listed on Exhibit
"P" hereto with respect to such Property, (ii) for each of the BRT Properties,
the existing leases with respect thereto and the mortgages, liens, restrictions,
easements, encroachments, exceptions and other encumbrances listed on Exhibit
"P" hereto with respect to such BRT Property, and (iii) for each Property and
BRT Property, the lien of taxes not yet due and payable and applicable laws and
ordinances.
(b) No Material Adverse Change. There shall not have occurred
any material adverse change to the Properties, taken as a whole.
(c) Tenant Estoppels. Estoppel Certificates with respect to
the B and C Properties in form and substance satisfactory to BRT shall have been
executed by the tenants of the B and C Properties listed on Exhibit "Q" hereto.
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(d) Fairness Opinion. BRT shall have received confirmation
from Legg Mason Walker Wood, Incorporated that as of the date of the Proxy
Statement such firm continues to be of the opinion that the transactions
contemplated by this Agreement are fair to the shareholders of BRT from a
financial point of view.
(e) Surveys, etc.. The environmental and engineering reports
and surveys obtained for the A Properties in connection with the GECC Loan shall
have been certified in favor of BRT or the Partnership. BRT shall have received
updated environmental and engineering reports and surveys for the B and C
Properties, certified to either BRT or the Partnership, in form reasonably
satisfactory to BRT and not disclosing any conditions not disclosed in the
original reports and surveys for such Properties which have a material adverse
effect on the Properties taken as a whole.
(f) Liquidity. (i) On the Closing Date, the combined current
assets of the Initial Properties at such date to be acquired by the Partnership
pursuant to this Agreement shall not be less than the combined current
liabilities of the Initial Properties at such date to be assumed by the
Partnership pursuant to this Agreement. The combined current assets and combined
current liabilities of the Initial Properties on the Closing Date shall be
computed in accordance with United States generally accepted accounting
principles applied on a basis consistent with the preparation of the combined
balance sheet of the Initial Properties at December 31, 1995 ("GAAP"), except to
the extent the computation rules provided in paragraphs (ii) or (iii) below
differ from GAAP. BRT, TNC and SSI shall cooperate with one another in the
preparation of a closing balance sheet showing such combined current assets and
combined current liabilities as of the Closing Date, and any disagreements over
the calculation of such combined current assets and combined current liabilities
shall be resolved by Arthur Andersen LLP.
(ii) For purposes of this Section, the combined
current assets of the Initial Properties means an amount equal to the sum of the
following, computed as of the Closing Date: (A) unrestricted cash; (B)
unrestricted cash equivalents; (C) accounts receivable not more than 30 days
overdue; (D) prepaid insurance; (E) prepaid taxes; and (F) the amount of rents
that are payable by tenants under leases within 30 days of the Closing Date.
(iii) For purposes of this Section, the combined
current liabilities means an amount equal to all current liabilities, computed
as of the Closing Date, excluding from current liabilities any principal and
interest payments on mortgage loans falling due more than 30 days after the
Closing Date.
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(iv) In the event the combined current assets of
the Initial Properties on the Closing Date are less than the combined current
liabilities of the Initial Properties on the Closing Date, SSI or TNC or their
affiliates may, at its or their option, contribute in cash to the Partnership
(as a capital contribution [for which no Units will be issued] and not as a
loan) an amount equal to such deficiency, in which event the closing condition
set forth in this subsection shall be deemed satisfied.
(g) No Mortgage Defaults. As of the Closing Date, all payments
of principal and interest on all mortgage indebtedness respecting the Properties
shall be current and no loan secured by any of the Properties otherwise shall be
in default in any material respect.
4.2 Conditions Precedent To TNC and SSI Obligations on the Closing
Date. The obligations of TNC and SSI to effect the transactions contemplated
under this Agreement at the Closing are subject to the fulfillment on or prior
to the Closing Date of the following condition, which may be waived by TNC and
SSI in writing:
(a) No Material Adverse Change. There shall not have occurred
any material adverse change to BRT or the properties owned by BRT and its
subsidiaries, taken as a whole.
4.3 Mutual Conditions Precedent of the Parties on the Closing Date. The
obligations of BRT, TNC and SSI to effect the transactions contemplated under
this Agreement at the Closing are subject to the fulfillment on or prior to the
Closing Date of the following conditions, any one or more of which may be waived
in whole or in part by BRT, TNC and SSI in writing:
(a) BRT Approvals. BRT shall have obtained all approvals
required of its lenders and the other partners in BRT OP for the transfer of
BRT's interest in BRT OP to the Partnership.
(b) SSI Investment in BRT. Pursuant to the Share and Warrant
Purchase Agreement of even date herewith between BRT and SSI, the general
partnership interest in Witmer shall be conveyed to a wholly-owned subsidiary of
BRT and SSI shall have exchanged SSI's Witmer Class B Units, together with
$426,250, in return for the issuance by BRT to SSI of 775,000 shares of common
stock and a warrant of BRT.
(c) Shareholder Approval. BRT shall have received the approval
of its shareholders to the transactions contemplated by this Agreement and the
Partnership Agreement.
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(d) Lender and Partner Consents. TNC and SSI shall have
received the consent of all lenders with respect to the Properties to the
transfers of interests with respect to the Properties under and subject to their
respective mortgages. TNC shall have received the agreement of all other
Existing Partners to transfer their Witmer Class A Units or Project Partnership
Interests, as the case may be, to the Partnership as contemplated by this
Agreement, and such other Existing Partners shall have executed and delivered
the necessary documents to effect such transfers at the Closing. TNC shall not
be deemed to have breached this Agreement if any such Existing Partner refuses
to consent to the transfer or execute and deliver the transfer documents.
(e) TNC Asset Sale; Management Contracts. TNC and BRT shall
have closed on the sale by TNC to BRT of the furniture, fixtures and equipment
of TNC for $25,000 in cash. The management contracts for BRT Properties other
than the BRT Property located in North Carolina shall have been transferred to
the Partnership's management company affiliate (or any such contracts shall have
been cancelled and new management contracts executed with the management company
affiliate). The management contracts for the Properties and all third party
properties (including the Option Properties) currently managed by TNC or any of
its affiliates shall have been transferred to the Partnership's management
company affiliate.
(f) SSI Loan Commitment. SSI Delaware and the Partnership
shall have executed and delivered the Distribution Support and Loan Agreement in
the form attached hereto as Exhibit "W".
(g) Option Agreement. TNC shall have executed and delivered an
Option Agreement to the Partnership in the form attached hereto as Exhibit "R",
with respect to Horsham 11-14 (the "Option Properties").
(h) Concurrent Closings and Deliveries. All of the closing
documents to be delivered at the Closing shall have been executed and be
available for concurrent delivery.
(i) Representations and Warranties True as of Closing Date.
The representations and warranties of each of the parties contained in this
Agreement shall be true at and as of the Closing Date in all material respects,
with the same effect as though such representations and warranties were made as
of such date, provided that the representations and warranties of each of the
parties shall be modified at Closing as provided in their respective Closing
Certificates to reflect, as necessary, the operation of the Properties from the
date hereof through the Closing Date in accordance with Article 5 hereof.
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(j) Closing Certificates. Each party to this Agreement shall
have executed and delivered a certificate dated as of the Closing Date (the
"Closing Certificate"), and signed by the President or other authorized officer,
as the case may be, certifying that its representations and warranties set forth
in this Agreement remain true and correct in all material respects, as may be
modified by information relating to events after the date hereof set forth in
the Closing Certificate. The ability of the parties to modify their
representations and warranties in a Closing Certificate to reflect events
occurring after the date hereof shall not affect the other conditions set forth
in this Section 4.
(k) Opinions. Counsel for each of the parties to this
Agreement shall have delivered to the other parties, as appropriate, its written
opinion, dated the Closing Date, in form and substance satisfactory to the other
parties and its counsel, as appropriate, substantially in the form attached
hereto as Exhibit "S".
(l) Employment Agreements. The Partnership's management
company affiliate shall have entered into employment agreements with Anthony A.
Nichols, Brian F. Belcher and John P. Gallagher in the forms attached hereto as
Exhibit "T", with the management company's obligations thereunder guaranteed by
BRT, the management company shall have entered into a new employment agreement
with Gerard H. Sweeney, with the management company's obligations thereunder
guaranteed by BRT, and BRT shall have issued its warrants to such persons as
contemplated by their employment agreements.
(m) Amex Approval. The shares issuable by BRT as contemplated
by this Agreement shall have been approved for listing by the American Stock
Exchange, Inc.
Section 5. Operations Prior to Transfer
5.1 Property Operations.
(a) Except as otherwise expressly provided herein, between the
date hereof and the Closing Date, SSI shall operate and TNC shall cause the
Project Partnerships to operate their respective Properties in the ordinary
course in a manner consistent with past practice, maintaining the Properties in
the same state of repair, order and condition as they are on the date hereof,
reasonable wear and tear, damage by fire or other casualty excepted. Without
limiting the foregoing, the applicable owner shall not defer any required
maintenance or repair unless such maintenance or repair would otherwise be
deferred in the ordinary course of business. SSI shall maintain, and TNC shall
cause each of the Project Partnerships to maintain,
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its books and records in accordance with past practice and use diligent efforts
to maintain in full force and effect all authorizations and all insurance
policies with respect to their respective Properties.
(b) Without in each case obtaining the prior written consent
of BRT, neither SSI nor any Project Partnership shall enter into new Leases or
modify, cancel, waive any material default under, accept any rental more than
thirty (30) days in advance of its accrual date or accept early surrender of any
of the Leases; provided that SSI and the Project Partnerships may enter into
Leases for 5,000 square feet of space or less provided that such Leases are on
terms and conditions consistent with the leasing pro forma provided by SSI or
TNC for the applicable Property.
(c) SSI and TNC shall notify BRT of any material change in any
of the information set forth in Section 3 hereof or any of the Exhibits attached
hereto with respect to their respective Properties, promptly after such party
has knowledge of such material change. SSI and TNC shall promptly deliver to BRT
copies of all default notices and other material written communications sent or
received by them or any Project Partnership with respect to their respective
Properties.
5.2 Casualty or Condemnation.
(a) If prior to the Closing Date there shall be any damage or
destruction to a Property by fire or other casualty, TNC (with respect to the A
and C Properties) or SSI (with respect to the B Properties) shall give prompt
notice thereof to BRT. Unless such damage or destruction results in a material
adverse change to the Properties taken as a whole, such damage or destruction
shall in no way void or impair this Agreement or reduce the number of Class A LP
Units to be issued with respect to such Property; all insurance proceeds
relating to such damage or destruction shall be contributed to the Partnership
together with such Property or the partnership interests relating thereto, as
otherwise provided in this Agreement. In such event, subject to BRT's right to
participate in the adjustment of the loss with the applicable insurance
companies involved and approve the manner of repair and restoration, SSI or the
applicable Project Partnership shall settle with the insurance companies and
apply the insurance proceeds to promptly and diligently repair and restore, or
commence to repair and restore, the affected Property to its condition and
character immediately prior to the damage or destruction. If such repair and
restoration is not completed by the Closing Date, then on the Closing Date the
owner of the affected Property shall pay over to the Partnership the amount of
the insurance proceeds collected to the extent such proceeds have not yet been
applied to the repair and restoration of the affected Property, (and if any such
proceeds have not been
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collected, the owner of the affected Property shall assign to the Partnership
all its right, title and interest in and to the same). The foregoing provisions
regarding repair and restoration and use of insurance proceeds are subject to
the terms and conditions of the mortgage encumbering the affected Property.
(b) If prior to the Closing Date condemnation or eminent
domain proceedings are commenced against any Property, SSI (with respect to the
B Properties) or TNC (with respect to the A and C Properties) shall give prompt
notice thereof to BRT. Unless the taking contemplated by such condemnation or
eminent domain proceeding would result in a material adverse change to the
Properties taken as a whole, no such condemnation or eminent domain proceeding
shall void or impair this Agreement, or reduce the number of Class A LP Units to
be issued with respect to such Property, provided that the owner of the affected
Property shall be relieved from any obligation hereunder to convey title to the
portion of any such Property so taken. BRT shall have the right to participate
in the negotiation of the award to be made for such taking, and the owner of the
affected Property shall not agree to any proposed award or execute a deed in
lieu of foreclosure without BRT's prior written consent. Any condemnation award
payable with respect to the taking of a Property shall be assigned to the
Partnership.
Section 6. Closing; Closing Deliveries; Transfer Deliveries
6.1 Closing. The closing for the transfer by TNC, the Existing Partners
and SSI of all of the Properties or partnership interests with respect thereto
(the "Closing"), shall take place at the offices of Drinker Biddle & Reath, at
10:00 a.m., on July 31, 1996, or on such other date or at such other time or
place as may be agreed upon in writing by the parties hereto (the "Closing
Date").
6.2 Closing Documents. In addition to the opinions, certificates and
other documents and instruments referred to in Section 4 of this Agreement, at
the Closing, the parties shall also execute and deliver, or cause to be executed
and delivered, the following documents:
(a) The Partnership Agreement, in substantially the form
attached hereto as Exhibit D;
(b) Assignments of Project Partnership Interests in all of the
C Properties to the Partnership and, with respect to a .1% interest in each
Project Partnership, to BRT; and, with respect to the A Properties, assignments
of all Witmer Class A Units from each Existing Partner owning such units to the
Partnership, in substantially the form attached hereto as Exhibit "U";
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<PAGE>
(c) Amendments and Restatements of the C Property Project
Partnership documents in substantially the form attached hereto as Exhibit "V";
and
(d) Deeds and Assignment Agreements in respect of each of the
B Properties other than Meetinghouse 2 in substantially the forms attached
hereto as Exhibits "F-1" and "F-2".
(e) With respect to Meetinghouse 2, assignments of the Leedom
Partnership Interests to the Partnership and, with respect to a .1% limited
partnership interest, to BRT, in substantially the form attached hereto as
Exhibit "U".
(f) SSI shall execute and deliver to the Partnership an
Environmental Indemnity Agreement with respect to the B Property known as
Whitelands Business Park, 110 Summit Drive, in
the form attached hereto as Exhibit "BB".
(g) With respect to each of the A Property Project
Partnerships, assignment of Witmer GP's limited partnership interests to the
Partnership.
Section 7. Closing Adjustments and Expenses
7.1 Adjustments.
(a) No closing adjustments shall be made in connection with
the transfer of any of the interests in the Project Partnerships or Properties
contemplated by this Agreement, provided that:
(i) payments of rent and additional rent that fall
due after the Closing Date and are received prior to their due date shall, in
the case of the Project Partnerships, continue to be held in Project Partnership
bank accounts, effective control of which is transferred to the Partnership on
the Closing Date, and in the case of the B Properties, be paid over to the
Partnership on the Closing Date;
(ii) all security deposits under Leases and all
interest required to be paid thereon pursuant to the terms of such Leases shall,
in the case of the Project Partnerships, continue to be held in Project
Partnership bank accounts effective control of which is transferred on the
Closing Date, and in the case of the B Properties, be paid over to the
Partnership on the Closing Date; and
(iii) all debt service payments, real estate
taxes and payments due under service contracts and to service providers that in
the ordinary course would have been paid prior to the Closing Date shall have
been paid.
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(b) No delinquent rent payment shall be apportioned on the
Closing Date. All rent receivables shall remain the property of the Project
Partnerships with respect to the Properties owned by them and, with respect to
the B Properties, shall be deemed assigned by SSI to the Partnership on the
Closing Date.
7.2 Expenses. Transfer taxes payable with respect to the conveyance of
the B Properties shall be divided equally between the Partnership and SSI. The
parties contemplate that the transfers of Project Partnership Interests in
accordance with the procedures and time periods set forth herein and in the
Partnership Agreement will not be subject to transfer tax. In the event either
the Partnership or an Existing Partner makes or causes a transfer of Project
Partnership Interests not in accordance with the procedures and time periods set
forth herein and in the Partnership Agreement, then the Partnership or such
Existing Partner making or causing such transfer shall be responsible for
payment of any transfer tax due as a result thereof. The Partnership shall be
responsible for all title insurance premiums and title company charges and
recording costs payable in connection with this Agreement. Otherwise each party
shall be responsible for all expenses incurred by it in connection with this
Agreement and the transactions contemplated hereby, including without limitation
the fees and expenses of such party's accountants, attorneys and other advisors,
except as otherwise provided in the Partnership Agreement.
Section 8. General Provisions
8.1 Notices. Any notice, request, demand, waiver, consent, approval or
other communication which is required or permitted hereunder shall be in writing
and shall be deemed given only if delivered personally, sent by reputable next
business day delivery service or by telegram or by registered or certified mail,
postage prepaid, as follows:
If to BRT, to:
Brandywine Realty Trust
Two Greentree Center
Suite 100
Marlton, NJ 08053
Attn: Gerard H. Sweeney
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<PAGE>
With a required copy to:
Pepper, Hamilton & Scheetz
3000 Two Logan Square
18th & Arch Streets
Philadelphia, PA 19103-2799
Attn: Michael H. Friedman, Esq.
If to TNC, to:
The Nichols Company
16 Campus Blvd.
Suite 150
Newtown Square, PA 19073
Attn: Anthony A. Nichols
With a required copy to:
Drinker Biddle & Reath
1000 Westlakes Drive
Suite 300
Berwyn, PA 19312
Attn: Robert H. Strouse, Esq.
If to SSI, to:
Safeguard Scientifics, Inc.
800 Safeguard Building
435 Devon Park Drive
Wayne, PA 19087
Attn: James A. Ounsworth, Esq.
With a required copy to:
Drinker Biddle & Reath
1000 Westlakes Drive
Suite 300
Berwyn, PA 19312
Attn: Robert H. Strouse, Esq.
8.2 Confidentiality. The parties to this Agreement acknowledge that
certain of the information that may be made available to them in connection with
their due diligence investigation or otherwise is proprietary and includes
confidential information. The parties shall hold all such information in
confidence and shall not disclose it to any person before the Closing without
the approval of the other parties, as applicable; provided, however, that the
foregoing restriction shall not apply to any information that is or becomes
publicly known or that is lawfully obtained from a third party, or to any
disclosure required by law or in connection with the enforcement of any party's
rights under this Agreement. Prior to the
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Closing, none of the parties (or any of their respective affiliates) shall make
any public announcement or disclosure relating to the transactions contemplated
herein without the prior agreement of each other party hereto, except as
required by law, provided that each other party shall use its best efforts to
consult with the other in advance of any disclosure required by law.
8.3 Entire Agreement. This Agreement, together with the Exhibits and
certificates referred to herein or delivered pursuant hereto, constitute the
entire agreement between the parties hereto with respect to its subject matter
and supersede all prior and contemporaneous agreements and understandings with
respect to the subject matter thereof.
8.4 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original copy of this
Agreement, and all of which, when taken together, shall be deemed to constitute
but one and the same Agreement.
8.5 Governing Law. This Agreement is made pursuant to, and shall be
construed and enforced in accordance with, the laws of the Commonwealth of
Pennsylvania (and United States federal law, to the extent applicable),
irrespective of the principal place of business, residence or domicile of the
parties hereto, and without giving effect to otherwise applicable principles of
conflicts of laws. Nothing contained herein or in any other document
contemplated hereunder shall prevent or delay any party from seeking, in any
court of competent jurisdiction, specific performance or other equitable
remedies in the event of any breach or intended breach by any party of any of
their respective obligations hereunder.
8.6 Section Headings, Captions and Defined Terms. The section headings
and captions contained herein are for reference purposes only and shall not in
any way affect the meaning and interpretation of this Agreement. The terms
defined herein and in any agreement executed in connection herewith include the
plural as well as the singular and the use of masculine pronouns include the
feminine and neuter. Except as otherwise indicated, all 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.
8.7 Amendments, Modifications and Waiver. The parties may amend or
modify this Agreement in any respect. Any such amendment or modification shall
be in writing. The waiver by any party of any provision of this Agreement shall
not constitute or operate as a waiver of any other provision hereof, nor shall
any failure to enforce any provision hereof operate as a waiver of such
provision or of any other provision.
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<PAGE>
8.8 Severability. The invalidity or unenforceability of any particular
provision, or part of any provision, of this Agreement shall not affect the
other provisions or parts hereof, and this Agreement shall be construed in all
respects as if such invalid or unenforceable provisions or parts were omitted.
8.9 Liability of Trustees, etc. No recourse shall be had for any
obligation of BRT hereunder, or for any claim based thereon or otherwise in
respect thereof, against any past, present or future trustee, shareholder,
officer or employee of BRT, whether by virtue of any statute or rule of law, or
by the enforcement of any assessment or penalty or otherwise, all such liability
being expressly waived and released by each other party hereto.
IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement, all as of the date first written above.
BRANDYWINE REALTY TRUST
By:____________________
Title:_________________
THE NICHOLS COMPANY
By:____________________
Title:_________________
SAFEGUARD SCIENTIFICS, INC.
By:____________________
Title:_________________
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<PAGE>
EXHIBIT LIST
Exhibit A: "A Properties" and owners thereof.
Exhibit B: "B Properties"
Exhibit C: "C Properties" and owners thereof.
Exhibit D: Agreement of Limited Partnership
Exhibit E: Description of BRT Units
Exhibit F-1: Form of Deed
Exhibit F-2: Form of Assignment and Assumption Agreement
Exhibit G: Allocation of Class A LP Units among Existing
Partners
Exhibit H: TNC Disclosure Schedule
Exhibit I: TNC Rent Rolls
Exhibit J: TNC Litigation
Exhibit K: Insurance Policies Relating to A & C Properties
Exhibit L: SSI Disclosure Schedule
Exhibit M: SSI Rent Rolls
Exhibit N: SSI Litigation
Exhibit O: Insurance Policies Relating to B Properties
Exhibit P: Permitted Exceptions on Properties
Exhibit Q: Required Tenant Estoppels
Exhibit R: Form of Horsham 11-14 Option
Exhibit S: Form of Opinion
Exhibit T: Form of Employment Agreement
Exhibit U: Form of Assignments of Project Partnership
Interests
Exhibit V: Form of Amendment and Restatement of Project
Partnership Agreements
Exhibit W: Form of Distribution Support and Loan Agreement
<PAGE>
Exhibit X: BRT Disclosure Schedule
Exhibit Y: BRT Rent Rolls
Exhibit Z: Insurance Policies relating to BRT Properties
Exhibit AA: BRT Properties
Exhibit BB: Form of Whitelands Environmental Indemnity
<PAGE>
INDEX OF DEFINED TERMS
Defined Term Section
- ------------ -------
A Properties............................................... Recitals
B Properties.............................................. Recitals
Assumed Liabilities..............................................2.6
BRT Disclosure Schedule.......................................3.1(k)
BRT OP......................................................Recitals
BRT Properties............................................... 3.1(e)
BRT Rent Rolls............................................... 3.1(e)
BRT Units...................................................Recitals
C Properties.............................................. Recitals
Class A LP Units............................................Recitals
Closing..........................................................6.1
Closing Certificate...........................................4.3(f)
Closing Date.....................................................6.1
Company SEC Reports...........................................3.1(h)
Existing Partners................................................2.2
GECC..........................................................3.2(f)
GECC Loan.....................................................3.2(f)
Hazardous Materials.......................................... 3.1(j)
Initial Properties............................................3.2(h)
Lawrenceville Property..................................... Recitals
Leedom II................................................Section 2.3
Leedom Partnership Interests.............................Section 2.3
Leedom Retained Interests................................Section 2.3
<PAGE>
Newtech III Interest.................................................2.2
Partnership.....................................................Recitals
Partnership Agreement................................................1.1
Permitted Exceptions..............................................4.1(a)
Project Partnership Interests........................................2.2
Project Partnerships............................................Recitals
Properties......................................................Recitals
Property........................................................Recitals
Proxy Statement...................................................3.2(h)
Retained Interests...................................................2.2
SSI Disclosure Schedule...........................................3.3(h)
SSI Leases........................................................3.3(j)
SSI Rent Rolls....................................................3.3(j)
Significant Agreement....................................3.2(j) & 3.3(h)
Tax......................................................3.2(u) & 3.3(s)
Tax Return...............................................3.2(u) & 3.3(s)
TNC Disclosure Schedule...........................................3.2(j)
TNC Leases........................................................3.2(l)
TNC Rent Rolls....................................................3.2(l)
Witmer..........................................................Recitals
Witmer Class A Units............................................Recitals
Witmer Class B Units............................................Recitals
Witmer GP.......................................................Recitals
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C> <C>
SECTION 1. SALE AND PURCHASE OF COMMON SHARES AND WARRANT;
CLOSING.......................................................................................1
1.1 Authorization of Common Shares and Warrants...................................................1
1.2 Sale and Purchase.............................................................................1
1.3 Closing.......................................................................................2
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.................................................2
2.1 Organization and Good Standing................................................................3
2.2 Authorization.................................................................................3
2.3 No Conflict with Law or Documents.............................................................3
2.4 Capital Stock of Company......................................................................3
2.5 Reservation of Shares.........................................................................4
2.6 Consents and Approvals........................................................................4
2.7 Private Offering..............................................................................4
2.8 Declaration of Trust and Bylaws...............................................................5
2.9 Subsidiaries..................................................................................5
2.10 SEC Reports...................................................................................5
2.11 Litigation....................................................................................5
2.12 Compliance with Laws..........................................................................6
2.13 Financial Statements..........................................................................6
2.14 Real Property.................................................................................7
2.15 Tenant Leases.................................................................................9
2.16 Dividends and Other Distributions.............................................................9
2.17 Tax Matters...................................................................................9
2.18 Agreements Affecting the Company's Capital Stock.............................................10
2.19 Insurance....................................................................................10
2.20 Employee Benefit Plans.......................................................................10
2.21 Contracts and Agreements.....................................................................10
2.22 Absence of Certain Developments..............................................................11
2.23 Contracts with Insiders......................................................................11
2.24 Use of Proceeds..............................................................................11
2.25 Environmental Matters........................................................................12
2.26 Certain Agreements...........................................................................12
2.27 Books and Records............................................................................12
2.28 Certain Payments.............................................................................13
2.29 Labor Agreements and Actions.................................................................13
2.30 Entire Business; Etc.........................................................................13
2.31 Proxy Statement..............................................................................13
2.32 Information..................................................................................14
2.33 RMO Fund Investment..........................................................................14
2.34 Standstill Agreement.........................................................................14
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SECTION 3. PURCHASER'S REPRESENTATIONS AND WARRANTIES...................................................14
3.1 Pre-Existing Entity..........................................................................14
3.2 Beneficial Ownership.........................................................................14
3.3 Principal Place of Business..................................................................15
3.4 Purchase Without View to Distribute..........................................................15
3.5 Restrictions on Transfer.....................................................................15
3.6 Access to Information........................................................................15
3.7 Additional Representations of the Purchaser..................................................15
3.8 Legends......................................................................................16
3.9 Representations Concerning BRT Witmer and Subpartnership.....................................16
3.10 Proxy Statement..............................................................................16
SECTION 4. CONDITIONS PRECEDENT TO THE PURCHASER'S
OBLIGATIONS..................................................................................17
4.1 Representations and Warranties...............................................................17
4.2 Performance..................................................................................17
4.3 Opinion of Counsel to the Company............................................................17
4.4 Proceedings; Certified Copies................................................................17
4.5 No Proceeding or Litigation..................................................................17
4.6 No Material Adverse Change...................................................................17
4.7 ASE Listing..................................................................................17
4.8 Blue Sky Compliance..........................................................................18
4.9 Registration Rights..........................................................................18
4.10 Transaction Documents........................................................................18
4.11 Amendments to Bylaws.........................................................................18
4.12 Stockholder Approval.........................................................................18
4.13 Maryland Anti-Takeover Statutes..............................................................18
4.14 Employment Agreements........................................................................19
4.15 RMO Fund Investment..........................................................................19
4.16 Additional Documents.........................................................................19
SECTION 5. CONDITIONS PRECEDENT TO THE COMPANY'S
OBLIGATIONS..................................................................................19
5.1 Representations and Warranties...............................................................19
5.2 Performance..................................................................................19
5.3 No Proceeding or Litigation..................................................................19
5.4 ASE Listing..................................................................................19
5.5 Standstill Agreement.........................................................................19
5.6 Stockholder Approval.........................................................................19
5.7 Fairness Opinion.............................................................................20
5.8 Employment Agreements........................................................................20
5.9 Contribution Closing.........................................................................20
5.10 Additional Documents.........................................................................20
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<PAGE>
SECTION 6. COVENANTS OF THE COMPANY AND THE PURCHASER PRIOR
TO CLOSING...................................................................................20
6.1 Payment of Expenses..........................................................................20
6.2 Operation of Business in Ordinary Course.....................................................20
6.3 Stockholders' Meeting........................................................................21
6.4 Access to Information........................................................................21
6.5 Notification of Certain Matters..............................................................22
6.6 Conditions Precedent.........................................................................22
SECTION 7. COVENANTS OF THE COMPANY AFTER CLOSING.......................................................22
7.1 Rule 144.....................................................................................22
7.2 Delivery of Financial Statements.............................................................23
7.3 Reservation of Shares........................................................................23
7.4 Compliance with Laws.........................................................................23
7.5 Waivers, Consents, Etc.......................................................................23
7.6 Press Releases...............................................................................23
7.7 Amendment to the Company's Declaration of Trust..............................................23
SECTION 8. COMPLIANCE WITH 1933 ACT; RESTRICTIONS ON
TRANSFERABILITY OF SHARES, WARRANT AND CONVERSION
.............................................................................................24
8.1 Compliance with 1933 Act.....................................................................24
8.2 Restrictive Legend...........................................................................24
8.3 Restrictions on Transferability..............................................................24
8.4 Termination of Restrictions on Transferability...............................................24
SECTION 9. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND
AGREEMENTS...................................................................................25
SECTION 10. MISCELLANEOUS................................................................................25
10.1 Owner of Shares, Warrant and Conversion Shares...............................................25
10.2 Successors...................................................................................25
10.3 Broker or Finder.............................................................................25
10.4 Governing Law................................................................................26
10.5 Notice.......................................................................................26
10.6 Full Agreement...............................................................................26
10.7 Headings.....................................................................................26
10.8 Amendment....................................................................................27
10.9 Survival of Representations and Warranties...................................................27
10.10 Settlement of Disputes.......................................................................27
10.11 Counterparts.................................................................................28
10.12 Termination..................................................................................28
10.13 Effect of Termination........................................................................28
10.14 Non-Recourse.................................................................................29
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<PAGE>
SCHEDULE OF EXHIBITS
Exhibit A -- Form of Warrant
Exhibit B -- Disclosure Letter
Exhibit C -- Registration Rights Agreement
Exhibit D -- Form of Opinion of Counsel to the Company
Exhibit E -- Amendment to the Company's By-Laws
Exhibit F -- Form of Employment Agreements
Exhibit G -- Form of Standstill Agreement
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<PAGE>
SHARE AND WARRANT PURCHASE AGREEMENT (this "Agreement") made
as of this 31st day of July, 1996 between BRANDYWINE REALTY TRUST, a Maryland
real estate investment trust (the "Company"), and SAFEGUARD SCIENTIFICS, INC., a
Pennsylvania corporation (the "Purchaser").
BACKGROUND
The Company desires to issue and sell to the Purchaser, and
the Purchaser desires to purchase, 775,000 of the Company's authorized but
unissued Common Shares (as defined in Section 1.1) and a Warrant (as defined in
Section 1.1) to purchase up to 775,000 Common Shares, subject to adjustment, on
the terms and conditions set forth herein.
Intending to be legally bound hereby, the parties hereto agree
as follows:
SECTION 1. SALE AND PURCHASE OF COMMON SHARES AND WARRANT;
CLOSING
1.1 Authorization of Common Shares and Warrants. The Company
shall authorize the issuance of 775,000 of its authorized but unissued common
shares of beneficial interest (the "Common Shares") and a warrant, having the
terms and provisions provided herein and in the form of warrant attached hereto
as Exhibit A, to purchase up to 775,000 Common Shares at a purchase price of
$6.50 per share, subject to adjustment as provided therein (the "Warrant"). The
term "Shares" as used herein means the 775,000 Common Shares issuable to the
Purchaser hereunder, and the term "Conversion Shares" as used herein means the
Common Shares issuable upon exercise of the Warrant.
1.2 Sale and Purchase.
(a) Subject to the terms and conditions herein set
forth, on the Closing Date (as defined in Section 1.3), the Company shall sell,
issue and deliver to the Purchaser, or to a wholly-owned subsidiary of the
Purchaser, as may be designated by the Purchaser, the Shares and Warrant, and,
in exchange therefor, the Purchaser shall, or shall cause a wholly-owned
subsidiary of the Purchaser to (i) sell, transfer and deliver to the Company, or
to a wholly-owned qualified real estate investment trust subsidiary of the
Company, all of the right, title and interest of the Purchaser, or such
wholly-owned subsidiary, in and to (A) all of its Class B limited partnership
interests (the "Subpartnership Interests") in Witmer Operating Partnership I,
L.P., a Delaware limited partnership (the "Subpartnership"), (B) the general
partnership interest in the Subpartnership (the "BRT Witmer General Partnership
Interest") owned by BRT Witmer, Inc., a Pennsylvania corporation and the sole
general partner of the Subpartnership ("BRT Witmer"), which general partnership
interest constitutes all of the outstanding general partnership interests of the
Subpartnership of BRT Witmer, and (C) all of the limited partnership interests
in the various title holding partnerships of which Witmer Operating Partnership
serves
<PAGE>
as general partner owned by BRT Witmer (the "BRT Witmer Title Holding Limited
Partnership Interests"), and (ii) pay to the Company Four Hundred Twenty Six
Thousand Two Hundred Fifty Dollars ($426,250) in cash (collectively, the
"Purchase Price").
(b) The Subpartnership Interests, BRT Witmer General
Partnership Interest and BRT Witmer Title Holding Limited Partnership Interests
shall be collectively valued at $3,937,000, therefore the total Purchase Price
shall equal $4,363,250. The Company and the Purchaser shall allocate $4,262,500
of the Purchase Price to the Shares (representing a per share price of $5.50)
and the remaining $100,750 to the Warrant.
(c) The Purchaser and the Company shall prepare and
file their respective federal income tax returns in a manner which is consistent
with the allocation of the Purchase Price to the Shares and the Warrant as
provided in clause (b) above and consistent with the treatment on the federal
income tax return of each other party of matters related to such allocation.
1.3 Closing.
(a) The closing of the issuance and sale of the
Shares and Warrant to the Purchaser hereunder shall take place as promptly as
practicable after satisfaction or, if permissible, waiver of the conditions set
forth in Sections 4 and 5, at 10:00 A.M. at the offices of Drinker Biddle &
Reath, Philadelphia National Bank Building, 1345 Chestnut Street, Philadelphia,
PA 19107, unless another date, time or place is agreed to in writing by the
parties hereto. As used herein "Closing" shall mean the closing of the issuance
and sale of the Shares and Warrant to the Purchaser hereunder and the "Closing
Date" shall mean the date on which such Closing takes place.
(b) Subject to the terms and conditions herein set
forth, at the Closing, the Company shall deliver to the Purchaser, or to a
wholly-owned subsidiary of the Purchaser, as may be designated by the Purchaser,
the Warrant and certificates for the Shares duly executed by the Company and
registered in the Purchaser's name or the name of its nominee and, in exchange
for the delivery of the Shares and Warrant, the Purchaser shall deliver to the
Company (i) the cash portion of the Purchase Price by wire transfer of
immediately available funds to an account designated by the Company, and (ii)
executed stock powers and any other appropriate documents of assignment as may
be reasonably requested by the Company to evidence the transfer and assignment
of the BRT Witmer General Partnership Interest, BRT Witmer Title Holding Limited
Partnership Interests and Subpartnership Interests to the Company.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Other than as set forth on the disclosure letter from the
Company to the Purchaser of even date herewith attached hereto as Exhibit B (the
"Disclosure Letter") or as described in the Proxy Statement (as defined in
Section 2.31), the Company represents and warrants to the Purchaser as follows:
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<PAGE>
2.1 Organization and Good Standing. The Company is a real
estate investment trust duly formed, validly existing and in good standing under
the laws of the State of Maryland and has all requisite power and trust
authority, and all necessary licenses and permits, to own and lease its
properties and assets and to conduct its business as now conducted. Each
Subsidiary (as defined in Section 2.9) is an entity duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization and has all requisite power and authority, and all necessary
licenses and permits, to own and lease its properties and assets and to conduct
its business as now conducted. The Company and its Subsidiaries are each
qualified to do business and are in good standing in all states where the
conduct of their respective businesses or their ownership or leasing of property
requires such qualification.
2.2 Authorization. The Company has all requisite power and
trust authority to execute and deliver this Agreement and each Transaction
Document (as defined in Section 4.11) required to be executed and delivered by
it prior to or at the Closing and, subject to the approval of its stockholders
as provided under Section 4.13, to carry out the transactions contemplated
hereby and thereby. The execution, delivery and performance by the Company of
this Agreement and each Transaction Document to which it is a party have been
duly authorized by all requisite corporate action, except for the approval of
the Company's stockholders. This Agreement has been duly executed and delivered
by the Company and, subject to obtaining stockholder approval, constitutes (and,
when executed and delivered as contemplated herein each such Transaction
Document will constitute) the valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, except as such
enforcement may be limited by bankruptcy, insolvency, moratorium, reorganization
and other similar laws relating to or affecting the enforcement of creditors'
rights generally, and except that the availability of specific performance,
injunctive relief or other equitable remedies is subject to the discretion of
the court before which any such proceeding may be brought.
2.3 No Conflict with Law or Documents. The execution, delivery
and performance by the Company of this Agreement and each Transaction Document
to which it is a party will not violate any provision of law, any rule or
regulation of any governmental authority, or any judgment, decree or order of
any court binding on the Company, and will not conflict with or result in any
breach of any of the terms, conditions or provisions of, or constitute a default
under, or result in the creation of any lien, security interest, charge or
encumbrance upon any of the properties, assets or outstanding stock of the
Company under its Declaration of Trust or Bylaws, or any indenture, mortgage,
lease, agreement or other instrument to which the Company is a party or by which
it or any of its properties is bound.
2.4 Capital Stock of Company. The authorized capital stock of
the Company consists of: (a) 15,000,000 Common Shares, 1,916,149 shares of which
are presently issued and outstanding, and (b) 5,000,000 undesignated preferred
shares, par value $.01 per share, none of which are presently issued and
outstanding. All issued and outstanding Common Shares have been duly and validly
issued and are fully paid and nonassessable. Except as otherwise set forth in
the SEC Reports (as defined in Section 2.10) and the Disclosure Letter, there
are no
-3-
<PAGE>
outstanding subscriptions, warrants, options or other rights or commitments of
any character to subscribe for or purchase from the Company, or obligating the
Company to issue, any shares of capital stock of the Company or any securities
convertible into or exchangeable for such shares, and there are no Common Shares
reserved for issuance. The number of Common Shares issuable upon the exercise,
conversion or exchange of those securities described in the SEC Reports and the
Disclosure Letter, is not subject to adjustment by reason of the issuance and
sale of the Shares and Warrant hereunder, or the Conversion Shares upon exercise
of the Warrant. Except as otherwise set forth in the SEC Reports and the
Disclosure Letter, there are no preemptive or similar rights to purchase or
otherwise acquire shares of capital stock of the Company pursuant to any
provision of law or the Declaration of Trust or Bylaws of the Company or by
agreement or otherwise.
2.5 Reservation of Shares. The requisite number of duly
authorized and unissued Common Shares of the Company have been duly authorized
and reserved for issuance upon exercise of the Warrant, and no further trust
action is required for the valid issuance of Common Shares upon exercise of the
Warrant. The Conversion Shares will, at the time of the Closing and thereafter,
not be subject to preemptive or similar rights of any person or entity, and when
issued against payment therefor in accordance with the terms of the Warrant,
will be duly and validly issued, fully paid and nonassessable.
2.6 Consents and Approvals. No permit, consent, approval or
authorization of, or declaration to or filing with, any federal, state, local or
foreign governmental or regulatory authority or other person or entity, not made
or obtained, is required in connection with the execution or delivery of this
Agreement or any Transaction Document by the Company, the offer, issuance, sale
or delivery of the Shares, Warrant or Conversion Shares, or the carrying out by
the Company of the other transactions contemplated hereby, other than (a) the
approval of the Company's stockholders, (b) the filing with, and approval of,
the American Stock Exchange, Inc. ("ASE") with respect to the listing of the
Shares and the Conversion Shares, and (c) filings under federal and applicable
state securities laws. The issuance and sale by the Company of the Shares,
Warrant and Conversion Shares as contemplated hereby will not require compliance
with the notification or other requirements of the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and the rules and regulations promulgated
thereunder. Prior to Closing, the Board of Trustees of the Company shall have
taken all action necessary so that the transactions contemplated by this
Agreement including, without limitation, the issuance of the Shares, Warrant and
Conversion Shares, shall be exempt from the operation of ss.3-601 et seq. (the
"business combination" statute) and ss.3-701 et seq. (the "control share
acquisition" statute) of the Maryland General Corporation Law (collectively, the
"Maryland Anti-Takeover Statutes").
2.7 Private Offering. Assuming the accuracy of the Purchaser's
representations and warranties contained in Section 3, the offer, issuance and
delivery to the Purchaser pursuant to the terms of this Agreement of the Shares
and Warrant and, assuming compliance by the Purchaser with the terms of this
Agreement and applicable law, the Conversion Shares, are exempt from
registration under the Securities Act of 1933, as amended
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(the "1933 Act"). Based on the representations of the Purchaser contained in
Section 3, it is not necessary, under the circumstances contemplated by this
Agreement, to register the Shares, Warrant or Conversion Shares under the 1933
Act or the Pennsylvania Securities Act of 1972.
2.8 Declaration of Trust and Bylaws. The Company has filed as
exhibits to the SEC Reports its Declaration of Trust and Bylaws, each as amended
to date, true and correct copies of which have been delivered to the Purchaser.
2.9 Subsidiaries. The SEC Reports disclose the name of each
entity in which the Company owns a majority interest, other than such entities
that neither own any assets nor have ever conducted any business (collectively,
the "Subsidiaries"). The SEC Reports also describe (a) each Subsidiary's
jurisdiction of organization and the percentage of its equity interests owned by
the Company and (b) the name of each of the Company's corporate or joint venture
affiliates (other than Subsidiaries) and the nature of the affiliation. Except
as described in the SEC Reports, the Company has good and marketable title to
all of the interests it purports to own of each Subsidiary, free and clear in
each case of any mortgage, lien, security interest, charge or other encumbrance,
and all such interests have been duly issued and are fully paid and
nonassessable. Except as set forth in the SEC Reports, the Disclosure Letter or
Section 2.4, there are no outstanding warrants, options or other rights or
commitments of any character to subscribe for or purchase from the Company or a
Subsidiary, or obligating such Subsidiary to issue, any additional equity
interests or any securities convertible into or exchangeable for such equity
interests.
2.10 SEC Reports. Since January 1, 1994, the Company and its
Subsidiaries have timely filed all forms, reports, schedules, statements and
other documents required to be filed with the Securities and Exchange Commission
(the "SEC") pursuant to the Securities Exchange Act of 1934, as amended (the
"Exchange Act") or the 1933 Act, including without limitation, (a) all Annual
Reports on Form 10-K, (b) all Quarterly Reports on Form 10-Q, (c) all reports on
Form 8-K, (d) all proxy statements relating to meetings of stockholders (whether
annual or special) and (e) all information incorporated by reference into any of
the foregoing (collectively, as amended to date, referred to herein as the "SEC
Reports"). The SEC Reports were prepared in all material respects in accordance
with and complied in all material respects with the requirements of applicable
law, including the Exchange Act and the 1933 Act and the applicable rules and
regulations of the SEC thereunder, and the SEC Reports did not at the time they
were filed and do not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances under which they
were made, not misleading. The Company has not filed any registration statements
with the SEC at any time within the last three years. The Company has delivered
to the Purchaser prior to the date hereof true and correct copies of all SEC
Reports and any other reports and documents filed with the SEC since January 1,
1994.
2.11 Litigation. The SEC Reports and the Disclosure Letter
list all material pending or, to the Company's knowledge, threatened litigation
involving the Company and its Subsidiaries. Except as so disclosed, there is no
pending or, to the knowledge of the Company,
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threatened suit, action or litigation, or administrative, arbitration or other
proceeding or governmental inquiry or investigation questioning the validity of
this Agreement or the transactions contemplated hereby, or affecting in any
material adverse respect the Company or any Subsidiary or the business,
properties, assets, operations, prospects or condition (financial or otherwise)
of the Company or any Subsidiary, nor is there, to the knowledge of the Company,
any basis for any such suit, action, litigation, proceeding, inquiry or
investigation.
2.12 Compliance with Laws. The Company and each Subsidiary is
in compliance in all material respects with all laws, ordinances, rules and
regulations of governmental authorities (including, without limitation, the
Americans with Disabilities Act of 1990) and requirements of insurance bodies
applicable to ownership, leasing, use and operation of its or their properties
and has obtained and fully paid for all material licenses, permits,
certificates, entitlements, grants of right and any other items and documents
required by applicable law to be obtained by the Company or its Subsidiaries for
the completion, ownership, leasing, use and occupancy of its or their
properties, except where the failure to so comply or obtain would not have a
material adverse effect on the Company or its Subsidiaries. Such licenses,
permits, certificates, entitlements, grants of right and other items and
documents are in full force and effect. Neither the Company nor any of its
Subsidiaries have taken any action that would (or failed to take any action, the
omission of which would) result in the revocation or suspension of such
licenses, permits, certificates, entitlements, grants of right and other items
and documents, and neither the Company nor any of its Subsidiaries have received
any notice of any material violation from any federal, state or municipal entity
or notice of an intent by any such governmental entity to revoke any material
certificate of occupancy or other certificate, license, permit, entitlement or
grant of right issued by it in connection with the ownership, use and occupancy
of any of its or their properties, that in each case has not been cured or
otherwise resolved to the satisfaction of such governmental entity.
2.13 Financial Statements.
(a) Each of the consolidated financial statements
(including, in each case, any related notes thereto) contained in the SEC
Reports (i) have been prepared in all material respects in accordance with the
published rules and regulations of the SEC and generally accepted accounting
principles ("GAAP") applied on a consistent basis throughout the periods
involved (except in the case of the unaudited financial statements, as permitted
by Form 10-Q of the SEC), (ii) comply as to form in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto and (iii) fairly present in all material respects
the consolidated financial position of the Company and its Subsidiaries as of
the respective dates thereof and the consolidated results of operations and cash
flows for the periods indicated (subject, in the case of unaudited consolidated
financial statements for interim periods, to year-end adjustments consisting
only of normal recurring accruals), except that any pro forma financial
statements contained in such consolidated financial statements are not
necessarily indicative of the consolidated financial position of the Company and
its Subsidiaries as of the respective dates thereof and the consolidated results
of operations and cash flows for the periods indicated. Since December 31, 1995,
the Company has not made
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any material change in the accounting practices or policies applied in the
preparation of its financial statements.
(b) Since March 31, 1996 (the "Balance Sheet Date")
there has been no material adverse change in the business, properties, assets,
operations or condition (financial or otherwise) of the Company and its
Subsidiaries, taken as a whole.
(c) The consolidated balance sheet of the Company and
its Subsidiaries at the Balance Sheet Date (the "Balance Sheet") reflects all
liabilities and obligations of the Company and of each Subsidiary, whether
accrued, contingent or otherwise as of the date thereof, that are of a nature
required to be set forth as a liability on a consolidated balance sheet under
GAAP. Except as set forth in the SEC Reports and the Disclosure Letter, neither
the Company nor any of its Subsidiaries have any liabilities or obligations of
any nature (whether or not of the nature required to be reflected on the balance
sheet prepared in accordance with GAAP) that are not reflected on the Balance
Sheet, except for current liabilities (within the meaning of GAAP) which have
been incurred since the date thereof in the ordinary course of business
consistent in nature and amount with past practice, and which are neither
material in amount nor inconsistent with any of the representations and
warranties contained herein. The Balance Sheet reflects reserves or other
appropriate provisions at least equal to reasonably anticipated liabilities,
losses and expenses of the Company and its Subsidiaries as of the date thereof
which are required to be disclosed by GAAP.
(d) At the time of the issuance and sale of the
Shares and Warrant to the Purchaser hereunder, neither the Company nor any of
its Subsidiaries will have any liabilities or obligations, whether absolute,
accrued, contingent, or otherwise, other than (i) current liabilities reflected
on the Balance Sheet not paid since the Balance Sheet Date, (ii) current
liabilities incurred after the Balance Sheet Date in the ordinary course of
business or in connection with the transactions contemplated hereby or by the
Contribution Agreement (as defined in Section 4.11) and (iii) the other
indebtedness of the Company or of its Subsidiaries described in the Disclosure
Letter and SEC Reports.
2.14 Real Property.
(a) The SEC Reports describe all real properties
owned by the Company and each Subsidiary. To the Company's knowledge, the
Company and each Subsidiary has good, valid and marketable title to all such
real and personal properties and assets reflected therein as being owned by the
Company or such Subsidiary, except for properties and assets sold or otherwise
disposed of in the ordinary course of business since the Balance Sheet Date or
that are not material to its or their business, subject to no liens, mortgages,
security interests, pledges, encumbrances, or charges of any kind except: (i)
liens for taxes or assessments or other government charges or levies not yet due
and payable, (ii) liens imposed by law, such as mechanic's, materialmen's,
warehousemen's and carrier's liens, and other similar liens, securing
obligations incurred in the ordinary course of business which are not past due
for more than 30 days, (iii) liens under workmen's compensation, unemployment
insurance, social security or
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similar legislation, and (iv) the liens securing other indebtedness of the
Company or its Subsidiaries described in the SEC Reports and the Disclosure
Letter (the "Permitted Liens").
(b) No eminent domain, condemnation, incorporation,
annexation or moratorium or similar proceeding has been commenced or, to the
best of the Company's knowledge, threatened by an authority having the power of
eminent domain to condemn any part of the properties owned by the Company and
its Subsidiaries. To the best of the Company's knowledge, there are no pending
or threatened governmental rules, regulations, plans, studies or efforts, or
court orders or decisions, which do or could adversely affect the use or value
of such properties for their present use.
(c) The improvements at all properties owned by the
Company and its Subsidiaries are in good condition and repair, ordinary wear and
tear excepted, and have not suffered any casualty or other material damage which
has not been repaired in all material respects. To the best of the Company's
knowledge, there is no material latent or patent structural, mechanical or other
significant defect, soil condition or deficiency in the improvements included in
such properties.
(d) Each of the properties owned by the Company and
its Subsidiaries has been fully assessed and is not subject to abatement. To the
best of the Company's knowledge, there are no proposed reassessments of any of
such properties by any taxing authority and there are no threatened or pending
special assessments or other actions or proceedings (other than county-wide
reassessments and/or the usual increases in millage rates that may be under
consideration by the taxing authorities in the jurisdictions where such
properties are located) that could give rise to an increase in real property
taxes or assessments against any of such properties.
(e) There are no "Significant Agreements" relating to
the properties owned by the Company and its Subsidiaries, or their operations,
other than as set forth in the Disclosure Letter or SEC Reports. For purposes
hereof, "Significant Agreement" means and includes any of the following by which
any of such properties may otherwise be subject or bound, in each such case as
amended and currently in effect, inclusive of any waivers relating thereto:
(i) all agreements, instruments and
documents (excluding tenant leases referred to in section 2.15 and easements
included in the Permitted Exceptions) evidencing, securing or pertaining to
contractual obligations that (A) are not cancelable upon 60 days notice or less
and (B) have payments or receipts, as applicable, in excess of fifteen thousand
dollars ($15,000) per year or twenty-five thousand dollars ($25,000) over its
life; and
(ii) all mortgages and ground leases.
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2.15 Tenant Leases.
(a) The Disclosure Letter lists each of the leases
currently in effect with respect to the properties owned by the Company and its
Subsidiaries as the same have been amended or modified to date (the "Leases").
The Leases are in full force and effect and, except as set forth in the
Disclosure Letter, (i) no material uncured Event of Default (as defined in any
such Lease), has occurred and is continuing under any such Lease, no tenant has
asserted a defense to, offset or claim against its rent or the performance of
its obligations under its Lease and no tenant has asserted a default on the part
of the landlord which would give it the right to terminate its Lease and (ii)
there are no rights of first refusal on, or options to purchase, any of such
leased properties in favor of any tenant, and no proposed modifications to any
Lease that would reduce (A) the space leased to any tenant, (B) the amount of
any tenant's rent or (C) the term of any Lease.
(b) Except for (i) security deposits or (ii) the
first full month's rent, whether or not the term of a Lease has commenced, no
prepayments of rent more than thirty (30) days in advance have been made under
the Leases. No rent or security deposits under the Leases have been assigned or
encumbered, except as security for the mortgages noted in the Disclosure Letter
or the SEC Reports, and there are no agreements or understandings, written or
oral, with any of the tenants other than as set forth in the Leases or otherwise
set forth in the Disclosure Letter or SEC Reports. All brokerage commissions and
other compensation and fees payable by reason of the Leases have been paid in
full, except as set forth in the Disclosure Letter or SEC Reports.
2.16 Dividends and Other Distributions. Since the Balance
Sheet Date, except for the Company's regular quarterly cash dividend not in
excess of its cash dividend for the preceding quarter, neither the Company nor
any Subsidiary has declared, set aside, or made any payment of a dividend or
made any other distribution in respect of the Company's capital stock,
repurchased or redeemed any of the Company's capital stock, or except as
disclosed in the SEC Reports made any other payments to any holder of 5% or more
of the Company's outstanding Common Stock other than salary paid to such
stockholder for bona fide services to the Company or a Subsidiary as an officer
or employee or reimbursement of reasonable expenses incurred in the ordinary
course of business.
2.17 Tax Matters. The Company qualifies for federal income tax
purposes as a real estate investment trust under Sections 856-860 of the
Internal Revenue Code of 1986, as amended (the "Code"). The Company and each
Subsidiary has filed all U.S. Federal, state, local, foreign and other tax
returns which were required to be filed on or before the date hereof and has
paid all taxes which have become due and payable. All such reports and returns
(copies of which have been delivered to the Purchaser) were materially accurate
and complete when filed and reflect all taxes required to be paid by the Company
and its Subsidiaries for the periods reported therein. The provision for taxes
made on the Balance Sheet at the Balance Sheet Date was sufficient for the
payment of all accrued and unpaid taxes of the Company and its Subsidiaries with
respect to the periods then ended. No additional material assessments,
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deficiencies or penalties in respect of taxes have been made or claimed in
writing against the Company or any Subsidiary which remain unpaid. No tax
returns or reports of the Company or any Subsidiary are or ever have been under
audit.
2.18 Agreements Affecting the Company's Capital Stock. Except
as disclosed in the SEC Reports or the Disclosure Letter, there are no
agreements, written or oral, between the Company and any holder of its capital
stock or, to the knowledge of the Company, among any holders of its capital
stock, relating to the acquisition, disposition or voting of the capital stock
of the Company. Except as disclosed in the SEC Reports or the Disclosure Letter,
and except for the provisions of the Registration Rights Agreement attached as
Exhibit C hereto there are no agreements, either written or oral, which obligate
the Company to effect the registration of any of its securities under the 1933
Act.
2.19 Insurance. The Disclosure Letter lists all insurance
policies carried by the Company or any Subsidiary relating to its or their real
property and assets. All such policies are in full force and effect and all
premiums thereunder have been paid to the extent due, and no notice of
cancellation has been received with respect thereto and, to the best knowledge
of Company, no cancellation is threatened.
2.20 Employee Benefit Plans.
The Disclosure Letter contains a complete and correct
list of all employee benefit plans and employee pension benefit plans currently
maintained for the benefit of any employees of the Company or any Subsidiary by
the Company or any ERISA Affiliate (as defined below) or to which the Company or
any ERISA Affiliate currently contributes or is currently obligated to make
payments with respect to any employees of the Company or any Subsidiary. "ERISA
Affiliate" shall refer to any trade or business, whether or not incorporated,
under common control with the Company within the meaning of Section 414(b), (c),
(m) or (o) of the Code.
(a) "IRS" shall refer to the Internal Revenue
Service.
(b) "Multiemployer Plan" shall have the meaning
ascribed to such term by Section 4001(a)(3) of ERISA.
(c) "PBGC" shall refer to the Pension Benefit
Guaranty Corporation.
2.21 Contracts and Agreements.
(a) The Company has filed as exhibits to its SEC
Reports all of the contracts and agreements required to be so filed by the 1933
Act, the Exchange Act and the rules and regulations of the SEC. True and correct
copies of all such agreements have been provided to the Purchaser prior to the
date hereof. Other than the contracts and agreements
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described in the SEC Reports and the Disclosure Letter, neither the Company nor
any Subsidiary is a party to any contract or agreement which is material to the
business, properties, assets, prospects, operations or condition (financial or
otherwise) of the Company and its Subsidiaries taken as a whole.
(b) Except as disclosed in the SEC Reports or the
Disclosure Letter, neither the Company nor any Subsidiary is (i) in default
under any agreement, contract or instrument to which it is a party or by which
it is bound, which default is reasonably likely to have a material adverse
effect on the business, properties, assets, prospects, operations or condition
(financial or otherwise) of the Company and its Subsidiaries taken as a whole,
(ii) in violation of its Declaration of Trust or Bylaws (or other organizational
documents), each as amended to date, or (iii) in default with respect to any
order, writ, injunction or decree of any court or governmental agency binding on
it, and no event has occurred which with notice or lapse of time, or both, would
create any default or violation described in clauses (i) through (iii).
2.22 Absence of Certain Developments. Except as described in
the SEC Reports or the Disclosure Letter, and except for the Employment
Agreement between the Company and Gerard H. Sweeney on substantially the same
terms as the form of Employment Agreement attached hereto as Exhibit F to be
executed by Anthony A. Nichols, since the Balance Sheet Date, neither the
Company nor any Subsidiary has (a) mortgaged, pledged or subjected to lien,
charge or any other encumbrance any of its assets, tangible or intangible,
except Permitted Liens, (b) sold, assigned or transferred any of its tangible
assets or cancelled any debts or obligations except in the ordinary course of
business, (c) suffered any extraordinary losses, or waived any rights of
substantial value (whether or not in the ordinary course of business), (d) made
any changes in officer compensation, (e) entered into any material transaction
other than in the ordinary course of business, (f) made any change in any of its
material contracts, its Declaration of Trust or Bylaws (or other organizational
documents), or in any arrangements or agreements of any nature relating to its
officers and directors, or (g) sold any equity interests other than as described
in the Proxy Statement.
2.23 Contracts with Insiders. Except as set forth in the SEC
Reports or the Disclosure Letter, no officer or director of the Company, or, to
the Company's knowledge, holder of more than 5% of the Company's outstanding
Common Stock, is a party to any contract, agreement, or arrangement providing
for the Company's or a Subsidiary's employment of, furnishing of services to the
Company or a Subsidiary by, the rental of real or personal property by the
Company or a Subsidiary from, or otherwise requiring payments by the Company or
a Subsidiary to, any such person or entity, or, to the Company's knowledge, any
member of such person's family, or any corporation, partnership or other entity
in which such person or entity, or, to the Company's knowledge, any member of
such person's family, has an interest or of which such person, or, to the
Company's knowledge, any member of such person's family, is an officer,
director, trustee, or beneficiary.
2.24 Use of Proceeds. The Company shall contribute $1,000 in
cash and all of the Subpartnership Interests acquired by it hereunder to the
capital of Brandywine Operating
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Partnership, L.P., a Delaware limited partnership (the "Partnership") formed by
the Company, the Purchaser and The Nichols Company ("TNC"), in exchange for all
of the general partnership interests in the Partnership and all of the Class B
units of limited partnership interests in the Partnership. The BRT Witmer
General Partnership Interest shall at all times be held by a qualified real
estate investment trust subsidiary of the Company. The remaining $426,250 of the
Purchase Price will be used for payment of the Company's costs and expenses
incurred in completing the transactions and for payment of certain expenses of
the Partnership, as described in Section 6.1, and for working capital.
2.25 Environmental Matters. Neither the Company nor its
Subsidiaries have (a) caused any substance or waste that is listed or defined as
hazardous or toxic under applicable environmental laws or petroleum products
(collectively, "Hazardous Materials") to be improperly maintained or disposed of
on, under or at any of its or their properties, or any part thereof, in a manner
which violates, or could give rise to liability under, applicable environmental
laws, or (b) failed to remediate, alter, mitigate or abate any condition
required to be remediated, altered, mitigated or abated under such environmental
laws, to the extent the Company and its subsidiaries have been notified of the
existence of a condition required to be remediated, altered, mitigated or
abated. Except as set forth in the environmental site assessments provided by
the Company to the Purchaser or disclosed in the SEC Reports: (i) to the
Company's knowledge, each of its properties, and the properties of its
Subsidiaries, is in compliance, and has heretofore complied, with all
environmental laws in all material respects, (ii) to the Company's knowledge,
there has been no discharge of Hazardous Materials by any tenant of any property
of the Company or its subsidiaries in quantities requiring response, remediation
or removal, and (iii) the Company has not received any written notice from any
governmental unit or other person or entity that it or its Subsidiaries, or any
of its or their properties or operations conducted thereon, are not or have not
been in compliance with all environmental laws.
2.26 Certain Agreements. The SEC Reports and the Disclosure
Letter list all employment and severance agreements that the Company and each
Subsidiary has entered into with its officers and employees. Except as described
in the SEC Reports and Disclosure Letter, the issuance and sale of the Shares
and Warrant to the Purchaser hereunder, the issuance of the Common Shares
issuable upon the exercise of the Warrant, and the completion of the other
transactions provided for herein will not give any employee the right to
terminate his or her employment and receive severance or other payments from the
Company or any Subsidiary, or result in the acceleration of vesting of any
outstanding option issued by the Company.
2.27 Books and Records. The books and records of the Company
and its Subsidiaries accurately and fairly reflect their respective income,
expenses, assets and liabilities, and the Company and its Subsidiaries maintain
internal accounting controls which provide reasonable assurance that: (a)
transactions are executed in accordance with management's authorization; (b)
transactions are recorded as necessary to permit preparation of reliable
financial statements and to maintain accountability for earnings and assets; (c)
access to assets is permitted only in accordance with management's
authorization; (d) the recorded accountability of all assets is compared with
existing assets at reasonable intervals; and (e) all intercompany
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transactions, charges and expenses among or between the Company, any Subsidiary,
or any other affiliate of the Company are accurately reflected in all financial
statements.
2.28 Certain Payments. Neither the Company nor any of its
Subsidiaries, nor any director, officer, agent or employee of any such entity,
or to the Company's knowledge, any other person or entity associated with or
acting for or on behalf of the Company or any of its Subsidiaries has directly
or indirectly (a) made any unlawful contributions, gift, bribe, rebate, payoff,
influence payment, kickback, or other payment to any person or entity, private
or public, regardless of form, whether in money, property or services, (i) to
obtain favorable treatment in securing business, (ii) to pay for favorable
treatment for business secured, or (iii) to obtain special concessions or
special concessions already obtained, for or in respect of the Company or any of
its Subsidiaries, or (b) established or maintained any fund or asset that has
not been recorded in the books and records of the Company and its Subsidiaries,
or (c) taken any other action in violation of any provision of the Foreign
Corrupt Practices Act of 1977, as amended.
2.29 Labor Agreements and Actions. Neither the Company nor any
Subsidiary is bound by or subject to, any written or oral, express or implied,
contract, commitment or arrangement with any labor union, and no labor union has
requested or, to the knowledge of the Company, has sought to represent any of
the employees, representatives or agents of the Company or any Subsidiary. There
is no strike or other labor dispute involving the Company or any Subsidiary
pending, or to the knowledge of the Company threatened, nor is the Company aware
of any labor organization activity involving any of the employees of the Company
or any Subsidiary. The Company is not aware that any officer or key employee, or
that any group of key employees, intends to terminate his, her or their
employment with the Company or any Subsidiary, nor does the Company or any
Subsidiary have a present intention to terminate the employment of any of the
foregoing. Except as described in the SEC Reports or the Disclosure Letter, the
employment of each employee of the Company or any Subsidiary is terminable at
the will of the applicable employer without further liability of such employer
to such employee except for the payment of such employee's normal salary accrued
but not paid through the date of such termination.
2.30 Entire Business; Etc. Except as set forth in the SEC
Reports or the Disclosure Letter, all of the assets (including the Company's and
its Subsidiaries' interests under franchises, licenses, leases and permits)
necessary for the conduct of the business of the Company and its Subsidiaries as
presently conducted are held exclusively by the Company or a Subsidiary.
2.31 Proxy Statement. Any proxy or similar materials
distributed to the Company's stockholders in connection with the transactions
contemplated by this Agreement and the Transaction Documents, including any
amendments or supplements thereto (the "Proxy Statement"), will comply at all
times in all material respects with the provisions of the Exchange Act and the
rules and regulations thereunder, as applicable, except that no representation
is made by the Company with respect to information supplied in writing by the
Purchaser or by TNC specifically for inclusion in the Proxy Statement
("Purchaser Information") and, at the date sent
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or given to the Company's stockholders and at the time of the meeting of the
Company's stockholders to be held in connection with this Agreement, except for
Purchaser Information, the Proxy Statement will not contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
2.32 Information. Neither this Agreement nor any document
delivered to the Purchaser pursuant hereto, including the SEC Reports (except to
the extent modified by the Disclosure Letter), as of the date hereof contains an
untrue statement of a material fact or omits to state a material fact necessary
in order to make the statements made therein, in the light of the circumstances
under which they were made, not misleading. There is no fact, development or
threatened development known to the Company which could reasonably be expected
to materially adversely effect the business, assets, properties, operations,
prospects or condition (financial or otherwise) of the Company and its
Subsidiaries taken as a whole which has not been set forth in this Agreement,
the Disclosure Letter or the SEC Reports.
2.33 RMO Fund Investment. Approval of the Company's
stockholders is not required in connection with the investment by the Turkey
Vulture Fund XIII, Ltd. (the "RMO Fund") of $1,329,806 in the Company, via an
unsecured loan to the Company, and the acquisition of 59,949 units at a per unit
price of $5.63, as further described under the heading "PROPOSAL NO. 3 -
RESTORATION OF VOTING RIGHTS" of the Proxy Statement (the "RMO Fund
Investment").
2.34 Standstill Agreement. The Agreement, dated March 20,
1996, by and among the Company, the Richard M. Osborne Trust (the "RMO Trust")
and Richard M. Osborne, a copy of which has been delivered to the Purchaser, has
been executed and delivered by all the parties thereto and is in full force and
effect.
SECTION 3. PURCHASER'S REPRESENTATIONS AND WARRANTIES
The Purchaser understands that the Shares, Warrant and
Conversion Shares will not be registered under the 1933 Act, on the grounds that
the sales provided for in this Agreement are exempt pursuant to Section 4(2) of
the 1933 Act and/or Regulation D promulgated under Section 4(2) of the 1933 Act,
and that the reliance of the Company on such exemptions is predicated in part on
the Purchaser's representations, warranties, covenants and acknowledgements set
forth in Sections 3.1 through 3.8.
3.1 Pre-Existing Entity. The Purchaser represents and warrants
to the Company that it was not organized for the specific purpose of purchasing
the Shares and Warrant to be purchased by it hereunder.
3.2 Beneficial Ownership. The Purchaser represents and
warrants to the Company that, as of the date hereof and prior to the purchase of
the Shares and Warrant as
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contemplated hereunder, (a) it is not the "beneficial owner" of any securities
of the Company, as such term is defined in Rule 13d-3 promulgated under the
Exchange Act, and (b) it is not a member of a group which has acquired
beneficial ownership of securities of the Company for purposes of Sections 13(d)
and 13(g) of the Exchange Act.
3.3 Principal Place of Business. The Purchaser represents and
warrants to the Company that the address of its principal place of business or
residence is as set forth in Section 10.5 herein.
3.4 Purchase Without View to Distribute. The Purchaser
represents and warrants to the Company that the Shares and Warrant to be
purchased by it are being, and any Conversion Shares acquired upon exercise of
the Warrant will be, acquired by the Purchaser for its own account, not as a
nominee or agent, and not with a view to resale or distribution within the
meaning of the 1933 Act, and the rules and regulations thereunder, and the
Purchaser will not distribute the Shares, Warrant or Conversion Shares in
violation of the 1933 Act.
3.5 Restrictions on Transfer. The Purchaser (a) acknowledges
that the Shares, Warrant and Conversion Shares are not registered under the 1933
Act or under any state securities laws and that the Shares, Warrant and
Conversion Shares (if any) to be acquired by it must be held indefinitely by it
unless they are subsequently registered under the 1933 Act and under any
applicable state securities laws or an exemption from registration is available,
(b) is aware that any routine sales pursuant to Rule 144 promulgated under the
1933 Act of the Shares, Warrant and Conversion Shares may be made only in
limited amounts and in accordance with the terms and conditions of that Rule and
that in such cases where the Rule is not applicable, compliance with some other
registration exemption will be required, (c) is aware that Rule 144 is not
presently available for use by the Purchaser for resale of the Shares, Warrant
and Conversion Shares and (d) is aware that, except as provided in the
Registration Rights Agreement attached as Exhibit C hereto, the Company is not
obligated to register under the 1933 Act any sale, transfer or other disposition
of the Shares or Conversion Shares.
3.6 Access to Information. The Purchaser confirms that the
Company has made available to it the opportunity to ask questions of and receive
answers from the Company's officers and trustees concerning the terms and
conditions of this transaction and the business and financial condition of the
Company and its Subsidiaries, and to acquire, and the Purchaser has received to
its satisfaction, such additional information, in addition to that set forth
herein, about the business and financial condition of the Company and its
Subsidiaries and the terms and conditions of this transaction as it has
requested.
3.7 Additional Representations of the Purchaser. The Purchaser
represents that (a) it is an "accredited investor" as such term is defined in
Rule 501 promulgated under the 1933 Act, and an "institutional investor" within
the meaning of Section 203(c) of the Pennsylvania Securities Act of 1972 and the
regulations promulgated thereunder, (b) its financial situation is such that it
can afford to bear the economic risk of holding the Shares, Warrant and
Conversion Shares for an indefinite period of time and suffer complete loss of
its investment in
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the Shares, Warrant and Conversion Shares, (c) its knowledge and experience in
financial and business matters are such that it is capable of evaluating the
merits and risks of its purchase of the Shares, Warrant and Conversion Shares as
contemplated by this Agreement and (d) the purchase of the Shares, Warrant and
Conversion Shares by it has been duly and properly authorized and this Agreement
has been duly executed by it or on its behalf.
3.8 Legends. The Purchaser understands that the certificates
evidencing the Shares, Warrant and Conversion Shares shall bear the legend set
forth in Section 8.2 herein.
3.9 Representations Concerning BRT Witmer and Subpartnership.
The Purchaser hereby represents and warrants to the Company that:
(a) BRT Witmer is a corporation duly organized,
validly existing and in good standing under the laws of the Commonwealth of
Pennsylvania;
(b) the Subpartnership is a limited partnership duly
organized, validly existing and in good standing under the laws of the State of
Delaware;
(c) the Purchaser or a wholly-owned subsidiary of the
Purchaser owns all of the outstanding capital stock of BRT Witmer and the
Subpartnership Interests free and clear of any lien, restriction, security
interest, pledge or other charge, claim or encumbrance (collectively, the
"Encumbrances"), and at the Closing the Company shall acquire good and valid
title to the BRT Witmer General Partnership Interest and the Subpartnership
Interests free and clear of any Encumbrance; and
(d) the BRT Witmer General Partnership Interest
represents all of the issued and outstanding general partnership interests in
the Subpartnership, and the Subpartnership Interests represent all of the
outstanding Class B limited partnership interests in the Subpartnership, and
there are no outstanding subscriptions, warrants, options or other rights or
commitments of any character to subscribe for or purchase from either BRT Witmer
or the Subpartnership, or obligating BRT Witmer or the Subpartnership to issue,
additional equity interests or any securities convertible into or exchangeable
for such equity interests, except as otherwise provided by this Agreement or the
Transaction Documents.
3.10 Proxy Statement. Each of the Purchaser and TNC represents
that none of the material supplied by it in writing specifically for inclusion
in the Proxy Statement will, at the date the Proxy Statement is mailed to the
Company's stockholders and at the time of the meeting of the Company's
stockholders to be held in connection with this Agreement, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading. The Company, the
Purchaser and TNC acknowledge that the material supplied by the Purchaser and
TNC in writing specifically for inclusion in the Proxy Statement is included
under the headings "PROPOSAL NO. 1 - THE SSI/TNC
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TRANSACTION -- Description of the Properties" and "-- Principal Features of the
SSI/TNC Transaction -- Mortgage Loans" of the Proxy Statement.
SECTION 4. CONDITIONS PRECEDENT TO THE PURCHASER'S
OBLIGATIONS
The Purchaser's obligation to purchase and make payment for
the Shares and Warrant subscribed for hereunder by it on the Closing Date is
subject, at its option, to the satisfaction of each of the following conditions:
4.1 Representations and Warranties. On the Closing Date, the
representations and warranties contained in Section 2 shall be true and correct
in all material respects with the same effect as though made on and as of the
Closing Date, and the Company shall have so certified to the Purchaser in
writing.
4.2 Performance. All the covenants, agreements and conditions
contained in this Agreement to be performed or complied with by the Company on
or prior to the Closing Date shall have been performed or complied with in all
material respects, and the Company shall have so certified to the Purchaser in
writing.
4.3 Opinion of Counsel to the Company. On the Closing Date,
the Purchaser shall have received an opinion from counsel for the Company, dated
the Closing Date, addressed to the Purchaser in the form of Exhibit D hereto.
4.4 Proceedings; Certified Copies. All proceedings to be taken
in connection with the transactions contemplated by this Agreement to be
consummated on or prior to the Closing Date, and all documents incident thereto,
shall be satisfactory in form and substance to the Purchaser. The Purchaser
shall have received such certified copies or other copies of such documents as
it may reasonably request.
4.5 No Proceeding or Litigation. No suit, action, or other
proceeding seeking to restrain, prevent or change the transactions contemplated
hereby or otherwise questioning the validity or legality of such transactions
shall have been instituted and be pending.
4.6 No Material Adverse Change. There shall have been no
material adverse change since the Balance Sheet Date in the business,
properties, assets, operations, or condition (financial or otherwise) of the
Company and its Subsidiaries taken as a whole.
4.7 ASE Listing. On or prior to the Closing Date, the Shares
and the Conversion Shares shall have been approved for listing on the ASE.
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4.8 Blue Sky Compliance. The Company shall have complied with
all applicable requirements of federal and state securities or "blue sky" laws
with respect to the issuance of the Shares and Warrant sold at the Closing.
4.9 Registration Rights. The Registration Rights Agreement by
and among the Company, the Purchaser and TNC, in the form attached hereto as
Exhibit C, shall have been executed and delivered by all the parties thereto and
shall be in full force and effect.
4.10 Transaction Documents. The closing contemplated by the
Contribution Agreement among the Company, the Purchaser, TNC and certain other
persons, which agreement provides, among other things, for the contribution by
the Company of the Subpartnership Interests to the Partnership in return for the
issuance of all general partnership interests and Class B units of limited
partnership interests in the Partnership, and the contribution by the Purchaser
and TNC of certain property and other interests to the Partnership in return for
the issuance of Class A units of limited partnership interests ("Class A Units")
in the Partnership (the "Contribution Agreement"), shall have occurred (the
"Contribution Closing"), unless waived in writing as provided therein. On the
date of the Contribution Closing, the Partnership Agreement shall have been
entered into by all parties holding an interest in the Partnership and shall be
in full force and effect, and a certificate of limited partnership for the
Partnership shall have been filed in accordance with the provisions of the
Delaware Revised Uniform Limited Partnership Act, as amended. The Warrant,
Registration Rights Agreement, Standstill Agreement (as defined in Section 5.4),
Contribution Agreement, Partnership Agreement and each document or agreement
required to be delivered at the closing hereunder and at the Contribution
Closing shall be referred to herein collectively as the "Transaction Documents."
4.11 Amendments to Bylaws. The amendment to the Company's
Bylaws, in the form of Exhibit E attached hereto, shall have been duly
authorized by all requisite corporate action and shall be in full force and
effect.
4.12 Stockholder Approval. This Agreement and the transactions
contemplated hereby and by the Transaction Documents including, without
limitation, (a) the approval of the transaction set forth under the heading
"PROPOSAL NO. 1 - THE SSI/TNC TRANSACTION" of the Proxy Statement, and (b) the
election to the Board of Trustees of Anthony A. Nichols, Sr., Warren V. Musser,
Walter D'Alessio and Charles P. Pizzi or, if any such persons are unable to
serve as trustees, such other persons as shall be designated by the Purchaser
(collectively, the "Stockholder Approval Matters"), shall have been approved by
the requisite vote of the Company's stockholders.
4.13 Maryland Anti-Takeover Statutes. The Company and its
counsel shall have confirmed to the Purchaser's satisfaction that this Agreement
and the transactions contemplated hereby are exempt from the operation of the
Maryland Anti-Takeover Statues.
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4.14 Employment Agreements. Each of Messrs. Brian F. Belcher,
John P. Gallagher and Anthony A. Nichols shall have entered into Employment
Agreements with Brandywine Realty Services Company, Inc. in substantially the
form of Exhibit F hereto, which agreements shall be in full force and effect.
4.15 RMO Fund Investment. The RMO Fund Investment shall have
been consummated on or prior to the Closing Date.
4.16 Additional Documents. The Company shall have delivered
such other documents necessary to effect the transactions contemplated hereby as
the Purchaser may reasonably request.
SECTION 5. CONDITIONS PRECEDENT TO THE COMPANY'S OBLIGATIONS
The Company's obligation to sell the Shares and Warrant
subscribed for by the Purchaser on the Closing Date is subject, at the Company's
option, to the satisfaction of each of the following conditions:
5.1 Representations and Warranties. On the Closing Date, the
representations and warranties contained in Section 3 shall be true and correct
in all material respects with the same effect as though made on and as of the
Closing Date and the Purchaser shall have so certified to the Company in
writing.
5.2 Performance. All the covenants, agreements and conditions
contained in this Agreement to be performed or complied with by the Purchaser on
or prior to the Closing Date shall have been performed or complied with in all
material respects, and the Purchaser shall have so certified to the Company in
writing.
5.3 No Proceeding or Litigation. No suit, action, or other
proceeding seeking to restrain, prevent or change the transactions contemplated
hereby or otherwise questioning the validity or legality of such transactions
shall have been instituted and be pending.
5.4 ASE Listing. On or prior to the Closing Date, the Shares
and the Conversion Shares shall have been approved for listing on the ASE.
5.5 Standstill Agreement. The Standstill Agreement by and
among the Company and the Purchaser, in the form attached hereto as Exhibit G,
shall have been executed and delivered by all the parties thereto and shall be
in full force and effect.
5.6 Stockholder Approval. This Agreement and the transactions
contemplated hereby and by the Transaction Documents including, without
limitation, the Stockholder Approval Matters set forth in Section 4.12, shall
have been approved by the requisite vote of the Company's stockholders.
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5.7 Fairness Opinion. The Company shall have received a
fairness opinion from Legg Mason Wood Walker Incorporated ("Legg Mason"), in
form and substance satisfactory to the Company's Board of Trustees, that the
transactions contemplated by this Agreement and the Transaction Documents are
fair from a financial point of view to the Company's stockholders.
5.8 Employment Agreements. Each of Messrs. Brian F. Belcher,
John P. Gallagher and Anthony A. Nichols shall have entered into Employment
Agreements with Brandywine Realty Services Company, Inc. in substantially the
form of Exhibit F hereto, which agreements shall be in full force and effect.
5.9 Contribution Closing. The Contribution Closing shall have
occurred.
5.10 Additional Documents. The Purchaser shall have delivered
such other documents necessary to effect the transactions contemplated hereby as
the Company may reasonably request.
SECTION 6. COVENANTS OF THE COMPANY AND THE PURCHASER PRIOR
TO CLOSING
6.1 Payment of Expenses.
(a) If the Closing occurs hereunder, the Company
shall (i) pay the expenses incurred by it in connection with (x) the issuance
and sale of the Shares and Warrant, (y) the execution, delivery and performance
of this Agreement and the documents relating to the RMO Fund Investment and (z)
the transactions described under the heading "PROPOSAL NO. 1 - THE SSI/TNC
TRANSACTION" in the Proxy Statement, including, without limitation, the
financial advisory fees and expenses of Legg Mason and the fees of Cushman &
Wakefield of Pa. Inc. for preparation of the "Market Analysis for Real Property
within the Meetinghouse Business," all as contemplated in the Proxy Statement;
(ii) pay those expenses of the Partnership allocated to the Company pursuant to
Article VIII of the Partnership Agreement; and (iii) pay the costs, fees and
expenses incurred by the holders of the Shares and Warrant with respect to any
amendment of this Agreement or any waiver or consent made or given under this
Agreement, or incurred by them in the enforcement of this Agreement.
(b) If the Closing hereunder does not occur, each
party shall bear its own expenses.
6.2 Operation of Business in Ordinary Course. Prior to the
Closing, the Company and each Subsidiary will operate its business and the
business of each of its other
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Subsidiaries only in the usual and normal course, and will not, without the
consent of the Purchaser, engage in any of the transactions described in
paragraphs (a), (b), (d), (e), (f) or (g) of Section 2.22 hereof.
6.3 Stockholders' Meeting. The Company shall duly call and
hold a meeting of its stockholders as soon as legally possible, but in no event
later than August 31, 1996, for the purpose of voting upon the approval of this
Agreement, the transactions contemplated hereby and the Stockholder Approval
Matters. In this regard, the Company will (i) use its best efforts to hold such
meeting as soon as legally possible, (ii) subject to the fiduciary duties of the
Board of Trustees, include in the Proxy Statement the unanimous recommendation
of the Board that stockholders of the Company vote in favor of this Agreement,
the transactions contemplated hereby and the Stockholder Approval Matters, and
(iii) use its best efforts (A) to obtain and furnish the information required to
be included by it in the Proxy Statement in compliance with the Exchange Act
and, after consultation with the Purchaser, respond promptly to any comments
made by the SEC with respect to the Proxy Statement and cause the Proxy
Statement to be mailed to its stockholders at the earliest practicable time and
(B) to obtain the necessary approvals by its stockholders of this Agreement,
subject to its Board's fiduciary duties.
6.4 Access to Information.
(a) Between the date hereof and the Closing Date, the
Company will give the Purchaser and its authorized representatives reasonable
access to all officers, employees, agents, properties, offices and other
facilities and to all books and records of the Company and its Subsidiaries, and
will permit the Purchaser to make such inspections as the Purchaser may
reasonably request and will cause the Company's officers and those of its
Subsidiaries to furnish the Purchaser promptly (i) a copy of each report,
schedule, registration statement and other document filed by it pursuant to the
requirements of federal securities laws and (ii) all other financial and
operating data and other information with respect to the business and properties
of the Company and any of its Subsidiaries as the Purchaser may from time to
time reasonably request.
(b) The Purchaser will hold and will cause its
authorized representatives, consultants and advisors to hold in confidence,
unless compelled to disclose by judicial or administrative process or, in the
written opinion of its legal counsel, by other requirements of law, all
documents and information concerning the Company and its Subsidiaries furnished
to the Purchaser in connection with the transactions contemplated by this
Agreement (except to the extent that such information can be shown to have been
(i) previously known by the Purchaser from sources other than the Company, its
trustees, officers, representatives or affiliates, (ii) in the public domain
through no fault of the Purchaser or (iii) later lawfully acquired by the
Purchaser on a non-confidential basis from other sources who are not known by
the Purchaser to be bound by a confidentiality agreement or otherwise prohibited
from transmitting the information to the Purchaser by a contractual, legal or
fiduciary obligation) and will not release or disclose such information to any
other person or entity, except its auditors, attorneys, financial advisors and
other consultants, agents and representatives in connection with
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this Agreement who need to know such information. If the transactions
contemplated by this Agreement are not consummated, such confidence shall be
maintained and, if requested by or on behalf of the Company, the Purchaser will,
and will use all reasonable efforts to cause its auditors, attorneys, financial
advisors and other consultants, agents and representatives to, return to the
Company or destroy all copies of written information furnished by the Company to
the Purchaser or its agents, representatives or advisors. It is understood that
the Purchaser shall be deemed to have satisfied its obligation to hold such
information confidential if it exercises the same care as it takes to preserve
confidentiality for its own similar information.
(c) No investigation pursuant to this Section 6.4
shall affect any representation or warranty in this Agreement made by the
Company and its Subsidiaries or any condition to the Purchaser's obligations
hereto.
6.5 Notification of Certain Matters. The Company shall give
prompt notice to the Purchaser, and the Purchaser shall give prompt notice to
the Company, of (a) the occurrence or nonoccurrence of any event the occurrence
or nonoccurrence of which would be likely to cause (i) any representation or
warranty contained in this Agreement to be untrue or inaccurate or (ii) any
covenant, condition or agreement contained in this Agreement not to be complied
with or satisfied and (b) any failure of the Company or the Purchaser, as the
case may be, to comply with or satisfy any covenant, condition or agreement to
be complied with or satisfied by it hereunder; provided, however, that the
delivery of any notice pursuant to this Section 6.5 shall not cure such breach
or noncompliance or limit or otherwise affect the remedies available hereunder
to the party receiving such notice.
6.6 Conditions Precedent. The Company and the Purchaser shall
use their reasonable best efforts to cause the conditions specified in Sections
4 and 5 to be satisfied by the Closing Date.
SECTION 7. COVENANTS OF THE COMPANY AFTER CLOSING
7.1 Rule 144.
(a) The Company covenants that (i) the Company will
use its best efforts to comply with the current public information requirements
of Rule 144(c)(1) under the 1933 Act; and (ii) at all such times as Rule 144 is
available for use by the holders of the Shares, Warrant or Conversion Shares,
the Company will furnish each such holder upon request with all information
within the possession of the Company required for the preparation and filing of
Form 144.
(b) At all times during which the Company is neither
subject to the reporting requirements of Section 13 or 15(d) of the Exchange
Act, nor exempt from reporting pursuant to Rule 12g3-2(b) under the Exchange
Act, it will provide as promptly as practicable (in any event not later than
fifteen (15) days after initial request) in written form, upon the
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written request of the Purchaser or any prospective buyer of the Shares or
Conversion Shares from the Purchaser, all information required by Rule
144A(d)(4)(i) of the General Regulations promulgated by the Commission under the
Securities Act ("Rule 144A Information"). The Company's obligations under this
Section 7.1 shall at all times be contingent upon such seller's obtaining from a
prospective buyer an agreement to take all reasonable precautions to safeguard
the Rule 144A Information from disclosure to anyone other than a person or
entity who will assist such buyer in evaluating the purchase of the Conversion
Shares.
7.2 Delivery of Financial Statements. From and after the
Closing, the Company shall deliver to the Purchaser, until such time as the
Purchaser no longer owns the Warrant or any Shares or Conversion Shares, a copy
of each and every report on Form 10-K, Form 8-K, Form 10-Q and all other reports
and proxy statements filed by the Company or any Subsidiary with the SEC within
fifteen (15) days of such filing.
7.3 Reservation of Shares. From and after the Closing, the
Company shall at all times reserve and keep available, free from pre-emptive
rights, out of its authorized but unissued capital stock, a sufficient number of
shares of Common Stock for issuance upon the exercise of the Warrant.
7.4 Compliance with Laws. The Company will, and will cause
each Subsidiary to, comply in all material respects with all laws and
regulations applicable to the conduct of its business, including without
limitation ERISA, environmental laws, and employee safety laws.
7.5 Waivers, Consents, Etc. Compliance with any of the
covenants in this Section 7 may be waived, either generally or in the particular
instance, and any consent required thereunder may be given, by the Purchaser in
writing.
7.6 Press Releases. The Purchaser shall have the right
reasonably to approve any press release with respect to the transactions
contemplated by this Agreement. In addition, at no time may the Company use or
otherwise refer to the name of the Purchaser or any of its affiliates in any
press release, publication or other report without the prior consent of the
Purchaser not to be unreasonably withheld.
7.7 Amendment to the Company's Declaration of Trust. In the
event that the amendment to the Company's Declaration of Trust, as set forth
under the heading "PROPOSAL No. 2 - AMENDMENT OF DECLARATION OF TRUST" of the
Proxy Statement, has not been approved by the requisite vote of the Company's
stockholders on or prior to the Closing Date, the Company shall resubmit such
amendment for the requisite vote of the Company's stockholders within ninety
(90) days of the Closing Date.
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SECTION 8. COMPLIANCE WITH 1933 ACT; RESTRICTIONS ON
TRANSFERABILITY OF SHARES, WARRANT AND
CONVERSION SHARES
8.1 Compliance with 1933 Act. The Shares, Warrant and
Conversion Shares shall not be transferable, except upon the conditions
specified in this Section 8, which conditions are intended to insure compliance
with the provisions of the 1933 Act and applicable state securities laws in
respect of any such transfer.
8.2 Restrictive Legend. The Warrant, and each certificate
representing the Shares and Conversion Shares and any Common Shares or other
securities issued in respect of such Shares and Conversion Shares upon any stock
split, stock dividend, recapitalization, merger, consolidation, similar event,
shall (unless otherwise permitted by the provisions of Section 8.4) be stamped
or otherwise imprinted with the following legend:
"[THIS WARRANT HAS] OR [THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE] NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE
STATE SECURITIES LAW AND THE TRANSFERABILITY [T]HEREOF IS SUBJECT TO THE
PROVISIONS OF A SHARE AND WARRANT PURCHASE AGREEMENT BETWEEN BRANDYWINE REALTY
TRUST AND SAFEGUARD SCIENTIFICS, INC."
8.3 Restrictions on Transferability. The Company shall not be
required to register the transfer of the Shares or Warrant or any Conversion
Shares on the books of the Company unless the Company shall have been provided
with an opinion of counsel reasonably satisfactory to it prior to such transfer
to the effect that registration under the 1933 Act or any applicable state
securities law is not required in connection with the transaction resulting in
such transfer; provided, however, that no such opinion of counsel shall be
necessary in order to effectuate a transfer in accordance with the provisions of
Rule 144(k) promulgated under the 1933 Act. Each Warrant or certificate for
Shares or Conversion Shares issued upon any transfer as above provided shall
bear the restrictive legend set forth in Section 8.2 above, except that such
restrictive legend shall not be required if the opinion of counsel reasonably
satisfactory to the Company referred to above is to the further effect that such
legend is not required in order to establish compliance with the provisions of
the 1933 Act and any applicable state securities law, or if the transfer is made
in accordance with the provisions of Rule 144(k) under the 1933 Act.
8.4 Termination of Restrictions on Transferability. The
conditions precedent imposed by this Section 8 upon the transferability of the
Shares, Warrant and Conversion Shares shall cease and terminate as to any of the
Shares, Warrant or Conversion Shares when (i) such securities shall have been
registered under the 1933 Act and sold or otherwise disposed of in accordance
with the intended method of disposition by the seller or sellers thereof set
forth in the registration statement covering such securities, (ii) at such time
as an opinion of counsel satisfactory to the Company shall have been rendered as
required
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pursuant to the second sentence of Section 8.3 to the effect that the
restrictive legend on such securities is no longer required, or (iii) when such
securities are transferable in accordance with the provisions of Rule 144(k)
promulgated under the 1933 Act. Whenever the conditions imposed by this Section
8 shall terminate as hereinabove provided with respect to any of the Shares,
Warrant or Conversion Shares, the holder of any such securities bearing the
legend set forth in this Section 8 as to which such conditions shall have
terminated shall be entitled to receive from the Company, without expense
(except for the payment of any applicable transfer tax) and as expeditiously as
possible, a new Warrant or new stock certificates not bearing such legend.
SECTION 9. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND
AGREEMENTS
All covenants, agreements, representations and warranties made
herein and in the certificates delivered pursuant hereto shall survive the
execution and delivery of this Agreement and the issuance and sale of the Shares
and Warrant hereunder.
SECTION 10. MISCELLANEOUS
10.1 Owner of Shares, Warrant and Conversion Shares. The
Company may deem and treat the person or entity in whose name the Shares,
Warrant and Conversion Shares, as the case may be, are registered as the
absolute owner thereof for all purposes whatsoever, and the Company shall not be
affected by any notice to the contrary.
10.2 Successors. This Agreement shall be binding upon and
except as provided herein, shall inure to the benefit of the respective
successors and permitted assigns of each of the parties hereto.
10.3 Broker or Finder. Each party to this Agreement represents
and warrants that, to the best of its knowledge, no broker or finder has acted
for such party in connection with this Agreement or the transactions
contemplated by this Agreement and that no broker or finder is entitled to any
broker's or finder's fee or other commission in respect thereof based in any way
on agreements, arrangements or understandings made by such party. The Company
shall indemnify the Purchaser against, and hold it harmless from, any liability,
cost or expense (including reasonable attorneys' fees and expenses) resulting
from any agreement, arrangement, or understanding made by the Company, and the
Purchaser shall indemnify the Company against, and hold the Company harmless
from, any liability, cost or expense (including reasonable attorneys' fees and
expenses) resulting from any agreement, arrangement, or understanding made by
the Purchaser with any third party, for brokerage or finder's fees or other
commissions in connection with this Agreement or any of the transactions
contemplated hereby.
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10.4 Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the Commonwealth of
Pennsylvania.
10.5 Notice. Any notice or other communication required or
permitted hereunder shall be deemed given when delivered personally, or upon
receipt by the party entitled to receive the notice when sent by registered or
certified mail, postage prepaid, addressed as follows or to such other address
or addresses as may hereafter be furnished in writing by notice similarly given
by one party to the other:
To the Company: Brandywine Realty Trust
Two Greentree Centre
Suite 100
Marlton, New Jersey 08053
Attention: Gerard H. Sweeney, President
With a copy to: Pepper, Hamilton & Scheetz
3000 Two Logan Square
18th and Arch Streets
Philadelphia, Pennsylvania 19103-2799
Attention: Michael H. Friedman, Esq.
To the Purchaser: Safeguard Scientifics, Inc.
800 The Safeguard Building
435 Devon Park Drive
Wayne, Pennsylvania 19087
Attention: General Counsel
With a copy to: Drinker Biddle & Reath
1000 Westlakes Drive, Suite 300
Berwyn, Pennsylvania 19312
Attention: Robert H. Strouse, Esq.
Notice to any holder of Shares, Warrant, or Conversion Shares other than the
Purchaser shall be given in a like manner to such holder at the address
reflected in the Company's records.
10.6 Full Agreement. This Agreement, together with all
Exhibits attached hereto or delivered herewith, and any other documents
delivered herewith, sets forth the entire understanding of the parties with
respect to the transactions contemplated hereby.
10.7 Headings. The headings of the sections of this Agreement
are inserted for convenience of reference only and shall not be considered a
part hereof.
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<PAGE>
10.8 Amendment. This Agreement may be amended by the parties
hereto, by action taken or authorized by their respective Boards of Directors or
Trustees, as applicable, at any time before or after approval of the matters
presented in connection with this Agreement by the stockholders of the Company,
but, after any such approval, no amendment shall be made which by law requires
further approval by the Company's stockholders without such further approval.
This Agreement may not be amended except by an instrument in writing signed on
behalf of each of the parties hereto.
10.9 Survival of Representations and Warranties. All
representations and warranties made by the parties in this Agreement shall
survive the execution of this Agreement for the period and to the extent set
forth in Article XIX of the Partnership Agreement. Any claims by a party against
any other party made after the Closing for breach of any representation,
warranty or covenant set forth herein shall only be made pursuant to and in
accordance with, and shall be subject to all of the limitations expressed in,
Article XIX of the Partnership Agreement, including the limitation that the
liability of the Purchaser and TNC hereunder shall be restricted to their
interests in the Collateral pledged under Section 19.3 of the Partnership
Agreement. The remedies set forth in Article XIX of the Partnership Agreement
for breaches of this Agreement shall be the sole and exclusive remedies
available to the parties hereto for claims made after Closing for breach of this
Agreement.
10.10 Settlement of Disputes. The parties will attempt in good
faith to resolve any and all controversies of every kind and nature between the
parties to this Agreement 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 20 days after receipt
of said notice, the receiving party shall submit to the other a written
response. The notice and response shall include (a) a statement of each party's
position and a summary of the evidence and arguments supporting its position,
and (b) the name and title of the executive who will represent that party. The
executives shall meet at a mutually acceptable time and place within 30 days of
the date of the disputing party's notice and thereafter as often as they
reasonably deem necessary to exchange relevant information and to attempt to
resolve the Dispute. If the matter has not been resolved within 60 days of the
disputing party's notice, or if the party receiving said notice will not meet
within 30 days, either party may initiate mediation of the controversy or claim
in accordance with the Center for Public Resources Model Procedure for Mediation
of Business Disputes. If the Dispute has not been resolved pursuant to the
aforesaid mediation procedure within 60 days of the initiation of such
procedure, or if either party will not participate in a mediation, the Dispute
shall be submitted to arbitration in accordance with the rules of the American
Arbitration Association. The parties further agree that all matters shall be
governed by the laws of the Commonwealth of Pennsylvania. The parties further
agree that any arbitration conducted pursuant to this Section 10.10 shall be
held in Philadelphia, Pennsylvania before a panel of three (3) arbitrators, one
selected by the Buyer and one selected by the Seller and the third selected by
the arbitrators
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<PAGE>
selected by the parties. All deadlines specified in this Section 10.10 may be
extended by mutual agreement.
10.11 Counterparts. This Agreement may be executed in two or
more counterparts each of which shall be deemed an original, and all of which
shall be considered one and the same agreement and shall become effective when
two or more counterparts have been signed by each of the parties and delivered
to the other parties, it being understood that all parties need not sign the
same counterpart.
10.12 Termination. This Agreement may be terminated, whether
before or after its approval by the stockholders of the Company, prior to the
Closing:
(a) by mutual written consent of the Purchaser and the
Company;
(b) by either the Purchaser or the Company if the Closing
shall not have been consummated before September 30, 1996 (unless the failure to
so close by such date shall be due to the action or failure to act of the party
seeking to terminate this Agreement);
(c) by either the Purchaser or the Company if any court of
competent jurisdiction or other governmental entity shall have issued a final
permanent order, decree or ruling or taken any other final action restraining,
enjoining or otherwise prohibiting the transactions contemplated by this
Agreement and such order, decree, ruling or other action is or shall have become
nonappealable;
(d) by the Purchaser if (i) there shall have been a material
breach on the part of the Company or any of its Subsidiaries of any
representation or warranty of the Company or its Subsidiaries set forth herein,
(ii) there shall have been any failure of the Company or any of its Subsidiaries
to perform or comply with its covenants or agreements hereunder and, in either
case, the aggregate effect of all such breaches or failures, as the case may be,
would be material, (iii) the Board of Trustees shall have withdrawn, amended or
modified in a manner adverse to the Purchaser its approval or recommendation of
this Agreement, or (iv) any person (as that term is used in Sections 13(d) and
14(d)(2) of the Exchange Act) acquires beneficial ownership of at least 20% of
the outstanding Common Shares; or
(e) by the Company if (i) there shall have been a material
breach of any representation or warranty on the part of the Purchaser or (ii)
there shall have been a failure of the Purchaser to perform or comply with its
covenants or agreements hereunder and, in either case, the aggregate effect of
all such breaches and failures, as the case may be, would be material.
10.13 Effect of Termination. In the event of the termination
and abandonment of this Agreement pursuant to Section 10.12, this Agreement
shall forthwith become void and have no effect, without any liability on the
part of any party hereto or its affiliates, trustees,
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<PAGE>
directors, officers or stockholders; provided, however, that nothing contained
in this Section 10.13 shall relieve any party from liability for any breach of
this Agreement.
10.14 Non-Recourse. No recourse shall be had for any
obligation of the Company hereunder, or for any claim based thereon or otherwise
in respect thereof, against any past, present or future trustee, stockholder,
officer or employee of the Company, whether by virtue of any statute or rule of
law, or by the enforcement of any assessment or penalty or otherwise, all such
other liability being expressly waived and released by each other party hereto.
[The remainder of this page has been intentionally left blank.]
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<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has fully
executed this Agreement as of the date first set forth above.
BRANDYWINE REALTY TRUST
By:
-------------------------------------
Gerard H. Sweeney, President
SAFEGUARD SCIENTIFICS, INC.
By:
-------------------------------------
The Nichols Company hereby executes this Agreement for the
sole purpose of being bound by the provisions of Section 3.10.
THE NICHOLS COMPANY
----------------------------------------
Anthony A. Nichols, President
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<PAGE>
EMPLOYMENT AGREEMENT
Employment Agreement (the "Agreement"), made and entered into
as of July 31, 1996, by and between Anthony A. Nichols ("Employee") and
Brandywine Realty Services Corporation, a Pennsylvania corporation (the
"Company").
BACKGROUND
The Company desires to employ Employee, and Employee desires
to enter into the employ of the Company, on the terms and conditions contained
in this Agreement.
NOW, THEREFORE, in consideration of the mutual agreements
contained herein, and intending to be legally bound hereby, the parties hereto
agree as follows:
1. Employment. The Company hereby employs Employee, and
Employee hereby accepts employment by the Company, for the period and upon the
terms and conditions contained in this Agreement.
2. Office and Duties.
(a) Employee shall be employed by the Company initially as
its Chairman of the Board and will serve as a member of the Board of Trustees of
the Company (the "Board") and as chairman of the Executive Committee of the
Board, and, subject to the supervision of the Board, perform such duties and
shall have such authority as may from time to time be specified by the Board.
Employee shall report directly to the Board.
(b) Without further consideration, Employee shall, as
directed by the Board, serve as a director or officer of, or perform such other
duties and services as may be requested for and with respect to, any of the
Company's Subsidiaries. As used in this Agreement, the terms "Subsidiary" and
"Subsidiaries" shall mean with respect to any entity, any corporation,
partnership, or other business entity in which the subject entity has the power
(whether by contract, through securities ownership, or otherwise and whether
directly or indirectly through control of one or more intermediate Subsidiaries)
to elect a majority of board of directors or other governing body, including, in
the case of a partnership, a majority of the board of directors or other
governing body of the general partner.
(c) Employee shall devote his full working time, energy,
skill and best efforts to the performance of his duties hereunder, in a manner
which will faithfully and diligently further the business interests of the
Company and its Subsidiaries.
3. Term. Unless sooner terminated as hereinafter provided, the
term of Employee's employment shall be for a period of two years (the "Term")
commencing on the
<PAGE>
closing date (the "Closing Date") of the Contribution Agreement. Until the
Closing Date and the completion of the transactions contemplated by the
Contribution Agreement, this Agreement shall not be effective for any purpose
whatsoever and neither party shall have any liability arising hereunder. The
Term shall automatically renew for additional one-year periods at the expiration
of the then current Term unless either party shall give notice of his or its
election to terminate Employee's employment at least thirty days prior to the
end of the then-current Term, unless earlier terminated as hereinafter provided.
If the Closing Date has not occurred on or before September 30, 1996, this
Agreement shall automatically terminate and neither party shall have any
obligation or liability hereunder.
4. Base Salary. For all of the services rendered by Employee
to the Company and its Subsidiaries, Employee shall receive an aggregate base
salary of $141,500 per annum during the term of his employment hereunder. Such
salary may be paid, at the election of the Company, either by the Company or by
one or more of its Subsidiaries, in such relative proportions as the Company may
determine, as earned in periodic installments in accordance with the Company's
normal payment policies for executive officers. In the event that the Employee
is also employed during any period by a Subsidiary of the Company, the amount of
the base salary payable by the Company during such period shall be reduced by
the amount of compensation received by Employee during such period from such
Subsidiary. For the purposes of this determination, the term "compensation"
shall mean all compensation which would be required to be reported pursuant to
Item 402(b) of Regulation S-K under the Securities Act of 1933 and the
Securities and Exchange Act of 1934 or any successor regulation whether or not
Employee's compensation is subject to such reporting. Employee shall receive
such salary increases as the Board may from time to time approve.
5. Bonus. Employee shall receive, during the term of this
Agreement, such annual bonus or incentive compensation as the Board, in its sole
discretion, shall determine from time to time. Any such bonus shall be based on
Employee's annual performance goals as established by the Board from time to
time. In addition, the Company expects to develop an incentive compensation
program consistent with those provided in the real estate investment trust
industry and agrees to permit Employee to participate in any such program.
6. Warrants. On the Closing Date, Brandywine Realty Trust, a
Maryland real estate investment trust ("BRT"), shall issue a six-year Warrant to
Employee to purchase up to 120,000 of BRT's shares of beneficial interest
("Shares") at a purchase price of $6.50 per Share. The Company shall cause,
within 60 days after the Closing Date, the Shares issuable upon exercise of the
Warrant to be registered under the Securities Act of 1933, as amended, 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 Employee to sell such
registered Shares publicly without regard to the volume and other limitations of
Rule 144. In addition, BRT shall issue additional six-year Warrants to up to ten
other employees of the Company and its affiliates designated by Employee to
purchase an aggregate of up to 40,000 Shares at a purchase price of $6.50 per
share.
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<PAGE>
7. Fringe Benefits. Throughout the term of his employment and
as long as they are kept in force by the Company, Employee shall be entitled to
participate in and receive the benefits of any profit sharing plan, retirement
plan, health or other employee benefit plan made available to other executive
officers of the Company, but in no event shall such benefits be less favorable
to Employee than the benefits listed on Schedule A hereto.
8. Expenses. The Company will reimburse Employee for all
reasonable, ordinary and necessary business expenses incurred by Employee in
connection with the performance of Employee's duties hereunder upon receipt of
vouchers therefor and in accordance with the Company's regular reimbursement
procedures and practices in effect from time to time.
9. Vacation. Employee shall be entitled to a vacation of four
(4) weeks during each twelve (12) month period of his employment hereunder,
during which time Employee's compensation hereunder shall be paid in full.
10. Disability. If the Board determines in good faith by a
vote of a majority of its Members (other than Employee) that Employee is unable
to perform his duties hereunder due to partial or total disability or incapacity
resulting from a mental or physical illness or injury or any similar cause for a
period of one hundred and twenty (120) consecutive days or for a cumulative
period of one hundred and eighty (180) days during any twelve (12) month period,
the Company shall have the right to terminate Employee's employment at any time
thereafter.
11. Death. If Employee dies, this Agreement shall terminate at
the time of death.
12. Discharge for Cause. The Company may discharge Employee at
any time for Cause. Cause shall mean: (i) habitual intoxication; (ii) drug
addiction; (iii) intentional and willful violation of any express direction of
the Board; (iv) theft, misappropriation or embezzlement of the Company's funds;
(v) conviction of a felony; or (vi) repeated and consistent failure of Employee
to be present at work during regular hours without valid reason therefor.
13. Termination without Cause. The Board, in its sole
discretion, may terminate Employee's employment hereunder upon 30 days' prior
written notice to Employee at any time.
14. Termination for Good Reason. Employee may terminate his
employment hereunder upon 30 days' prior written notice to the Company for Good
Reason. Good Reason shall mean, without Employee's express written consent, the
occurrence of any of the following circumstances unless in the case of clause
(b) or (c) such circumstances are fully corrected prior to the end of such 30
day period: (a) a reduction in Employee's annual rate of base salary, (b) a
failure of the Company to make the payments required by Section 4 hereof, (c)
any other material breach by the Company of this Agreement, (d) relocation of
the Company's executive offices to a location 30 miles from its current
location, or (e) after a Change in Control. As
-3-
<PAGE>
used herein "Change in Control" means an event other than a Qualified Offering
(as defined below) occurring after the date of this Agreement as the result of
which (i) any "person" (as such term is used in Sections 13(d) and 14(d) of the
Exchange Act), other than BRT and its affiliates or any stockholder of the
Company on the date of this Agreement, becomes the "Beneficial Owner" (as
defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly or
indirectly, of (A) stock of the Company entitling the holder thereof to elect a
majority of the members of the Board of Directors of the Company, or (B) Shares
of BRT representing a majority of the total issued and outstanding Shares of
BRT; (ii) the Company consolidates or merges with or into another corporation or
conveys, transfers or leases all or substantially all of its assets to any
person other than in a transaction in which holders of the Company's voting
stock immediately prior to such transaction own, directly or indirectly, not
less than 51% of the voting stock of the surviving entity immediately after such
transaction; or (iii) the Company is liquidated or dissolved or adopts a plan of
liquidation. However, Employee shall be deemed to have waived his rights
pursuant to circumstances constituting Good Reason hereunder if he shall not
have provided the Company a notice of termination within three (3) months
following his actual knowledge of the circumstances constituting Good Reason. As
used herein "Qualified Offering" means a public or private sale of equity
securities generating at least $35 million of net proceeds to BRT at a price per
share at least equal to the per share book value of the Shares as of the end of
BRT's most recently completed quarter preceding the sale or at least $25 million
of net proceeds, but less than $35 million of net proceeds, at a price per share
of at least $5.50 (subject to adjustment in the event of stock dividends, stock
splits or reverse stock splits).
15. Payments Upon or After Termination.
(a) In the event that the Employee's employment hereunder
is terminated prior to the expiration of the Term, the Company, or at its
direction, its Subsidiaries shall pay to the Employee or, as appropriate, his
representatives, heirs or estate all amounts payable under Sections 4 and 8
accrued through the date of termination (the "Accrued Amount") within 15 days
after such date, plus the amounts set forth below at such times as such amounts
would otherwise be payable, as follows:
(i) If the Employee's employment is terminated as a
result of the Employee's death, the consideration provided for in Sections 4 and
5 hereof, at the rate in effect at the date of termination, for one year after
such death, less the proceeds receivable by Employee's heirs and legal
representatives from any life insurance policy provided by the Company;
(ii) If the Employee's employment is terminated by the
Company for Disability, the consideration provided for in Sections 4, 5 and 7
hereof, at the rate in effect at the date of termination, until Employee becomes
eligible to receive benefits pursuant to the disability insurance policy
provided by the Company and for one year after such eligibility at the rate in
effect at the date of termination less the amount of disability insurance
proceeds receivable by Employee, provided that such period shall not exceed two
years in the aggregate, and
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<PAGE>
(iii) If the Employee's employment is terminated by
the Employee for Good Reason or by the Company without Cause or if the Company
notifies Employee of its intention not to renew the term of this Agreement
pursuant to Section 3, the consideration provided for in Sections 4, 5 and 7 to
be paid during the period equal to the remainder of the then current Term or
twelve months, whichever is greater, at the rate in effect on the date of
termination.
(b) If the Employee's employment is terminated by the
Company for Cause, by the Employee voluntarily without Good Reason or if
Employee notifies the Company of its intention not to renew the term of this
Agreement pursuant to Section 3, the Company shall have no obligation or
liability after the date of discharge or termination to pay or provide base
salary, bonus compensation, fringe benefits, or any other form of compensation
hereunder other than to pay the Accrued Amount.
(c) In the event that the Employee is employed by a
Subsidiary of the Company at the time of termination of employment, any amounts
payable to the Employee pursuant to this Section 15 shall be reduced by the
amounts payable to such Employee by any such Subsidiary.
(d) Upon the payment of the amounts payable under this
Section 15, neither the Company nor any of its subsidiaries shall have any
further obligations hereunder to Employee (or to his estate, heirs,
beneficiaries, or legal representatives, as appropriate, or otherwise) to pay or
provide any base salary, bonus compensation, or fringe benefits.
16. Prior Agreement. Employee represents to the Company that
(a) there are no other agreements or understandings to which Employee is a party
relating to employment, benefits or retirement, (b) there are no restrictions,
agreements or understandings whatsoever to which Employee is a party which would
prevent or make unlawful his execution of this Agreement or his employment
hereunder, (c) his execution of this Agreement and his employment hereunder
shall not constitute a breach of any contract, agreement or understanding, oral
or written, to which he is a party or by which he is bound, and (d) he is free
and able to execute this Agreement and to enter into employment by the Company.
17. Key Man Insurance. The Company shall have the right at its
expense to purchase insurance on the life of Employee in such amounts as it
shall from time to time determine, of which the Company shall be the
beneficiary. Employee shall submit to such physical examinations as may be
required, and shall otherwise cooperate with the Company, in connection with the
Company obtaining such insurance.
18. Miscellaneous.
(a) Controlling Law. This Agreement and all questions
relating to its validity, interpretation, performance and enforcement, shall be
governed by and construed in accordance with the laws of the Commonwealth of
Pennsylvania.
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<PAGE>
(b) Notices. All notices, requests, demands and other
communications required or permitted under this Agreement shall be in writing
and shall be deemed to have been duly given, made and received when delivered in
person against receipt, or when sent by United States registered or certified
mail, return receipt requested, postage prepaid, addressed as set forth below:
(1) If to Employee:
Anthony A. Nichols
(2) If to the Company:
Brandywine Realty Services Corporation
16 Campus Boulevard
Suite 150
Newtown Square, PA 19073
In addition, notice by mail shall be by air mail if posted
outside of the continental United States.
Any party may alter the address to which communications or
copies are to be sent by giving notice of such change of address in conformity
with the provisions of this paragraph for the giving of notice.
(c) Binding Nature of Agreement. This Agreement shall be
binding upon and inure to the benefit of the Company and its successors and
assigns and shall be binding upon Employee, his heirs and legal representatives.
(d) Execution in Counterparts. This Agreement may be
executed in any number of counterparts, each of which shall be deemed to be an
original as against any party who executes the same, and all of which shall
constitute one and the same instrument. This Agreement shall become binding when
one or more counterparts hereof, individually or taken together, shall bear the
signatures of all of the parties reflected hereon as the signatories.
(e) Provisions Separable. The provisions of this Agreement
are independent of and separable from each other, and no provision shall be
affected or rendered invalid or unenforceable by virtue of the fact that for any
reason any other or others of them may be invalid or unenforceable in whole or
in part.
(f) Entire Agreement. This Agreement contains the entire
understanding among the parties hereto with respect to the subject matter hereof
and supersedes all prior agreements and understandings, inducements or
conditions, express or implied, oral or
-6-
<PAGE>
written, except as herein contained. The express terms hereof control and
supersede any course of performance and/or usage of the trade inconsistent with
any of the terms hereof. This Agreement may not be modified or amended other
than by an agreement in writing.
(g) Section and Paragraph Headings. The section and
paragraph headings in this Agreement are for convenience only; they form no part
of this Agreement and shall not affect its interpretation.
(h) Gender, Etc. Words used herein, regardless of the
number and gender specifically used, shall be deemed and construed to include
any other number, singular or plural, and any other gender, masculine, feminine
or neuter, as the context requires.
(i) Number of Days. In computing the number of days for
purposes of this Agreement (except vacation days), all days shall be counted,
including Saturdays, Sundays and holidays; provided, however, that if the final
day of any time period falls on a Saturday, Sunday or holiday, then the final
day shall be deemed to be the next day which is not a Saturday, Sunday or
holiday.
(j) Survival. The provisions of Sections 10, 11, 12, 13,
14, 15 and 16 shall survive the expiration or termination of the term of
Employee's employment hereunder.
(k) Assignability. This Agreement is not assignable by
Employee. It is assignable by the Company only (i) to any subsidiary of the
Company so long as the Company agrees to guarantee such subsidiary's obligations
hereunder, or (ii) subject to Section 14, to a person which is a successor in
interest to the Company in the business operated by it or which acquires all or
substantially all of its assets.
(l) Liability of Trustees, etc. No recourse shall be had
for any obligation of BRT hereunder, or for any claim based thereon or otherwise
in respect thereof, against any past, present or future trustee, stockholder,
officer or employee of BRT, whether by virtue of any statute or rule of law, or
by the enforcement of any assessment or penalty or otherwise, all such other
liability being expressly waived and released by each other party hereto.
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<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed and delivered on the date first above-written.
BRANDYWINE REALTY SERVICES
CORPORATION
By:
--------------------------------------------
Gerard H. Sweeney, President and Chief
Executive Officer
EMPLOYEE:
------------------------------------------------
Anthony A. Nichols
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<PAGE>
JOINDER
Brandywine Realty Trust hereby joins in this Agreement solely
for purposes of guaranteeing the obligations of the Company set forth in Section
6 hereof.
BRANDYWINE REALTY TRUST
By:
--------------------------------------
Gerard H. Sweeney, President and
Chief Executive Officer
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<PAGE>
GUARANTEE
In the event that the Company fails to perform its obligations
under the foregoing Employment Agreement, Brandywine Operating Partnership, L.P.
shall promptly perform the obligations of the Company arising thereunder which
have not been performed in strict accordance with the terms and conditions
thereof.
BRANDYWINE OPERATING PARTNERSHIP,
L.P.
By: BRANDYWINE REALTY TRUST, its
general partner
By:
--------------------------------------
Gerard H. Sweeney, President and
Chief Executive Officer
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<PAGE>
Schedule A
FRINGE BENEFITS
The fringe benefits shall be no less favorable to Employee
than those described in the document captioned "The Nichols Company Employee
Benefit Programs and Personnel Policies," effective January 1, 1995.
-11-
<PAGE>
EMPLOYMENT AGREEMENT
Employment Agreement (the "Agreement"), made and entered into
as of July 31, 1996, by and between Gerard H. Sweeney ("Employee") and
Brandywine Realty Services Corporation, a Pennsylvania corporation (the
"Company").
BACKGROUND
The Company desires to employ Employee, and Employee desires
to enter into the employ of the Company, on the terms and conditions contained
in this Agreement.
NOW, THEREFORE, in consideration of the mutual agreements
contained herein, and intending to be legally bound hereby, the parties hereto
agree as follows:
1. Employment. The Company hereby employs Employee, and
Employee hereby accepts employment by the Company, for the period and upon the
terms and conditions contained in this Agreement.
2. Office and Duties.
(a) Employee shall be employed by the Company initially as
its President and Chief Executive Officer and will serve as a member of the
Board of Trustees of the Company (the "Board") and member of the Executive
Committee of the Board, and, subject to the supervision of the Chairman and the
Board, perform such duties and shall have such authority as may from time to
time be specified by the Chairman of the Board or the Board. Employee shall
report directly to the Chairman of the Board.
(b) Without further consideration, Employee shall, as
directed by the Chairman or the Board, serve as a director or officer of, or
perform such other duties and services as may be requested for and with respect
to, any of the Company's Subsidiaries. As used in this Agreement, the terms
"Subsidiary" and "Subsidiaries" shall mean with respect to any entity, any
corporation, partnership, or other business entity in which the subject entity
has the power (whether by contract, through securities ownership, or otherwise
and whether directly or indirectly through control of one or more intermediate
Subsidiaries) to elect a majority of board of directors or other governing body,
including, in the case of a partnership, a majority of the board of directors or
other governing body of the general partner.
(c) Employee shall devote his full working time, energy,
skill and best efforts to the performance of his duties hereunder, in a manner
which will faithfully and diligently further the business interests of the
Company and its Subsidiaries.
<PAGE>
3. Term. Unless sooner terminated as hereinafter provided, the
term of Employee's employment shall be for a period of two years (the "Term")
commencing on the closing date (the "Closing Date") of the Contribution
Agreement. Until the Closing Date and the completion of the transactions
contemplated by the Contribution Agreement, this Agreement shall not be
effective for any purpose whatsoever and neither party shall have any liability
arising hereunder. The Term shall automatically renew for additional one-year
periods at the expiration of the then current Term unless either party shall
give notice of his or its election to terminate Employee's employment at least
thirty days prior to the end of the then-current Term, unless earlier terminated
as hereinafter provided. If the Closing Date has not occurred on or before
September 30, 1996, this Agreement shall automatically terminate and neither
party shall have any obligation or liability hereunder.
4. Base Salary. For all of the services rendered by Employee
to the Company and its Subsidiaries, Employee shall receive an aggregate base
salary of $141,500 per annum during the term of his employment hereunder. Such
salary may be paid, at the election of the Company, either by the Company or by
one or more of its Subsidiaries, in such relative proportions as the Company may
determine, as earned in periodic installments in accordance with the Company's
normal payment policies for executive officers. In the event that the Employee
is also employed during any period by a Subsidiary of the Company, the amount of
the base salary payable by the Company during such period shall be reduced by
the amount of compensation received by Employee during such period from such
Subsidiary. For the purposes of this determination, the term "compensation"
shall mean all compensation which would be required to be reported pursuant to
Item 402(b) of Regulation S-K under the Securities Act of 1933 and the
Securities and Exchange Act of 1934 or any successor regulation whether or not
Employee's compensation is subject to such reporting. Employee shall receive
such salary increases as the Board may from time to time approve.
5. Bonus. Employee shall receive, during the term of this
Agreement, such annual bonus or incentive compensation as the Board, in its sole
discretion, shall determine from time to time. Any such bonus shall be based on
Employee's annual performance goals as established by the Board from time to
time. In addition, the Company expects to develop an incentive compensation
program consistent with those provided in the real estate investment trust
industry and agrees to permit Employee to participate in any such program.
6. Warrants. On the Closing Date, Brandywine Realty Trust, a
Maryland real estate investment trust ("BRT"), shall issue a six-year Warrant to
Employee to purchase up to 300,000 of BRT's shares of beneficial interest
("Shares") at a purchase price of $6.50 per Share. The Company shall cause,
within 60 days after the Closing Date, the Shares issuable upon exercise of the
Warrant to be registered under the Securities Act of 1933, as amended, 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 Employee to sell such
registered Shares publicly without regard to the volume and other limitations of
Rule 144. Upon the commencement of the Term of this Agreement, the Employment
Agreement executed on August 8, 1994 (the "1994 Agreement")
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<PAGE>
by BRT and Employee shall terminate; provided, however, that the Options (as
defined therein) granted to Employee thereunder shall remain in effect and those
provisions of the 1994 Agreement which govern Employee's entitlement to exercise
the Options shall continue in effect as if such 1994 Agreement had not been
terminated for so long as Employee is either employed by BRT or by the Company.
In furtherance of the foregoing, references in Section 4.1(b)(v) of the 1994
Agreement to "the Company" shall hereafter be construed as references to BRT
and/or the Company.
7. Fringe Benefits. Throughout the term of his employment and
as long as they are kept in force by the Company, Employee shall be entitled to
participate in and receive the benefits of any profit sharing plan, retirement
plan, health or other employee benefit plan made available to other executive
officers of the Company, but in no event shall such benefits be less favorable
to Employee than the benefits listed on Schedule A hereto.
8. Expenses. The Company will reimburse Employee for all
reasonable, ordinary and necessary business expenses incurred by Employee in
connection with the performance of Employee's duties hereunder upon receipt of
vouchers therefor and in accordance with the Company's regular reimbursement
procedures and practices in effect from time to time.
9. Vacation. Employee shall be entitled to a vacation of four
(4) weeks during each twelve (12) month period of his employment hereunder,
during which time Employee's compensation hereunder shall be paid in full.
10. Disability. If the Board determines in good faith by a
vote of a majority of its Members (other than Employee) that Employee is unable
to perform his duties hereunder due to partial or total disability or incapacity
resulting from a mental or physical illness or injury or any similar cause for a
period of one hundred and twenty (120) consecutive days or for a cumulative
period of one hundred and eighty (180) days during any twelve (12) month period,
the Company shall have the right to terminate Employee's employment at any time
thereafter.
11. Death. If Employee dies, this Agreement shall terminate at
the time of death.
12. Discharge for Cause. The Company may discharge Employee at
any time for Cause. Cause shall mean: (i) habitual intoxication; (ii) drug
addiction; (iii) intentional and willful violation of any express direction of
the Board; (iv) theft, misappropriation or embezzlement of the Company's funds;
(v) conviction of a felony; or (vi) repeated and consistent failure of Employee
to be present at work during regular hours without valid reason therefor.
13. Termination without Cause. The Board, in its sole
discretion, may terminate Employee's employment hereunder upon 30 days' prior
written notice to Employee at any time.
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<PAGE>
14. Termination for Good Reason. Employee may terminate his
employment hereunder upon 30 days' prior written notice to the Company for Good
Reason. Good Reason shall mean, without Employee's express written consent, the
occurrence of any of the following circumstances unless in the case of clause
(b) or (c) such circumstances are fully corrected prior to the end of such 30
day period: (a) a reduction in Employee's annual rate of base salary, (b) a
failure of the Company to make the payments required by Section 4 hereof, (c)
any other material breach by the Company of this Agreement, (d) relocation of
the Company's executive offices to a location 30 miles from its current
location, or (e) after a Change in Control. As used herein "Change in Control"
means an event other than a Qualified Offering (as defined below) occurring
after the date of this Agreement as the result of which (i) any "person" (as
such term is used in Sections 13(d) and 14(d) of the Exchange Act), other than
BRT and its affiliates or any stockholder of the Company on the date of this
Agreement, becomes the "Beneficial Owner" (as defined in Rules 13d-3 and 13d-5
under the Exchange Act), directly or indirectly, of (A) stock of the Company
entitling the holder thereof to elect a majority of the members of the Board of
Directors of the Company, or (B) Shares of BRT representing a majority of the
total issued and outstanding Shares of BRT; (ii) the Company consolidates or
merges with or into another corporation or conveys, transfers or leases all or
substantially all of its assets to any person other than in a transaction in
which holders of the Company's voting stock immediately prior to such
transaction own, directly or indirectly, not less than 51% of the voting stock
of the surviving entity immediately after such transaction; or (iii) the Company
is liquidated or dissolved or adopts a plan of liquidation. However, Employee
shall be deemed to have waived his rights pursuant to circumstances constituting
Good Reason hereunder if he shall not have provided the Company a notice of
termination within three (3) months following his actual knowledge of the
circumstances constituting Good Reason. As used herein "Qualified Offering"
means a public or private sale of equity securities generating at least $35
million of net proceeds to BRT at a price per share at least equal to the per
share book value of the Shares as of the end of BRT's most recently completed
quarter preceding the sale or at least $25 million of net proceeds, but less
than $35 million of net proceeds, at a price per share of at least $5.50
(subject to adjustment in the event of stock dividends, stock splits or reverse
stock splits).
15. Payments Upon or After Termination.
(a) In the event that the Employee's employment hereunder
is terminated prior to the expiration of the Term, the Company, or at its
direction, its Subsidiaries shall pay to the Employee or, as appropriate, his
representatives, heirs or estate all amounts payable under Sections 4 and 8
accrued through the date of termination (the "Accrued Amount") within 15 days
after such date, plus the amounts set forth below at such times as such amounts
would otherwise be payable, as follows:
(i) If the Employee's employment is terminated as a
result of the Employee's death, the consideration provided for in Sections 4 and
5 hereof, at the rate in effect at the date of termination, for one year after
such death, less the proceeds receivable by Employee's heirs and legal
representatives from any life insurance policy provided by the Company;
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(ii) If the Employee's employment is terminated by the
Company for Disability, the consideration provided for in Sections 4, 5 and 7
hereof, at the rate in effect at the date of termination, until Employee becomes
eligible to receive benefits pursuant to the disability insurance policy
provided by the Company and for one year after such eligibility at the rate in
effect at the date of termination less the amount of disability insurance
proceeds receivable by Employee, provided that such period shall not exceed two
years in the aggregate, and
(iii) If the Employee's employment is terminated by
the Employee for Good Reason or by the Company without Cause or if the Company
notifies Employee of its intention not to renew the term of this Agreement
pursuant to Section 3, the consideration provided for in Sections 4, 5 and 7 to
be paid during the period equal to the remainder of the then current Term or
twelve months, whichever is greater, at the rate in effect on the date of
termination.
(b) If the Employee's employment is terminated by the
Company for Cause, by the Employee voluntarily without Good Reason or if
Employee notifies the Company of its intention not to renew the term of this
Agreement pursuant to Section 3, the Company shall have no obligation or
liability after the date of discharge or termination to pay or provide base
salary, bonus compensation, fringe benefits, or any other form of compensation
hereunder other than to pay the Accrued Amount.
(c) In the event that the Employee is employed by a
Subsidiary of the Company at the time of termination of employment, any amounts
payable to the Employee pursuant to this Section 15 shall be reduced by the
amounts payable to such Employee by any such Subsidiary.
(d) Upon the payment of the amounts payable under this
Section 15, neither the Company nor any of its subsidiaries shall have any
further obligations hereunder to Employee (or to his estate, heirs,
beneficiaries, or legal representatives, as appropriate, or otherwise) to pay or
provide any base salary, bonus compensation, or fringe benefits.
16. Prior Agreement. Employee represents to the Company that
(a) there are no other agreements or understandings to which Employee is a party
relating to employment, benefits or retirement, (b) there are no restrictions,
agreements or understandings whatsoever to which Employee is a party which would
prevent or make unlawful his execution of this Agreement or his employment
hereunder, (c) his execution of this Agreement and his employment hereunder
shall not constitute a breach of any contract, agreement or understanding, oral
or written, to which he is a party or by which he is bound, and (d) he is free
and able to execute this Agreement and to enter into employment by the Company.
17. Key Man Insurance. The Company shall have the right at its
expense to purchase insurance on the life of Employee in such amounts as it
shall from time to time determine, of which the Company shall be the
beneficiary. Employee shall submit to such
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physical examinations as may be required, and shall otherwise cooperate with the
Company, in connection with the Company obtaining such insurance.
18. Miscellaneous.
(a) Controlling Law. This Agreement and all questions
relating to its validity, interpretation, performance and enforcement, shall be
governed by and construed in accordance with the laws of the Commonwealth of
Pennsylvania.
(b) Notices. All notices, requests, demands and other
communications required or permitted under this Agreement shall be in writing
and shall be deemed to have been duly given, made and received when delivered in
person against receipt, or when sent by United States registered or certified
mail, return receipt requested, postage prepaid, addressed as set forth below:
(1) If to Employee:
Gerard H. Sweeney
2 Craig Lane
Haverford, PA 19041
(2) If to the Company:
Brandywine Realty Services Corporation
16 Campus Boulevard
Suite 150
Newtown Square, PA 19073
In addition, notice by mail shall be by air mail if posted
outside of the continental United States.
Any party may alter the address to which communications or
copies are to be sent by giving notice of such change of address in conformity
with the provisions of this paragraph for the giving of notice.
(c) Binding Nature of Agreement. This Agreement shall be
binding upon and inure to the benefit of the Company and its successors and
assigns and shall be binding upon Employee, his heirs and legal representatives.
(d) Execution in Counterparts. This Agreement may be
executed in any number of counterparts, each of which shall be deemed to be an
original as against any party who executes the same, and all of which shall
constitute one and the same instrument. This Agreement shall become binding when
one or more counterparts hereof, individually or taken together, shall bear the
signatures of all of the parties reflected hereon as the signatories.
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<PAGE>
(e) Provisions Separable. The provisions of this Agreement
are independent of and separable from each other, and no provision shall be
affected or rendered invalid or unenforceable by virtue of the fact that for any
reason any other or others of them may be invalid or unenforceable in whole or
in part.
(f) Entire Agreement. This Agreement contains the entire
understanding among the parties hereto with respect to the subject matter hereof
and supersedes all prior agreements and understandings, inducements or
conditions, express or implied, oral or written, except as herein contained. The
express terms hereof control and supersede any course of performance and/or
usage of the trade inconsistent with any of the terms hereof. This Agreement may
not be modified or amended other than by an agreement in writing.
(g) Section and Paragraph Headings. The section and
paragraph headings in this Agreement are for convenience only; they form no part
of this Agreement and shall not affect its interpretation.
(h) Gender, Etc. Words used herein, regardless of the
number and gender specifically used, shall be deemed and construed to include
any other number, singular or plural, and any other gender, masculine, feminine
or neuter, as the context requires.
(i) Number of Days. In computing the number of days for
purposes of this Agreement (except vacation days), all days shall be counted,
including Saturdays, Sundays and holidays; provided, however, that if the final
day of any time period falls on a Saturday, Sunday or holiday, then the final
day shall be deemed to be the next day which is not a Saturday, Sunday or
holiday.
(j) Survival. The provisions of Sections 10, 11, 12, 13,
14, 15 and 16 shall survive the expiration or termination of the term of
Employee's employment hereunder.
(k) Assignability. This Agreement is not assignable by
Employee. It is assignable by the Company only (i) to any subsidiary of the
Company so long as the Company agrees to guarantee such subsidiary's obligations
hereunder, or (ii) subject to Section 14, to a person which is a successor in
interest to the Company in the business operated by it or which acquires all or
substantially all of its assets.
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<PAGE>
(l) Liability of Trustees, etc. No recourse shall be had
for any obligation of BRT hereunder, or for any claim based thereon or otherwise
in respect thereof, against any past, present or future trustee, stockholder,
officer or employee of BRT, whether by virtue of any statute or rule of law, or
by the enforcement of any assessment or penalty or otherwise, all such other
liability being expressly waived and released by each other party hereto.
IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed and delivered on the date first above-written.
BRANDYWINE REALTY SERVICES
CORPORATION
By:
--------------------------------------------
Gerard H. Sweeney, President and Chief
Executive Officer
EMPLOYEE:
------------------------------------------------
Gerard H. Sweeney
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<PAGE>
JOINDER
Brandywine Realty Trust hereby joins in this Agreement solely
for purposes of guaranteeing the obligations of the Company set forth in Section
6 hereof.
BRANDYWINE REALTY TRUST
By:
--------------------------------------
Gerard H. Sweeney, President and
Chief Executive Officer
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<PAGE>
GUARANTEE
In the event that the Company fails to perform its obligations
under the foregoing Employment Agreement, Brandywine Operating Partnership, L.P.
shall promptly perform the obligations of the Company arising thereunder which
have not been performed in strict accordance with the terms and conditions
thereof.
BRANDYWINE OPERATING PARTNERSHIP,
L.P.
By: BRANDYWINE REALTY TRUST, its
general partner
By:
--------------------------------------
Gerard H. Sweeney, President and
Chief Executive Officer
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<PAGE>
Schedule A
FRINGE BENEFITS
The fringe benefits shall be no less favorable to Employee
than those described in the document captioned "The Nichols Company Employee
Benefit Programs and Personnel Policies," effective January 1, 1995.
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<PAGE>
EMPLOYMENT AGREEMENT
Employment Agreement (the "Agreement"), made and entered into
as of July 31, 1996, by and between Brian F. Belcher ("Employee") and Brandywine
Realty Services Corporation, a Pennsylvania corporation (the "Company").
BACKGROUND
The Company desires to employ Employee, and Employee desires
to enter into the employ of the Company, on the terms and conditions contained
in this Agreement.
NOW, THEREFORE, in consideration of the mutual agreements
contained herein, and intending to be legally bound hereby, the parties hereto
agree as follows:
1. Employment. The Company hereby employs Employee, and
Employee hereby accepts employment by the Company, for the period and upon the
terms and conditions contained in this Agreement.
2. Office and Duties.
(a) Employee shall be employed by the Company initially
as its Executive Vice President - Marketing and Development and, subject to the
supervision of the President (the "President") and the Board of Trustees of the
Company (the "Board"), perform such duties and shall have such authority as may
from time to time be specified by the President or the Board. Employee shall
report directly to the President.
(b) Without further consideration, Employee shall, as
directed by the President or the Board, serve as a director or officer of, or
perform such other duties and services as may be requested for and with respect
to, any of the Company's Subsidiaries. As used in this Agreement, the terms
"Subsidiary" and "Subsidiaries" shall mean with respect to any entity, any
corporation, partnership, or other business entity in which the subject entity
has the power (whether by contract, through securities ownership, or otherwise
and whether directly or indirectly through control of one or more intermediate
Subsidiaries) to elect a majority of board of directors or other governing body,
including, in the case of a partnership, a majority of the board of directors or
other governing body of the general partner.
(c) Employee shall devote his full working time, energy,
skill and best efforts to the performance of his duties hereunder, in a manner
which will faithfully and diligently further the business interests of the
Company and its Subsidiaries.
3. Term. Unless sooner terminated as hereinafter provided, the
term of Employee's employment shall be for a period of two years (the "Term")
commencing on the
<PAGE>
closing date (the "Closing Date") of the Contribution Agreement. Until the
Closing Date and the completion of the transactions contemplated by the
Contribution Agreement, this Agreement shall not be effective for any purpose
whatsoever and neither party shall have any liability arising hereunder. The
Term shall automatically renew for additional one-year periods at the expiration
of the then current Term unless either party shall give notice of his or its
election to terminate Employee's employment at least thirty days prior to the
end of the then-current Term, unless earlier terminated as hereinafter provided.
If the Closing Date has not occurred on or before September 30, 1996, this
Agreement shall automatically terminate and neither party shall have any
obligation or liability hereunder.
4. Base Salary. For all of the services rendered by Employee
to the Company and its Subsidiaries, Employee shall receive an aggregate base
salary of $125,500 per annum during the term of his employment hereunder. Such
salary may be paid, at the election of the Company, either by the Company or by
one or more of its Subsidiaries, in such relative proportions as the Company may
determine, as earned in periodic installments in accordance with the Company's
normal payment policies for executive officers. In the event that the Employee
is also employed during any period by a Subsidiary of the Company, the amount of
the base salary payable by the Company during such period shall be reduced by
the amount of compensation received by Employee during such period from such
Subsidiary. For the purposes of this determination, the term "compensation"
shall mean all compensation which would be required to be reported pursuant to
Item 402(b) of Regulation S-K under the Securities Act of 1933 and the
Securities and Exchange Act of 1934 or any successor regulation whether or not
Employee's compensation is subject to such reporting. Employee shall receive
such salary increases as the Board may from time to time approve.
5. Bonus. Employee shall receive, during the term of this
Agreement, such annual bonus or incentive compensation as the Board, in its sole
discretion, shall determine from time to time. Any such bonus shall be based on
Employee's annual performance goals as established by the Board from time to
time. In addition, the Company expects to develop an incentive compensation
program consistent with those provided in the real estate investment trust
industry and agrees to permit Employee to participate in any such program.
6. Warrants. On the Closing Date, Brandywine Realty Trust, a
Maryland real estate investment trust ("BRT"), shall issue a six-year Warrant to
Employee to purchase up to 120,000 of BRT's shares of beneficial interest
("Shares") at a purchase price of $6.50 per Share. The Company shall cause,
within 60 days after the Closing Date, the Shares issuable upon exercise of the
Warrant to be registered under the Securities Act of 1933, as amended, 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 Employee to sell such
registered Shares publicly without regard to the volume and other limitations of
Rule 144.
7. Fringe Benefits. Throughout the term of his employment and
as long as they are kept in force by the Company, Employee shall be entitled to
participate in and receive
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<PAGE>
the benefits of any profit sharing plan, retirement plan, health or other
employee benefit plan made available to other executive officers of the Company,
but in no event shall such benefits be less favorable to Employee than the
benefits listed on Schedule A hereto.
8. Expenses. The Company will reimburse Employee for all
reasonable, ordinary and necessary business expenses incurred by Employee in
connection with the performance of Employee's duties hereunder upon receipt of
vouchers therefor and in accordance with the Company's regular reimbursement
procedures and practices in effect from time to time.
9. Vacation. Employee shall be entitled to a vacation of four
(4) weeks during each twelve (12) month period of his employment hereunder,
during which time Employee's compensation hereunder shall be paid in full.
10. Disability. If the Board determines in good faith by a
vote of a majority of its Members that Employee is unable to perform his duties
hereunder due to partial or total disability or incapacity resulting from a
mental or physical illness or injury or any similar cause for a period of one
hundred and twenty (120) consecutive days or for a cumulative period of one
hundred and eighty (180) days during any twelve (12) month period, the Company
shall have the right to terminate Employee's employment at any time thereafter.
11. Death. If Employee dies, this Agreement shall terminate at
the time of death.
12. Discharge for Cause. The Company may discharge Employee at
any time for Cause. Cause shall mean: (i) habitual intoxication; (ii) drug
addiction; (iii) intentional and willful violation of any express direction of
the Board; (iv) theft, misappropriation or embezzlement of the Company's funds;
(v) conviction of a felony; or (vi) repeated and consistent failure of Employee
to be present at work during regular hours without valid reason therefor.
13. Termination without Cause. The Board, in its sole
discretion, may terminate Employee's employment hereunder upon 30 days' prior
written notice to Employee at any time.
14. Termination for Good Reason. Employee may terminate his
employment hereunder upon 30 days' prior written notice to the Company for Good
Reason. Good Reason shall mean, without Employee's express written consent, the
occurrence of any of the following circumstances unless in the case of clause
(b) or (c) such circumstances are fully corrected prior to the end of such 30
day period: (a) a reduction in Employee's annual rate of base salary, (b) a
failure of the Company to make the payments required by Section 4 hereof, (c)
any other material breach by the Company of this Agreement, (d) relocation of
the Company's executive offices to a location 30 miles from its current
location, or (e) after a Change in Control. As used herein "Change in Control"
means an event other than a Qualified Offering (as defined below) occurring
after the date of this Agreement as the result of which (i) any "person" (as
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such term is used in Sections 13(d) and 14(d) of the Exchange Act), other than
BRT and its affiliates or any stockholder of the Company on the date of this
Agreement, becomes the "Beneficial Owner" (as defined in Rules 13d-3 and 13d-5
under the Exchange Act), directly or indirectly, of (A) stock of the Company
entitling the holder thereof to elect a majority of the members of the Board of
Directors of the Company, or (B) Shares of BRT representing a majority of the
total issued and outstanding Shares of BRT; (ii) the Company consolidates or
merges with or into another corporation or conveys, transfers or leases all or
substantially all of its assets to any person other than in a transaction in
which holders of the Company's voting stock immediately prior to such
transaction own, directly or indirectly, not less than 51% of the voting stock
of the surviving entity immediately after such transaction; or (iii) the Company
is liquidated or dissolved or adopts a plan of liquidation. However, Employee
shall be deemed to have waived his rights pursuant to circumstances constituting
Good Reason hereunder if he shall not have provided the Company a notice of
termination within three (3) months following his actual knowledge of the
circumstances constituting Good Reason. As used herein "Qualified Offering"
means a public or private sale of equity securities generating at least $35
million of net proceeds to BRT at a price per share at least equal to the per
share book value of the Shares as of the end of BRT's most recently completed
quarter preceding the sale or at least $25 million of net proceeds, but less
than $35 million of net proceeds, at a price per share of at least $5.50
(subject to adjustment in the event of stock dividends, stock splits or reverse
stock splits).
15. Payments Upon or After Termination.
(a) In the event that the Employee's employment
hereunder is terminated prior to the expiration of the Term, the Company, or at
its direction, its Subsidiaries shall pay to the Employee or, as appropriate,
his representatives, heirs or estate all amounts payable under Sections 4 and 8
accrued through the date of termination (the "Accrued Amount") within 15 days
after such date, plus the amounts set forth below at such times as such amounts
would otherwise be payable, as follows:
(i) If the Employee's employment is terminated as
a result of the Employee's death, the consideration provided for in Sections 4
and 5 hereof, at the rate in effect at the date of termination, for one year
after such death, less the proceeds receivable by Employee's heirs and legal
representatives from any life insurance policy provided by the Company;
(ii) If the Employee's employment is terminated by
the Company for Disability, the consideration provided for in Sections 4, 5 and
7 hereof, at the rate in effect at the date of termination, until Employee
becomes eligible to receive benefits pursuant to the disability insurance policy
provided by the Company and for one year after such eligibility at the rate in
effect at the date of termination less the amount of disability insurance
proceeds receivable by Employee, provided that such period shall not exceed two
years in the aggregate, and
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(iii) If the Employee's employment is terminated
by the Employee for Good Reason or by the Company without Cause or if the
Company notifies Employee of its intention not to renew the term of this
Agreement pursuant to Section 3, the consideration provided for in Sections 4, 5
and 7 to be paid during the period equal to the remainder of the then current
Term or twelve months, whichever is greater, at the rate in effect on the date
of termination.
(b) If the Employee's employment is terminated by the
Company for Cause, by the Employee voluntarily without Good Reason or if
Employee notifies the Company of its intention not to renew the term of this
Agreement pursuant to Section 3, the Company shall have no obligation or
liability after the date of discharge or termination to pay or provide base
salary, bonus compensation, fringe benefits, or any other form of compensation
hereunder other than to pay the Accrued Amount.
(c) In the event that the Employee is employed by a
Subsidiary of the Company at the time of termination of employment, any amounts
payable to the Employee pursuant to this Section 15 shall be reduced by the
amounts payable to such Employee by any such Subsidiary.
(d) Upon the payment of the amounts payable under this
Section 15, neither the Company nor any of its subsidiaries shall have any
further obligations hereunder to Employee (or to his estate, heirs,
beneficiaries, or legal representatives, as appropriate, or otherwise) to pay or
provide any base salary, bonus compensation, or fringe benefits.
16. Prior Agreement. Employee represents to the Company that
(a) there are no other agreements or understandings to which Employee is a party
relating to employment, benefits or retirement, (b) there are no restrictions,
agreements or understandings whatsoever to which Employee is a party which would
prevent or make unlawful his execution of this Agreement or his employment
hereunder, (c) his execution of this Agreement and his employment hereunder
shall not constitute a breach of any contract, agreement or understanding, oral
or written, to which he is a party or by which he is bound, and (d) he is free
and able to execute this Agreement and to enter into employment by the Company.
17. Key Man Insurance. The Company shall have the right at its
expense to purchase insurance on the life of Employee in such amounts as it
shall from time to time determine, of which the Company shall be the
beneficiary. Employee shall submit to such physical examinations as may be
required, and shall otherwise cooperate with the Company, in connection with the
Company obtaining such insurance.
18. Miscellaneous.
(a) Controlling Law. This Agreement and all questions
relating to its validity, interpretation, performance and enforcement, shall be
governed by and construed in accordance with the laws of the Commonwealth of
Pennsylvania.
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(b) Notices. All notices, requests, demands and other
communications required or permitted under this Agreement shall be in writing
and shall be deemed to have been duly given, made and received when delivered in
person against receipt, or when sent by United States registered or certified
mail, return receipt requested, postage prepaid, addressed as set forth below:
(1) If to Employee:
Brian F. Belcher
(2) If to the Company:
Brandywine Realty Services Corporation
16 Campus Boulevard
Suite 150
Newtown Square, PA 19073
In addition, notice by mail shall be by air mail if posted
outside of the continental United States.
Any party may alter the address to which communications or
copies are to be sent by giving notice of such change of address in conformity
with the provisions of this paragraph for the giving of notice.
(c) Binding Nature of Agreement. This Agreement shall be
binding upon and inure to the benefit of the Company and its successors and
assigns and shall be binding upon Employee, his heirs and legal representatives.
(d) Execution in Counterparts. This Agreement may be
executed in any number of counterparts, each of which shall be deemed to be an
original as against any party who executes the same, and all of which shall
constitute one and the same instrument. This Agreement shall become binding when
one or more counterparts hereof, individually or taken together, shall bear the
signatures of all of the parties reflected hereon as the signatories.
(e) Provisions Separable. The provisions of this
Agreement are independent of and separable from each other, and no provision
shall be affected or rendered invalid or unenforceable by virtue of the fact
that for any reason any other or others of them may be invalid or unenforceable
in whole or in part.
(f) Entire Agreement. This Agreement contains the entire
understanding among the parties hereto with respect to the subject matter hereof
and supersedes all prior agreements and understandings, inducements or
conditions, express or implied, oral or
-6-
<PAGE>
written, except as herein contained. The express terms hereof control and
supersede any course of performance and/or usage of the trade inconsistent with
any of the terms hereof. This Agreement may not be modified or amended other
than by an agreement in writing.
(g) Section and Paragraph Headings. The section and
paragraph headings in this Agreement are for convenience only; they form no part
of this Agreement and shall not affect its interpretation.
(h) Gender, Etc. Words used herein, regardless of the
number and gender specifically used, shall be deemed and construed to include
any other number, singular or plural, and any other gender, masculine, feminine
or neuter, as the context requires.
(i) Number of Days. In computing the number of days for
purposes of this Agreement (except vacation days), all days shall be counted,
including Saturdays, Sundays and holidays; provided, however, that if the final
day of any time period falls on a Saturday, Sunday or holiday, then the final
day shall be deemed to be the next day which is not a Saturday, Sunday or
holiday.
(j) Survival. The provisions of Sections 10, 11, 12, 13,
14, 15 and 16 shall survive the expiration or termination of the term of
Employee's employment hereunder.
(k) Assignability. This Agreement is not assignable by
Employee. It is assignable by the Company only (i) to any subsidiary of the
Company so long as the Company agrees to guarantee such subsidiary's obligations
hereunder, or (ii) subject to Section 14, to a person which is a successor in
interest to the Company in the business operated by it or which acquires all or
substantially all of its assets.
(l) Liability of Trustees, etc. No recourse shall be had
for any obligation of BRT hereunder, or for any claim based thereon or otherwise
in respect thereof, against any past, present or future trustee, stockholder,
officer or employee of BRT, whether by virtue of any statute or rule of law, or
by the enforcement of any assessment or penalty or otherwise, all such other
liability being expressly waived and released by each other party hereto.
-7-
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed and delivered on the date first above-written.
BRANDYWINE REALTY SERVICES
CORPORATION
By:_____________________________________________
Gerard H. Sweeney, President and Chief
Executive Officer
EMPLOYEE:
_________________________________________________
Brian F. Belcher
-8-
<PAGE>
JOINDER
Brandywine Realty Trust hereby joins in this Agreement solely
for purposes of guaranteeing the obligations of the Company set forth in Section
6 hereof.
BRANDYWINE REALTY TRUST
By:_____________________________________
Gerard H. Sweeney, President and
Chief Executive Officer
-9-
<PAGE>
GUARANTEE
In the event that the Company fails to perform its obligations
under the foregoing Employment Agreement, Brandywine Operating Partnership, L.P.
shall promptly perform the obligations of the Company arising thereunder which
have not been performed in strict accordance with the terms and conditions
thereof.
BRANDYWINE OPERATING PARTNERSHIP,
L.P.
By: BRANDYWINE REALTY TRUST, its
general partner
By:_______________________________________
Gerard H. Sweeney, President and
Chief Executive Officer
-10-
<PAGE>
Schedule A
FRINGE BENEFITS
The fringe benefits shall be no less favorable to Employee
than those described in the document captioned "The Nichols Company Employee
Benefit Programs and Personnel Policies," effective January 1, 1995.
-11-
<PAGE>
EMPLOYMENT AGREEMENT
Employment Agreement (the "Agreement"), made and entered into
as of July 31, 1996, by and between John P. Gallagher ("Employee") and
Brandywine Realty Services Corporation, a Pennsylvania corporation (the
"Company").
BACKGROUND
The Company desires to employ Employee, and Employee desires
to enter into the employ of the Company, on the terms and conditions contained
in this Agreement.
NOW, THEREFORE, in consideration of the mutual agreements
contained herein, and intending to be legally bound hereby, the parties hereto
agree as follows:
1. Employment. The Company hereby employs Employee, and
Employee hereby accepts employment by the Company, for the period and upon the
terms and conditions contained in this Agreement.
2. Office and Duties.
(a) Employee shall be employed by the Company initially as
its Executive Vice President - Finance and, subject to the supervision of the
President (the "President") and the Board of Trustees of the Company (the
"Board"), perform such duties and shall have such authority as may from time to
time be specified by the President or the Board. Employee shall report directly
to the President.
(b) Without further consideration, Employee shall, as
directed by the President or the Board, serve as a director or officer of, or
perform such other duties and services as may be requested for and with respect
to, any of the Company's Subsidiaries. As used in this Agreement, the terms
"Subsidiary" and "Subsidiaries" shall mean with respect to any entity, any
corporation, partnership, or other business entity in which the subject entity
has the power (whether by contract, through securities ownership, or otherwise
and whether directly or indirectly through control of one or more intermediate
Subsidiaries) to elect a majority of board of directors or other governing body,
including, in the case of a partnership, a majority of the board of directors or
other governing body of the general partner.
(c) Employee shall devote his full working time, energy,
skill and best efforts to the performance of his duties hereunder, in a manner
which will faithfully and diligently further the business interests of the
Company and its Subsidiaries.
3. Term. Unless sooner terminated as hereinafter provided, the
term of Employee's employment shall be for a period of two years (the "Term")
commencing on the
<PAGE>
closing date (the "Closing Date") of the Contribution Agreement. Until the
Closing Date and the completion of the transactions contemplated by the
Contribution Agreement, this Agreement shall not be effective for any purpose
whatsoever and neither party shall have any liability arising hereunder. The
Term shall automatically renew for additional one-year periods at the expiration
of the then current Term unless either party shall give notice of his or its
election to terminate Employee's employment at least thirty days prior to the
end of the then-current Term, unless earlier terminated as hereinafter provided.
If the Closing Date has not occurred on or before September 30, 1996, this
Agreement shall automatically terminate and neither party shall have any
obligation or liability hereunder.
4. Base Salary. For all of the services rendered by Employee
to the Company and its Subsidiaries, Employee shall receive an aggregate base
salary of $104,500 per annum during the term of his employment hereunder. Such
salary may be paid, at the election of the Company, either by the Company or by
one or more of its Subsidiaries, in such relative proportions as the Company may
determine, as earned in periodic installments in accordance with the Company's
normal payment policies for executive officers. In the event that the Employee
is also employed during any period by a Subsidiary of the Company, the amount of
the base salary payable by the Company during such period shall be reduced by
the amount of compensation received by Employee during such period from such
Subsidiary. For the purposes of this determination, the term "compensation"
shall mean all compensation which would be required to be reported pursuant to
Item 402(b) of Regulation S-K under the Securities Act of 1933 and the
Securities and Exchange Act of 1934 or any successor regulation whether or not
Employee's compensation is subject to such reporting. Employee shall receive
such salary increases as the Board may from time to time approve.
5. Bonus. Employee shall receive, during the term of this
Agreement, such annual bonus or incentive compensation as the Board, in its sole
discretion, shall determine from time to time. Any such bonus shall be based on
Employee's annual performance goals as established by the Board from time to
time. In addition, the Company expects to develop an incentive compensation
program consistent with those provided in the real estate investment trust
industry and agrees to permit Employee to participate in any such program.
6. Warrants. On the Closing Date, Brandywine Realty Trust, a
Maryland real estate investment trust ("BRT"), shall issue a six-year Warrant to
Employee to purchase up to 120,000 of BRT's shares of beneficial interest
("Shares") at a purchase price of $6.50 per Share. The Company shall cause,
within 60 days after the Closing Date, the Shares issuable upon exercise of the
Warrant to be registered under the Securities Act of 1933, as amended, 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 Employee to sell such
registered Shares publicly without regard to the volume and other limitations of
Rule 144.
7. Fringe Benefits. Throughout the term of his employment and
as long as they are kept in force by the Company, Employee shall be entitled to
participate in and receive
-2-
<PAGE>
the benefits of any profit sharing plan, retirement plan, health or other
employee benefit plan made available to other executive officers of the Company,
but in no event shall such benefits be less favorable to Employee than the
benefits listed on Schedule A hereto.
8. Expenses. The Company will reimburse Employee for all
reasonable, ordinary and necessary business expenses incurred by Employee in
connection with the performance of Employee's duties hereunder upon receipt of
vouchers therefor and in accordance with the Company's regular reimbursement
procedures and practices in effect from time to time.
9. Vacation. Employee shall be entitled to a vacation of four
(4) weeks during each twelve (12) month period of his employment hereunder,
during which time Employee's compensation hereunder shall be paid in full.
10. Disability. If the Board determines in good faith by a
vote of a majority of its Members that Employee is unable to perform his duties
hereunder due to partial or total disability or incapacity resulting from a
mental or physical illness or injury or any similar cause for a period of one
hundred and twenty (120) consecutive days or for a cumulative period of one
hundred and eighty (180) days during any twelve (12) month period, the Company
shall have the right to terminate Employee's employment at any time thereafter.
11. Death. If Employee dies, this Agreement shall terminate at
the time of death.
12. Discharge for Cause. The Company may discharge Employee at
any time for Cause. Cause shall mean: (i) habitual intoxication; (ii) drug
addiction; (iii) intentional and willful violation of any express direction of
the Board; (iv) theft, misappropriation or embezzlement of the Company's funds;
(v) conviction of a felony; or (vi) repeated and consistent failure of Employee
to be present at work during regular hours without valid reason therefor.
13. Termination without Cause. The Board, in its sole
discretion, may terminate Employee's employment hereunder upon 30 days' prior
written notice to Employee at any time.
14. Termination for Good Reason. Employee may terminate his
employment hereunder upon 30 days' prior written notice to the Company for Good
Reason. Good Reason shall mean, without Employee's express written consent, the
occurrence of any of the following circumstances unless in the case of clause
(b) or (c) such circumstances are fully corrected prior to the end of such 30
day period: (a) a reduction in Employee's annual rate of base salary, (b) a
failure of the Company to make the payments required by Section 4 hereof, (c)
any other material breach by the Company of this Agreement, (d) relocation of
the Company's executive offices to a location 30 miles from its current
location, or (e) after a Change in Control. As used herein "Change in Control"
means an event other than a Qualified Offering (as defined below) occurring
after the date of this Agreement as the result of which (i) any "person" (as
-3-
<PAGE>
such term is used in Sections 13(d) and 14(d) of the Exchange Act), other than
BRT and its affiliates or any stockholder of the Company on the date of this
Agreement, becomes the "Beneficial Owner" (as defined in Rules 13d-3 and 13d-5
under the Exchange Act), directly or indirectly, of (A) stock of the Company
entitling the holder thereof to elect a majority of the members of the Board of
Directors of the Company, or (B) Shares of BRT representing a majority of the
total issued and outstanding Shares of BRT; (ii) the Company consolidates or
merges with or into another corporation or conveys, transfers or leases all or
substantially all of its assets to any person other than in a transaction in
which holders of the Company's voting stock immediately prior to such
transaction own, directly or indirectly, not less than 51% of the voting stock
of the surviving entity immediately after such transaction; or (iii) the Company
is liquidated or dissolved or adopts a plan of liquidation. However, Employee
shall be deemed to have waived his rights pursuant to circumstances constituting
Good Reason hereunder if he shall not have provided the Company a notice of
termination within three (3) months following his actual knowledge of the
circumstances constituting Good Reason. As used herein "Qualified Offering"
means a public or private sale of equity securities generating at least $35
million of net proceeds to BRT at a price per share at least equal to the per
share book value of the Shares as of the end of BRT's most recently completed
quarter preceding the sale or at least $25 million of net proceeds, but less
than $35 million of net proceeds, at a price per share of at least $5.50
(subject to adjustment in the event of stock dividends, stock splits or reverse
stock splits).
15. Payments Upon or After Termination.
(a) In the event that the Employee's employment hereunder
is terminated prior to the expiration of the Term, the Company, or at its
direction, its Subsidiaries shall pay to the Employee or, as appropriate, his
representatives, heirs or estate all amounts payable under Sections 4 and 8
accrued through the date of termination (the "Accrued Amount") within 15 days
after such date, plus the amounts set forth below at such times as such amounts
would otherwise be payable, as follows:
(i) If the Employee's employment is terminated as a
result of the Employee's death, the consideration provided for in Sections 4 and
5 hereof, at the rate in effect at the date of termination, for one year after
such death, less the proceeds receivable by Employee's heirs and legal
representatives from any life insurance policy provided by the Company;
(ii) If the Employee's employment is terminated by the
Company for Disability, the consideration provided for in Sections 4, 5 and 7
hereof, at the rate in effect at the date of termination, until Employee becomes
eligible to receive benefits pursuant to the disability insurance policy
provided by the Company and for one year after such eligibility at the rate in
effect at the date of termination less the amount of disability insurance
proceeds receivable by Employee, provided that such period shall not exceed two
years in the aggregate, and
-4-
<PAGE>
(iii) If the Employee's employment is terminated by
the Employee for Good Reason or by the Company without Cause or if the Company
notifies Employee of its intention not to renew the term of this Agreement
pursuant to Section 3, the consideration provided for in Sections 4, 5 and 7 to
be paid during the period equal to the remainder of the then current Term or
twelve months, whichever is greater, at the rate in effect on the date of
termination.
(b) If the Employee's employment is terminated by the
Company for Cause, by the Employee voluntarily without Good Reason or if
Employee notifies the Company of its intention not to renew the term of this
Agreement pursuant to Section 3, the Company shall have no obligation or
liability after the date of discharge or termination to pay or provide base
salary, bonus compensation, fringe benefits, or any other form of compensation
hereunder other than to pay the Accrued Amount.
(c) In the event that the Employee is employed by a
Subsidiary of the Company at the time of termination of employment, any amounts
payable to the Employee pursuant to this Section 15 shall be reduced by the
amounts payable to such Employee by any such Subsidiary.
(d) Upon the payment of the amounts payable under this
Section 15, neither the Company nor any of its subsidiaries shall have any
further obligations hereunder to Employee (or to his estate, heirs,
beneficiaries, or legal representatives, as appropriate, or otherwise) to pay or
provide any base salary, bonus compensation, or fringe benefits.
16. Prior Agreement. Employee represents to the Company that
(a) there are no other agreements or understandings to which Employee is a party
relating to employment, benefits or retirement, (b) there are no restrictions,
agreements or understandings whatsoever to which Employee is a party which would
prevent or make unlawful his execution of this Agreement or his employment
hereunder, (c) his execution of this Agreement and his employment hereunder
shall not constitute a breach of any contract, agreement or understanding, oral
or written, to which he is a party or by which he is bound, and (d) he is free
and able to execute this Agreement and to enter into employment by the Company.
17. Key Man Insurance. The Company shall have the right at its
expense to purchase insurance on the life of Employee in such amounts as it
shall from time to time determine, of which the Company shall be the
beneficiary. Employee shall submit to such physical examinations as may be
required, and shall otherwise cooperate with the Company, in connection with the
Company obtaining such insurance.
18. Miscellaneous.
(a) Controlling Law. This Agreement and all questions
relating to its validity, interpretation, performance and enforcement, shall be
governed by and construed in accordance with the laws of the Commonwealth of
Pennsylvania.
-5-
<PAGE>
(b) Notices. All notices, requests, demands and other
communications required or permitted under this Agreement shall be in writing
and shall be deemed to have been duly given, made and received when delivered in
person against receipt, or when sent by United States registered or certified
mail, return receipt requested, postage prepaid, addressed as set forth below:
(1) If to Employee:
John P. Gallagher
(2) If to the Company:
Brandywine Realty Services Corporation
16 Campus Boulevard
Suite 150
Newtown Square, PA 19073
In addition, notice by mail shall be by air mail if posted
outside of the continental United States.
Any party may alter the address to which communications or
copies are to be sent by giving notice of such change of address in conformity
with the provisions of this paragraph for the giving of notice.
(c) Binding Nature of Agreement. This Agreement shall be
binding upon and inure to the benefit of the Company and its successors and
assigns and shall be binding upon Employee, his heirs and legal representatives.
(d) Execution in Counterparts. This Agreement may be
executed in any number of counterparts, each of which shall be deemed to be an
original as against any party who executes the same, and all of which shall
constitute one and the same instrument. This Agreement shall become binding when
one or more counterparts hereof, individually or taken together, shall bear the
signatures of all of the parties reflected hereon as the signatories.
(e) Provisions Separable. The provisions of this Agreement
are independent of and separable from each other, and no provision shall be
affected or rendered invalid or unenforceable by virtue of the fact that for any
reason any other or others of them may be invalid or unenforceable in whole or
in part.
(f) Entire Agreement. This Agreement contains the entire
understanding among the parties hereto with respect to the subject matter hereof
and supersedes all prior agreements and understandings, inducements or
conditions, express or implied, oral or
-6-
<PAGE>
written, except as herein contained. The express terms hereof control and
supersede any course of performance and/or usage of the trade inconsistent with
any of the terms hereof. This Agreement may not be modified or amended other
than by an agreement in writing.
(g) Section and Paragraph Headings. The section and
paragraph headings in this Agreement are for convenience only; they form no part
of this Agreement and shall not affect its interpretation.
(h) Gender, Etc. Words used herein, regardless of the
number and gender specifically used, shall be deemed and construed to include
any other number, singular or plural, and any other gender, masculine, feminine
or neuter, as the context requires.
(i) Number of Days. In computing the number of days for
purposes of this Agreement (except vacation days), all days shall be counted,
including Saturdays, Sundays and holidays; provided, however, that if the final
day of any time period falls on a Saturday, Sunday or holiday, then the final
day shall be deemed to be the next day which is not a Saturday, Sunday or
holiday.
(j) Survival. The provisions of Sections 10, 11, 12, 13,
14, 15 and 16 shall survive the expiration or termination of the term of
Employee's employment hereunder.
(k) Assignability. This Agreement is not assignable by
Employee. It is assignable by the Company only (i) to any subsidiary of the
Company so long as the Company agrees to guarantee such subsidiary's obligations
hereunder, or (ii) subject to Section 14, to a person which is a successor in
interest to the Company in the business operated by it or which acquires all or
substantially all of its assets.
(l) Liability of Trustees, etc. No recourse shall be had
for any obligation of BRT hereunder, or for any claim based thereon or otherwise
in respect thereof, against any past, present or future trustee, stockholder,
officer or employee of BRT, whether by virtue of any statute or rule of law, or
by the enforcement of any assessment or penalty or otherwise, all such other
liability being expressly waived and released by each other party hereto.
-7-
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed and delivered on the date first above-written.
BRANDYWINE REALTY SERVICES
CORPORATION
By:
--------------------------------------------
Gerard H. Sweeney, President and Chief
Executive Officer
EMPLOYEE:
-----------------------------------------------
John P. Gallagher
-8-
<PAGE>
JOINDER
Brandywine Realty Trust hereby joins in this Agreement solely
for purposes of guaranteeing the obligations of the Company set forth in Section
6 hereof.
BRANDYWINE REALTY TRUST
By:
------------------------------------------
Gerard H. Sweeney, President and
Chief Executive Officer
-9-
<PAGE>
GUARANTEE
In the event that the Company fails to perform its obligations
under the foregoing Employment Agreement, Brandywine Operating Partnership, L.P.
shall promptly perform the obligations of the Company arising thereunder which
have not been performed in strict accordance with the terms and conditions
thereof.
BRANDYWINE OPERATING PARTNERSHIP,
L.P.
By: BRANDYWINE REALTY TRUST, its
general partner
By:
--------------------------------------
Gerard H. Sweeney, President and
Chief Executive Officer
-10-
<PAGE>
Schedule A
FRINGE BENEFITS
The fringe benefits shall be no less favorable to Employee
than those described in the document captioned "The Nichols Company Employee
Benefit Programs and Personnel Policies," effective January 1, 1995.
-11-
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000790816
<NAME> BRANDYWINE REALTY TRUST
<MULTIPLIER> 1
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> JUN-30-1996
<EXCHANGE-RATE> 0.00001
<CASH> 2,272,000
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,272,000
<PP&E> 21,082,000
<DEPRECIATION> (7,330,000)
<TOTAL-ASSETS> 18,167,000
<CURRENT-LIABILITIES> 488,000
<BONDS> 9,872,000
0
0
<COMMON> 19,000
<OTHER-SE> 7,553,000
<TOTAL-LIABILITY-AND-EQUITY> 18,167,000
<SALES> 1,975,000
<TOTAL-REVENUES> 2,027,000
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,605,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 416,000
<INCOME-PRETAX> 1,000
<INCOME-TAX> 1,000
<INCOME-CONTINUING> 1,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,000
<EPS-PRIMARY> 0.00
<EPS-DILUTED> 0.00
</TABLE>
