<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, 1998
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 or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization
16 Campus Boulevard, Newtown Square, Pennsylvania 19073
-------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(610) 325-5600
--------------
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 38,103,682 Common Shares of Beneficial Interest were
outstanding as of August 13, 1998.
<PAGE>
BRANDYWINE REALTY TRUST
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of June 30, 1998 (unaudited) and
December 31, 1997
Consolidated Statements of Operations for the three months and
six months ended June 30, 1998 (unaudited) and June 30, 1997
(unaudited)
Consolidated Statements of Cash Flow for the six months ended
June 30, 1998 (unaudited) and June 30, 1997 (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
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
Signatures
2
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. - Financial Statements
BRANDYWINE REALTY TRUST
CONSOLIDATED BALANCE SHEETS
(unaudited and in thousands)
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
------------ ------------
ASSETS
<S> <C> <C>
Real estate investments
Operating properties $ 1,167,717 $ 586,414
Accumulated depreciation (39,723) (22,857)
----------- -----------
1,127,994 563,557
Cash and cash equivalents 42,394 29,442
Escrowed cash 1,325 212
Accounts receivable 6,971 3,689
Due from affiliates -- 214
Investment in management company 149 74
Investment in unconsolidated real estate ventures 11,965 5,480
Deposits 1,300 12,133
Deferred costs and other assets 8,311 6,680
----------- -----------
Total assets $ 1,200,409 $ 621,481
=========== ===========
LIABILITIES AND BENEFICIARIES' EQUITY
Mortgage notes payable $ 71,567 $ 48,731
Notes payable, Credit Facility 351,825 115,233
Accrued interest 1,354 857
Accounts payable and accrued expenses 4,266 2,377
Distributions payable 14,870 8,843
Due to affiliates 239 --
Tenant security deposits and deferred rents 11,489 5,535
----------- -----------
Total liabilities 455,610 181,576
----------- -----------
Commitments and Contingencies
Minority interest 22,084 14,377
----------- -----------
Beneficiaries' equity
Shares of beneficial interest, $0.01 par value, 100,000,000
common shares authorized, 38,103,682 and 24,087,315 shares
issued and outstanding at June 30, 1998 and December 31, 1997,
respectively 377 241
Additional paid-in capital 753,066 446,054
Share warrants 962 962
Cumulative earnings 30,119 11,753
Cumulative distributions (61,809) (33,482)
----------- -----------
Total beneficiaries' equity 722,715 425,528
----------- -----------
Total liabilities and beneficiaries' equity $ 1,200,409 $ 621,481
=========== ===========
</TABLE>
The accompanying condensed notes are integral part of these
consolidated financial statements.
3
<PAGE>
BRANDYWINE REALTY TRUST
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share information)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
--------------------- ---------------------
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenue:
Rents $ 37,058 $ 9,890 $ 65,553 $ 16,889
Tenant reimbursements 5,583 1,958 9,406 3,285
Other 489 272 1,273 544
-------- -------- -------- --------
Total revenue 43,130 12,120 76,232 20,718
-------- -------- -------- --------
Operating Expenses:
Interest 6,630 2,084 11,017 3,059
Depreciation and amortization 10,480 3,465 18,193 5,775
Amortization of deferred compensation costs 372 -- 744 --
Property operating expenses 13,313 4,222 23,450 7,032
Management fees 1,551 442 2,882 757
Administrative expenses 363 261 627 430
-------- -------- -------- --------
Total operating expenses 32,709 10,474 56,913 17,053
-------- -------- -------- --------
Income before equity in income of management
company, gains on sales, minority interest and extraordinary item 10,421 1,646 19,319 3,665
Equity in income of management company 40 92 75 217
-------- -------- -------- --------
Income before gains on sales, minority interest
and extraordinary item 10,461 1,738 19,394 3,882
Gains on sale of interests in real estate 209 -- 209 --
-------- -------- -------- --------
Income before minority interst and extraordinary item 10,670 1,738 19,603 3,882
Minority interest in income (248) (80) (378) (174)
-------- -------- -------- --------
Net income before extraordinary item 10,422 1,658 19,225 3,708
Extraordinary item -- -- (858) --
-------- -------- -------- --------
Net income 10,422 1,658 18,367 3,708
Income allocated to Preferred Shares -- -- -- (499)
======== ======== ======== ========
Income allocated to Common Shares $ 10,422 $ 1,658 $ 18,367 $ 3,209
======== ======== ======== ========
Earnings per Common Share:
Basic $ 0.28 $ 0.17 $ 0.53 $ 0.37
======== ======== ======== ========
Diluted $ 0.28 $ 0.15 $ 0.53 $ 0.36
======== ======== ======== ========
</TABLE>
The accompanying condensed notes are an integral part
of these consolidated financial statements.
4
<PAGE>
BRANDYWINE REALTY TRUST
CONSOLIDATED STATEMENTS OF CASH FLOW
(unaudited and in thousands)
<TABLE>
<CAPTION>
Six Months
Ended June 30,
------------------------------
1998 1997
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 18,367 $ 3,708
Adjustments to reconcile net income to net cash provided
by operating activities:
Minority interest 378 174
Depreciation and amortization 18,193 5,775
Equity in income of management company (75) (216)
Amortization of deferred compensation costs 744 --
Issuance of shares to trustees 29 --
Amortization of discounted notes payable 142 --
Gain on sale of interest in real estate (209)
Extraordinary items 858 --
Changes in assets and liabilities:
Accounts receivable (3,282) (1,389)
Affiliate receivable 453 224
Other assets 231 69
Accounts payable and accrued expenses 1,975 565
Accrued mortgage interest 497 193
Other liabilities 5,954 1,397
--------- ---------
Net cash provided by operating activites 44,255 10,500
--------- ---------
Cash flows from investing activities:
Purchase of properties (545,582) (194,604)
Sales of Properties 14,704 --
Investment in real estate ventures (6,485) --
Decrease (increase) in escrowed cash (1,113) 831
Capital expenditures and leasing commissions paid (7,113) (4,573)
--------- ---------
Net cash used in investing activities (545,589) (198,346)
--------- ---------
Cash flows from financing activites:
Proceeds from issuance of shares, net 301,336 45,404
Distributions paid to shareholders (22,482) (5,975)
Distributions paid to minority partners (286) (177)
Proceeds from mortgage notes payable 5,708 13,277
Repayment of mortgage notes payable (5,090) (2,961)
Proceeds from notes payable, Credit Facility 658,642 137,775
Repayment of notes payable, Credit Facility (422,050) (7,000)
Other debt costs (1,492) 1
--------- ---------
Net cash provided by financing activities 514,286 180,344
--------- ---------
Increase (decrease) in cash and cash equivalents 12,952 (7,502)
Cash and cash equivalents at beginning of period 29,442 18,279
--------- ---------
Cash and cash equivalents at end of period $ 42,394 $ 10,777
========= =========
</TABLE>
The accompanying condensed notes are an integral part
of these consolidated financial statements.
5
<PAGE>
BRANDYWINE REALTY TRUST
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1998
1. ORGANIZATION AND NATURE OF OPERATIONS:
Brandywine Realty Trust (collectively with its subsidiaries, the "Company") is
a self-administered, self-managed and fully integrated real estate investment
trust (a "REIT") . The Company currently owns a portfolio of real estate
assets located primarily in the Mid-Atlantic Region. As of June 30, 1998, the
Company's portfolio included 151 office properties and 28 industrial
facilities (collectively, the "Properties") that contain an aggregate of
approximately 12.1 million net rentable square feet. As of June 30, 1998, the
Company also held economic interests in seven office development entities (the
"Development Entities").
The Company's interest in the Properties and the Development Entities is held
through Brandywine Operating Partnership, L.P. (the "Operating Partnership").
The Company is the sole general partner of the Operating Partnership and, as
of June 30, 1998, the Company held a 97.6 % interest in the Operating
Partnership. The Operating Partnership holds a 95% economic interest in
Brandywine Realty Services Corporation (the "Management Company") through its
ownership of 100% of the Management Company's non voting preferred stock and
5% of its voting common stock. As of June 30, 1998, the Management Company was
responsible for managing and leasing 177 of the Company's Properties and
additional properties on behalf of third parties.
A majority of the Properties are located within the suburban Philadelphia
office and industrial market. As such, a downturn in business activity in this
market could negatively impact the Company . Management believes that the
Philadelphia office and industrial market provides a well-diversified economic
base which helps to insulate the region from the types of market vicissitudes
that can adversely affect a single-sector economy.
2. BASIS OF PRESENTATION:
The consolidated financial statements have been prepared by the Company without
audit except as to the balance sheet as of December 31, 1997 which has been
prepared from audited data, 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 Company believes that the included
disclosures are adequate to make the information presented not misleading. In
the opinion of the Company, all adjustments (consisting solely of normal
recurring matters) necessary to fairly present the financial position of the
Company as of June 30, 1998, the results of its operations for the three month
periods ended June 30, 1998 and 1997, and the results of its operations and its
cash flows for the six month periods ended June 30, 1998 and 1997 have been
included. The results of operations for such interim periods are not necessarily
indicative of the results for a full year. For further information, refer to the
Company's consolidated financial statements and footnotes thereto included in
the Annual Report on Form 10-K, as amended on Form 10-K/A, for the year ended
December 31, 1997.
3. ACQUISITIONS OF REAL ESTATE INVESTMENTS:
Second Quarter - 1998
During the second quarter of 1998, the Company acquired 13 office properties
which contained an aggregate of approximately 796,150 net rentable square feet.
The aggregate purchase price of the 13 Properties was approximately $98.2
million, which was satisfied with approximately $87.9 million of cash,
approximately $1.0 million of debt assumed, and approximately $9.3 million in
Class A units of limited partner interest ("Class A Units" in the Operating
Partnership. Also, during the second quarter of 1998, the Company sold an office
property located in Cincinnati, Ohio which contains approximately 156,175 net
rentable square feet for a gross selling price of approximately $15.2 million.
6
<PAGE>
First Quarter - 1998
During the first three months of 1998, the Company acquired 50 Properties (44
office properties and six industrial facilities) which contained an aggregate of
approximately 4.3 million net rentable square feet. The aggregate purchase price
of the 50 Properties was $492.7 million, which was satisfied with approximately
$468.10 million of cash, approximately $21.0 million of debt assumed, and
approximately $3.6 million in Class A Units.
1997
During 1997, the Company acquired 80 Properties (61 office properties and 19
industrial facilities) which contained an aggregate of approximately 5.1
million net rentable square feet. The aggregate purchase price for the 1997
property acquisitions was $403.7 million, which was satisfied with $378.3
million of cash, $15.9 million of debt assumed and $9.5 million in Class A
Units.
The following unaudited pro forma financial information of the Company for the
six months ended June 30, 1998 and 1997 gives effect to the Properties
acquired through June 30, 1998 and the offerings of Common Shares of
beneficial interest, par value $0.01 per share ("Common Shares") during 1998
and 1997 as if the purchases and offerings had occurred on January 1, 1997.
<TABLE>
<CAPTION>
Six Months Ended June 30,
-----------------------------------------
1998 1997
------------------ -------------------
(in thousands, except per share data)
(Unaudited)
<S> <C> <C>
Pro forma total revenues $87,776 $82,469
Pro forma net income before extraordinary items $20,042 $15,591
Diluted pro forma net income per Common Share before extraordinary items $0.51 $0.42
</TABLE>
All acquisitions described above were accounted for by the purchase method.
The results of operations for each of the acquired properties have been
included from the respective purchase dates. All pro forma financial
information presented within this footnote is unaudited and is not necessarily
indicative of the results which actually would have occurred if acquisitions
had been consummated on the respective dates indicated, nor does the pro forma
information purport to represent the results of operations for future periods.
Probable Acquisitions
On July 11, 1998, the Company entered into an agreement with Donald E. Axinn
to acquire a portfolio of nine office properties and 20 industrial facilities
located in Long Island, New York and Northern New Jersey for an aggregate
purchase price of approximately $103.5 million.
Certain of the properties (seven office and 19 industrial) are scheduled to
close during the third quarter of 1998. The purchase price applicable to these
properties is approximately $83.4 million, of which $10.5 million will be
deferred until the fourth quarter and the balance will be satisfied through a
combination of cash and Class A Units. The seller has the right to elect the mix
of cash and Class A Units, provided that a minimum of $24.0 million must be
taken in Class A Units. The sellers have agreed to value the Class A Units at
$24.00.
On August 6, 1998, the Company entered into an agreement with certain entities
to acquire a portfolio of 44 office properties, 23 industrial facilities and
one retail property located in Pennsylvania, New Jersey and Virginia for an
aggregate purchase price of approximately $612.0 million (the "Lazard
Transaction"). For a more complete description of the Lazard Transaction, see
Item 5 of this Form 10-Q.
7
<PAGE>
4. INDEBTEDNESS
Notes Payable Credit Facility - The Company uses credit facility borrowings
for general business purposes, including the acquisition of office and
industrial properties and the repayment of certain outstanding debt. At
December 31, 1997, the Company had a $150.0 million secured credit facility (the
"1997 Credit Facility") . The 1997 Credit Facility was secured by 39 of the
Properties and bore interest at a per annum floating rate equal to the
Company's choice of 30, 60 or 90-day LIBOR, plus 175 basis points.
During the first six months of 1998, the Company replaced the 1997 Credit
Facility with a $330.0 million unsecured revolving credit facility (the "1998
Credit Facility"). The Company wrote off $858,000 of unamortized deferred
financing costs relating to the 1997 Credit Facility which has been accounted
for as an extraordinary item on the statement of operations. The new facility
enables the Company to borrow funds at a reduced interest rate equal to the
30, 60, 90 or 180-day LIBOR, plus, in each case, a range of 100 to 137.5 basis
points, depending on the Company's then existing leverage and debt rating.
Alternatively, the Company can borrow funds at a base rate equal to the higher
of (i) the Prime Rate or (ii) the Fed Funds Rate plus 50 basis points. The
1998 Credit Facility matures on January 5, 2001 and is extendible, under
certain circumstances, at the Company's option to January 5, 2002. As of June
30, 1998, the Company had $326.8 million of outstanding indebtedness under the
1998 Credit Facility.
The 1998 Credit Facility requires the Company to maintain ongoing compliance
with a number of customary financial and other covenants, including leverage
ratios based on gross implied asset value and debt service coverage ratios,
limitations on liens and distributions and a minimum net worth requirement. As
of June 30, 1998, the Company was in compliance with all debt covenants.
On May 7, 1998, the Company and the Operating Partnership entered into an
unsecured credit facility (the "Additional Facility") with NationsBank, N.A.
permitting advances of up to $150.0 million, subject to certain conditions.
The Additional Facility matures on November 7, 1998, subject to a two-month
extension under certain circumstances, and allows the Company to borrow funds
at an interest rate equal to LIBOR plus 150 basis points or, at the Company's
option, the Prime Rate plus 25 basis points. Amounts repaid by the Company
under the Additional Facility are not subject to reborrowing. The Additional
Facility incorporates the covenants contained in the 1998 Credit Facility. As
of June 30, 1998, the Company had $25.0 million of outstanding indebtedness
under the Additional Facility.
The Company paid interest totaling $11.0 million during the six months ended
June 30, 1998 and $2.7 million during the six months ended June 30, 1997. As of
June 30, 1998, the fair values of mortgage notes payable and notes payable under
the 1998 Credit Facility and the Additional Facility approximate carrying costs.
During the six months ended June 30, 1998, the Company capitalized interest
totaling $568,392 related to development and redevelopment projects.
The Company has received a commitment from NationsBank N.A. to increase the 1998
Credit Facility to $550.0 million (or to replace it with a new $550.0 million
Credit Facility) as part of the Lazard Transaction. The interest rate to be
borne by the new revolving credit facility would be LIBOR plus 150 basis points
initially, subject to certain reductions and would mature three years from the
closing date of such financing. The Company has also received a commitment from
NationsBank Mortgage Capital Corp. for a $150.0 million bridge loan which would
bear interest at LIBOR plus 200 basis points and would be payable in full six
months from the closing date of such financing. For a more complete description
of such commitments, see Item 5 of this Form 10-Q.
As of June 30, 1998, the Company had entered into guaranties, and agreements
contemplating the provision of guaranties, for the benefit of unconsolidated
real estate ventures, aggregating approximately $33.3 million. Payment under
these guaranties would constitute loan obligations of, or preferred equity
positions in, the applicable unconsolidated real estate venture.
5. ISSUANCE OF SHARES, WARRANTS AND OPTIONS:
The following table summarizes the Company's issuance of shares, warrants and
options during the periods presented:
8
<PAGE>
<TABLE>
<CAPTION>
Number of Number of
Date of Common Share options/ Exercise Proceeds (in
Type of issuance Investor issuance Shares Price warrants Price thousands)(1)
---------------- -------- -------- --------- ----- ---------- -------- -------------
1998 Activity through June 30, 1998
- ----------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Trustee Fees (2) Trustees 5/8/98 1,248 - - - -
Share offering Public 4/21/98 625,000 $ 24.00 - - 14,250
Share offering (3) Public 3/6/98 1,000,000 $ 24.00 - - 22,770
Share offering Public 2/27/98 629,921 $ 23.81 - - 14,325
Share offering Public 2/18/98 1,012,820 $ 24.06 - - 23,152
Share offering Public 2/4/98 10,000,000 $ 24.00 - - 227,700
Unit redemptions (4) Various 6/30/98 1,434 - - - -
Unit redemptions (4) Scarborough 6/22/98 50,000 - - - -
Unit redemptions (4) Safeguard Scientifics 1/6/98 252,387 - - - -
Employee share awards Company employees 1/2/98 443,557 - - - 16,679
Employee share options Company employees 1/2/98 - - 748,874 $ 29.04 -
Employee share options Company employees 1/2/98 - - 740,796 $ 27.78 -
Employee share options Company employees 1/2/98 - - 554,034 $ 25.25 -
----------- ------------- ----------
14,016,367 2,043,704 $ 304,626
----------- ------------- ==========
Amounts outstanding at December 31, 1997
- --------------------------------------------------
Shares outstanding Various 12/31/97 24,087,315 - - -
Options outstanding Various 12/31/97 - 762,105 $6.21 - $25.50 -
----------- -------------
24,087,315 762,105
----------- -------------
Total outstanding as of June 30, 1998 38,103,682 2,805,809
=========== =============
</TABLE>
(1) Proceeds are net of underwriter's discounts and before deducting other
expenses, if any.
(2) The Company issued Common Shares as partial payment of annual fees to
non-employee Trustees.
(3) This offering was pursuant to the exercise of underwriters' over-allotment
options.
(4) Class A Unit Redemptions represent Common Shares issued upon redemption of
Class A Units.
On January 2, 1998, the Company awarded an aggregate of 443,557 "restricted"
Common Shares to six of the Company's executives. These restricted shares vest
over five to eight year periods and were valued at approximately $11.2 million
(based on the closing price of Common Shares on January 2, 1998). Also on
January 2, 1998, the Company awarded certain of its employees options
exercisable for an aggregate 2,043,704 Common Shares. Of the options awarded,
1,737,261 were granted subject to shareholder approval, which was obtained on
May 15, 1998. These options vest over two to five years and have exercise
prices ranging from $25.25 to $29.04. The Company has reserved, as of June 30,
1998, 2,805,809 Common Shares for issuance upon the exercise of options and
warrants described above. There were no options or warrants exercised or
canceled and no options or warrants expired from January 1, 1997 to June 30,
1998.
6. DISTRIBUTIONS:
On June 10 , 1998 , the Company declared a distribution of $0.38 per share,
totaling approximately $14.5 million, which was paid on July 15 , 1998 to
shareholders of record as of June 22 , 1998 . The Operating Partnership
simultaneously declared a $0.38 per unit cash distribution to holders of Class
A Units totaling approximately $300,093.
7. NET INCOME PER SHARE:
In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, "Earnings per Share" ("SFAS 128"). SFAS 128 establishes standards for
computing and presenting earnings per share ("EPS"). Basic earnings per share
are based on the weighted average number of Common Shares outstanding during
the year. Diluted earnings per share are based on the weighted average number
of Common Shares outstanding during the year adjusted to give effect to common
share equivalents. All per share amounts for all periods presented have been
restated to conform to SFAS 128. A reconciliation between basic and diluted
EPS is shown below (in thousands, except share and per share data).
9
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended June 30,
--------------------------------------------------------------
1998 1997
---------------------------- ----------------------------
Basic Diluted Basic Diluted
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net income $ 10,422 $ 10,422 $ 1,658 $ 1,658
Income allocated to Preferred Shares -- -- -- --
----------- ----------- ----------- -----------
Income available to common shareholders $ 10,422 $ 10,422 $ 1,658 $ 1,658
----------- ----------- ----------- -----------
Weighted average shares outstanding 37,475,025 37,475,025 9,817,412 9,817,412
Options and warrants -- 110,232 -- 29,031
Common stock equivilants of Preferred Shares -- -- -- 1,189,889
----------- ----------- ----------- -----------
Total weighted average shares outstanding 37,475,025 37,585,257 9,817,412 11,036,332
----------- ----------- ----------- -----------
Earnings per share before extraordinary item $ 0.28 $ 0.28 $ 0.17 $ 0.15
=========== =========== =========== ===========
Earnings per share after extraordinary item $ 0.28 $ 0.28 $ 0.17 $ 0.15
=========== =========== =========== ===========
Six Months Ended June 30,
---------------------------------------------------------------
1998 1997
----------------------------- -----------------------------
Basic Diluted Basic Diluted
------------ ------------ ------------ ------------
Net income before extraordinary item $ 19,225 $ 19,225 $ 3,708 $ 3,708
Income allocated to Preferred Shares -- -- (499) --
------------ ------------ ------------ ------------
Income available to common shareholder before
extraordinary item $ 19,225 $ 19,225 $ 3,209 $ 3,708
Extraordinary Item (858) (858) -- --
------------ ------------ ------------ ------------
Net income available to common shareholders $ 18,367 $ 18,367 $ 3,209 $ 3,708
------------ ------------ ------------ ------------
Weighted average shares outstanding 34,524,113 34,524,113 8,790,971 8,790,971
Options and warrants -- 121,279 -- 40,683
Common stock equivilants of Preferred Shares -- -- -- 1,383,801
------------ ------------ ------------ ------------
Total weighted average shares outstanding 34,524,113 34,645,392 8,790,971 10,215,455
------------ ------------ ------------ ------------
Earnings per share before extraordinary item $ 0.56 $ 0.55 $ 0.37 $ 0.36
============ ============ ============ ============
Earnings per share after extraordinary item $ 0.53 $ 0.53 $ 0.37 $ 0.36
============ ============ ============ ============
</TABLE>
8. INCOME TAXES:
The Company is taxed as a REIT under Section 856(c) of the Internal Revenue Code
of 1986, as amended, and generally will not be subject to federal income tax to
the extent it distributes at least 95% of its REIT taxable income to its
stockholders and meets certain other requirements. If the Company fails to
qualify as a REIT in any taxable year, the Company will be subject to federal
income tax on its taxable income at regular corporate rates. The Company may
also be subject to certain state and local taxes on its income and property and
federal income and excise taxes on its undistributed taxable income. The Company
was and is in compliance with all REIT requirements and was not subject to
federal income taxes.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following discussion should be read in conjunction with the financial
statements appearing elsewhere herein. This Form 10-Q contains forward-looking
statements for purposes of the Securities Act of 1933, as amended, and the
Securities Exchange Act of 1934, as amended, and as such may involve known and
unknown risks, uncertainties and other factors that may cause the actual
results, performance or achievements of the Company to be materially different
from future results, performance or achievements expressed or implied by such
forward-looking statements. Although the Company believes that the
expectations reflected in such forward-looking statements are based upon
reasonable assumptions, there can be no assurance that these expectations will
be realized. Factors that could cause actual results
10
<PAGE>
to differ materially from current expectations include, but are not limited
to, changes in general economic conditions, changes in local real estate
conditions, changes in industries in which the Company's principal tenants
compete, the failure to timely lease unoccupied space, the failure to timely
re-lease occupied space upon expiration of leases, the inability to generate
sufficient revenues to meet debt service payments and operating expenses, the
unavailability of equity and debt financing, unanticipated costs associated
with the acquisition and integration of the Company's recent and pending
acquisitions and the failure of the Company to manage its growth effectively.
OVERVIEW
The Company believes it has established an effective platform in the suburban
Philadelphia, Pennsylvania market that provides a foundation for achieving the
Company's goal of maximizing market penetration and operating economies of
scale. The Company believes this platform provides a basis to continue its
penetration into additional targeted markets in the Mid-Atlantic United States
through strategic acquisitions structured to increase cash available for
distribution and maximize shareholder value.
The Company continued its growth during the six months ended June 30, 1998 by
purchasing 57 office and six industrial properties for an aggregate purchase
price of approximately $590.8 million and investing approximately $6.5 million
in unconsolidated real estate ventures . These acquisitions increased the
Company's market share in the suburban Philadelphia office and industrial
market and expanded the Company's presence into several other markets within
the Mid-Atlantic Region. Also, the Company sold an office property in Ohio
which contains approximately 156,175 net rentable square feet for a sales
price of approximately $15.2 million. As of June 30, 1998, the Company's
portfolio consisted of 151 office and 28 industrial properties totaling
approximately 12.1 million net rentable square feet.
The acquisitions during the six months ended June 30, 1998, were financed
through a combination of proceeds received from four public offerings of an
aggregate of approximately 13.3 million Common Shares which raised net
proceeds of approximately $301.3 million, borrowings under the Company's
revolving credit facilities and the issuance of 543,400 Class A Units in the
Operating Partnership valued at approximately $12.9 million. These
acquisitions expanded the Company's presence into Maryland, Delaware, New
Jersey and Harrisburg, Pennsylvania while reinforcing the Company's presence
in suburban Philadelphia.
During the period June 30, 1998 through August 13, 1998, the Company entered
into two separate agreements to acquire 53 office properties, 43 industrial
facilities and one retail property containing an aggregate of approximately 6.9
million net rentable square feet for approximately $715.5 million. These
acquisitions will expand the Company's portfolio into the New York, Virginia,
and Harrisburg, Pennsylvania markets and strengthen the Company's presence in
the New Jersey market.
The Company receives income primarily from rental revenue (including tenant
reimbursements) from the Properties and, to a lesser extent, from the management
of certain properties owned by third parties. The Company expects that revenue
growth in the next two years will result primarily from additional
redevelopment, development and acquisition projects as well as from rent and
occupancy increases in its current portfolio.
RESULTS OF OPERATIONS
Comparison of the Three and Six Months Ended June 30, 1998 and June 30, 1997
Net income before extraordinary items for the three months and six months
ended June 30, 1998 was $10.4 million and $19.2 million compared with net
income of $1.7 million and $3.7 million for the corresponding periods in 1997.
The increases were primarily attributable to the operating results contributed
by the 143 properties acquired from January 1, 1997 through June 30, 1998 .
Revenues, which include rental income, recoveries from tenants and other
income, increased from $12.1 million to $43.1 million for the three months
ended June 30, 1997 to 1998 and increased from $20.7 million to $76.2 million
for the six months ended June 30, 1997 to 1998. These increases were primarily
as a result of property acquisitions and,
11
<PAGE>
to a lesser extent, increased occupancy. The impact of the straight-line rent
adjustment increased revenues by $2.5 million for the six months ended June
30, 1998 and $521,000 for the six months ended June 30, 1997.
Property operating expenses, depreciation and amortization and management fees
increased from $8.1 million to $25.7 million for the three months ended June
30, 1997 to 1998 and increased from $13.6 million to $45.3 million for the six
months ended June 30, 1997 to 1998. These increases were primarily as a result
of property acquisitions.
Property level operating income for the 70 properties owned as of June 30, 1997
increased from $12.6 million to $13.4 million for the six months ended June 30,
1997 to 1998, an increase of 5.5%. Occupancy for the 70 properties increased
from 92% to 95% driving revenue growth of 4.2% and causing expenses to increase
by 1.1%.
During the six month period ended June 30, 1998, 39 leases representing
96,585 square feet of office and industrial space commenced at an average rate
per square foot of $16.90 which was 16.9% higher than the average rate per
square foot on the expired leases.
Interest expense increased from $2.1 million to $6.6 million for the three
months ended June 30, 1997 to 1998 and increased from $3.1 million to $11.0
million for the six months ended June 30, 1997 to 1998. The increase in
interest expense was a result of additional indebtedness incurred to finance
certain of the Company's acquisitions.
Administrative expenses increased from $0.3 million to $0.4 million for the
three months ended June 30, 1997 to 1998 and increased from $0.4 million to
$0.6 million for the six months ended June 30, 1997 to 1998. These increases
are primarily a result of management and staffing additions to support the
Company's growth.
Minority Interest in the Operating Partnership relates to the interest in the
Operating Partnership that is not owned by the Company. Income allocated to
the minority interest is based on the weighted average percentage ownership
throughout the year. Persons contributing assets to the Operating Partnership
received Class A Units. The Operating Partnership will, at the request of a
Unitholder, be obligated to redeem each Class A Unit held by such Unitholder,
at the option of the Company, for cash or one Common Share at the time of
redemption. Such redemptions will cause the Company's percentage ownership in
the Operating Partnership to increase. As of June 30, 1998, the number of
issued and outstanding Class A Units held by Unitholders other than the
Company was 947,005 or approximately 2.4% of total Class A Units outstanding.
LIQUIDITY AND CAPITAL RESOURCES
Cash Flows
During the six months ended June 30, 1998, the Company generated $44.3 million
in cash flow from operating activities. Other sources of cash flow consisted of
(i) $658.6 million in net additional borrowings under the Company's revolving
credit facilities, (ii) $301.3 million in net proceeds from share issuances,
(iii) $14.7 million from a property sale and (iv) $5.7 million in proceeds from
additional borrowings under mortgage notes payable. During the six months ended
June 30, 1998, the Company used its cash to (i) finance the cash portion, $545.6
million, of the acquisition cost of 63 Properties, (ii) repay notes payable
under the credit facility of $422.1 million, (iii) invest $6.5 million in
unconsolidated real estate ventures, (iv) fund capital expenditures and leasing
commissions of $7.1 million, (v) pay distributions totaling $22.8 million to
shareholders and minority partners in the Operating Partnership, (vi) repay
mortgage notes payable of $5.1 million (vii) increase escrowed cash by $1.1
million, (viii) pay other debt costs of $1.5 million and (ix) increase existing
cash reserves by $13.0 million.
Development
The Company is in the process of developing five sites and redeveloping two
sites with anticipated completion at the end of 1998. These projects are in
various stages of development and there can be no assurance that any of these
projects will be completed or opened, or that there will not be delays in the
opening or completion of any development
12
<PAGE>
or redevelopment project. During the six months ended June 30, 1998, the Company
capitalized interest totaling $568,392 related to development and redevelopment
projects.
Capitalization
During the first six months of 1998, the Company replaced the 1997 Credit
Facility with the 1998 Credit Facility. The interest rate was reduced by 37.5
to 60 basis points depending on the Company's degree of leverage. The 1998
Credit Facility matures on January 5, 2001 and is extendible, under certain
circumstances, at the Company's option to January 5, 2002.
To provide for recent acquisitions, on May 7, 1998 the Company and the Operating
Partnership entered into a $150.0 million unsecured credit facility (the
"Additional Facility"). The Additional Facility matures on November 7, 1998,
subject to a two-month extension under certain circumstances, and allows the
Company to borrow funds at an interest rate equal to LIBOR plus 150 basis points
or, at the Company's option, the Prime Rate plus 25 basis points. Amounts repaid
by the Company under the Additional Facility are not subject to reborrowing. The
Additional Facility incorporates the covenants contained in the 1998 Credit
Facility.
As of June 30, 1998, the Company had approximately $423.4 million of debt
outstanding, consisting of mortgage loans totaling $71.6 million, notes payable
under the 1998 Credit Facility of $326.8 million and borrowings under the
Additional Facility of $25.0 million. The mortgage loans mature between July
1998 and November 2004. As of June 30, 1998, the Company had $3.2 million of
remaining availability under the 1998 Credit Facility, which provides for total
borrowings up to $330.0 million and bore interest at a per annum floating rate
equal to the 30, 60 or 90-day LIBOR, plus 137.5 basis points. As of June 30,
1998, the Company had $125.0 million of remaining availability under the
Additional Facility, which provides for total borrowings up to $150.0 million
and bore interest at an interest rate equal to LIBOR plus 150 basis points or,
at the Company's option, the Prime Rate plus 25 basis points. For the six months
ended June 30, 1998, the weighted average interest rate under the Company's
1998 Credit Facility and Additional Facility was 7.07%, and the weighted average
interest rate for borrowings under mortgage notes payable was 7.74%.
The Company's debt to market capitalization ratio was 32.5% as of June 30,
1998. As a general policy, the Company intends, but is not obligated, to
adhere to a policy of maintaining a long-term average debt to market
capitalization ratio of no more than 50%. This policy is intended to provide
the Company with financial flexibility to select what management believes to
be the optimal source of capital to finance the Company's growth.
To provide financing for the Lazard Transaction, the Company received a
commitment from NationsBank N.A. to increase the 1998 Credit Facility to $550.0
million (or to replace it with a new $550.0 million credit facility). The
interest rate to be borne by the new revolving credit facility would be LIBOR
plus 150 basis points initially, subject to reductions and would mature three
years from the closing date of such financing. The new revolving credit facility
would contain financial and operating convenants consistent with those contained
in the 1998 Credit Facility. The Company has also received a commitment from
NationsBank Mortgage Capital Corp. for a $150.0 million bridge loan in
connection with the Lazard Transaction. The new bridge loan would bear interest
at LIBOR plus 200 basis points and would be payable in full six months from the
closing date of such financing.
During the period January 1, 1998 through June 30, 1998, the Company sold an
aggregate 13.3 million Common Shares for net proceeds of $301.3 million
pursuant to four public offerings.
Short and Long Term Liquidity
The Company believes that its cash flow from operations is adequate to fund
its short-term liquidity requirements for the foreseeable future. Cash flow
from operations is generated primarily from rental revenues and operating
expense reimbursements from tenants and management services income from the
provision of services to third parties. The Company intends to use these funds
to meet its short-term liquidity needs, which are to fund operating expenses,
debt service requirements, recurring capital expenditures, tenant allowances,
leasing commissions and the minimum distribution required to maintain the
Company's REIT qualification under the Internal Revenue Code.
13
<PAGE>
On June 10, 1998, the Company declared a distribution of $0.38 per share,
totaling $14.5 million, which was paid on July 15, 1998 to shareholders of
record as of June 22, 1998. The Operating Partnership simultaneously declared
a $0.38 per unit cash distribution to holders of Class A Units totaling
$300,093.
As of June 30, 1998, the Company had entered into guaranties, and agreements
contemplating the provision of guaranties, for the benefit of unconsolidated
real estate ventures, aggregating approximately $33.3 million. Payment under
these guaranties would constitute loan obligations of, or preferred equity
positions in, the applicable unconsolidated real estate venture.
The Company expects to meet its long-term liquidity requirements, such as for
property acquisitions, development, investments in unconsolidated real estate
ventures, scheduled debt maturities, renovations, expansions and other
non-recurring capital improvements, through the 1998 Credit Facility and other
long-term secured and unsecured indebtedness and the issuance of additional
Class A Units and other equity securities.
Funds from Operations
Management generally considers Funds from Operations ("FFO") as one measure of
REIT performance. The Company adopted the NAREIT definition of FFO in 1996 and
has used this definition for all periods presented in the financial statements
included herein. FFO is calculated as net income (loss) adjusted for
depreciation expense attributable to real property, amortization expense
attributable to capitalized leasing costs, gains on sales of real estate
investments and extraordinary and nonrecurring items. FFO may not be
calculated in the same manner for all companies and accordingly FFO presented
below may not be comparable to similarly titled measures by other companies.
FFO should not be considered an alternative to net income as an indication of
the Company's performance or to cash flows as a measure of liquidity.
FFO for the three months and six months ended June 30 , 1998 and 1997 is
summarized in the following table (in thousands, except share data).
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
--------------------------------- --------------------------------
1998 1997 1998 1997
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Income before gains on sales, minority interest,
and extraordinary item $ 10,461 $ 1,738 $ 19,394 $ 3,882
Add (Deduct):
Depreciation attributable to real property 9,801 3,124 17,101 5,093
Amortization attributable to leasing costs 493 160 736 339
Minority interest not attributable to unit holders - (5) - (16)
--------------- --------------- --------------- ---------------
Funds from Operations before minority interest $ 20,755 $ 5,017 $ 37,231 $ 9,298
=============== =============== =============== ===============
Weighted average Common Shares (including common
share equivalents) and Operating Partnership units (1) 38,420,032 11,423,396 35,299,165 10,595,612
=============== =============== =============== ===============
</TABLE>
(1) Includes the weighted average effect of Common Shares issued upon the
conversion of preferred shares for the period prior to conversion, the
weighted average effect of Common Shares issuable upon the conversion of Class
A Units.
Year 2000 Issue
The Company has recognized the need to ensure that its systems, equipment and
operations will not be adversely impacted by the change to the calendar year
2000. The Company has initiated the process of identifying potential areas of
risk and the related effects on planning, purchasing and daily operations. No
estimates can be made as to the potential adverse impact resulting from the
failure of third party suppliers and tenants to prepare for the year 2000.
14
<PAGE>
However, the Company does not anticipate the cost of successfully converting
all internal systems, equipment and operations to the year 2000 to be
material.
Inflation
A majority of the Company's leases provide for separate escalations of real
estate taxes and operating expenses either on a triple net basis or over a
base amount. In addition, many of the office leases provide for fixed base
rent increases or indexed escalations (based on the CPI or other measure). The
Company believes that inflationary increases in expenses will be significantly
offset by the expense reimbursement and contractual rent increases.
15
<PAGE>
Part II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company is not currently involved (nor was it involved at June 30, 1998)
in any material legal proceedings nor, to the Company's knowledge, is any
material legal proceeding currently threatened against the company, other than
routine litigation arising in the ordinary course of business, substantially
all of which is expected to be covered by liability insurance.
Item 2. Changes in Securities
(a) Not applicable.
(b) Not applicable.
(c) Not applicable.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
Reference is made to the information contained in the Company's current report
on Form 8-K filed with the Securities and Exchange Commission on June 3, 1998.
Item 5. Other Information
(i) Lazard Transaction. On August 6, 1998, Brandywine Realty Trust (the "Trust")
and the Operating Partnership entered into an agreement (the "Lazard Acquisition
Agreement") with Prometheus AAPT Holdings, L.L.C. ("Prometheus"), LF Strategic
Realty Investors L.P., Commonwealth Atlantic Operation Properties Inc.,
Commonwealth Atlantic Land IV Inc., Commonwealth Atlantic Land II Inc.,
Commonwealth Atlantic Development Inc. and Commonwealth Atlantic Land Company
(the "CAP Sellers," and together with Prometheus, the "Sellers") to acquire a
portfolio of 44 office properties, 23 industrial facilities and one retail
property located in Pennsylvania, New Jersey and Virginia (collectively, the
"Lazard Properties") that contain an aggregate of approximately 5.6 million net
rentable square feet. As part of the Lazard Transaction, the Company will also
acquire approximately 172 acres of undeveloped land which management estimates
can accommodate approximately 1.4 million square feet of commercial space. The
aggregate acquisition price for the Lazard Properties is approximately $612.0
million. A copy of the Acquisition Agreement is attached hereto as Exhibit 10.1.
The Company expects to pay, at closing, approximately (i) $237.0 million of
the acquisition price through the assumption of mortgage debt secured by 62 of
the Lazard Properties, (ii) $240.0 million of the acquisition price in cash,
(iii) $37.5 million of the acquisition price through the issuance of $37.5 in
liquidation value of the Trust's Series A Preferred Shares (as defined below)
and (iv) $97.5 million of the acquisition price through the issuance of $97.5
in liquidation value of the Operating Partnership's Series B Preferred Units
(as defined below).
In anticipation of the Lazard Transaction, the Company has received a
commitment letter from NationsBank, N.A. to provide financing in an amount up
to $550.0 million in the form of a revolving credit facility and a commitment
letter from NationsBank Mortgage Capital Corp. to provide short-term financing
in an amount up to $150.0 million as more fully described below.
As of August 1, 1998, the Lazard Properties were approximately 94% leased to
421 tenants. The following table identifies the location and net rentable
square feet of the Lazard Properties.
16
<PAGE>
PROPERTY NET RENTABLE
IDENTIFICATION LOCATION SQUARE FEET
VIRGINIA INDUSTRIAL
1. Dabney I Richmond, VA 33,600
2. Dabney II Richmond, VA 42,000
3. Dabney III Richmond, VA 23,850
4. Dabney IV Richmond, VA 41,550
5. Dabney V Richmond, VA 45,353
6. Dabney VI Richmond, VA 50,400
7. Dabney VII Richmond, VA 33,419
8. Dabney VIII Richmond, VA 29,700
9. Dabney IX Richmond, VA 30,263
10. Dabney X Richmond, VA 85,844
11. Dabney XI Richmond, VA 45,250
12. Dabney A-1 Richmond, VA 15,389
13. 2511 Brittons Hill Road Richmond, VA 132,103
14. 1957 Westmoreland Street Richmond, VA 121,815
15. 2201 Dabney Street Richmond, VA 45,000
16. 2110 Tomlynn Street Richmond, VA 15,910
-------
Subtotal Virginia Industrial 791,446
-------
VIRGINIA OFFICE
17. 1970 Chainbridge Road Greenway, VA 203,084
18. Oakwood Center Fairfax, VA 128,383
19. Greenwood Center Fairfax, VA 150,358
20. 1880 Campus Commons Drive Reston, VA 172,448
21. 8260 Greensboro Drive McLean, VA 154,155
22. Dabney A-2 Richmond, VA 33,050
23. 2812 Emerywood Parkway Henrico, VA 56,076
24. 4805 Lake Brooke Drive Henrico, VA 61,632
25. 2100-2108 West Laburnum Richmond, VA 127,327
26. Arboretum I Richmond, VA 58,167
27. Arboretum II Richmond, VA 49,542
28. Arboretum III Richmond, VA 214,282
29. Arboretum V Richmond, VA 47,943
30. Arboretum VI Richmond, VA 73,195
31. Arboretum VII Richmond, VA 30,791
32. 600 East Main Street Richmond, VA 423,062
---------
Subtotal Virginia Office 1,983,495
---------
NEW JERSEY OFFICE
33. 700 East Gate Drive Mt. Laurel, NJ 121,114
34. 701 East Gate Drive Mt. Laurel, NJ 61,434
35. 815 East Gate Drive Mt. Laurel, NJ 25,500
36. 817 East Gate Drive Mt. Laurel, NJ 25,351
37. 303 Fellowship Road Mt. Laurel, NJ 53,848
38. 305 Fellowship Road Mt. Laurel, NJ 55,511
39. 307 Fellowship Road Mt. Laurel, NJ 55,286
40. 309 Fellowship Road Mt. Laurel, NJ 55,351
41. 304 Harper Drive Moorestown, NJ 29,537
42. 305 Harper Drive Moorestown, NJ 14,981
43. 308 Harper Drive Moorestown, NJ 59,500
-------
Subtotal New Jersey Office 557,413
-------
17
<PAGE>
PROPERTY NET RENTABLE
IDENTIFICATION LOCATION SQUARE FEET
PENNSYLVANIA INDUSTRIAL
44. 7055 Ambassador Drive Allentown, PA 153,600
45. 6670 Grant Way Allentown, PA 72,885
46. 6690 Grant Way Allentown, PA 88,000
47. 6755 Snowdrift Road Allentown, PA 125,000
48. 6845 Snowdrift Road Allentown, PA 93,000
49. 7010 Snowdrift Road Allentown, PA 33,029
50. 7020 Snowdrift Road Allentown, PA 41,390
51. 6810 Tilghman Street Allentown, PA 54,844
-------
Subtotal Pennsylvania Industrial 661,748
-------
PENNSYLVANIA OFFICE
52. E-M Venture I-Keystone Park Bristol, PA 22,500
53. E-M Venture II-Keystone Park Bristol, PA 96,000
54. 50 Swedesford Square Frazer, PA 109,800
55. 52 Swedesford Square Frazer, PA 131,017
56. Maschellmac I King of Prussia, PA 74,140
57. Maschellmac II King of Prussia, PA 74,556
58. Maschellmac III King of Prussia, PA 75,488
59. Maschellmac IV King of Prussia, PA 77,718
60. 1720 Walton Road Blue Bell, PA 15,918
61. Masons Mill Business Park Bryn Athyn, PA 211,753
62. 1760 Market Street Philadelphia, PA 130,416
63. 7350 Tilghman Street Allentown, PA 111,500
64. 7450 Tilghman Street Allentown, PA 100,000
65. 7150 Windsor Drive Allentown, PA 49,420
66. 7535 Windsor Drive Allentown, PA 128,351
---------
Subtotal Pennsylvania Office 1,408,577
---------
PENNSYLVANIA RETAIL
67. Philadelphia Marine Center Philadelphia, PA 167,760
---------
Subtotal Pennsylvania Retail 167,760
---------
NORTH CAROLINA OFFICE
68. Westpark South Alston Avenue Durham, NC 56,601
---------
Subtotal North Carolina Office 56,601
---------
TOTAL LAZARD PROPERTIES 5,627,040
=========
18
<PAGE>
The table set forth below shows scheduled lease expirations for leases in
place at August 1, 1998 for the Lazard Properties for each of the next ten
years beginning August 1, 1998, assuming none of the tenants exercise renewal
options or termination rights, if any, at or prior to scheduled expirations:
<TABLE>
<CAPTION>
Final Annualized Percentage of
Base Total Final
Number of Rent From Annualized Base
Year of Leases Net Rentable Square Properties Under Rent From Cumulative
Lease Expiring Within Footage Subject to Expiring Properties Under
Expiration the Year Expiring Leases Leases(1) Leases %
- ---------- -------- --------------- --------- ------ --
<S> <C> <C> <C> <C> <C>
1998 54 721,530 8,548,043 11.8% 11.8%
1999 103 689,721 8,005,643 11.0% 22.8%
2000 82 811,356 9,656,406 13.3% 36.1%
2001 69 688,764 8,742,935 12.0% 48.1%
2002 62 570,595 7,312,538 10.1% 58.1%
2003 42 577,134 9,273,272 12.8% 70.9%
2004 21 235,356 4,253,878 5.9% 76.8%
2005 9 275,042 4,247,468 5.8% 82.6%
2006 7 81,371 1,597,134 2.2% 84.8%
2007 10 265,259 5,703,442 7.8% 96.6%
2008 and thereafter 11 328,731 5,346,617 7.4% 100.0%
-- ------- --------- ----- ------
Consolidated Total 470 5,244,859 72,687,376 100.0%
=== ========= ========== =====
</TABLE>
- ---------------------
(1) "Final Annualized Base Rent" for each lease scheduled to expire
represents the cash rental rate of base rents, excluding tenant
reimbursements, in the final month prior to expiration multiplied by
twelve. Tenant reimbursements generally include payments on account
of real estate taxes, operating expense escalations and common area
utility charges.
As part of the Lazard Transaction, the Company acquired an option to purchase
an approximately 294,000 net rentable square foot office property currently
under construction in Tyson's Corner, Virginia. The purchase price under this
option, which is exercisable on or before March 31, 1999, is $68.0 million. As
of the date hereof, leases or lease commitment covering approximately 95% of
the space of this property have been executed, and the Company expects to
exercise the option.
In connection with the Lazard Transaction, the Trust has agreed to designate
750,000 of its authorized and unissued preferred shares of beneficial
interest, par value $.01 per share, as 7.25% Series A Cumulative Convertible
Preferred Shares (the "Series A Preferred Shares"). Each Series A Preferred
Share will have a stated value (the "Stated Value") of $50 and will be
convertible into Common Shares at the option of the holder at a conversion
price (the "Conversion Price") of $28. The Conversion Price will be reduced to
$26.50 if the average closing price of the Common Shares during the 60-trading
day period ending on December 31, 2003 is $23 or lower. At any time that the
average market price of the Common Shares is equal to or greater than 120% of
the Conversion Price for 60 consecutive trading days, the Trust will have the
right to redeem all or any part of the outstanding Series A Preferred Shares
for an amount in cash equal to the aggregate Stated Value of the Series A
Preferred Shares to be redeemed (plus accrued and unpaid distributions) or for
19
<PAGE>
a number of Common Shares equal to the aggregate Stated Value of the Series A
Preferred Shares to be redeemed divided by the Conversion Price (plus accrued
and unpaid distributions). In addition, at any time after six years following
the issuance of the Series A Preferred Shares, the Trust will have the right
to redeem all or any part of the outstanding Series A Preferred Shares for an
amount in cash equal to the aggregate Stated Value of the Series A Preferred
Shares to be redeemed (plus accrued and unpaid distributions) or, in the event
that the average closing price of the Common Shares is equal to or greater
than 110% of the Conversion Price for 60 consecutive trading days, for a
number of Common Shares equal to the aggregate Stated Value of the Series A
Preferred Shares to be redeemed divided by the Conversion Price (plus accrued
and unpaid distributions). Each Series A Preferred Share will accrue
distributions, payable in cash, in an amount equal to the greater of (i)
$0.9063 per quarter (equivalent to $3.625 per annum) or (ii) the cash
distributions paid or payable for the most recent quarter on the number of
Common Shares into which a Series A Preferred Share is convertible. The
holders of Series A Preferred Shares will have no voting rights except (i)
with respect to actions which would have a material and adverse effect on the
rights of such holders and (ii) in the event quarterly distributions on the
Series A Preferred Shares are in arrears for six or more quarters. In the
event the quarterly distributions are so in arrears, the holders of the Series
A Preferred Shares will have the right, voting together as a single class with
any other class of the Trusts's preferred shares of beneficial interest
ranking on a parity with the Series A Preferred Shares, to elect two
additional members to the Board of Trustees of the Trust (the "Board"). A copy
of the form of Articles Supplementary with respect to the Series A Preferred
Shares is attached hereto as Exhibit 3.1.
In exchange for the Trust's contribution to the Operating Partnership of the
properties acquired by the Trust in exchange for the issuance of the Series A
Preferred Shares, the Operating Partnership will issue to the Trust $37.5
million in liquidation value of a newly created class of limited partner
interest (the "Series A Preferred Mirror Units"). The preferences of the
Series A Preferred Mirror Units will "mirror" those of the Series A Preferred
Shares. Upon conversion of Series A Preferred Shares into Common Shares, an
equal number of Series A Preferred Mirror Units will be converted into an
equal number of Class A Units. Upon redemption of Series A Preferred Shares
for cash, an equal number of Series A Preferred Mirror Units will be canceled.
Upon redemption of Series A Preferred Shares for Common Shares, an equal
number of Series A Preferred Mirror Units will be redeemed for an equal number
of Class A Units. Each Class A Unit will be redeemable, at the option of the
holder, for either an amount of cash equal to the trading price of one Common
Share at the time of the redemption or, at the option of the Trust, for one
Common Share. A copy of the form of amendment to the Amended and Restated
Agreement of Limited Partnership of the Operating Partnership creating the
Series A Preferred Mirror Units is attached hereto as Exhibit 10.2.
<PAGE>
In connection with the Lazard Transaction, the Operating Partnership has
agreed to create Series B Preferred Units of limited partner interest (the
"Series B Preferred Units"). Each Class B Preferred Unit will have a Stated
Value of $50 and will be convertible into Class A Units at the option of the
holder at the Conversion Price. The Conversion Price is subject to reduction
from $28.00 to $26.50 under the circumstances identified above. At any time
that the average market price of the Common Shares is equal to or greater than
120% of the Conversion Price for 60 consecutive trading days, the Operating
Partnership will have the right to redeem all or any part of the outstanding
Series B Preferred Units for an amount in cash equal to the aggregate Stated
Value of the Series B Preferred Shares to be redeemed (plus accrued and unpaid
distributions), or for a number of Class A Units equal to the aggregate Stated
Value the Series B Preferred Shares to be redeemed divided by the Conversion
Price (plus accrued and unpaid distributions). In addition, at any time after
six years following the issuance of the Series B Preferred Units, the
Operating Partnership will have the right to redeem all or any part of the
outstanding Series B Preferred Units for an amount in cash equal to the
aggregate Stated Value the Series B Preferred Shares to be redeemed (plus
accrued and unpaid distributions) or, in the event that the average closing
price of the Common Shares is equal to or greater than 110% of the Conversion
Price for 60 consecutive trading days, for a number of Class A Units equal to
the aggregate Stated Value the Series B Preferred Shares to be redeemed
divided by the Conversion Price (plus accrued and unpaid distributions). Each
Class B Preferred Unit will accrue distributions, payable in cash, in an
amount equal to the greater of (i) $0.9063 per quarter (equivalent to $3.625
per annum) or (ii) the cash distributions paid or payable on the number of
Class A Units, or portion thereof, into which a Class B Preferred Unit is
convertible. The holders of Series B Preferred Units will have no voting
rights except (i) with respect to actions which would have a material and
adverse effect on the rights of such holders and (ii) in the event quarterly
distributions on the Series B Preferred Units are in arrears for six or more
quarters. In the event quarterly distributions are so in arrears, holders of
Series B Preferred Units will have the right, voting separately as a class, to
nominate two individuals who will vote as a group with the Board in connection
with any action to be taken by the Operating Partnership at the direction of
the Trust, as general partner, and as to which the Trust may act only upon
authorization by its Board. Except for transfers to affiliates of the Sellers
or upon the prior written consent of the Company, none of the Series B
Preferred Units, the Class A Units issuable upon redemption or conversion of
the Series B Preferred Units (the "Underlying Class A Units") nor the Common
Shares issuable upon redemption of the Underlying Class A Units may be
transferred prior to January 2, 2004. A copy of the form of amendment to the
Amended and Restated Agreement of Limited Partnership of the Operating
Partnership creating the Series B Preferred Units is attached hereto as
Exhibit 10.3.
20
<PAGE>
None of the securities to be issued in connection with the Lazard Transaction
nor the securities issuable upon the redemption or conversion thereof have
been registered under the Securities Act of 1933, as amended, or any state
securities laws and none of such securities may be offered and sold in the
United States absent registration or an applicable exemption from
registration. The Company has agreed to file registration statements
registering the resale of the Series A Preferred Shares, the Common Shares
issuable upon the redemption or conversion of the Series A Preferred Shares
and the Common Shares issuable upon redemption of the Underlying Class A
Units. Copies of the forms of Registration Rights Agreements relating to such
securities are attached hereto as Exhibits 10.4 and 10.5.
In connection with the Lazard Transaction, the Company has received two
financing commitments. One commitment, from NationsBank, N.A., is for a $550.0
million revolving credit facility which will take the form of either an increase
to the Company's current $330.0 million 1998 Credit Facility or a new,
substantially similar revolving credit facility to replace the 1998 Credit
Facility. The new revolving credit facility will be used to repay the Additional
Facility, to pay a portion of the cash purchase price for the Lazard
Transaction, for ongoing working capital and to provide letters of credit. The
interest rate to be borne by the new revolving credit facility will be LIBOR
plus 150 basis points initially, with the spread over LIBOR subject to
reductions of from 12.5 to 35 basis points, based on the Company's leverage. The
spread over LIBOR may also be reduced to either 115 or 100 basis points in
connection with the Company's long term debt rating. Rates based on the federal
funds rate and the bank's prime rate are also available. The new revolving
credit facility will mature three years from the closing date. Initially the new
revolving credit facility will be unsecured, but will convert to a secured
borrowing if certain leverage requirements are not met. The new revolving credit
facility will contain financial and operating covenants consistent with those
contained in the 1998 Credit Facility with certain definitional and
computational modifications. The principal condition to the closing of the new
revolving credit facility is the closing of the Lazard Transaction.
The second commitment, from NationsBank Mortgage Capital Corp., is for a
$150.0 million bridge loan to be used to pay a portion of the cash purchase
price of the Lazard Transaction. The new bridge loan will bear interest at
LIBOR plus 200 basis points, and will be payable in full six months from the
closing date. The new bridge loan will be unsecured, and will contain
financial and operating covenants as well as closing conditions identical to
those applicable to the new revolving credit facility described above.
The Company estimates that, after giving effect to the consummation of the
Lazard Transaction and the previously announced scheduled third quarter closing
from the Axinn transaction, its debt to market capitalization ratio (based on
the closing price of the Common Shares on June 30, 1998 of $22.75) will be
approximately 47.8%.
The Acquisition Agreement provides that at closing (the "Closing Date"), Murry
N. Gunty (or another person selected by certain of the Sellers and reasonably
acceptable to the Board) will become a member of the Board, which individual
will serve until the next annual meeting of shareholders of the Trust. In
addition, at closing and pursuant to a letter in substantially the form as
Exhibit 10.6 attached hereto, the Trust will agree to use commercially
reasonable efforts, during the Term (as defined below), to cause Mr. Gunty (or
another person selected by certain of the Sellers and reasonably acceptable to
the Trust's Board of Trustees) to be nominated for election to the Board at
each annual meeting of shareholders of the Trust and, if elected, to serve
until the next annual meeting of shareholders of the Trust. The "Term" means
the period of time commencing on the Closing Date and ending on the earliest
to occur of the following: (i) the date that LF Strategic Realty Investors,
L.P. ceases to own, directly or indirectly, any combination of (a) the Series
A Preferred Shares, (b) the Common Shares issuable upon redemption or
conversion of the Series A Preferred Shares, (c) the Series B Preferred Units,
(b) the Underlying Class A Units and (c) the Common Shares issuable upon
redemption of the Underlying Class A Units, having an aggregate value at least
equal to 60% of the value of the Series A Preferred Shares and the Series B
Preferred Units issued on the Closing Date and (ii) the occurrence of a change
in control of the Trust.
The portfolio acquisition provided for in the Acquisition Agreement has been
structured as the acquisition by the Company of (i) substantially all of the
equity interests in Atlantic American Properties Trust ("AAPT"), a private
real estate investment trust organized under sections 856 through 859 (the
"REIT Provisions") of the Internal Revenue Code of 1986, as amended, which
owns, through wholly-owned subsidiaries, 37 of the Lazard Properties and (ii)
fee title to 31 of the Lazard Properties. The Company intends to hold and
operate AAPT in accordance with the REIT Provisions and the rules and
regulations promulgated thereunder.
21
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In the Acquisition Agreement, the Company agreed not to sell certain of the
Lazard Properties prior to January 2, 2004 and to maintain approximately $88.0
million in debt allocable to the CAP Sellers. In the event the Company were to
breach these agreements, the Company would be required to pay certain tax
liabilities that would be incurred by the CAP Sellers.
In connection with the Lazard Transaction and in accordance with the Maryland
General Corporation Law (the "MGCL"), the Board has exempted any future
business combination involving the Sellers (and their affiliates and
associates) and the Company from the "business combination" restrictions set
forth in the MGCL. Absent an exemption, the business combination restrictions
would have restricted certain types of future transactions (such as asset
transfers and issuances of equity securities) between the Company and the
Sellers.
The Sellers are unaffiliated with the Company and, accordingly, the
acquisition price was determined by arm's-length negotiation between the
Company and the Sellers. Following an extensive due diligence review of the
Lazard Properties, the Company based its determination of the acquisition
price on the Lazard Properties' expected cash flow, physical condition,
location, existing tenancies and opportunities to retain and attract
additional tenants. Prior to final approval of the Lazard Transaction, the
Board of Trustees received an opinion from NationsBanc Montgomery Securities
LLC, its financial advisor in the Lazard Transaction, that the Lazard
Transaction was fair, from a financial point of view, to the Company.
Consummation of the Lazard Transaction is subject to customary closing
conditions, including receipt of third party consents. Accordingly, no
assurance can be given that all or part of the Lazard Transaction will be
consummated or that, if consummated, it would follow all of the terms set
forth in the Acquisition Agreement.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
3.1 Form of Articles Supplementary
10.1 Contribution and Purchase Agreement
10.2 Form of Amendment to the Amended and Restated Agreement of Limited
Partnership of the Operating Partnership creating the Series A Preferred
Mirror Units
10.3 Form of Amendment to the Amended and Restated Agreement of Limited
Partnership of the Operating Partnership creating the Series B Preferred
Units.
10.4 Form of Registration Rights Agreement
10.5 Form of Registration Rights Agreement
10.6 Form of Board of Trustees Designation Letter
27.1 Financial Data Schedule (electronic filers)
(b) Reports on Form 8-K:
During the three months ended June 30, 1998, and through August 13, 1998, the
Company filed the following:
(i) Current Report on Form 8-K filed April 13, 1998 (reporting under Items 2
and 7). Item 2 of this current report referenced the DKM acquisition.
(ii) Current Report on Form 8-K/A No. 1 filed April 16, 1998 (reporting under
Items 5 and 7). This Amendment No. 1 included (i) an audited statement of
revenue and certain expenses of the DKM Properties for the year ended December
31, 1997 and (ii) an audited statement of revenue and certain expenses of
Three Christina Centre for the year ended December 31, 1997. This Amendment
No. 1 also included pro forma financial information for the year ended
December 31, 1997.
22
<PAGE>
(iii) Current Report on Form 8-K filed April 17, 1998 (reporting under Items 5
and 7). Item 5 of this current report references the Underwriting agreement
entered into with Legg Mason Wood Walker Item 7 includes the agreement and
consent.
(iv) Current Report on Form 8-K filed May 14, 1998 (reporting under Items 2, 5
and 7). This Current Report included an audited combined statement of revenue
and certain expenses of the First Commercial Properties for the year ended
December 31, 1997 and an audited statement of revenue and certain expenses of
One Christina Centre for the year ended December 31, 1997. This Current Report
also included pro forma financial information for the year ended December 31,
1997.
(v) Current Report on Form 8-K filed June 3, 1998 (reporting under Items 5 and
7). This report includes votes at the Annual Shareholders Meeting held May 15,
1998.
(vi) Current Report on Form 8-K/A No. 1 filed July 30, 1998 (reporting under
Item 7). This amendment included (i) an audited financial statement of revenue
and certain expenses of the First Commercial Properties for the year ended
December 31, 1997 and (ii) an audited financial statement of revenue and
certain expenses of One Christina Centre for the year ended December 31, 1997.
This Amendment No. 1 also included pro forma information for the year ended
December 31, 1997.
(vii) Current Report on Form 8-K filed July 30, 1998 (reporting under Items 5
and 7). This Current Report included an audited combined statement of revenue
and certain expenses of the Axinn Properties for the year ended December 31,
1997 and a unaudited combined statement of revenue and certain expenses of the
Axinn Properties for the three months ended March 31, 1998. This Current
Report also included pro forma financial information for the three months
ended March 31, 1998 and year ended December 31, 1997.
23
<PAGE>
BRANDYWINE REALTY TRUST
SIGNATURES OF REGISTRANT
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
BRANDYWINE REALTY TRUST
(Registrant)
Date: August 13, 1998 By: /s/ Gerard H. Sweeney
------------------ -----------------------
Gerard H. Sweeney, President and
Chief Executive Officer
(Principal Executive Officer)
Date: August 13, 1998 By: /s/ Mark S. Kripke
------------------ --------------------
Mark S. Kripke, Chief Financial Officer
(Principal Financial and Accounting Officer)
<PAGE>
EXHIBIT 3.1
BRANDYWINE REALTY TRUST
ARTICLES SUPPLEMENTARY
CLASSIFYING AND DESIGNATING __________
PREFERRED SHARES AS SHARES OF
7.25% SERIES A CUMULATIVE CONVERTIBLE PREFERRED SHARES
Brandywine Realty Trust, a Maryland real estate investment trust (the
"Trust"), hereby certifies to the State Department of Assessments and Taxation
of Maryland that:
FIRST: Under a power contained in Article 6 of the Trust's
Declaration of Trust (as amended and restated to date, the "Declaration of
Trust") the Board of Trustees (the "Board"), by resolutions duly adopted on
________ ______ , 1998, classified and designated _______ shares of the
Trust's preferred shares of beneficial interest, $.01 par value per share, as
the 7.25% Series A Cumulative Convertible Preferred Shares, with the
preferences, conversion and other rights, voting powers, restrictions,
limitations as to distributions, qualifications and terms and conditions of
redemption of shares (which under any restatement of the Declaration of Trust
will become a part of Article 6 thereof, with any necessary or appropriate
changes to the numbering or lettering thereof) as follows:
7.25% SERIES A CUMULATIVE CONVERTIBLE PREFERRED SHARES
1. Designation and Number. A series of Preferred Shares,
designated the "7.25% Series A Cumulative Convertible Preferred Shares" (the
"Series A Preferred Shares"), is hereby established. The par value of the
Series A Preferred Shares, as set forth in the Declaration of Trust, is $.01
per share. The authorized number of Series A Preferred Shares shall be
________ . The stated value of each Series A Preferred Share shall be $50.00
(the "Stated Value").
2. Rank. The Series A Preferred Shares shall, with respect
to distribution rights and rights upon voluntary or involuntary liquidation,
dissolution or winding up of the Trust, rank (a) senior to all classes or
series of Common Shares (as defined in the Declaration of Trust) and to all
equity securities the terms of which provide that such equity securities shall
rank junior to such Series A Preferred Shares; (b) on a parity with all equity
securities issued by the Trust other than those referred to in clauses (a) and
(c); and (c) junior to all equity securities issued by the Trust which rank
senior to the Series A Preferred Shares in accordance with Section
<PAGE>
6(d). The term "equity securities" shall not include debt securities including
convertible debt securities.
3. Distributions.
a. The holders of Series A Preferred Shares shall be
entitled to receive, when, as and if authorized by the Board out of funds
legally available for that purpose, cumulative distributions payable in cash
in an amount per Series A Preferred Share equal to the greater of (i) $0.9063
per quarter (equivalent to $3.625 per annum) or (ii) the cash distributions
paid or payable on the number of Common Shares, or portion thereof, into which
a Series A Preferred Share is convertible, in each case with appropriate
proration for partial quarters. The amount referred in clause (ii) of this
paragraph (a) with respect to each Distribution Period (as defined in Section
9 below) shall be determined as of the applicable Distribution Payment Date
(as defined in Section 9 below) by multiplying the number of Common Shares, or
portion thereof calculated to the fourth decimal point, into which a share of
Series A Preferred Share would be convertible at the opening of business on
such Distribution Payment Date (based on the Conversion Price then in effect)
by the quarterly cash distribution payable or paid for such Distribution
Period in respect of a Common Share outstanding as of the record date for the
payment of distributions on the Common Shares with respect to such
Distribution Period or, if different, with respect to the most recent
quarterly period for which distributions with respect to the Common Shares
have been declared. Such distributions shall be cumulative from the Issue Date
(as defined in Section 9 below), whether or not in any Distribution Period or
Periods such distributions shall be declared or there shall be funds of the
Trust legally available for the payment of such distributions, and shall be
payable quarterly in arrears on the Distribution Payment Dates, commencing on
the first Distribution Payment Date after the Issue Date. Each such
distribution shall be payable in arrears to the holders of record of the
Series A Preferred Shares, as they appear on the share records of the Trust at
the close of business on a record date which shall be not less than 10 and not
more than 60 days prior to the applicable Distribution Payment Date and shall
be fixed by the Board to coincide with the record date for the regular
quarterly distributions, if any, payable with respect to the Common Shares.
Accumulated, accrued and unpaid distributions for any past Distribution
Periods may be declared and paid at any time, without reference to any regular
Distribution Payment Date, to holders of record on a given date, which date
shall not precede by more than 45 days the payment date thereof, as may be
fixed by the Board. The amount of accumulated, accrued and unpaid
distributions on any Series A Preferred Share, or fraction thereof, at any
date shall be the amount of any distributions thereon calculated at the
applicable rate to and including such date, whether or not earned or declared,
which have not been paid in cash. The amount of distributions payable per
Series A Preferred Share for the initial Distribution Period, or any other
period shorter or longer than a full Distribution Period, shall be computed
ratably on the basis of four 90-day quarters and a 364-day year.
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<PAGE>
b. No distribution on the Series A Preferred Shares shall
be authorized by the Board or paid or set apart for payment by the Trust at
such time as the terms and provisions of any agreement of the Trust, including
any agreement relating to its indebtedness, prohibits such authorization,
payment or setting apart for payment or provides that such authorization,
payment or setting apart for payment would constitute a breach thereof, or a
default thereunder, or if such authorization or payment shall be restricted or
prohibited by law. No interest, or sum of money in lieu of interest, shall be
payable in respect of any distribution payment or payments on the Series A
Preferred Shares which may be in arrears.
Notwithstanding the foregoing, distributions on the Series A
Preferred Shares shall accumulate whether or not any of the foregoing
restrictions exist, whether or not there are funds legally available for the
payment thereof and whether or not such distributions are authorized.
Accumulated but unpaid distributions on the Series A Preferred Shares shall
not bear interest and holders of the Series A Preferred Shares shall not be
entitled to any distributions in excess of full cumulative distributions. Any
distribution payment made on the Series A Preferred Shares shall first be
credited against the earliest accumulated but unpaid distribution due with
respect to such shares which remains payable.
c. Except as provided in subsection 3(d) herein, if any
Series A Preferred Shares are outstanding, no distributions (other than in
Common Shares or other equity securities of the Trust ranking junior to the
Series A Preferred Shares as to distributions and upon liquidation,
dissolution or winding up of the Trust) shall be declared or paid or set apart
for payment nor shall any other distribution be declared or made on any equity
securities of the Trust ranking, as to distributions or upon liquidation,
dissolution or winding up of the Trust, on a parity with or junior to the
Series A Preferred Shares for any period unless full cumulative distributions
have been or contemporaneously are declared and paid or declared and a sum
sufficient for the payment thereof set apart for such payment on the Series A
Preferred Shares for all past distribution periods and the then current
distribution period, nor shall any Common Shares, or any other equity
securities of the Trust ranking junior to or on a parity with the Series A
Preferred Shares as to distributions or upon liquidation, dissolution or
winding up of the Trust, be redeemed, purchased or otherwise acquired for any
consideration (or any monies be paid to or made available for a sinking fund
for the redemption of any such equity securities) by the Trust or any other
entity controlled directly or indirectly by the Trust (except (i) by
conversion into or exchange for other equity securities of the Trust ranking
junior to the Series A Preferred Shares as to distributions and upon
liquidation, dissolution or winding up of the Trust, (ii) for the repurchase
of Common Shares held by employees, officers, trustees, or consultants of the
Trust (or their permitted transferees) that are subject to restrictive share
purchase agreements under which the Trust has the option or obligation to
repurchase such shares upon the occurrence of certain events, such as
termination of employment or (iii) as necessary for the Trust to continue to
qualify as a REIT).
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<PAGE>
d. When distributions are not paid in full (or a sum
sufficient for such full payment is not so set apart) upon the Series A
Preferred Shares and any other equity securities ranking on a parity as to
distributions with the Series A Preferred Shares, all distributions declared
upon the Series A Preferred Shares and any other equity securities ranking on
a parity as to distributions with the Series A Preferred Shares shall be
declared pro rata so that the amount of distributions declared per share of
Series A Preferred Shares and such other equity securities shall in all cases
bear to each other the same ratio that accumulated distributions per share on
the Series A Preferred Shares and such other equity securities (which shall
not include any accumulation in respect of unpaid distributions for prior
distribution periods if such equity securities do not have a cumulative
distribution) bear to each other.
e. Holders of Series A Preferred Shares shall not be
entitled to any distribution, whether payable in cash, property or shares, in
excess of full cumulative distributions on the Series A Preferred Shares as
described above. Accumulated but unpaid distributions on the Series A
Preferred Shares will accumulate as of the Distribution Payment Date on which
they first become payable.
4. Liquidation Preference.
a. In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the Trust, the holders of the Series
A Preferred Shares shall be entitled to receive out of the assets of the Trust
available for distribution to shareholders remaining after payment or
provisions for payment of all debts and other liabilities of the Trust a
liquidation preference equal to the Stated Value per share, plus an amount
equal to any accumulated and unpaid distributions to the date of payment,
before any distribution of assets is made to holders of Common Shares or any
other equity securities that rank junior to the Series A Preferred Shares as
to liquidation rights.
b. If upon any such voluntary or involuntary liquidation,
dissolution or winding up of the Trust, the assets of the Trust are
insufficient to make such full payment to holders of the Series A Preferred
Shares and the corresponding amounts payable on all shares of other classes or
series of equity securities of the Trust ranking on a parity with the Series A
Preferred Shares as to liquidation rights, then the holders of the Series A
Preferred Shares and all other such classes or series of equity securities
shall share ratably in any such distribution of assets in proportion to the
full liquidating distributions to which they would otherwise be respectively
entitled.
c. Written notice of any such liquidation, dissolution or
winding up of the Trust, stating the payment date or dates when, and the place
or places where, the amounts distributable in such circumstances shall be
payable, shall be given by first class mail, postage pre-paid, not less than
30 nor more than 60 days prior to the payment date stated therein, to each
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<PAGE>
record holder of the Series A Preferred Shares at the respective addresses of
such holders as the same shall appear on the share transfer records of the
Trust.
d. After payment of the full amount of the liquidating
distributions to which they are entitled, the holders of Series A Preferred
Shares shall have no right or claim to any of the remaining assets of the
Trust.
e. None of a consolidation or merger of the Trust with or
into another entity, a merger of another entity with or into the Trust, a
statutory share exchange by the Trust or a sale, lease or conveyance of all or
substantially all of the Trust's property or business shall be considered a
liquidation, dissolution or winding up of the Trust.
f. In determining whether a distribution (other than upon
voluntary or involuntary liquidation) by dividend, redemption or other
acquisition of shares or otherwise is permitted under Maryland Law, no effect
shall be given to amounts that would be needed, if the Trust were to be
dissolved at the time of the distribution, to satisfy the preferential rights
upon dissolution of shareholders whose preferential rights on dissolution are
superior to those receiving the distribution.
5. Redemption.
a. Cash Redemption Right. On and after January 2, 2004
and, in addition, at any time after the Issue Date that the Current Market
Price (as defined in Section 9) of the Common Shares has equaled or exceeded
120% of the Conversion Price for any 60 consecutive Trading Days (as defined
in Section 9), the Trust, upon giving notice as provided below, may redeem the
Series A Preferred Shares, in whole or in part, for a redemption price per
share payable in cash equal to the Stated Value (the "Cash Redemption Right").
b. Share Redemption Right. If (i) at any time during the
period commencing on the Issue Date and ending on January 1, 2004, the Current
Market Price of the Common Shares has equaled or exceeded 120% of the
Conversion Price for any 60 consecutive Trading Days or (ii) at any time on or
after January 2, 2004, the Current Market Price of the Common Shares has
equaled or exceeded 110% of the Conversion Price for 60 consecutive Trading
Days, the Trust, upon giving notice as provided below, may redeem the Series A
Preferred Shares, in whole or in part, for such number of Common Shares as
equals the Stated Value of the Series A Preferred Shares to be redeemed
divided by the Conversion Price as of the opening of business on the date set
for such redemption (the "Share Redemption Right").
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<PAGE>
c. Limitations on Redemption.
(i) The Trust may exercise the Cash Redemption Right
provided that the redemption price (other than the portion thereof consisting
of accumulated and unpaid distributions) is payable solely out of the sale
proceeds of other equity securities of the Trust, and from no other source.
For purposes of the preceding sentence, "equity securities" means any equity
securities (including Common Shares and Preferred Shares (as defined in the
Declaration of Trust)), shares, interest, participation or other ownership
interests (however designated) and any rights (other than debt securities
convertible into or exchangeable for equity securities) or options to purchase
any of the foregoing.
(ii) If fewer than all of the outstanding Series A
Preferred Shares are to be redeemed, the shares to be redeemed shall be
determined pro rata or by lot or in such other manner as prescribed by the
Board.
(iii) Notwithstanding anything to the contrary
contained herein, unless full cumulative distributions on all Series A
Preferred Shares shall have been or contemporaneously are declared and paid or
declared and a sum sufficient for the payment thereof set apart for payment
for all past distribution periods and the current distribution period, no
Series A Preferred Shares shall be redeemed unless all outstanding Series A
Preferred Shares are simultaneously redeemed or exchanged; provided, however,
that the foregoing shall not prevent the purchase or acquisition of Series A
Preferred Shares pursuant to a purchase or exchange offer made on the same
terms to holders of all outstanding Series A Preferred Shares. In addition,
unless full cumulative distributions on all outstanding Series A Preferred
Shares have been or contemporaneously are declared and paid or declared and a
sum sufficient for the payment thereof set apart for payment for all past
distributions periods and the then current distribution period, the Trust
shall not purchase or otherwise acquire directly or indirectly any Series A
Preferred Shares or any equity securities of the Trust ranking junior to or on
a parity with the Series A Preferred Shares as to distributions or upon
liquidation, dissolution or winding up of the Trust (except (i) by conversion
into or exchange for other equity securities of the Trust ranking junior to
the Series A Preferred Shares as to distributions and upon liquidation,
dissolution or winding up of the Trust, (ii) for the repurchase of Common
Shares held by employees, officers, trustees, or consultants of the Trust (or
their permitted transferees) that are subject to restrictive share purchase
agreements under which the Trust has the option or obligation to repurchase
such shares upon the occurrence of certain events, such as termination of
employment or (iii) as necessary for the Trust to continue to qualify as a
REIT).
(iv) The foregoing provisions of subsections
5(c)(i)-(iii) shall not prevent the purchase by the Trust of Series A
Preferred Shares pursuant to Article 6 of the Declaration of Trust or
otherwise in order to ensure that the Trust remains qualified as a REIT for
federal income tax purposes.
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<PAGE>
(v) Immediately prior to any redemption of Series A
Preferred Shares, the Trust shall pay, in cash, any accumulated and unpaid
distributions through the Redemption Date (as defined in subsection (d)
below), unless a Redemption Date falls after a Distribution Record Date and on
or prior to the corresponding Distribution Payment Date, in which case each
holder of Series A Preferred Shares at the close of business on such
Distribution Record Date shall be entitled to the distribution payable on such
shares on the corresponding Distribution Payment Date notwithstanding the
redemption of such shares on or prior to such Distribution Payment Date.
Except as provided above, the Trust will make no payment or allowance for
unpaid distributions, whether or not in arrears, on Series A Preferred Shares
for which a notice of redemption has been given.
d. Procedures for Redemption.
(i) Notice of redemption shall be mailed, not less
than 30 nor more than 60 days, prior to the date fixed for redemption set
forth in such notice (the "Redemption Date") to each holder of record of
Series A Preferred Shares to be redeemed, notifying such holder of the Trust's
election to redeem such shares. Such notice shall be mailed to such holder's
address as the same appears on the share records of the Trust. No failure to
give such notice or any defect therein or in the mailing thereof shall affect
the validity of the proceedings for the redemption of any Series A Preferred
Shares except as to the holder to whom notice was defective or not given.
(ii) In addition to any information required by law,
such notice shall state: (i) the Redemption Date, (ii) with respect to the
Cash Redemption Right, the cash redemption price per Series A Preferred Share
and, with respect to the Share Redemption Right, the number of Common Shares
to be issued with respect to each Series A Preferred Share, (iii) the number
of shares to be redeemed (and, if fewer than all the Series A Preferred Shares
are to be redeemed from such holder, the number of shares to be redeemed from
such holder), (iv) the place or places where certificates for such Series A
Preferred Shares are to be surrendered for payment of the redemption price in
cash, with respect to the Cash Redemption Right, and in certificates
representing Common Shares, with respect to the Share Redemption Right, (v)
that distributions on the shares to be redeemed will cease to accumulate on
such Redemption Date and (vi) the date upon which the holder's conversion
rights, if any, as to such shares shall terminate.
(iii) On or after the Redemption Date, each holder of
Series A Preferred Shares to be redeemed shall present and surrender the
certificates evidencing its Series A Preferred Shares to the Trust at the
place designated in the notice of redemption and thereupon the redemption
price (in cash or Common Shares, as applicable) of such shares shall be paid
to or on the order of the person whose name appears on such certificate
evidencing Series A Preferred
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<PAGE>
Shares as the owner thereof and each surrendered certificate shall be
canceled. If fewer than all the shares evidenced by any such certificate
evidencing Series A Preferred Shares are to be redeemed, a new certificate
shall be issued evidencing the unredeemed shares.
(iv) From and after the Redemption Date (unless the
Trust defaults in payment of the redemption price), all distributions on the
Series A Preferred Shares designated for redemption in such notice shall cease
to accumulate and all rights of the holders thereof, except the right to
receive the redemption price thereof (including all accumulated and unpaid
distributions up to the Redemption Date), shall cease and terminate and such
shares shall not thereafter be transferred (except with the consent of the
Trust) on the Trust's books, and such shares shall not be deemed to be
outstanding for any purpose whatsoever. At its election, the Trust, prior to a
Redemption Date, may irrevocably deposit the redemption price (including
accumulated and unpaid distributions) of the Series A Preferred Shares so
called for redemption in trust for the holders thereof with a bank or trust
company, in which case the redemption notice to holders of the Series A
Preferred Shares to be redeemed shall (i) state the date of such deposit, (ii)
specify the office of such bank or trust company as the place of payment of
the redemption price and (iii) require such holders to surrender the
certificates evidencing such shares at such place on or about the date fixed
in such redemption notice (which may not be later than the Redemption Date)
against payment of the redemption price (including all accumulated and unpaid
distributions to the Redemption Date). At the close of business on a
Redemption Date relating to the Trust's Share Redemption Right, each holder of
Series A Preferred Shares to be so redeemed (unless the Trust defaults in the
delivery of the Common Shares payable on such Redemption Date) shall be deemed
to be the record holder of the number of Common Shares into which such Series
A Preferred Shares are to be so redeemed, regardless of whether such holder
has surrendered the certificates evidencing the Series A Preferred Shares. Any
monies or Common Shares so deposited which remain unclaimed by the holders of
the Series A Preferred Shares at the end of two years after the Redemption
Date shall be returned by such bank or trust company to the Trust.
e. Status of Redeemed Shares. Any Series A Preferred
Shares that shall at any time have been redeemed shall, after such redemption,
have the status of authorized but unissued Preferred Shares, without
designation as to series until such shares are once more designated as part of
a particular series by the Board.
f. No Fractional Shares. No fractional shares or scrip
representing fractions of Common Shares shall be issued upon redemption of a
Series A Preferred Share pursuant to the Trust's Share Redemption Right.
Instead of any fractional interest in a Common Share that would otherwise be
deliverable upon the redemption of a Series A Preferred Share, the Trust shall
pay to the holder of such Series A Preferred Share an amount in cash in
respect of such fractional interest (computed to the nearest cent) based upon
the Current Market Price of Common Shares on the Trading Day immediately
preceding the Redemption Date. If more than
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one Series A Preferred Share shall be surrendered for redemption at one time
by the same holder, the number of full Common Shares issuable upon redemption
thereof shall be computed on the basis of the aggregate number of Series A
Preferred Shares so surrendered.
g. Common Shares Issuable Upon Redemption. The Trust
covenants that any Common Shares issued upon redemption of the Series A
Preferred Shares shall be validly issued, fully paid and non-assessable.
6. Voting Rights.
a. Holders of the Series A Preferred Shares shall not
have any voting rights, except as provided by law and as described below.
b. Whenever distributions on any Series A Preferred
Shares shall be in arrears for six or more quarterly periods (a "Preferred
Distribution Default"), the number of trustees of the Trust shall be
automatically increased by two and the holders of such Series A Preferred
Shares (voting separately as a class with all other equity securities ranking
on a parity with the Series A Preferred Shares as to distributions and upon
voluntary or involuntary liquidation, dissolution or winding up of the Trust
upon which like voting rights have been conferred and are exercisable ("Parity
Preferred Shares")) shall be entitled to vote for the election of a total of
two additional trustees of the Trust (the "Preferred Share Trustees") who
shall each be elected for one-year terms. Such election shall be held at a
special meeting called by the holders of record of at least 10% of the
outstanding Series A Preferred Shares or the holders of shares of any other
series of Parity Preferred Shares so in arrears (unless such request is
received less than 90 days before the date fixed for the next annual or
special meeting of shareholders) or, if the request for a special meeting is
received by the Trust less than 90 days before the date fixed for the next
annual or special meeting of the shareholders, at the next annual or special
meeting of shareholders, and at each subsequent annual meeting until all
distributions accumulated on the Series A Preferred Shares for the past
distribution periods and the distribution for the then current distribution
period shall have been fully paid or authorized and a sum sufficient for the
payment thereof set aside for payment in full.
c. If and when all accumulated distributions on the
Series A Preferred Shares shall have been paid in full or set aside for
payment in full, the holders of Series A Preferred Shares shall be divested of
the voting rights set forth in Section 6(b) herein (subject to revesting in
the event of each and every Preferred Distribution Default) and, if all
accumulated distributions have been paid in full or set aside for payment in
full on all other series of Parity Preferred Shares upon which like voting
rights have been conferred and are exercisable, the term of office of each
Preferred Share Trustee so elected shall terminate and the number of trustees
of the Trust shall be automatically decreased by two. So long as a Preferred
Distribution Default shall continue, any vacancy in the office of a Preferred
Share Trustee may be filled by written
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consent of the Preferred Share Trustee remaining in office, or if there is no
such remaining trustee, by vote of holders of a majority of the outstanding
Series A Preferred Shares and any other series of Parity Preferred Shares
voting as a single class. Any Preferred Share Trustee may be removed at any
time with or without cause by the vote of, and shall not be removed otherwise
than by the vote of, the holders of record of a majority of the outstanding
Series A Preferred Shares when they have the voting rights set forth in
Section 6(b) (voting separately as a class with all other series of Parity
Preferred Shares upon which like voting rights have been conferred and are
exercisable). The Preferred Share Trustees shall each be entitled to one vote
per trustee on any matter.
d. So long as any Series A Preferred Shares remain
outstanding, the Trust shall not, without the affirmative vote or consent of
the holders of at least two-thirds of Series A Preferred Shares outstanding at
the time, given in person or by proxy, either in writing or at a meeting, (i)
authorize or create, or increase the authorized or issued amount of, any class
or series of shares of beneficial interest ranking prior to Series A Preferred
Shares with respect to the payment of distributions or the distribution of
assets upon voluntary or involuntary liquidation, dissolution or winding up of
the Trust or reclassify any authorized shares of beneficial interest of the
Trust into such shares, or create, authorize or issue any obligation or
security convertible or exchangeable into or evidencing the right to purchase
any such shares; or (ii) amend, alter or repeal the provisions of the
Declaration of Trust or these Articles Supplementary, whether by merger,
consolidation or otherwise, or consummate a merger or consolidation involving
the Trust (any such merger or consolidation, an "Event") , so as to materially
and adversely affect any right, preference, privilege or voting power of such
Series A Preferred Shares or the holders thereof; provided, however, with
respect to the occurrence of any of the Events set forth in (ii) above, the
occurrence of any such Event shall not be deemed to materially adversely
affect such rights, preferences, privileges or voting powers of holders of
Series A Preferred Shares if immediately after any such Event (i) in which the
Trust is the surviving entity, there are outstanding no equity securities
ranking as to distribution rights or liquidation preference senior to the
Series A Preferred Shares other than the securities of the Trust outstanding
prior to such Event, (ii) in which the Trust is not the surviving entity, as a
result of the Event, the holders of the Series A Preferred Shares receive
shares of stock or other equity securities with preferences, rights and
privileges substantially similar to the preferences, rights and privileges of
the Series A Preferred Shares and there are outstanding no shares of stock or
other equity securities of the surviving entity ranking as to distribution
rights or liquidation preference senior to the Series A Preferred Shares other
than the securities issued in respect of securities of the Trust outstanding
prior to such Event or (iii) whether or not the Trust is the surviving entity,
there are no outstanding equity securities of the Trust or its successor
(other than securities of the Trust outstanding prior to such Event, or
securities issued in respect of securities of the Trust outstanding prior to
such Event) ranking as to distribution rights or liquidation preference senior
to the Senior A Preferred Shares; and provided further that any increase in
the amount of the authorized Preferred Shares or the creation or issuance of
any series of Preferred
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Shares (other than the Series A Preferred Shares), in each case ranking on a
parity with or junior to the Series A Preferred Shares with respect to payment
of distributions and the distribution of assets upon voluntary or involuntary
liquidation, dissolution or winding up of the Trust, shall not be deemed to
materially and adversely affect such rights, preferences, privilege or voting
powers.
Notwithstanding anything to the contrary contained
herein, the creation or issuance of any series of Preferred Shares that is
subject to mandatory redemption at a scheduled date or dates or that has the
benefit of a sinking fund or that is subject to redemption at the option of
the Trust or the holder but that otherwise ranks on a parity with or junior to
the Series A Preferred Shares with respect to payment of distributions and the
distribution of assets upon voluntary or involuntary liquidation, dissolution
or winding up of the Trust shall not require the affirmative vote or consent
of all or any of the holders of Series A Preferred Shares.
e. So long as any of the Series A Preferred Shares remain
outstanding, the Trust will not terminate the Trust's status as a REIT without
the affirmative vote or consent of the holders of at least two-thirds of the
outstanding Series A Preferred Shares, Common Shares and all other series or
classes of shares of beneficial interest of the Trust outstanding at the time
and having voting rights, voting together as a single class, given in person
or by proxy, either in writing or at a meeting. For the purposes of the
foregoing sentence, (i) each Series A Preferred Share shall entitle the holder
thereof to such number of votes as is equal to the number of Common Shares
into which such Series A Preferred Share is convertible and (ii) each other
share of beneficial interest of the Trust outstanding at the time and having
voting rights shall entitle the holder thereof to one vote per share or such
number of votes per share as is set forth in the amendment to the Declaration
of Trust designating such shares of beneficial interest.
f. The foregoing voting provisions shall not apply if, at
or prior to the time when the act with respect to which such vote would
otherwise be required shall be effected, all outstanding Series A Preferred
Shares shall have been converted, redeemed or called for redemption upon
proper notice and sufficient funds or Common Shares, as applicable, shall have
been deposited in trust to effect such redemption.
7. Conversion.
a. Subject to the restrictions on transfer and ownership
contained in Article 6 of the Declaration of Trust, each whole (but not
fractional) Series A Preferred Share shall be convertible at any time, at the
option of the holder thereof, into such number of fully paid and
non-assessable Common Shares as is equal to the quotient that results from
dividing (i) the sum of (X) the Stated Value plus (Y) accrued and unpaid
distributions on such Series A Preferred Share (other than such accrued and
unpaid distributions that the Trust elects to pay in cash at the time of
conversion) by (ii) a conversion price (the "Conversion Price") of $28.00 per
Series A Preferred Share; provided, however, that if the average Current
Market Price of the Common
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Shares during the 60-Trading Day period ending on December 31, 2003 is $23.00
or lower then the Conversion Price shall automatically be reduced from $28.00
to $26.50, subject to adjustment as described in Section 7(f) herein;
provided, further, that the right to convert Series A Preferred Shares called
for redemption pursuant to Section 5 shall terminate at the close of business
on the Redemption Date, unless the Trust shall default in making payment of
the redemption price.
b. To exercise the conversion right, the holder of each
Series A Preferred Share to be converted shall surrender the certificate
evidencing such share, duly endorsed or assigned to the Trust or in blank, at
the principal office of the Transfer Agent accompanied by written notice to
the Trust that the holder thereof elects to convert such Series A Preferred
Share. Unless the shares issuable on conversion are to be issued in the same
name as the name in which such Series A Preferred Share is registered, in
which case the Trust shall bear the related taxes, each share surrendered for
conversion shall be accompanied by instruments of transfer, in form
satisfactory to the Trust, duly executed by the holder or such holder's duly
authorized attorney and an amount sufficient to pay any transfer or similar
tax (or evidence reasonably satisfactory to the Trust demonstrating that such
taxes have been paid).
c. Each conversion shall be deemed to have been effected
immediately prior to the close of business on the date on which the
certificates for Series A Preferred Shares shall have been surrendered and
such notice (and if applicable, payment of an amount equal to the distribution
payable on such shares) received by the Trust as aforesaid, and the person or
persons in whose name or names any certificate or certificates for Common
Shares shall be issuable upon such conversion shall be deemed to have become
the holder or holders of record of the shares evidenced thereby at such time
on such date, and such conversion shall be at the Conversion Price in effect
at such time and on such date unless the share transfer books of the Trust
shall be closed on that date, in which event such person or persons shall be
deemed to have become such holder or holders of record at the close of
business on the next succeeding day on which such share transfer books are
open, but such conversion shall be at the Conversion Price in effect on the
date on which such shares have been surrendered and such notice received by
the Trust.
d. Holders of Series A Preferred Shares at the close of
business on a Distribution Record Date shall be entitled to receive the
distribution payable on such shares on the corresponding Distribution Payment
Date notwithstanding the conversion of such shares following such Distribution
Record Date and prior to such Distribution Payment Date. However, certificates
evidencing Series A Preferred Shares surrendered for conversion during the
period between the close of business on any Distribution Record Date and
ending with the opening of business on the corresponding Distribution Payment
Date (except shares converted after the issuance of a notice of redemption
with respect to a Redemption Date during such period or coinciding with such
Distribution Payment Date) shall be accompanied by payment of an amount equal
to the distribution payable on such shares on such Distribution Payment Date.
A holder of
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Series A Preferred Shares on a Distribution Record Date who (or whose
transferee) tenders any such shares for conversion into Common Shares on such
Distribution Payment Date shall receive the distribution payable by the Trust
on such Series A Preferred Shares on such date, and the converting holder need
not include payment of the amount of such distribution upon surrender of
certificates representing such Series A Preferred Shares for conversion.
Except as provided above, the Trust shall make no payment or allowance for
unpaid distributions, whether or not in arrears, on converted shares or for
distribution on the Common Shares that are issued upon such conversion.
As promptly as practicable after the surrender of
certificates for Series A Preferred Shares as aforesaid, the Trust shall issue
and shall deliver at such office to such holder, or on such holder's written
order, a certificate or certificates for the number of full Common Shares
issuable upon the conversion of such shares in accordance with the provisions
of this Section 7, and any fractional interest in respect of a Common Share
arising upon such conversion shall be settled as provided in subsection (e) of
this Section 7.
e. No fractional shares or scrip representing fractions
of Common Shares shall be issued upon conversion of the Series A Preferred
Shares. Instead of any fractional interest in a Common Share that would
otherwise be deliverable upon the conversion of a Series A Preferred Share,
the Trust shall pay to the holder of such share an amount in cash in respect
of such fractional interest based upon the Current Market Price of Common
Shares on the Trading Day immediately preceding the date of conversion. If
more than one Series A Preferred Share, as the case may be, shall be
surrendered for conversion at one time by the same holder, the number of full
Common Shares issuable upon conversion thereof shall be computed on the basis
of the aggregate number of Series A Preferred Shares so surrendered.
f. Conversion Price Adjustments.
The Conversion Price shall be adjusted from time to time
as follows:
(i) If the Trust shall after the Issue Date (A) pay or
make a distribution to holders of its equity securities in Common Shares, (B)
subdivide its outstanding Common Shares into a greater number of shares, (C)
combine its outstanding Common Shares into a smaller number of shares or (D)
issue any shares of beneficial interest by reclassification of its Common
Shares, the Conversion Price in effect at the opening of business on the day
following the date fixed for the determination of shareholders entitled to
receive such distribution or at the opening of business on the day following
the day on which such subdivision, combination or reclassification becomes
effective, as the case may be, shall be adjusted so that the holder of any
Series A Preferred Shares thereafter surrendered for conversion shall be
entitled to receive the number of Common Shares that such holder would have
owned or have been entitled to receive after the happening of any of the
events described above had such Series A
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Preferred Shares been converted immediately prior to the record date in the
case of a distribution or the effective date in the case of a subdivision,
combination or reclassification. An adjustment made pursuant to this
subsection (i) shall become effective immediately after the opening of
business on the day next following the record date (except as provided in
subsection (j) below) in the case of a distribution and shall become effective
immediately after the opening of business on the day next following the
effective date in the case of a subdivision, combination or reclassification.
(ii) If the Trust shall issue after the Issue Date
rights, options or warrants to all holders of Common Shares entitling them
(for a period expiring within 45 days after the record date mentioned below)
to subscribe for or purchase Common Shares at a price per share less than the
Fair Market Value per Common Share on the record date fixed for the
determination of shareholders entitled to receive such rights, options or
warrants (any of the foregoing being hereinafter in this subsection (ii)
called the "Securities"), then the Conversion Price shall be adjusted so that
it shall equal the price determined by multiplying (I) the Conversion Price in
effect immediately prior to the close of business on the record date fixed for
the determination of shareholders entitled to receive such distribution by
(II) a fraction, the numerator of which shall be the sum of (A) the number of
Common Shares outstanding on the close of business on the record date fixed
for the determination of shareholders entitled to receive such distribution
and (B) the number of shares that the aggregate proceeds to the Trust from the
exercise of such rights, options or warrants for Common Shares would purchase
at such Fair Market Value, and the denominator of which shall be the sum of
(A) the number of Common Shares outstanding on the close of business on the
record date fixed for the determination of shareholders entitled to receive
such distribution and (B) the number of additional Common Shares offered for
subscription or purchase pursuant to such rights, options or warrants. Such
adjustment shall become effective immediately upon the opening of business on
the business day next following the record date fixed for the determination of
shareholders entitled to receive such distribution (subject to paragraph (j)
below). In determining whether any rights, options or warrants entitle the
holders of Common Shares to subscribe for or purchase Common Shares at less
than such Fair Market Value, there shall be taken into account any
consideration received by the Trust upon issuance and upon exercise of such
rights, options or warrants, the value of such consideration, if other than
cash, to be determined by the Chief Executive Officer or the Board, whose
determination shall be conclusive. For the purposes of this subsection (ii),
the distribution of a Security, which is distributed not only to the holders
of the Common Shares on the date for the determination of shareholders
entitled to such distribution of such Security, but also is distributed with
each Common Share delivered to a person converting a Series A Preferred Share
after such determination date, shall not require an adjustment of the
Conversion Price pursuant to this subsection (ii); provided that on the date,
if any, on which a person converting a Series A Preferred Share would no
longer be entitled to receive such Security with a Common Share (other than as
a result of the termination of all such Securities), a distribution of such
Securities shall be deemed to have occurred, and the Conversion Price shall be
adjusted as provided in this
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subsection (ii) (and such day shall be deemed to be "the record date fixed for
the determination of shareholders entitled to receive such distribution"
within the meaning of the two preceding sentences).
(iii) If the Trust shall distribute to all holders of
its Common Shares any equity securities of the Trust (other than Common
Shares) or evidence of its indebtedness or assets (excluding cash
distributions paid out of current or accumulated funds from operations to the
extent the same results in a payment of at least equal cash distributions to
the holders of Series A Preferred Shares) or rights, options and warrants to
subscribe for or purchase any of its securities (excluding those rights and
warrants issued to all holders of Common Shares entitling them for a period
expiring within 45 days after the record date referred to in subparagraph (ii)
above to subscribe for or purchase Common Shares, which rights and warrants
are referred to in and treated under subparagraph (ii) above) (any of the
foregoing being hereinafter in this subsection (iii) called the "Securities"),
then in each case the Conversion Price shall be adjusted so that it shall
equal the price determined by multiplying (I) the Conversion Price in effect
immediately prior to the close of business on the record date fixed for the
determination of shareholders entitled to receive such distribution by (II) a
fraction, the numerator of which shall be the Fair Market Value per Common
Share on the record date fixed for the determination of shareholders entitled
to receive such distribution less the then fair market value (as determined by
the Chief Executive Officer or the Board, whose determination shall be
conclusive) of the portion of the shares of beneficial interest or assets or
evidences of indebtedness so distributed or of such rights, options or
warrants applicable to one Common Share, and the denominator of which shall be
the Fair Market Value per Common Share on the record date fixed for the
determination of shareholders entitled to receive such distribution. Such
adjustment shall become effective immediately at the opening of business on
the business day next following the record date fixed for the determination of
shareholders entitled to receive such distribution (except as provided in
subsection (j) below). For the purposes of this subsection (iii), the
distribution of a Security, which is distributed not only to the holders of
the Common Shares on the record date fixed for the determination of
shareholders entitled to such distribution of such Security, but also is
distributed with each Common Share delivered to a person converting a Series A
Preferred Share after such determination date, shall not require an adjustment
of the Conversion Price pursuant to this subsection (iii); provided that on
the date, if any, on which a person converting a Series A Preferred Share
would no longer be entitled to receive such Security with a Common Share
(other than as a result of the termination of all such Securities), a
distribution of such Securities shall be deemed to have occurred, and the
Conversion Price shall be adjusted as provided in this subsection (iii) (and
such day shall be deemed to be "the record date fixed for the determination of
the shareholders entitled to receive such distribution" within the meaning of
the two preceding sentences).
(iv) No adjustment in the Conversion Price shall be
required unless such adjustment would require a cumulative increase or
decrease of at least 1% in such
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price; provided, however, that any adjustments that by reason of this
subsection (iv) are not required to be made shall be carried forward and taken
into account in any subsequent adjustment until made; and provided, further,
that any adjustment shall be required and made in accordance with the
provisions of this Section 7 (other than this subsection (iv)) not later than
such time as may be required in order to preserve the tax-free nature of a
distribution to the holders of Common Shares. Notwithstanding any other
provisions of this Section 7, the Trust shall not be required to make any
adjustment of the Conversion Price for the issuance of any Common Shares
pursuant to any plan providing for the reinvestment of distributions or
interest payable on securities of the Trust and the investment of additional
optional amounts in Common Shares under such plan. All calculations under this
Section 7 shall be made to the nearest cent with ($.005 being rounded upward)
or to the nearest one-tenth of a share (with .05 of a share being rounded
upward), as the case may be. Anything in this subsection (f) to the contrary
notwithstanding, the Trust shall be entitled, to the extent permitted by law,
to make such reductions in the Conversion Price, in addition to those required
by this subsection (f), as the Board of Trustees, the chief executive officer
or the chief financial officer of the Trust in its, his or her discretion
shall determine to be advisable in order that any share distributions,
subdivision of shares, reclassification or combination of shares, distribution
of rights, options or warrants to purchase shares or securities, or a
distribution of other assets (other than cash distributions) hereafter made by
the Trust to its shareholders shall not be taxable.
g. If the Trust shall be a party to any transaction
(including, without limitation, a merger, consolidation, statutory share
exchange, self tender offer for all or substantially all of the Common Shares,
sale of all or substantially all of the Trust's assets or recapitalization of
the Common Shares and excluding any transaction as to which subsection (f)(i)
of this Section 7 applied) (each of the foregoing being referred to herein as
a "Transaction"), in each case as a result of which Common Shares shall be
converted into the right to receive shares, stock, securities or other
property (including cash or any combination thereof), each Series A Preferred
Share which is not converted into the right to receive shares, stock,
securities or other property in connection with such Transaction shall
thereafter be convertible into the kind and amount of shares, stock,
securities and other property (including cash or any combination thereof)
receivable upon the consummation of such Transaction by a holder of that
number of Common Shares into which one Series A Preferred Share was
convertible immediately prior to such Transaction, assuming such holder of
Common Shares (i) is not a Person with which the Trust consolidated or into
which the Trust merged or which merged into the Trust or to which such sale or
transfer was made, as the case may be (a "Constituent Person"), or an
affiliate of a Constituent Person and (ii) failed to exercise his appraisal
rights or rights of election, if any, as to the kind or amount of shares,
stock, securities and other property (including cash) receivable upon such
Transaction (each a "Non-Electing Share") (provided that if the kind and
amount of shares, stock, securities and other property (including cash)
receivable upon such Transaction is not the same for each Non-Electing Share,
the kind and amount receivable by each Non-Electing Share shall be deemed to
be the kind and
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amount receivable per share by a plurality of the Non-Electing Shares). The
Trust shall not be a party to any Transaction unless the terms of such
Transaction are consistent with the provisions of this subsection (g), and it
shall not consent or agree to the occurrence of any Transaction until the
Trust has entered into an agreement with the successor or purchasing entity,
as the case may be, for the benefit of the holders of the Series A Preferred
Shares that will contain provisions enabling the holders of the Series A
Preferred Shares that remain outstanding after such Transaction to convert
into the consideration received by holders of Common Shares at the Conversion
Price in effect immediately prior to such Transaction. The provisions of this
subsection (g) shall similarly apply to successive Transactions.
h. If:
(i) the Trust shall make a distribution on the Common
Shares (excluding cash distributions paid out of current or accumulated funds
from operations to the extent the same results in a payment of at least equal
cash distribution to the holders of Series A Preferred Shares) or there shall
be a reclassification, subdivision or combination of Common Shares; or
(ii) the Trust shall authorize the granting to the
holders of the Common Shares of rights, options or warrants to subscribe for
or purchase any shares of any class or any other rights, options or warrants;
or
(iii) there shall be any reclassification of the
Common Shares (other than an event to which subsection (f)(i) of this Section
7 applied) or any consolidation or merger to which the Trust is a party and
for which approval of any shareholders of the Trust is required, or a
statutory share exchange involving the conversion or exchange of Common Shares
into securities or other property, or a self tender offer by the Trust for all
or substantially all of its outstanding Common Shares, or the sale or transfer
of all or substantially all of the assets of the Trust as an entity and for
which approval of any shareholder of the Trust is required; or
(iv) there shall occur the voluntary or involuntary
liquidation, dissolution or winding up of the Trust,
then the Trust shall cause to be filed with the Transfer Agent and shall cause
to be mailed to the holders of the Series A Preferred Shares at their
addresses as shown on the share records of the Trust, as promptly as possible,
but at least 15 days prior to the applicable date hereinafter specified, a
notice stating (A) the date on which a record is to be taken for the purpose
of such distribution or rights, options or warrants, or, if a record is not to
be taken, the date as of which the holders of Common Shares of record to be
entitled to such distribution or rights, options or warrants are to be
determined or (B) the date on which such reclassification, subdivision,
combination, consolidation, merger, statutory share exchange, sale, transfer,
liquidation,
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dissolution or winding up is expected to become effective, and the date as of
which it is expected that holders of Common Shares of record shall be entitled
to exchange their Common Shares for securities or other property, if any,
deliverable upon such reclassification, subdivision, combination,
consolidation, merger, statutory share exchange, sale, transfer, liquidation,
dissolution or winding up. Failure to give or receive such notice or any
defect therein shall not affect the legality or validity of the proceedings
described in this Section 7.
i. Whenever the Conversion Price is adjusted as herein
provided, the Trust shall promptly file with the Transfer Agent an officer's
certificate setting forth the Conversion Price after such adjustment and
setting forth a brief statement of the facts requiring such adjustment, which
certificate shall be conclusive evidence of the correctness of such adjustment
absent manifest error. Promptly after delivery of such certificate, the Trust
shall prepare a notice of such adjustment of the Conversion Price setting
forth the adjusted Conversion Price and the effective date such adjustment
becomes effective and shall mail such notice of such adjustment of the
Conversion Price to the holder of each Series A Preferred Share at such
holder's last address as shown on the share records of the Trust.
j. In any case in which subsection (f) of this Section 7
provides that an adjustment shall become effective on the date next following
the record date for an event, the Trust may defer until the occurrence of such
event (A) issuing to the holder of any Series A Preferred Shares converted
after such record date and before the occurrence of such event the additional
Common Shares issuable upon such conversion by reason of the adjustment
required by such event over and above the Common Shares issuable upon such
conversion before giving effect to such adjustment and (B) fractionalizing any
Series A Preferred Share and/or paying to such holder any amount of cash in
lieu of any fraction pursuant to subsection (e) of this Section 7.
k. There shall be no adjustment of the Conversion Price
in case of the issuance of any shares of beneficial interest of the Trust in a
reorganization, acquisition or other similar transaction except as
specifically set forth in this Section 7. If any action or transaction would
require adjustment of the Conversion Price pursuant to more than one
subsection of this Section 7, only one adjustment shall be made, and such
adjustment shall be the amount of adjustment that has the highest absolute
value.
l. If the Trust shall take any action affecting the
Common Shares, other than action described in this Section 7, that in the
opinion of the Board would materially and adversely affect the conversion
rights of the holders of the Series A Preferred Shares, the Conversion Price
for the Series A Preferred Shares may be adjusted, to the extent permitted by
law, in such manner, if any, and at such time, as the Board, in its sole
discretion, may determine to be equitable in the circumstances.
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m. The Trust will at all times reserve and keep
available, free from preemptive rights, out of the aggregate of its authorized
but unissued Common Shares, for the purpose of effecting conversion of the
Series A Preferred Shares, the full number of Common Shares deliverable upon
the conversion of all outstanding Series A Preferred Shares not theretofore
converted. For purposes of this subsection (m), the number of Common Shares
that shall be deliverable upon the conversion of all outstanding Series A
Preferred Shares shall be computed as if at the time of computation all such
outstanding shares were held by a single holder.
Any Common Shares issued upon conversion of the Series A
Preferred Shares shall be validly issued, fully paid and non-assessable.
n. The Trust will pay any and all documentary stamp or
similar issue or transfer taxes payable in respect of the issue or delivery of
Common Shares or other securities or property on conversion or redemption of
the Series A Preferred Shares pursuant hereto; provided, however, that the
Trust shall not be required to pay any tax that may be payable in respect of
any transfer involved in the issue or delivery of Common Shares or other
securities or property in a name other than that of the record holder of the
Series A Preferred Shares to be converted or redeemed, and no such issue or
delivery shall be made unless and until the person requesting such issue or
delivery has paid to the Trust the amount of any such tax or established, to
the reasonable satisfaction of the Trust, that such tax has been paid.
8. Ownership Limitations. The Series A Preferred Shares are
subject to the restrictions on transferability and ownership provisions set
forth in Article 6 of the Declaration of Trust. For purposes of applying the
ownership limitation and transfer restrictions contained in Section 6.6 of the
Declaration of Trust, including the definition of the term "Ownership Limit,"
the term "Shares" is and shall hereinafter be understood to mean shares of
beneficial interest of the Trust, whether such shares are Common Shares or
Preferred Shares.
Pursuant to Section 6.6(k) of the Declaration of Trust, the
initial holders (the "Initial Holders") of the Series A Preferred Shares and
the Series B Preferred Units of Brandywine Operating Partnership, L.P. and the
Initial Holders' permitted transferees who acquire such securities or any
securities of the Trust or Brandywine Operating Partnership, L.P. issued upon
redemption or conversion of such securities are hereby exempted from the
Ownership Limit on the condition that, and for so long as, such holders comply
with those representations, warranties and agreements contained in Exhibit A
attached hereto and made a part hereof.
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<PAGE>
9. Definitions.
"Current Market Price" of publicly traded Common Shares or
any other class of shares of beneficial interest or other security of the
Trust or any other issuer for any day shall mean the last reported sales
price, regular way, on such day, or, if no sale takes place on such day, the
average of the reported closing bid and asked prices on such day, regular way,
in either case as reported on the New York Stock Exchange ("NYSE") or, if such
security is not listed or admitted for trading on the NYSE, on the principal
national securities exchange on which such security is listed or admitted for
trading or, if not listed or admitted for trading on any national securities
exchange, on the NASDAQ National Market or, if such security is not quoted on
such NASDAQ National Market, the average of the closing bid and asked prices
on such day in the over-the-counter market as reported by NASDAQ or, if bid
and asked prices for such security on such day shall not have been reported
through NASDAQ, the average of the bid and asked prices on such day as
furnished by any NYSE member firm regularly making a market in such security
selected for such purpose by the Chief Executive Officer of the Trust or the
Board.
"Distribution Payment Date" shall mean, with respect to each
Distribution Period, the fifteenth day of January, April, July and October in
each year, commencing, on ______________, 1998; provided, however, that if any
Distribution Payment Date falls on any day other than a business day, the
distribution payment due on such Distribution Payment Date shall be paid on
the business day immediately following such Distribution Payment Date.
"Distribution Periods" shall mean quarterly distribution
periods commencing on January 1, April 1, July 1 and October 1 of each year
and ending on and including the day preceding the first day of the next
succeeding Distribution Period (other than the initial Distribution Period,
which shall commence on the Issue Date and end on and include _____________,
1998).
"Fair Market Value" shall mean the average of the daily
Current Market Prices per Common Share during the five consecutive Trading
Days selected by the Trust commencing not more than 20 Trading Days before,
and ending not later than, the earlier of the day in question and the day
before the "ex" date with respect to the issuance or distribution requiring
such computation. The term " 'ex' date," when used with respect to any
issuance or distribution, means the first day on which the Common Shares trade
regular way, without the right to receive such issuance or distribution, on
the exchange or in the market, as the case may be, used to determine that
day's Current Market Price.
"Issue Date" shall mean the date on which Series A Preferred
Shares are first issued by the Trust.
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<PAGE>
"Trading Day" shall mean any day on which the securities in
question are traded on the NYSE or, if such securities are not listed or
admitted for trading on the NYSE, on the principal national securities
exchange on which such securities are listed or admitted or, if not listed or
admitted for trading on any national securities exchange, on the NASDAQ
National Market or, if such securities are not quoted on such NASDAQ National
Market, in the applicable securities market in which the securities are
traded.
"Transfer Agent" means The Bank of New York, or such other
agent or agents of the Trust as may be designated by the Board or its designee
as the transfer agent for the Series A Preferred Shares.
SECOND: The Series A Preferred Shares have been classified
and designated by the Board under the authority contained in the Declaration
of Trust.
THIRD: These Articles Supplementary have been approved by
the Board in the manner and by the vote required by law.
FOURTH: These Articles Supplementary shall be effective at
the time the State Department of Assessments and Taxation of Maryland accepts
these Articles Supplementary for record.
FIFTH: The undersigned President and Chief Executive Officer
of the Trust acknowledges these Articles Supplementary to be the act of the
Trust and, as to all matters or facts required to be verified under oath, the
undersigned President and Chief Executive Officer acknowledges that to the
best of his knowledge, information and belief, these matters and facts are
true in all material respects and that this statement is made under the
penalties for perjury.
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<PAGE>
IN WITNESS WHEREOF, the Trust has caused these Articles
Supplementary to be executed under seal in its name and on its behalf by its
President and Chief Executive Officer and attested to by its Secretary on this
_______ of __________ , 1998.
BRANDYWINE REALTY TRUST
By: _____________________________________
Gerard H. Sweeney
President and Chief Executive Officer
[SEAL]
ATTEST:
By: ___________________________
Brad A. Molotsky, Secretary
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<PAGE>
EXHIBIT A
REPRESENTATIONS OF
PROMETHEUS AAPT HOLDINGS, L.L.C.
and
COMMONWEALTH ATLANTIC PROPERTIES, INC.
I, the undersigned, certify that I am the _____________ of
Prometheus AAPT Holdings, L.L.C., a Delaware limited liability company
("Prometheus"), and the ______________ of Commonwealth Atlantic Properties
Inc., a Virginia corporation ("CAPI"), and on behalf of Prometheus and CAPI do
further represent, warrant and agree that:
1. Prometheus is a limited liability company that is
wholly-owned by LF Stragetic Realty Investors L.P., a Delaware limited
partnership ("LFSRI").
2. CAPI is a corporation, over 99% of the outstanding stock
of which is owned by LFSRI.
3. LFSRI is a limited partnership, the interests of which
are held by various pension funds, partnerships, and other entities. No
partner of LFSRI is a natural person or an organization described in Internal
Revenue Code (the "Code") section 501(c)(17) or section 509(a), or a portion
of a trust permanently set aside or to be used exclusively for the purposes
described in section 642(c) or a corresponding provision of prior law (any
such person, organization, or trust, an "Individual").
4. Applying the rules of Code section 544, as modified by
Code section 856(h), no Individual would be treated as owning shares of
beneficial interest of Brandywine Realty Trust (the "Company") held by
Prometheus and CAPI that have a value in excess of 9.8% of the value of all
outstanding shares of beneficial interest of the Company.
5. In connection with the delivery of these representations
to the Company, the Board of Trustees of the Company is expected to grant
LFSRI, Prometheus and CAPI permission to own shares of beneficial interest of
the Company in excess of the "Ownership Limit" and related restrictions on
ownership and transfer of shares of beneficial interest of the Company, as set
forth in the Company's declaration of trust. LFSRI, Prometheus and CAPI
acknowledge their understanding that if any of the above representations are
violated such that the ownership by Prometheus or CAPI of shares of beneficial
interest in the Company in excess of the Ownership Limit would cause an
Individual to be treated as owning shares of beneficial interest of the
Company held by Prometheus and CAPI that have a value in excess of 9.8% of the
value of all outstanding shares of beneficial interest of the Company, or
would cause the Company to cease to qualify as a REIT, the exemption granted
by the Board of Trustees will be revoked, and a portion of the shares of
beneficial interest owned by any of them will be automatically transferred to
a trust, as more particularly set forth in the Company's declaration of trust.
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<PAGE>
IN WITNESS WHEREOF, I have hereunto subscribed by name as of
this ____ day of ___________, 1998.
PROMETHEUS AAPT HOLDINGS, L.L.C.,
By: LF Strategic Realty Investors L.P.,
its sole member
By: ____________________________
Name:
Title:
COMMONWEALTH ATLANTIC PROPERTIES INC.
By: ____________________________
Name:
Title:
LF STRATEGIC REALTY INVESTORS L.P.
By: Lazard Freres Real Estate Investors L.L.C.,
its general partner
By: ____________________________
Name:
Title:
-24-
<PAGE>
EXHIBIT 10.1
PURCHASE AND CONTRIBUTION AGREEMENT
This Purchase and Contribution Agreement (this "Agreement"), dated
August 6, 1998, is by and among Brandywine Realty Trust, a Maryland real estate
investment trust ("Buyer Parent"), and Brandywine Operating Partnership L.P., a
Delaware limited partnership ("Buyer OP" and, together with Buyer Parent,
"Buyers"), LF Strategic Realty Investors L.P., Prometheus AAPT Holdings, L.L.C.
("Prometheus"), Commonwealth Atlantic Operation Properties Inc. ("CAOPI"),
Commonwealth Atlantic Land IV Inc. ("CAL IV"), Commonwealth Atlantic Land II
Inc. ("CAL II"), Commonwealth Atlantic Development Inc. ("CAD") and Commonwealth
Atlantic Land Company ("CALC" and, together with CAOPI, CAL IV, CAL II and CAD,
individually and collectively, "CAP Sellers" and, together with Prometheus,
individually and collectively, "Sellers").
RECITALS
A. Prometheus now owns in excess of 99% of the outstanding Equity
Interests in Atlantic American Properties Trust ("AAPT"); and CAP Sellers now
own all of the Contributed Assets (as defined below).
B. Buyers desire to acquire from Sellers, and Sellers desire to sell or
contribute to Buyers, as applicable, all of the outstanding Equity Interests in
AAPT (the "Acquired Equity Interests") and all of the Contributed Assets,
subject to and otherwise in accordance with the terms and conditions of this
Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein and for other good and valuable consideration, the receipt and
legal sufficiency of which are hereby acknowledged, the parties hereto,
intending to be legally bound, agree as follows:
ARTICLE 1
DEFINITIONS
1.1 Defined Terms. As used herein, the terms below shall have the
following meanings (such meanings to be equally applicable to both the singular
and plural forms of the terms defined):
"7350 Tilghman Drive Letter" shall mean the letter agreement, dated
as of the date hereof, between Sellers and Buyers and relating to the asset
known as 7350 Tilghman Drive.
"8260 Greensboro Drive Letter" shall mean the letter agreement,
dated as the date hereof, between Sellers and Buyers and relating to the asset
known as 8260 Greensboro Drive.
<PAGE>
"AAPT Financial Statements" shall mean (i) the audited consolidated
balance sheet of AAPT and its Subsidiaries as of December 31, 1997 and the
related audited statements of operations and cash flows for the eight month
period ending December 31, 1997 and (ii) the unaudited consolidated balance
sheet of AAPT and its Subsidiaries as of June 30, 1998 and the related unaudited
statements of operations and cash flows for the six month period ending June 30,
1998.
"AAPT Operations" shall mean the activities of owning, operating,
leasing, managing, acquiring, developing, selling, disposing and transferring
the Real Property set forth on Schedule 4.4(a)(1), as conducted by the Acquired
Entity and the Acquired Subsidiaries on the date hereof.
"AAPT Repaid Indebtedness" shall mean all of the Indebtedness of
the Acquired Entity and the Acquired Subsidiaries set forth on Schedule 1.1(a)
hereto to be repaid by Sellers on or prior to the Closing Date as provided in
Section 8.7.
"AAPT Seller" shall mean Prometheus.
"AAPT Transferred Indebtedness" shall mean only the Indebtedness of
the Acquired Entity and the Acquired Subsidiaries set forth on Schedule 1.1(b)
hereto, together with the Acquired Entity's proportionate share of the
Indebtedness, if any, of IR Northlight Associates II (to the extent IR
Northlight Associates II remains a Partially Owned Partnership at Closing and
Buyer acquires a 50% interest in IR Northlight Associates II).
"Acquired Entity" shall mean AAPT.
"Acquired Equity Interests" shall mean all of the Equity Interests
in the Acquired Entity.
"Acquired Subsidiaries" shall mean each of the Subsidiaries of the
Acquired Entity, all of which are set forth on Schedule 1.1(c) hereto.
"Affiliate" shall mean, with respect to any Person, (a) each other
Person that, directly or indirectly, owns or controls, whether beneficially or
as a trustee, guardian or other fiduciary, 10% or more of the Equity Interests
in such Person, (b) each other Person that controls, is controlled by or is
under common control with such Person, (c) each of such Person's officers,
directors, trustees, employees, partners and members and (d) the immediate
family members of each of such Person's officers, directors, trustees,
employees, partners, members and, if natural persons, Affiliates. For the
purpose of this definition, "control" of a Person shall mean the possession,
directly or indirectly, of the power to direct or cause the direction of its
management or policies, whether through the ownership of voting securities, by
contract or otherwise.
"Asset Sale Proceeds" shall mean proceeds from the sale of assets
pursuant to the exercise of Purchase\Put Options, without reduction for costs
incurred in effecting any such sale.
"Assignment and Assumption Agreements" shall mean an assignment and
assumption agreement in respect of the Contributed Assets between Buyer OP and
CAP Sellers, substantially in the form attached hereto as Exhibit A.
"Assumption Agreements" shall mean an assumption agreement in
respect of the Assumed Liabilities between Buyer OP and CAP Sellers,
substantially in the form attached hereto as Exhibit B.
2
<PAGE>
"Balance Sheet" shall mean the consolidated unaudited balance
sheets of AAPT with respect to its Operations at the Balance Sheet Date and the
separate unaudited balance sheets for each of the properties listed on Schedules
4.4(a)(2) at the Balance Sheet Date attached hereto as Schedule 1.1(d).
"Balance Sheet Date" shall mean June 30, 1998.
"Bell Atlantic Management Agreement" shall mean the Tower
Management Agreement, dated as of April 30, 1998, between Bell Atlantic
Properties, Inc. and Atlantic American Properties Management, Inc.
"Bell Atlantic Purchase Agreement" shall mean the Asset Purchase
Agreement, dated as of March 14, 1997, by and among AAPT (as assignee of
Atlantic American Properties, Inc.), Penn's Landing Marine Trade Center
Associates, 1760 Market Street Associates, Bell Atlantic Properties, Inc. and
Bell Atlantic Investment, Inc, as amended and modified from time to time through
the date hereof.
"Bills of Sale and Assignment" shall mean a bill of sale and
assignment in respect of the Contributed Assets, executed by CAP Sellers,
substantially in the form attached hereto as Exhibit C.
"Books and Records" shall mean, as to any Person, all books,
records, lists, ledgers, files, reports, plans, drawings and operating records
of every kind primarily relating to, or used in the conduct of, the Operations
of such Person and customers, suppliers or distributors of the Operations of
such Person, including, without limitation, (a) all disk or tape files,
printouts, runs or other computer-prepared information, (b) all product,
business and marketing plans, (c) all separate Tax Returns of such Person and
(d) all sales, maintenance and production records, but excluding Privileged
Materials.
"Business Day" shall mean any day other than Saturday or Sunday or
a day on which commercial banks are required or authorized to close in New York
City, NY.
"Buyer Operations" shall mean the activities of owning, operating,
leasing, managing, acquiring, developing, selling, disposing and transferring
its real property, as conducted by Buyers or their Affiliates on the date
hereof.
"Buyer Partnership Agreement" shall mean the Amended and Restated
Agreement of Limited Partnership of Buyer OP, as amended; provided that nothing
in this Agreement shall restrict the ability of Buyer OP or its partners to
amend the Buyer Partnership Agreement after the date hereof.
"Buyer Termination Date" shall mean the day which is one hundred
and twenty (120) days after the date hereof (provided that such date may be
extended by up to twenty (20) days at the option of Sellers if the occurrence of
force majeure events prevent a closing condition or conditions from being
satisfied by Sellers).
"Buyers" shall have the meaning set forth in the Recitals.
"CAP Financial Statements" shall mean (i) the separate unaudited
balance sheet for each of the properties listed on Schedule 4.4(a)(2) (other
than the Construction Property) as of December 31, 1997 and the related
unaudited statements of operations and cash flows for the year ending December
31, 1997 and (ii) the separate unaudited balance sheet for each of the
properties listed on Schedule 4.4(a)(2) (other than the
3
<PAGE>
Construction Property) as of June 30, 1998 and the related unaudited statements
of operations and cash flows for the six month period ending June 30, 1998.
"CAP Operations" shall mean the activities of owning, operating,
leasing, managing, acquiring, developing, selling, disposing and transferring
the Real Property set forth on Schedule 4.4(a)(2), as conducted by CAP Sellers
on the date hereof.
"CAP Sellers" shall mean, individually and collectively,
Commonwealth Atlantic Operation Properties, Inc., Commonwealth Atlantic Land IV,
Inc., Commonwealth Atlantic Land II, Inc., Commonwealth Atlantic Development,
Inc. and Commonwealth Atlantic Land Company.
"CAP Repaid Indebtedness" shall mean all of the Indebtedness of the
CAP Sellers set forth on Schedule 1.1(f) hereto to be repaid by Sellers on or
prior to the Closing Date as provided in Section 8.7.
"CAP Transferred Indebtedness" shall mean only the Indebtedness of
the CAP Sellers set forth on Schedule 1.1(e) hereto, together with the Cap
Sellers' proportionate share of the Indebtedness of the Partially Owned
Partnerships as set forth on Schedule 1.1(e) hereto.
"CAPI" shall mean Commonwealth Atlantic Properties Inc.
"Capital Lease" shall mean, with respect to any Person, any lease
of any property (whether real, personal or mixed) by such Person as lessee that,
in accordance with GAAP, either would be required to be classified and accounted
for as a capital lease on a balance sheet of such Person or otherwise be
disclosed as a capital lease in a note to such balance sheet.
"Capital Lease Obligation" shall mean, with respect to any Capital
Lease, the amount of the obligation of the lessee thereunder that, in accordance
with GAAP, would appear on a balance sheet of such lessee in respect of such
Capital Lease or otherwise be disclosed in a note to such balance sheet.
"Carved-Out Assets" shall mean the Buyer Carved-Out Assets, the
Sellers Carved-Out Assets or the Environmental Carved-Out Assets, as applicable.
"CCM Management Agreement" shall mean the CCM Management Agreement,
dated as of April 30, 1997, by and between Bell Atlantic Properties, Inc. and
Atlantic American Properties Management, Inc.
"Closing" shall mean the consummation of the transactions
contemplated hereby on the Closing Date.
"Closing Date" shall mean August 31, 1998 or, subject to Article 10
hereof, such other date as promptly thereafter as of which all of the conditions
set forth in Articles 7 and 8 shall have been satisfied or duly waived or, if
the parties hereto shall mutually agree upon a different date, the date upon
which they shall have mutually agreed upon in writing.
"COBRA" shall mean the Consolidated Omnibus Budget Reconciliation
Act of 1989, as amended.
4
<PAGE>
"Code" shall mean the Internal Revenue Code of 1986, as amended
(including, without limitation, any successor internal revenue law).
"Confidentiality Agreement" shall mean that certain confidentiality
letter agreement dated August 14, 1998, by and among Buyer Parent, Smith Barney,
Inc. and Lazard Freres Real Estate Investors, L.L.C.
"Consolidated Net Worth" shall mean, with respect to any Person as
of any date, the tangible net worth of such Person and its 80% or more owned
Subsidiaries as of such date.
"Contract" shall mean, with respect to any Person, any legally
binding oral or written agreement, arrangement, commitment, contract, lease,
license, instrument, obligation, commitment, purchase and sales order and other
executory commitment to which such Person and/or its Subsidiaries is a party and
which relates primarily to its Operations.
"Contributed Assets" shall mean all of CAP Sellers' right, title
and interest in and to all of the assets, properties, rights, contracts and
claims that are used or useful in the CAP Operations, in each case of every kind
and description, wherever located, whether tangible or intangible, real,
personal or mixed, as the same shall exist on the Closing Date (other than the
Excluded Assets), including, without limitation:
(a) all of its Real Property listed in Schedule 4.4(a)(2) and all
rights of CAP Sellers affecting such Real Property;
(b) all assets reflected on the Balance Sheet for the properties
listed on 4.4(a)(2) (other than the Excluded Assets pursuant to Section 2.3(f));
(c) all of CAP Sellers' Fixtures and Equipment relating to the Real
Property owned by the CAP Sellers;
(d) all intellectual property owned by CAP Sellers, or owned by
third parties and used by CAP Sellers, in connection with other Contributed
Assets or the CAP Operations;
(e) all Permits relating to the Real Property owned by the CAP
Sellers and held by any CAP Seller; and
(f) all rights under Contracts relating to the Real Property owned
by the CAP Sellers to which any CAP Seller is a party.
"Deeds" shall mean the customary form of deed for transfer of fee
simple title to the Real Property in the same form as obtained by Seller from
its grantor in the jurisdiction in which such Real Property is situated.
"Encumbrance" shall mean, with respect to any Person, any of the
following affecting the assets of such Person's business: pledge, option,
charge, easement, right-of-way, covenant, condition, encroachment, restriction,
conditional sales agreement or other encumbrance or other right of third
parties, whether voluntarily incurred or arising by operation of law, and
includes, without limitation, all encumbrances and any agreement to give any of
the foregoing in the future.
5
<PAGE>
"Environmental Laws" shall mean all applicable federal, state,
district and local laws, all rules or regulations promulgated thereunder, and
all orders, consent orders, judgments, notices, permits or demand letters
issued, promulgated or entered pursuant thereto, in each case, relating to
pollution or protection of the environment (including, without limitation,
ambient air, surface water, ground water or land). Environmental Laws shall
include, without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, the Toxic Substances Control
Act, as amended, the Hazardous Materials Transportation Act, as amended, the
Occupational Health and Safety Act, as amended, the Resource Conservation and
Recovery Act, as amended, the Federal Water Pollution Control Act, as amended,
the Safe Drinking Water Act, as amended, and the Clean Air Act, as amended.
"Equity Interests" shall mean all shares, options, warrants,
general or limited partnership interests, membership interests, participations
or other equivalents (regardless of how designated) of or in a corporation,
partnership, limited liability company or other entity whether voting or
nonvoting, including, without limitation, common stock, preferred stock or any
other "equity security" (as such term is defined in Rule 3a11-1 of the General
Rules and Regulations promulgated by the Securities and Exchange Commission
under the Exchange Act).
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended (including, without limitation, any successor legislation
thereto), and the rules and regulations promulgated thereunder.
"ERISA Affiliate" shall mean, with respect to any Person, any trade
or business (whether or not incorporated) under common control with such Person
or any of its Subsidiaries and which, together with such Person or such
Subsidiary, are treated as a single employer within the meaning of Section 4
14(b), (c), (m) or (o) of the Code.
"Estimated Closing AAPT Transferred Indebtedness" shall mean
$123,000,000, representing all principal, interest, fees, costs, expenses and
other amounts which would be due and owing with respect to the AAPT Transferred
Indebtedness assuming the Closing occurs on August 31, 1998.
"Estimated Closing CAP Transferred Indebtedness" shall mean
$112,900,000, representing all principal, interest, fees, costs, expenses and
other amounts which would be due and owing with respect to the CAP Transferred
Indebtedness assuming the Closing occurs on August 31, 1998.
"Exchange Act" shall mean the Securities and Exchange Act of 1934,
as amended (including, without limitation, any successor legislation thereto),
and the rules and regulations promulgated thereunder.
"Facilities" shall mean, with respect to any Transferring Party,
all Real Property and related facilities (or such portion of such Real Property
and related facilities) owned or leased by such Transferring Party from third
parties and used in the operation of the Operations of such Transferring Party,
as more fully identified on Schedules 4.4(a)(1) and 4.4(a)(2) attached hereto.
"Financial Product Agreement" shall mean any (a) interest rate,
currency, commodity or other swap, cap, floor, collar, insurance or similar
agreement or arrangement, (b) put, call, futures or forward contract, straddle,
commodities contract, option or warrant, (c) repurchase or reverse repurchase or
similar agreement or arrangement or (d) any other financial, derivative, hedge,
or speculative product, service or agreement, contract or arrangement.
6
<PAGE>
"Financial Statements" shall mean the (a) AAPT Financial
Statements, (b) the CAP Financial Statements and (c) the Partially Owned
Partnership Financial Statements.
"Fixtures and Equipment" shall mean, with respect to any Person,
all of the furniture, fixtures, shelving, display cases, refrigerators,
furnishings, machinery, equipment, spare parts, supplies, appliances, vehicles,
computer equipment (including all related hardware, software and other technical
equipment used in the operation of such Person's Operations) and other tangible
personal property used or useful in such Person's Operations in which the such
Person has any interest and which are located in, at or upon such Person's
material real property or facilities.
"GAAP" shall mean generally accepted accounting principles in the
United States of America, as in effect from time to time.
"Governmental Authority" shall mean any nation or government, any
state, county, local or other political subdivision thereof, and any agency,
department or other entity exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to government.
"Grande A Loan Agreement" shall mean the Loan Agreement, dated as
of June 30, 1997, between Goldman Sachs Mortgage Company and the borrowers named
therein, as amended from time to time through the date hereof.
"Grande A Properties" shall mean the Real Property set forth on
Schedule 5.10(a).
"Grande A Single Purpose Entity" shall mean a "Single Purpose
Entity" as defined in the Grande A Loan Agreement.
"Grande B Loan Agreement" shall mean the Loan Agreement, dated as
of June 30, 1997, between Goldman Sachs Mortgage Company and Commonwealth
Atlantic Operating Properties Inc., as amended from time to time through the
date hereof.
"Grande B Properties" shall mean the Real Property set forth on
Schedule 5.10(b).
"Grande B Single Purpose Entity" shall mean a "Single Purpose
Entity" as defined in the Grande B Loan Agreement.
"Grande Loan Documents" shall mean each of the Grande A Loan
Agreement and the Grande B Loan Agreement.
"Guaranteed Indebtedness" shall mean, as to any Person, any
obligation of such Person guaranteeing any Indebtedness, lease, dividend or
other obligation ("primary obligations") of any other Person (the "primary
obligor") in any manner including, without limitation, any obligation or
arrangement of such Person (a) to purchase or repurchase any such primary
obligation, (b) to advance or supply funds (i) for the purchase or payment of
any such primary obligation or (ii) to maintain working capital or equity
capital of the primary obligor or otherwise to maintain the net worth or
solvency or any balance sheet condition of the primary obligor, (c) to purchase
property, securities or services primarily for the purpose of assuring the owner
of any such primary obligation of the ability of the primary obligor to make
payment of such primary obligation or (d) to indemnify the owner of such primary
obligation against loss in respect thereof.
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<PAGE>
"Hazardous Substances" shall mean any substance, chemical compound,
product, solid, gas, liquid, byproduct, pollutant, contaminant or material which
is hazardous or toxic, and includes, without limitation, any such substance
classified or regulated as a "Hazardous Waste," "Hazardous Substance,"
"Extremely Hazardous Substance" or any pollutant regulated pursuant to any
applicable Environmental Law, including, but not limited to, the Comprehensive
Environmental Response, Compensation and Liability Act (42 U.S.C. section 9601
at seq.), as amended, the Resource Conservation and Recovery Act (42 U.S.C.
section 6901 et seq.), as amended, the Federal Water Pollution Control Act (33
U.S.C. section 1251 et seq.), as amended, the Clean Air Act (42 U.S.C. section
7401 et seq.), as amended, the Toxic Substances Control Act (15 U.S.C. section
2601 et seq.), as amended, the Occupational Safety and Health Act (29 U.S.C.
section 651 et seq.), as amended, the Hazardous Materials Transportation Act (49
U.S.C. section 1801 et seq), as amended, the Emergency Planning and Community
Right-to- Know Act (42 U.S.C. section 4321 et seq.), as amended, and the Safe
Drinking Water Act (42 U.S.C. section 300(f) et seq.), as amended.
"Indebtedness" of any Person shall mean all principal, interest,
fees, costs, expenses and other amounts which may be due and owing or which may
become due and owing with respect to (a) all indebtedness of such Person for
borrowed money or for the deferred purchase price of property (including,
without limitation, reimbursement and all other obligations with respect to
surety bonds, letters of credit and bankers acceptances, whether or not matured,
but not including obligations to trade creditors or obligations under motor
vehicle leases or installment contracts, in each case which are not in default
and which are incurred in the ordinary course of business and consistent with
prudent business and commercial practice), (b) all obligations evidenced by
notes, bonds, debentures or similar instruments, (c) all indebtedness created or
arising under any conditional sale or other title retention agreements (other
than in respect of motor vehicles and installment contracts of the type
described in the parenthetical in clause (a) above) with respect to property
acquired by such Person (even though the rights and remedies of the seller or
lender under such agreement in the event of default are limited to repossession
or sale of such property), (d) all Capital Lease Obligations, (e) all Guaranteed
Indebtedness, (f) all items referred to in clause (a), (b), (c), (d) or (e)
above secured by (or for which the holder thereof has an existing right,
contingent or otherwise, to be secured by) any Encumbrance upon or in property
(including, without limitation, accounts and contract rights) owned by such
Person, even though such Person has not assumed or become liable for the payment
of such item and (g) all liabilities, indebtedness and other obligations under
Financial Product Agreements.
"Interest Rate" shall mean the Prime Rate as published by The Wall
Street Journal on the date of payment.
"IRS" shall mean the United States Internal Revenue Service or any
successor agency.
"Lazard Entities" means LF Strategic Realty Investors, L.P., Lazard
Freres Real Estate Investors LLC and any Affiliates thereof.
"Leverage Ratio" shall mean, as of any date of determination, for
any Person, a percentage equal to (i) the aggregate amount of indebtedness of
such Person and its consolidated subsidiaries as of such date less the aggregate
amount of cash or cash equivalents held by or on behalf of such Person as
additional security for such indebtedness and its consolidated subsidiaries as
of such date, determined in accordance with GAAP, divided by (ii) the fair
market value of the assets of such Person and its consolidated subsidiaries as
of such date (which, in the case of any Person whose common equity securities
are publicly traded or redeemable for publicly traded securities, shall be
deemed to equal the sum of (A) the market value of the common equity securities
of such Person as of such date (which, in the case of common partnership
interests
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redeemable for publicly traded securities or held by a real estate investment
trust in an "UPREIT" structure, shall equal the closing price on the date of
determination of the number of such publicly traded securities for which such
partnership interests are redeemable or with respect to which such real estate
investment trust received such partnership interests) plus (B) the liquidation
preference of all outstanding preferred stock as of such date plus (C) the
aggregate amount of indebtedness of such Person and its consolidated
subsidiaries as of such date).
"Management Company Voting Stock" shall mean the voting common
stock of Atlantic American Properties Management II, Inc. not currently held by
the Acquired Entity or the Acquired Subsidiaries (which shares represent the
only remaining equity interest in Atlantic American Properties Management II,
Inc. not currently held by the Acquired Entity or the Acquired Subsidiaries).
"Material Adverse Effect" or "Material Adverse Change" shall mean
events, facts or circumstances which would reasonably be expected to result in a
material adverse change or effect, individually or in the aggregate, on the
operations, assets, liabilities, condition (financial or otherwise), results of
operations or cash flow of the applicable Person's Operations, taken as a whole
(provided that no Material Adverse Effect or Material Adverse Change shall occur
with respect to the Transferring Parties, the Acquired Equity Interests or the
Contributed Assets unless the adverse effect or change, individually or in the
aggregate, would reasonably be expected to result in Losses as to which
indemnity may be sought under the indemnity provisions hereunder (without regard
to the Sellers Indemnity Deductible or the Sellers Indemnity Cap) or a
diminution in value in an amount equal to or greater than $34.0 million).
"Material Contracts" shall mean, with respect to any Person, any
Contracts to which such Person or any of its Subsidiaries is a party and which
relates to its Operations which either (i) involve payments by or to any Person,
of more than $100,000 in cash or other property or services annually, (ii)
extend for a term of more than one year from the date hereof (in each case,
unless the same is cancelable on not more than thirty (30) days' notice without
fee, premium or penalty), (iii) relates to Transferred Indebtedness or Capital
Lease Obligations; provided, however, that Tenant Leases shall not be Material
Contracts or (iv) employment contracts or consulting agreements not terminable
at will without penalty or liability (other than consulting arrangements with
respect to construction at the Construction Property). Material Contracts shall
also include the partnership agreements and other charter documents of the
Partially Owned Partnerships.
"Operations" shall mean, with respect to the Acquired Entity or any
Acquired Subsidiary, the AAPT Operations; with respect to CAP Sellers, the CAP
Operations; and with respect to Buyers, the Buyer Operations.
"Partially Owned Partnership Financial Statements" shall mean (i)
the audited balance sheet of each Partially Owned Partnership as of December 31,
1997 and the related audited statements of operations and cash flows for each
such entity for the one year period ending December 31, 1997 and (ii) the
unaudited balance sheet of each partially Owned Partnership as of June 30, 1998
and the related unaudited statements of operations and cash flows for each such
entity for the six month period ending June 30, 1998.
"Partially Owned Partnerships" shall mean IR Northlight Associates
II and Interstate Center Associates.
"Permits" shall mean, with respect to any Person, all (a) licenses
held or otherwise used by such Person and its Subsidiaries in respect of its
Operations and (b) approvals, authorizations, consents,
9
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licenses, certificates of occupancy, zoning letters, orders and permits,
including environmental permits, of all Governmental Authorities required (i) in
connection with the operation of its Operations or (ii) to permit the continued
ownership, lease, use, operation, maintenance or development by such Person and
its Subsidiaries of any of its real property, or the operation of business
conducted thereon by such Person and its Subsidiaries in the manner currently
conducted.
"Permitted Encumbrances" shall mean, with respect to any
Transferring Party:
(i) any Encumbrances for Taxes (A) not yet due and payable
or (B) being contested in good faith by appropriate proceedings and, in the case
of contest, either paid by a Transferring Party or set forth on Schedule 4.17;
provided, that if such Encumbrances are set forth on Schedule 4.17, the Title
Company, at Closing, shall not take exception for the non-payment of the same
(e.g. Buyers shall be insured by the Title Company against losses by reason of
such contest);
(ii) statutory liens of landlords, Encumbrances of carriers,
warehousemen, mechanics and materialmen incurred in the ordinary course of
business, for sums not yet due and payable;
(iii) Encumbrances incurred or deposits made in the ordinary
course of business in connection with workers compensation, unemployment
insurance and other types of social security or to secure the performance of
tenders, statutory obligations, surety and appeal bonds, bids, leases,
government contracts, performance and return of money bonds and similar
obligations, such money bonds and similar obligations to be identified on
Schedule 4.17;
(iv) purchase money liens incurred in the ordinary course of
business and identified on Schedule 4.17;
(v) privileges, licenses or rights of public utilities and
public service companies, and recorded easements, recorded restrictions,
recorded agreements and similar recorded items, in each case which do not
materially interfere with the conduct of its Operations or with the use of
assets to be purchased pursuant hereto as presently conducted or used and do not
materially affect the value of such assets;
(vi) minor imperfections in title and minor encroachments,
if any, not material in amount and that individually or in the aggregate do not
materially interfere with the conduct of its Operations or with the use of the
assets to be purchased pursuant hereto as presently conducted or used and do not
materially affect the value of such assets;
(vii) the rights of tenants, subtenants, licensees or other
occupants or Persons under Tenant Leases or such Transferring Party's Material
Contracts;
(viii) Encumbrances arising under zoning, environmental,
municipal building and all other laws applicable to the ownership, use or
development of, or the right to maintain or operate the Real Property, provided
that none of the same enacted between the date hereof and the Closing Date shall
materially adversely affect the use of the Real Property for its current use;
(ix) all other Encumbrances, provided the Title Company
will, at the Closing, insure (at no additional cost) against collection of such
liens from Buyers or the Real Property;
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(x) possible lack or revocability of the right, if any, to
maintain or use or receive value for any vaults, marquees, stoops, awnings,
signs and sidewalk openings provided the same shall not prohibit or materially
adversely affect the use of any material portion of the existing improvements
for its current use;
(xi) Encumbrances arising under and from the 8260 Greensboro
Drive Letter and agreements entered into in accordance with Section 2.6 with
approval of Buyer; and
(xii) all matters appearing on Schedule 1.1(j).
"Person" shall mean any individual, sole proprietorship,
partnership, joint venture, trust, business trust, unincorporated organization,
association, corporation, limited liability company, institution, public benefit
corporation, entity or Governmental Authority.
"Personnel" shall mean, with respect to any Person, the directors,
trustees, officers and employees of such Person.
"Plan" shall mean, with respect to any Person, any "employee
benefit plan," as defined in Section 3(3) of ERISA, and any other employee
benefit arrangement or payroll practice, including, without limitation,
severance pay, sick leave, vacation pay, salary continuation for disability,
employment, consulting or other compensation agreement, retirement, pension,
deferred compensation, bonus, stock purchase, stock option, hospitalization,
medical insurance, life insurance or scholarship programs maintained by such
Person, any of its Subsidiaries or any of their ERISA Affiliates or to which
such Person, any of its Subsidiaries or any of their ERISA Affiliates
contributes or are or has been obligated to contribute, or under which such
Person, any of its Subsidiaries or any of their ERISA Affiliates may have any
liability or obligation (whether oral or written and whether or not terminated).
"Preferred Shares" shall mean the preferred shares of beneficial
interest of Buyer Parent having terms and conditions substantially as set forth
on Exhibit D hereto.
"Preferred Units" shall mean Class B Preferred Units of Buyer OP
having terms and conditions substantially as set forth on Exhibit E hereto.
"Privileged Materials" shall mean (i) internal valuations and
analyses prepared by any Lazard Entity; (ii) communications between any Lazard
Entity and Sellers and their legal counsel and all related attorney-client work
product; (iii) information not primarily related to the assets to be purchased
pursuant hereto or any Operations; and (iv) such other information that any
Lazard Entity or Seller determines, based on reasonable advice of counsel, may
be required to be reported to a regulatory agency if disclosed to Buyers, but
that may not be required to be reported to a regulatory agency if not disclosed
to Buyers. Any waiver by any Lazard Entity or Seller of any privilege or
confidentiality shall be effective only if in writing, shall apply only to the
specific material in question and shall not be deemed a waiver with respect to
any other Privileged Materials. Notwithstanding the foregoing, information
falling within clause (iv) shall not be treated as Privileged Materials if a
reasonable purchaser would consider such information material to its purchase
when viewed in the context of the other information provided to it by Sellers.
"Purchase\Put Options" shall mean any rights of first offer, rights
of first refusal, option rights and agreements to purchase, acquire or ground
lease any of the assets, or any interest therein, or to sell, dispose
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or transfer (put) any of the assets, or any interest therein, of any
Transferring Party (other than the Construction Property Option).
"Remaining Interest" shall mean the 100 shares of Series A
Preferred Stock in AAPT not currently held by Prometheus (which 100 shares
constitute the only remaining equity interest in AAPT not currently held by
Prometheus).
"Repaid Indebtedness" shall mean the AAPT Repaid Indebtedness and
the CAP Repaid Indebtedness to be repaid by Sellers on or prior to the Closing
Date as provided in Section 8.7.
"Representative" shall mean with respect to any Person, any
attorney, financial advisor, agent, consultant or other authorized
representative of such Person.
"RF Purchase Agreement" shall mean the Stock Purchase Agreement,
dated as of October 25, 1996, by and between Virginia Retirement System and LF
Strategic Realty Investors, L.P., as amended and modified from time to time
through the date hereof.
"Rubenstein Note" shall mean the $12.9 million note issued by The
Rubenstein Company, L.P. in favor of AAPOP 2, L.P. further described on Schedule
1.1(l).
"SEC" means the United States Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as amended
(or any successor legislation), and all rules and regulations promulgated
thereunder.
"Seller Termination Date" shall mean the day which is one hundred
and twenty (120) days after the date hereof (provided that such date may be
extended by up to twenty (20) days at the option of Buyers if the occurrence of
force majeure events prevent a closing condition or conditions from being
satisfied by Buyers).
"Sellers" shall have the meaning set forth in the Recitals.
"Subsidiary" shall mean, with respect to any Person, (a) any
corporation of which an aggregate of more than 50% of the outstanding Equity
Interests is at the time, directly or indirectly, owned legally or beneficially
by such Person and/or one or more Subsidiaries of such Person and (b) any
partnership, trust, limited liability company or other entity in which such
Person and/or one or more Subsidiaries of such Person shall have an interest
(whether in the form of voting or participation in profits or capital
contribution) of more than 50%.
"Tax Return" shall mean any report, return, statement or other
information required to be supplied to a taxing authority in connection with
Taxes.
"Taxes" shall mean any taxes, estimated taxes, withholding taxes,
assessments, levies, imposts, fees and other charges, including any interest,
penalties, additions to tax or additional amounts that may become payable in
respect thereof imposed by any federal, state, local or other governmental or
taxing authority, which taxes shall include, without limitation, any income
taxes, payroll and employee withholding taxes, unemployment insurance, social
security, sales and use taxes, value-added taxes, excise taxes, franchise
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taxes, gross receipts taxes, occupation taxes, real and personal property taxes,
stamp taxes, transfer taxes, real property transfer gains taxes, workers
compensation and other obligations of the same or of a similar nature.
"Tenant Leases" shall mean oral or written agreements, arrangements
or commitments relating to the leasing or occupancy of all or any portion of the
Real Property, each of which is listed on Schedule 4.4(i).
"Title Company" shall mean the National Title Service of
Philadelphia of Commonwealth Land Title Insurance Company: Attention M. Gordon
Daniels.
"Transaction Documents" shall mean all documents executed at
Closing, including, but not limited to, this Agreement, the Assignment and
Assumption Agreements, the Assumption Agreements and the Bills of Sale and
Assignment.
"Transferred Indebtedness" shall mean the AAPT Transferred
Indebtedness and the CAP Transferred Indebtedness.
"Transferring Party" shall mean each of the Acquired Entity, the
Acquired Subsidiaries and CAP Sellers.
"Treasury Regulations" shall mean the applicable regulations
promulgated under the Code.
"WARN" shall mean the Workers Adjustment and Retraining
Notification Act, as amended, and any other applicable federal, state or local
plant closing statutes.
1.2 Other Defined Terms. In addition to the terms defined in the
Recitals to this Agreement and Section 1.1, the following terms shall have the
meanings defined for such terms in the Sections set forth below:
Term Section
---- -------
"AAPT Indemnified Claim"....................... 9.2(a)(iii)
"AAPT Purchase Price".......................... 2.1(b)
"Accountants".................................. 10.19
"Actions"...................................... 4.11
"Additional Conditions"........................ 2.6
"Additional Environmental Testing"............. 6.2(b)
"Additional Rent".............................. 2.4(c)
"Aggregate Allocated Debt"..................... 11.1
"Assigned Amount".............................. 2.4(g)(i)
"Assumed Liabilities".......................... 2.10(a)
"Base Building"................................ 2.6
"Basic Rent"................................... 2.4(c)
"Buyer Carved-Out Assets"...................... 8.3
"Buyer Disclosure Schedule".................... Article 5 Preamble
"Buyer Financial Statements"................... 5.15
"Buyer Indemnified Claim"...................... 9.2(a)(iii)
"Buyer Indemnified Party"...................... 9.2(a)(iii)
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"Buyer Indemnity Cap".......................... 9.2(c)
"Buyer Indemnity Deductible"................... 9.2(c)
"Buyer Missing Consents"....................... 8.3
"Buyer Personnel".............................. 10.16
"Buyers' Auditor".............................. 2.8
"CAP Consideration"............................ 2.2(b)
"CAP Indemnified Claim"........................ 9.2(a)(iii)
"CAP Sellers Contribution Obligation".......... 11.2(a)
"Cap/Ex Requirements".......................... 2.4(g)(i)
"Capital Interest"............................. 4.17(g)
"Combined Allocated Debt Amount"............... 11.1
"Consolidation Transaction".................... 11.3(d)
"Construction Property"........................ 2.6
"Construction Property Option"................. 2.6
"Construction Property Purchase Agreement"..... 2.6
"Construction Property Purchase Price"......... 2.6
"Contribution"................................. 2.2(a)
"Covered Loan"................................. 11.2(a)
"Dealer Property".............................. 4.17(g)
"Earned Amount"................................ 2.6
"Environmental Carved-Out Assets".............. 6.2(b)
"Environmental Matters"........................ 4.13
"Escrow Agent"................................. 2.12
"Escrow Agreement"............................. 2.12
"Escrow Deposit"............................... 2.12
"Estimated Apportionments"..................... 2.7
"Exchanged Property"........................... 11.3(c)
"Excluded Assets".............................. 2.3
"Excluded Liabilities"......................... 2.11(a)
"Grande B Loan"................................ 11.2(c)
"Independent Auditor".......................... 2.8
"Indemnified Tenant"........................... 8.8
"Insurance Proceeds"........................... 6.7
"Insured Events"............................... 9.8
"knowledge".................................... 10.16
"Laws"......................................... 4.13
"Leasehold Estate"............................. 4.4(a)
"Leasing Costs"................................ 2.4(g)(i)
"Lessee"....................................... 4.17(1)(i)
"Letter"....................................... 10.19
"Lockout Expiration Date"...................... 11.2(b)
"Losses"....................................... 9.2(a)
"Management Lease"............................. 4.22
"Minimum Coverage Amount"...................... 11.2(b)
"Non REIT Services"............................ 4.17(1)(iv)
"Partnership Account Balance".................. 2.5(a)
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"Pre-Closing Partial Period"................... 4.1(i)
"Percentage Rents"............................. 2.4(c)
"Post-Closing Audit"........................... 2.8
"Real Property"................................ 4.4(a)
"Real Property Leases"......................... 4.4(a)
"Required Form"................................ 8.8
"Savings Plan"................................. 9.7(c)
"Seller Disclosure Schedule"................... Article 4 Preamble
"Seller Personnel"............................. 10.16
"Sellers Carved-Out Assets".................... 7.4
"Sellers Environmental Consent"................ 6.2(b)
"Sellers Indemnified Claim".................... 9.2(a)(i)
"Sellers Indemnified Party".................... 9.2(a)(i)
"Sellers Indemnity CAP"........................ 9.2(c)
"Sellers Indemnity Deductible"................. 9.2(c)
"Sellers Missing Consents"..................... 7.4
"Specific Projects"............................ 4.1(e)
"Specified Items".............................. 2.4(g)(i)
"Specified Projects"........................... 4.1(e)
"Successor Partnership"........................ 11.3(d)
"Temporary Investment of New Capital".......... 4.17(g)
"Tenant Charges"............................... 2.4(b)(ii)
"Tenant Claim"................................. 4.4(i)
"Transparent Subsidiaries"..................... 11.2(a)
"Use Permit"................................... 2.6
"Utilities".................................... 4.4(j)
"Written Statements"........................... 4.17(v)
1.3 References to Agreement. References to this "Agreement", including
all amendments and modifications to this "Agreement," shall mean this Agreement
and mutually agreed supplements hereto and any exhibits or schedules to any of
the foregoing, and shall refer to this Agreement as the same may be in effect at
the time such reference becomes operative. The words "herein," "hereof" and
"hereunder" and other words of similar import refer to this Agreement as a
whole, including the exhibits and schedules hereto, as the same may from time to
time be amended, modified, restated or supplemented, and not to any particular
article, section, subsection or clause contained in this Agreement. Wherever
from the context it appears appropriate, each term stated in either the singular
or plural shall include the singular and the plural, and pronouns stated in the
masculine, feminine or neuter gender shall include the masculine, the feminine
and the neuter.
1.4 Accounting and Other Terms. Except as specifically provided in the
Financial Statements and the Buyer Financial Statements, any accounting term
used in this Agreement shall have, unless otherwise specifically provided
herein, the meaning customarily given such term in accordance with GAAP, and all
financial computations hereunder shall be computed, unless otherwise
specifically provided herein, in accordance with GAAP consistently applied. That
certain terms or computations are explicitly modified by the phrase "in
accordance with GAAP" shall in no way be construed to limit the foregoing.
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1.5 Materiality. The parties hereby acknowledge that the definition of
the terms "Material Adverse Effect" and "Material Adverse Change," and the
various other dollar thresholds included in Articles 4, 5 and 9 of this
Agreement, are not indicative of, do not reflect, and shall not be used to
interpret, the parties' understanding of the meaning of the terms "material" and
"material adverse effect," and other like terms, as used in this Agreement.
ARTICLE 2
PURCHASE AND SALE AND CONTRIBUTION OF
ACQUIRED EQUITY INTERESTS AND CONTRIBUTED ASSETS
2.1 Purchase and Sale of Acquired Equity Interests.
(a) Transfer of Acquired Equity Interests. Upon the terms and
subject to the conditions contained herein, on the Closing Date, AAPT Seller
shall sell, convey, transfer, assign and deliver to Buyers and Buyers shall
purchase and accept from AAPT Seller (subject to allocation between Buyer Parent
and Buyer OP as Buyers may determine), all of AAPT Seller's right, title and
interest in and to the Acquired Equity Interests owned by it, excluding only the
Excluded Assets, subject to the AAPT Transferred Indebtedness and Permitted
Encumbrances.
(b) Consideration for Acquired Equity Interests. Upon the terms and
subject to the conditions contained herein, as consideration for the purchase of
the Acquired Equity Interests, on the Closing Date, Buyers shall pay to AAPT
Seller $247,000,000 in cash, plus 750,000 shares of Preferred Shares having an
aggregate liquidation preference of $37,500,000, (A) increased or reduced, as
applicable, by the (i) Estimated Apportionments relating to the Acquired Entity
as provided in Section 2.4 and (ii) adjustments for Carved-Out Assets, if any,
relating to the Acquired Entity as provided in Sections 6.2(b), 7.4 and 8.3 and
(B) (i) increased, dollar for dollar, by the amount by which the AAPT
Transferred Indebtedness outstanding on the Closing Date is less than the
Estimated Closing AAPT Transferred Indebtedness and (ii) decreased, dollar for
dollar, by the amounts by which the AAPT Transferred Indebtedness outstanding on
the Closing Date is greater than the Estimated Closing AAPT Transferred
Indebtedness (collectively, after taking into account such reductions, increases
and adjustments, the "AAPT Purchase Price"). The parties acknowledge that the
AAPT Purchase Price shall also be adjusted in accordance with the 7350 Tilghman
Drive Letter. The parties further acknowledge that $50,000 of the AAPT Purchase
Price shall be paid to the holders of the Remaining Interests in exchange for
their sale of the Remaining Interests to designees of Buyers. As soon as
practical after the Closing Date, Buyers shall remit to AAPT Seller the
aggregate amount of any cash or other Excluded Assets held by the Acquired
Entity and the Acquired Subsidiaries on the Closing Date (and not distributed by
the Acquired Entity or the Acquired Subsidiaries prior to the Closing), and any
such remittance shall be treated by the parties as an adjustment to the purchase
price. The Escrow Deposit and any accrued interest thereon shall be applied
toward the AAPT Purchase Price in accordance with Section 2.12.
(c) Delivery of AAPT Purchase Price. Upon the terms and subject to
the conditions herein set forth, at the Closing, Buyers shall pay the AAPT
Purchase Price by (A) transferring by wire transfer immediately available funds
in an amount equal to the cash portion of the AAPT Purchase Price to AAPT
Seller's accounts (which AAPT Seller shall designate by written notice delivered
to Buyers at least one Business Day prior to the Closing Date) and (B)
delivering certificates evidencing the Preferred Shares.
2.2 Contribution of Contributed Assets.
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(a) Conveyance of Contributed Assets. Upon the terms and subject to
the conditions set forth herein, on the Closing Date, each CAP Seller shall
contribute and convey or cause to be contributed and conveyed, to Buyer OP, and
Buyer OP shall accept all right, title, and interest in and to the Contributed
Assets, in each case excluding the Excluded Assets and the Excluded Liabilities,
subject in each case to the CAP Transferred Indebtedness and Permitted
Encumbrances (the transaction described in this Section 2.2(a), the
"Contribution").
(b) Consideration for Conveyance of Contributed Assets. Upon the
terms and subject to the conditions contained herein, as consideration for the
conveyance of the Contributed Assets on the Closing Date, Buyer OP shall (A)
deliver to CAP Sellers 1,950,000 Preferred Units having an aggregate liquidation
preference of $97,500,000, (X) increased or reduced, as applicable, by the (i)
Estimated Apportionments relating to the Contributed Assets as provided in
Section 2.4 and (ii) adjustments for Carved-Out Assets, if any, relating to the
Contributed Assets as provided in Sections 6.2(b), 7.4, 8.3 and the 8260
Greensboro Drive Letter and (Y) (i) increased, dollar for dollar, by the amount
by which the CAP Transferred Indebtedness outstanding on the Closing Date is
less than Estimated Closing CAP Transferred Indebtedness and (ii) decreased,
dollar for dollar, by the amounts by which the CAP Transferred Indebtedness
outstanding on the Closing Date is greater than Estimated Closing CAP
Transferred Indebtedness (collectively, after taking into account such
reductions, increases and adjustments, the "CAP Consideration") and (B) assume
all of the Assumed Liabilities as set forth in Section 2.10(a).
(c) Delivery of CAP Consideration. Upon the terms and subject to
the conditions herein set forth, at the Closing, Buyer OP shall deliver to CAP
Sellers certificates evidencing Preferred Units in an amount equal to the CAP
Consideration.
2.3 Excluded Assets. Notwithstanding anything to the contrary herein,
Sellers are not selling, conveying, transferring, assigning, contributing or
delivering to Buyers, and Buyers are not purchasing or accepting from Sellers,
any Transferring Party's right, title and interest in and to the following
assets of any Transferring Party (the properties, assets and rights excluded
by this Section 2.3 constitute "Excluded Assets"):
(a) The direct or indirect Equity Interests of CAPI and AAPT in
Prometheus Mid-Atlantic Investors Trust, Prometheus Investment Holding Corp.,
The Rubenstein Company, L.P. and Commerce Square Partners-Philadelphia Plaza,
L.P.;
(b) The Rubenstein Note;
(c) The direct or indirect Equity Interests of AAPT in Atlantic
American Properties Management, Inc.;
(d) Other amounts and assets set forth on Schedule 2.3(d);
(e) The Bell Atlantic Management Agreement and the CCM Management
Agreement; and
(f) Cash and, to the extent provided in Section 2.4, other current
assets held by any Transferring Party (other than (i) cash or current assets
held by the Partially Owned Partnerships for which Seller receives a credit on
the Closing Date as provided in Section 2.5, (ii) Asset Sale Proceeds and (iii)
Insurance Proceeds).
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Prior to the Closing Date, Sellers will distribute the Excluded Assets to
Sellers or Affiliates of Sellers (other than the Acquired Entity and the
Acquired Subsidiaries); provided, in the event the Acquired Entity or any
Acquired Subsidiary owns any Excluded Assets on the Closing Date, Buyers shall
use commercially reasonable efforts to transfer, at Seller's expense, such
Excluded Assets to Sellers or an Affiliate of Sellers, as Sellers shall direct
in their sole discretion, as soon as practicable following the Closing.
2.4 Apportionments. For each Real Property which is conveyed or
contributed to Buyers pursuant to the transfer of the Acquired Equity
Interests and the Contributed Assets (other than such Real Property held by
the Partially Owned Partnerships which shall be governed by Section 2.5), the
following items shall be adjusted and apportioned between Buyers and Sellers
as follows:
(a) Real Property Taxes. All real property Taxes, charges and
assessments affecting such Real Property shall be prorated on a per diem basis
as of 11:59 p.m. as of the day preceding the Closing Date, disregarding any
discount or penalty for early or late payment and on the basis of the fiscal
year of the authority levying the same. If any of the same have not been finally
assessed, as of the Closing Date, for the current fiscal year of the taxing
authority, then the same shall be adjusted at Closing based upon the most
recently issued bills therefor and shall be readjusted in connection with the
Post-Closing Audit. Following the Closing, (i) if any Seller actually receives
any refund on account of such real property Taxes, charges and assessments paid
by any Seller, the Acquired Entity or any Acquired Subsidiary (other than a
Partially Owned Partnership), such Seller shall promptly return to Buyers any
portion of such refund which would be due tenants pursuant to the applicable
Tenant Leases (provided Buyers, in turn, return to such Seller any portion of
the refund not actually paid to such tenants); and (ii) if Buyers actually
receive any refund on account of such real property Taxes, charges and
assessments paid by any Seller, the Acquired Entity or any Acquired Subsidiary
(other than a Partially Owned Partnership), Buyers shall promptly return to
Seller any portion of such refund which is either not due to tenants pursuant to
the applicable Tenant Leases or is not actually paid to such tenants.
(b) Utilities: Operating Expenses: Miscellaneous Expenses.
(i) Charges for (x) water, electricity, sewer rental, gas,
telephone and all other utilities and (y) operating expenses (including sales
and use taxes) associated with the operation of the Real Properties of the type
specified on Schedule 2.4(b)(i) shall be prorated on a per diem basis as of
11:59 p.m. on the day preceding the Closing Date, disregarding any discount or
penalty for early or late payment and, if applicable, on the basis of the fiscal
year or billing period of the authority, utility or other person levying or
charging for the same; provided, however, that operating expenses (including
sales and use taxes) of the type specified on Schedule 2.4(b)(i) referred to in
clause (y) above shall be allocated over the period with regard to which such
operating expenses of the type specified on Schedule 2.4(b)(i) are incurred
notwithstanding the date on which such amounts become payable. If the
consumption of any of the foregoing utility services is measured by meters, then
in lieu of apportionment as aforesaid Sellers shall, not earlier than the day
preceding the Closing Date, obtain a reading of each such meter and Sellers
shall pay all charges thereunder through the date of the meter readings. If
there is no such meter or if the bills for any of the foregoing have not been
issued prior to the Closing Date, the charges shall be adjusted at the Closing
on the basis of the charges for the prior period for which bills were issued and
shall be readjusted in connection with the Post-Closing Audit. If, following the
Closing, (i) any Seller actually receives any refund on account of such utility
charges, operating expenses of the type specified on Schedule 2.4(b)(i) paid by
any Seller, the Acquired Entity or any Acquired Subsidiary (other than a
Partially Owned Partnership), such Seller shall promptly return to Buyers any
portion of such refund which would be due tenants pursuant to the applicable
Tenant Leases (provided Buyers, in turn, return to such Seller any portion of
the refund not actually paid to such tenants), and (ii) Buyers actually
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receive any refund on account of utility charges, operating expenses of the type
specified on Schedule 2.4(b)(i) paid by any Seller, the Acquired Entity or any
Acquired Subsidiary (other than a Partially Owned Partnership) prior to the
Closing, Buyers shall promptly return to Seller any portion of such refund which
is either not due to tenants pursuant to the applicable Tenant Leases or is not
actually paid to such tenants.
(ii) [Intentionally Deleted.]
(iii) Sellers shall receive a credit at Closing for any
deposits, reserves or escrow accounts funded by any Seller, the Acquired Entity
or any Acquired Subsidiary (to any of the lenders for reserve requirements, cash
collateral accounts and deferred maintenance accounts and the like, or to
utility service providers or otherwise), including, without limitation, those
set forth on Schedule 2.4(b)(iii) (unless such amounts are distributed to
Sellers on or prior to Closing, in which case all such distributed deposits,
reserves and escrow accounts shall constitute Excluded Assets). Buyers shall
accordingly arrange for the replacement of any such deposits, reserves or escrow
accounts which are distributed to Sellers prior to Closing and shall open
accounts in Buyers' name (where applicable) on or before the Closing Date. Buyer
agrees to cause all letters of credit posted by or on behalf of Sellers, the
Acquired Entity or any Acquired Subsidiary, including those on Schedule
2.4(b)(iii), to be replaced as of the Closing, and to cause Sellers to be
released from obligations under any such letters of credit (or, if Sellers are
not released from any of such letters of credit Buyers shall indemnify Sellers
for Losses incurred in connection therewith as provided in Section 9.2.)
(iv) Miscellaneous prepaid expenses and other current assets
associated with the operation of the Transferring Parties' Operations being
assumed by Buyers and not otherwise apportioned pursuant to this Section 2.4 of
the type specified on Schedule 2.4(b)(iv) shall be prorated on a per diem basis
as of 11:59 p.m. on the day preceding the Closing Date.
(c) Rents. All Basic Rents, Additional Rents and Percentage Rents
shall be deemed to be applied first to current rental periods and secondly to
satisfy rental obligations arising from past rental periods. As used herein the
term "Basic Rents" shall mean all rents and charges payable by the tenants under
the Tenant Leases, including, without limitation, occupancy rents, parking
revenues and all other revenues derived from ownership of the Real Properties,
but excluding Additional Rents and Percentage Rents. As used herein the term
"Additional Rents" shall mean any amounts payable by the tenants under the
Tenant Leases pursuant to any provisions of such leases relating to escalation
and pass-through of operating expenses and real property Taxes and any
provisions therein in respect of tenant escrows and reimbursements, which
amounts shall be allocated over the period with regard to which such operating
expenses or real property Taxes are incurred notwithstanding the date on which
such amounts become payable. As used herein the term "Percentage Rents" shall
mean any amounts payable by the tenants under the Tenant Leases pursuant to any
provisions of such leases relating to or based upon gross receipts, sales,
revenues, profits or other performance-based measures.
(i) Basic Rents shall be apportioned as follows:
(A) Sellers shall be entitled to all Basic Rents payable
in accordance with the terms of all Tenant Leases with respect to periods ending
on or prior to the Closing Date (without regard to contractual increases in such
Basic Rents occurring after the Closing Date). Buyers shall be entitled to all
Basic Rents payable in accordance with the terms of all Tenant Leases with
respect to periods ending after the Closing Date.
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(B) If Buyers shall receive Basic Rents under any Tenant
Lease after the Closing Date which are in arrears as of the Closing Date, the
same shall be applied as follows:
(a) first, to Basic Rents due for the calendar month in
which the Closing occurs, to be apportioned through the date prior to the
Closing Date between Sellers and Buyers in proportion to their respective
periods of ownership of the Real Property for such month so that the Basic
Rents payable for the period prior to the Closing Date shall be paid to
Sellers, and from and after the Closing Date for the account of Buyers;
(b) next, to Basic Rents then due and unpaid for the
calendar month(s) after the month in which the Closing occurs, to be
received and retained for the account of Buyers; and
(c) last, to Basic Rents due and unpaid for the calendar
month(s) preceding the calendar month in which the Closing occurs, to be
paid to Sellers.
The parties agree to remit forthwith the amount of such past due Basic Rents
which is collected in accordance with the foregoing. On the Closing Date,
Sellers shall (x) furnish or cause to be furnished to Buyers a statement of
prepaid and uncollected Basic Rents under the Tenant Leases, and (y) credit to
Buyers any such Basic Rents collected by Sellers which pertain to any period
of time on or after the Closing Date. On or before the fifteenth (15th) day of
each calendar month to occur in the period commencing with the calendar month
immediately following the Closing Date and ending with the calendar month that
ends on or immediately after the date that is six months from the Closing
Date, both inclusive, Buyers shall render an accounting to Sellers with
respect to Basic Rents allocable to any extent to the period prior to the
Closing Date. If Sellers shall receive Basic Rents under any Tenant Lease
after the Closing Date, the same shall be applied by Sellers in the same order
of priority as aforesaid.
(ii) Additional Rents and Percentage Rents shall be
apportioned as follows: subject to the provisions of the last sentence of this
Section 2.4(c)(ii), at the end of the fiscal year with respect to which any
Additional Rent or Percentage Rent is payable under a Tenant Lease, there shall
be a calculation of the amount of each of such Additional Rents and Percentage
Rents to which Sellers and Buyers shall be entitled pro rata, with Sellers being
entitled to an amount equal to the amount of Additional Rent or Percentage Rent,
as applicable, multiplied by a fraction, expressed as a percentage, the
numerator of which is the number of days in said fiscal year with respect to
which such Additional Rent or Percentage Rent, as applicable, under such Tenant
Lease was payable prior to the Closing Date, and the denominator of which is the
total number of days in said fiscal year during which such Additional Rent or
Percentage Rent, as applicable, under such Tenant Lease was payable, and Buyers
shall be entitled to the remaining portion of such Additional Rent or Percentage
Rent, as applicable, provided that there shall be deducted from Sellers' and
Buyers' shares their respective proportionate share of any reasonable attorneys'
fees and costs and expenses of collection thereof actually incurred. If either
party shall have received Additional Rents or Percentage Rents with respect to
any Tenant Lease for such fiscal year in excess of the amount to which it is
entitled pursuant hereto, such excess shall be paid by the party not entitled
thereto to the other party promptly after such calculation to be applied as
aforesaid. Anything to the contrary contained in this Section 2.4(c)(ii)
notwithstanding, with respect to tenants which are in arrears in the payment of
Additional Rent or Percentage Rent under Tenant Leases as of the Closing Date,
the provisions of Section 2.4(c)(i) hereof shall apply.
(iii) Buyers agree to use commercially reasonable efforts to
collect Basic Rents, Additional Rents and Percentage Rents attributable to
pre-Closing periods (it being understood and agreed that,
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subject to the terms of this Section 2.4(c), such rent receivables relating to
pre-Closing periods are Excluded Assets).
(d) Security Deposits. Sellers shall deliver to Buyers at Closing
in cash or by certified check without adjustment to the AAPT Purchase Price or
the CAP Consideration, the amounts of all security deposits which have been
received from tenants under the Tenant Leases to the extent not applied in
accordance with the terms thereof, together with interest thereon through the
Closing Date which is then due to or has accrued for the benefit of any tenant
under the provisions of any Tenant Lease or applicable law (to the extent any
tenant security deposit is in the form of a letter of credit, Sellers shall
assign such letter of credit or, if not assignable, cause the tenant to amend
such letter of credit so that it runs in favor of Buyers and shall deliver such
letters of credit to Buyers at the Closing (in the event that such letters of
credit are not in Sellers' possession on or by the Closing Date, Sellers shall
in lieu of delivering such letters of credit either deliver to Buyers cash in
the face amount thereof or indemnify Buyers for an amount equal to the face
amount thereof)). A list of all such letters of credit is contained on Schedule
2.4(d).
(e) Ground Leases. All current rents and other current charges
under any ground leases shall be prorated on a per diem basis as of 11:59 p.m.
on the day preceding the Closing Date.
(f) Net Leases. In respect of any Tenant Leases which are "net
leases," Basic Rents shall be apportioned as aforesaid, but there shall be no
separate apportionment of those items of Additional Rents (such as real property
Taxes, utilities and insurance premiums) to the extent the same are payable by
the respective tenants thereunder directly to the collecting authority or
entity.
(g) Leasing Costs/Capital Expenditures/Miscellaneous Items.
(i) All brokerage fees, leasing commissions, tenant
improvements and capital improvements (including free rent and reduced rent) due
and payable with respect to the Tenant Leases (collectively, "Leasing Costs"),
together with capital expenditure requirements with respect to the Real Property
("Cap/Ex Requirements"), including all Leasing Costs and Cap/Ex Requirements set
forth on Schedule 2.4(g)(i), shall be the obligation of Buyers (except as set
forth in subsection (ii) below), and there shall be no proration or adjustment
to the Purchase Price on account of such Leasing Costs and Cap/Ex Requirements,
except as provided below in this subsection (i). Schedule 2.4(g)(i) also sets
forth certain items ("Specified Items") representing Leasing Costs and Cap/Ex
Requirements, together with an assigned amount with respect to such items set
forth opposite such item ("Assigned Amount"), and Sellers' estimate of the
amount funded by Sellers, the Acquired Entity or the Acquired Subsidiaries with
respect to such items through the date hereof. Sellers shall receive a
dollar-for-dollar increase to the Purchase Price in an amount equal to the
amount actually paid by Sellers, the Acquired Entity or the Acquired
Subsidiaries in accordance with the provisions of Article 6 on or prior to
Closing Date (whether or not paid prior to the date hereof) with respect to the
Specified Items, other than Items 207, 208, 227, 228 on Schedule 2.4(g)(i),
relating to 7350 Tilghman Drive which is covered by the 7350 Tilghman Drive
Letter (such amounts not to exceed the Assigned Amount). In addition, Sellers
shall receive a dollar-for-dollar increase to the Purchase Price for any amounts
paid by Sellers, the Acquired Entity or the Acquired Subsidiaries in accordance
with the provisions of Article 6 for other Leasing Costs and Cap/Ex Requirements
after the date hereof but prior to Closing Date (it being understood that
ordinary course capital expenditures made with respect to Tenant Leases which
expenditures are reimbursable charges from Tenants shall be governed and
prorated in accordance with Section 2.4(c) above (and not this Section 2.4(g)).
The parties acknowledge that certain prorations with respect to 7350 Tilghman
Drive are set forth in the 7350 Tilghman Drive Letter.
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(ii) Notwithstanding anything to the contrary set forth in
this Agreement: (A) Buyer agrees and acknowledges that all representations and
warranties relating to Leasing Costs and Cap/Ex Requirements contained herein
(whether contained in Section 4.4(i) or otherwise) are made as to Sellers'
knowledge; and (B) Buyer shall be able to seek indemnity for any claims relating
to Leasing Costs or Cap/Ex Requirements (subject to the Sellers' Indemnity
Deductible and the Sellers' Indemnity Cap) if Buyer demonstrates both that (x)
there has been a breach by Sellers of any representation and warranty relating
to Leasing Costs or Cap/Ex Requirements contained herein and (y) such Leasing
Costs or Cap/Ex Requirements which gave rise to such breach were not expressly
set forth in the written Tenant Leases or written amendments thereto provided to
Buyer prior to the date hereof.
The parties to this Agreement hereby acknowledge that all amounts paid and
received pursuant to this Section 2.4 are adjustments to the AAPT Purchase
Price and the CAP Consideration, as applicable.
2.5 Partially Owned Partnership Interests.
(a) With respect to the Real Property held by the Partially Owned
Partnerships, (i) the cash held by each Partially Owned Partnership as of the
Closing Date shall be netted against accrued and unpaid expenses of such
Partially Owned Partnership as of the Closing Date (the "Partnership Account
Balance"), and (ii) the apportionments described in Section 2.4 shall be
calculated for the entire Real Property, and the net sum of such calculation (A)
if in favor of Buyers, shall be subtracted from the Partnership Account Balance,
or (B) if in favor of Sellers, shall be added to the Partnership Account
Balance; and the result of the foregoing calculation shall be multiplied by the
percentage interest in residual net sale proceeds to which Sellers are entitled
under the Partially Owned Partnerships' partnership agreement, which percentage
interests are identified on Schedule 4.18. The adjustment set forth in the
preceding sentence shall be estimated as of the Closing, and the AAPT Purchase
Price and the CAP Consideration adjusted according to such estimate. Final
adjustments shall be made at the time and in the manner set forth in Sections
2.4 and 2.8.
(b) With respect to the assignments of partnership interests
themselves, as between the Sellers, the Acquired Entity or the applicable
Acquired Subsidiary and Buyers, all items of partnership income, gain, loss,
deduction or credit shall be allocated between them, as of the Closing Date, by
an interim closing of the books of the partnership as of that date.
2.6 Purchase Option for Construction Property. CAP Sellers hereby grant
to Buyer Parent an option (the "Construction Property Option") to purchase the
Real Property set forth on Schedule 2.6 (the "Construction Property"). The
Construction Purchase Option shall be exercisable as provided in this Section
2.6 on or before March 31, 1999. The purchase price for the Construction
Property shall be $68,000,000 (the "Construction Property Purchase Price")
subject only to customary prorations and adjustments (i.e. similar in scope and
substance to the prorations and adjustments set forth in Section 2.4) and free
of all Encumbrances other than Permitted Encumbrances on the Construction
Property. From and after the Closing Date, Seller shall notify Buyer Parent of
the time and place of all monthly construction status meetings held with respect
to the base building at the Construction Property ("Base Building") and all
tenant work to be performed by Seller therein, and Buyer Parent shall have the
option, at its election, of having a representative of Buyer Parent who has
knowledge of construction matters participate in all such monthly construction
meetings. Upon the closing of the purchase of the Construction Property, Buyer
Parent shall receive a credit against the Construction Property Purchase Price
in an amount equal to the Earned Amount to such closing. The "Earned Amount"
shall mean an amount equal to (i) $5,000 multiplied by (ii) a fraction,
expressed as a percentage, the numerator of which is the number of days in the
period commencing on the Closing Date and ending on the
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date when such amount is payable hereunder and the denominator of which is 30,
in payment of a portion of the costs, expenses and fees expended by or on behalf
of Buyer Parent in performing its due diligence. If Buyer Parent fails to
exercise the Construction Property Option by March 31, 1999, then the Earned
Amount shall be paid to Buyer Parent to the date of such election by Buyer
Parent. If Buyer Parent exercises the Construction Property Option by March 31,
1999, the parties shall enter into a purchase agreement in a form to be agreed
upon on or before the Closing Date (the "Construction Property Purchase
Agreement") with (A) a provision for the payment by Buyer Parent of a $3.4
million deposit (the "Construction Property Deposit") and survival of all
representations and warranties in such purchase agreement for a one year period
following the closing of such transaction (provided that all indemnification
obligations of CAP Sellers with respect to the Construction Property shall be
subject to the same (and not a separate) Sellers Indemnity Deductible and
Sellers Indemnity CAP, and shall be subject to a Material Adverse Effect closing
condition which shall be the same as set forth in the definition of "Material
Adverse Effect" herein, except that $3.5 million shall be substituted for $34.0
million) in addition to the Additional Conditions and (B) other terms and
conditions that are substantially the same as the terms in this Agreement,
including, without limitation, a provision for the closing deliveries specified
in Section 3.2(a), termination rights substantially the same as those in Article
10, tenant estoppel certificates, and the following closing conditions: (a) CAP
Sellers shall deliver (i) Deeds and Bills of Sale and Assignment and such other
bills of sale, endorsements and other good and sufficient instruments of sale,
conveyance and transfer in connection with the Construction Property, (ii)
"as-built" sealed drawings from the architect for the Construction Property, and
(iii) an architect's certificate (in form and substance required by the
architects contract or if no such certificate is required, then a certificate in
form and substance reasonably satisfactory to Buyer Parent) confirming that the
Construction Property has been completed substantially in accordance with the
plans and specifications, (b) an unconditional non-residential use permit
subject only to such conditions that do not relate to the physical construction
of the Base Building or the tenant work which it is responsible for as stated
above or any fees, costs or expenses arising out of such work or failure to
perform same, relating to the Construction Property from Fairfax County,
Virginia (the "Use Permit"), as required under the Fairfax County Zoning Code
for both completion of the Base Building and certain tenant space in the Base
Building under which the landlord is responsible for completion of tenant
improvements therein, (c) and final lien releases and waivers on customary forms
from the Sellers' material contractors and sub-contractors (the deliveries and
items referenced in clauses (a) through (c) are collectively referred to as the
"Additional Conditions"). In addition, the parties acknowledge that the
Construction Property Purchase Agreement shall contain a condition that, to the
extent an issue exists regarding access to the Construction Property through the
interparcel connection abutting adjacent parcels 10 and 11 of the Construction
Property, Seller shall resolve such issue to Buyer's reasonable satisfaction
prior to the closing thereunder and, if such issue is not so resolved, Buyer (i)
shall not be required to close and shall be entitled to the return of the
Construction Property Deposit as liquidated damages or (ii) Buyer may waive the
condition and close the transaction without abatement in the purchase price.
Buyer Parent acknowledges, however, that notwithstanding the provisions of this
Section 2.6, in no event shall the Construction Property Purchase Price be
adjusted on account of free rent or other rental abatement attributable to the
KPMG lease at the Construction Property. Buyer Parent may exercise the
Construction Property Option by delivering to CAP Sellers, at the address
specified in Section 10.4 below, an irrevocable offer to purchase prior to 5:00
p.m. (New York Time) (without regard to the next-day or "four-hour" delay
provision in Section 10.4) on March 31, 1999 (the date on which the Buyer
Parent's right to exercise the Construction Property Option expires). Buyer
Parent's purchase of the Construction Property shall close pursuant to the
Construction Property Purchase Agreement on the 30th day after the satisfaction
of the Additional Conditions. In the event the purchase of the Construction
Property does not close on or before May 31, 1999 because the Additional
Conditions (through no action of Buyer Parent) have not been satisfied by such
date, (i) the closing date may be extended by either CAP Sellers or Buyer Parent
for a period not to exceed 90 additional days in order to enable CAP Sellers to
satisfy the Additional Conditions, or (ii) if Buyer Parent or CAP
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Sellers do not elect to extend the Closing Date as provided above, (x) Buyer
Parent may terminate the Construction Property Purchase Agreement and receive a
refund of the Construction Property Deposit and payment of the Earned Amount to
such date and, in addition, if a Use Permit is not delivered by CAP Sellers as
contemplated above or Seller fails to comply with the Additional Conditions or
Seller is otherwise in breach under this Section 2.6, Buyer Parent shall be
entitled to liquidated damages on account thereof equal to a return of 40,000 OP
Units or (y) Buyer Parent may enforce specific performance of or waive the
Additional Conditions and elect to close without any abatement in the
Construction Property Purchase Price except that CAP Sellers shall continue to
be obligated to complete the construction of the Construction Property at CAP
Sellers' expense substantially in accordance with the plans and specifications
and deliver the certification from the architect as provided above and Seller
shall continue to be responsible to deliver the Use Permit. In addition to the
foregoing, Sellers shall pay to Buyer OP upon ten days prior demand therefore
any reasonably documented third-party out-of-pocket costs and expenses incurred
to complete the construction of the Base Building and the tenant work specified
above and, in such event, if Buyer Parent elects to extend the Closing Date as
set forth in clause (i) above, at the end of such extension period, if the
Additional Conditions are still not satisfied by CAP Sellers, Buyer Parent may
elect to proceed under (ii) above. The Construction Property Purchase Agreement
shall also include a provision that allows Buyer Parent to direct Sellers to
deliver title to the Construction Property to any Person. Buyer Parent may
transfer or assign its rights under the Construction Property Option to a
majority-owned Affiliate of Buyer.
2.7 Estimated Apportionments. Using the latest available financial
reports prepared in the ordinary course of business (after reasonable
consultation with Buyers), Sellers shall prepare and deliver to Buyers at least
five (5) days prior to Closing, a good faith and reasonable estimate of the
amount of the apportionments to be made pursuant to this Article 2 (the
"Estimated Apportionments") setting forth in reasonable detail Sellers'
calculation thereof. The Estimated Apportionments shall be based upon Sellers'
reasonable estimate of the items described in this Article 2 made on the basis
of the data then available and the 1998 budget. The Estimated Apportionments
shall be credited to, or deducted from, the AAPT Purchase Price in accordance
with Section 2.1(b) and the CAP Consideration in accordance with Section 2.2(b).
In no way shall Sellers' calculation of the Estimated Apportionments, or the
payment of the AAPT Purchase Price or CAP Consideration based upon the Estimated
Apportionments, estop or otherwise limit either party from making any claim or
lodging any objection with respect to such calculation.
2.8 Post-Closing Audit. There shall be a post-Closing audit (the
"Post-Closing Audit") of the Books and Records relating to the assets,
liabilities and business of the AAPT Operations and the CAP Operations for the
purpose of (i) confirming the increases, reductions and adjustments made to the
AAPT Purchase Price and the CAP Consideration at Closing in accordance with
Article 2 hereof and (ii) confirming all other payments, allocations and
apportionments between the parties pursuant to this Agreement. The Post-Closing
Audit shall be prepared as of the Closing Date, shall be conducted by Arthur
Andersen LLP and shall be completed and delivered to the Buyers within six (6)
months of the Closing (with any amounts which are not finally determined being
estimated in good faith by Arthur Anderson LLP in accordance with the historical
experience of the Transferring Parties' Operations). Sellers and their
Representatives shall provide the Post-Closing Audit and other documentation
(including all accounting work papers relating to such audit) reasonably
required to confirm such audit to an accounting firm to be chosen by Buyers
("Buyers' Auditor") for the purpose of review by Buyers' Auditor. Within thirty
(30) Business Days after Sellers and their Representatives have provided to
Buyers' Auditor the Post-Closing Audit and supporting documentation, Buyers
shall confirm or dispute such audit and final increases, reductions and
adjustments shall be made and any over- or under-payment of the AAPT Purchase
Price and/or CAP Consideration and any other payments
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between the parties required hereunder shall be reimbursed or paid, as the case
may be within five (5) Business Days of final agreement of the parties. If
Sellers and Buyers are unable to agree on particular final increases, reductions
and adjustments, then at any time after the expiration of the thirty (30)
Business Day period referred to in the immediately preceding sentence, either
Buyers or Sellers may direct that any such disputed items be submitted to such
other "big five" independent accounting firm selected jointly by Sellers and
Buyers (the "Independent Auditor") to resolve any such disputes, and to perform
any such confirming audit, if reasonably necessary to resolve such disputes with
Sellers and Buyers each paying one-half of the fees to resolve any such disputed
items. The decisions of any such Independent Auditor shall be binding upon the
parties and payment or reimbursement of the amounts as determined by the
Independent Auditor shall be made within five (5) Business Days after receipt of
the final decision of the Independent Auditor. If the apportionment in the
Post-Closing Audit (i) exceeds the Estimated Apportionments by five percent or
more (such amount over five percent being the "Excess Amount") or (ii) is less
than the Estimated Apportionments by five percent or more (such amount over five
percent being the "Deficiency Amount"), then, in the event of (i) above, Buyer
shall pay Seller Interest on the Excess Amount from the Closing Date to the date
of payment or, in the event of (ii) above, Seller shall pay Buyer Interest on
the Deficiency Amount from the Closing Date to the date of payment.
2.9 Method of Payment. All adjustments under this Article 2 in
connection with the Acquired Entity and the Acquired Subsidiaries shall be paid
in cash by wire transfer of immediately available funds and all adjustments
under this Article 2 in connection with the Contributed Assets shall be made
through adjustments in Preferred Units (based on the liquidation preference)
issued on the Closing Date.
2.10 Assumption of Liabilities.
(a) Subject to Section 2.4, upon the terms and subject to the
conditions contained herein, at the Closing, Buyer OP shall accept and assume,
and thereafter be fully responsible for and perform, pay or otherwise discharge,
in accordance with the respective terms and subject to the respective conditions
thereof, the following, and only the following, obligations and liabilities of
CAP Sellers (the "Assumed Liabilities"):
(i) liabilities set forth on, or reserved against in, the
June 30, 1998 balance sheet in the CAP Financial Statements for the properties
listed on 4.4(a)(2); and
(ii) all liabilities incurred in the operation of the CAP
Operations or the Contributed Assets arising from and after the Closing that
relate to activities that occur after the Closing;
provided, that Assumed Liabilities shall not include obligations or liabilities
that are Excluded Liabilities; provided, further, that Assumed Liabilities will
be subject to the apportionment provisions contained in Section 2.4.
(b) The parties hereby acknowledge that, following the Closing,
AAPT, as a matter of law, will retain all of its liabilities and each Acquired
Subsidiary, severally, as a matter of law, will retain all liabilities of such
Acquired Subsidiary, notwithstanding the purchase by Buyers of the AAPT Equity
Interests pursuant to this Agreement.
2.11 Excluded Liabilities.
(a) Subject to Section 2.4, notwithstanding any other provision of
this Agreement, except for the Assumed Liabilities expressly specified in
Section 2.10(a), Buyer OP shall not assume or be responsible
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for, and CAP Sellers shall retain, perform and be fully responsible for, all of
the liabilities and obligations of any CAP Seller (the "Excluded Liabilities"),
including, without limitation, the following:
(i) liabilities of the CAP Sellers that do not relate to
the CAP Operations;
(ii) liabilities relating to the CAP Operations or the
Contributed Assets arising prior to the Closing or that relate to activities
that occur prior to Closing;
(iii) liabilities, if any, arising out of Sellers' breach of
the RF Purchase Agreement;
(iv) liabilities arising under CAP Repaid Indebtedness;
(v) the matters set forth on Schedule 2.11(a);
(vi) liabilities, if any, related to any Excluded Asset,
retained by the CAP Sellers, including any taxes payable on account of the
transfer of any such Excluded Asset;
(vii) liabilities, if any, relating to any pending Actions to
which any CAP Seller is a party or by which any of its assets may be bound or
affected, in each case relating to periods on or prior to Closing; and
(viii) liabilities, if any, relating to any federal, state or
local income taxes on the built-in gains under Section 1374 of the Code, and the
Treasury Regulations (or similar future statutes or regulations), as disclosed
in Internal Revenue Service Bulletin 88-119 arising after the Closing from the
partial or complete sale, transfer, conversion or redemption of Preferred Units.
(b) The parties hereby acknowledge that AAPT Seller shall be fully
responsible for and perform, pay or cause to be paid or otherwise discharge or
cause to be discharged, in accordance with their respective terms or the
respective conditions thereof, all obligations and liabilities arising from or
related to any such Excluded Asset being retained by the AAPT Seller, including
any taxes payable on account of the transfer of any Excluded Asset, and
liabilities arising under AAPT Repaid Indebtedness and those "true up" assets
and liabilities under the Bell Atlantic Purchase Agreement identified as
Excluded Assets on Schedules 2.3(d) and 4.7(b).
2.12 Deposit. Upon execution of this Agreement, by Buyers and Sellers,
Buyers shall deliver Ten Million Dollars ($10,000,000.00) (the "Escrow Deposit")
to the Title Company (the "Escrow Agent") to be held in an escrow account
pursuant to the agreement set forth in Exhibit F (the "Escrow Agreement"). In
the event the Closing occurs as set forth in this Article 2, the Escrow Deposit
and any accrued interest thereon shall be applied toward the AAPT Purchase
Price. In the event this Agreement is terminated, the Escrow Deposit shall be
applied as provided in Section 10.1(b)(iii).
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ARTICLE 3
CLOSING
3.1 Closing. Upon the terms and conditions set forth herein, and
subject to Section 10.1, the Closing shall be held at 10:00 a.m. local time on
the Closing Date at the offices of Latham & Watkins, 885 Third Avenue, Suite
1000, New York, New York 10022, or on such other date or at such other location
as mutually agreed by the parties hereto.
3.2 Deliveries at Closing. To effect the sale and purchase of the
Acquired Equity Interests and the contribution of the Contributed Assets,
subject to and otherwise in accordance with the provisions hereof, Sellers and
Buyers shall, on the Closing Date, deliver the following:
(a) Instruments of Possession. At the Closing, Sellers will execute
and deliver to Buyers (and, if required, Buyers will counter-execute and deliver
to Sellers):
(i) certificates representing all of the Acquired Equity
Interests, endorsed in blank or accompanied by stock powers duly executed in
blank, in proper form for transfer, if applicable, together with any other
documents and instruments, as shall be necessary or appropriate to warrant and
vest in Buyers good and marketable right, title and interest in and to the
Acquired Equity Interests;
(ii) Deeds and the Bills of Sale and Assignment;
(iii) the Assignment and Assumption Agreements;
(iv) such other bill(s) of sale, endorsements, assignments
and other good and sufficient instruments of sale, conveyance, transfer and
assignment, in form and substance reasonably satisfactory to Buyers, with
respect to the Contributed Assets, as reasonably requested by Buyers, sufficient
to transfer the Contributed Assets in accordance with the provisions hereof;
(v) all plans, specifications, as-built drawings, surveys,
site plans, and final, written reports of architects, engineers and surveyors
relating to any of the assets to be transferred to Buyers, but only to the
extent that the same exist and are in the possession of any Sellers or any
property manager controlled by any Sellers;
(vi) all building records, maintenance records, expense
histories and tenant lease files in with respect to all Real Property to be
conveyed at the Closing that are in the possession of any Sellers or any
property manager controlled by any Seller;
(vii) non-foreign person certifications executed by Sellers,
as Buyers shall reasonably deem necessary, in form attached hereto as Schedule
3.2;
(viii) all master and duplicate keys, combinations and codes to
all locks and security devices for the assets to be transferred at Closing, but
only to the extent that the same exist and are in the possession of any Sellers
or any property manager controlled by any Sellers;
(ix) all machinery and/or equipment operating manuals,
technical data and other documentation relating to the building systems and
equipment, and all machinery, and all machinery,
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equipment and other building warranties and guarantees, if any, but only to the
extent that the same exist and are in the possession of any Sellers or any
property manager controlled by any Sellers;
(x) an affidavit in favor of the Title Company on the form
used by such Title Company, in form reasonably acceptable to Sellers, to enable
the Title Company to issue its customary form of title policy. Buyers shall
require non-imputation endorsements and affirmative endorsements against
mechanic's liens, consistent with each such Sellers' obligations under Section
8.7 above;
(xi) certificates representing the Remaining Interests and
Management Company Voting Stock duly endorsed for transfer to Buyers' designees
(or with stock powers duly endorsed in blank); and
(xii) vehicle title certificates for each of the vehicles
owned by the Acquired Entity or any Acquired Subsidiary, or forming a part of
the Contributed Assets.
(b) Consents and Assumption Agreements. (A) Sellers shal deliver to
Buyers all consents set forth on Schedule 7.4 which have been obtained by the
Closing Date and all notifications, if any, to third parties obtained or made by
Sellers with respect to (i) the transfer of the Acquired Equity Interests and
the Contributed Assets to Buyers in accordance with the terms of this Agreement
and (ii) the consummation of the transactions contemplated herein and (B) Buyers
shall deliver to Sellers the Assumption Agreements.
(c) AAPT Purchase Price and CAP Consideration. Buyers shall pay to
AAPT Seller the AAPT Purchase Price pursuant to Section 2.1(c) and Buyer OP
shall deliver to CAP Sellers the CAP Consideration pursuant to Section 2.2(c).
(d) Documents; Certificates. At the Closing:
(i) Sellers shall deliver to Buyers:
(A) a certificate in substantially the form attached
hereto as Exhibit H executed by the Secretary of each Seller, the Acquired
Entity and each Acquired Subsidiary certifying as of the Closing Date: (v) a
true and correct copy of the Declaration of Trust, Certificate of Incorporation
and other organizational documents of each Seller, the Acquired Entity and each
Acquired Subsidiary and the partnership agreement governing each of the
Partially Owned Partnerships, as applicable (all of which shall be certified by
the Secretary of State of the applicable jurisdiction), and, in the case of the
Acquired Entity which is a party to a partnership agreement governing each of
the Partially Owned Partnerships, such partnership agreement, in each case as in
effect on the date of this Agreement and the Closing Date, (w) a true and
correct copy of the Bylaws of each Seller, the Acquired Entity and each Acquired
Subsidiary, as applicable, as in effect on the date of this Agreement and the
Closing Date, (x) a true and correct copy of the resolutions of the board of
trustees or directors, as applicable, of each Seller authorizing the execution,
delivery and performance of this Agreement (and all documents, agreements and
instruments contemplated hereby) by such Seller, and the consummation of the
transactions contemplated hereby and thereby, and that such resolutions are in
full force and effect and are the only resolutions in effect with respect to the
subject matter thereof, (y) a true and correct copy of the resolutions of the
board of trustees or directors, as applicable, of the Acquired Entity and each
Acquired Subsidiary authorizing the execution, delivery and performance of all
documents, agreements and instruments to be executed and delivered by it as
contemplated hereby, and the
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consummation of the transactions contemplated thereby, and that such resolutions
are in full force and effect and are the only resolutions in effect with respect
to the subject matter thereof, and (z) incumbency matters;
(B) a certificate in substantially the form attached
hereto as Exhibit I executed by (i) the President, Chief Executive Officer or
any Vice President, and (ii) the Chief Financial Officer, of each Seller, or by
such other Representatives of each Seller reasonably acceptable to Buyers,
certifying that, as of the Closing Date, the conditions set forth in Sections
8.1, 8.2 and 8.3 with respect to Sellers (which have not been waived by Buyers)
have been satisfied;
(C) a certificate certifying as of a recent date the
good standing of each Seller, the Acquired Entity and each Acquired Subsidiary
from the Secretary of State of its applicable State of incorporation or
formation and any states where it owns or hold ground leases for any Real
Property;
(D) all other Transaction Documents to which any Seller,
the Acquired Entity or any Acquired Subsidiary is a party;
(E) a letter, from the New Jersey Department of
Environmental Protection or its successor stating that the provisions of the
Industrial Site Recovery Act, N.J.S.A. 13:1K-6 et seq., the regulations
promulgated thereunder and any successor legislation and regulations are
inapplicable to Real Property located in New Jersey;
(F) evidence of the termination of all management
agreements affecting any of the Real Property or evidence that such management
agreements will be terminated prior to the date that is 60 days after the
Closing Date, without any continuing obligation to make payments thereunder
following such termination on the part of either Buyer, the Acquired Entity or
any Acquired Subsidiary;
(G) letters of resignation signed by all officers,
directors and trustees of the Acquired Entity and the Acquired Subsidiaries and
evidence of the termination of all employees of the Acquired Entity and the
Acquired Subsidiaries, including the termination of all personal service
Contracts with employees;
(H) FIRPTA certificates executed by each Seller in form
and substance reasonably acceptable to Buyers;
(I) documentation in form and substance reasonably
acceptable to Buyers to effectuate the provisions of Section 10.7(a) hereof;
(J) all Books and Records of the AAPT Operations and the
CAP Operations, except as expressly set forth in this Agreement;
(K) such other documents or instruments necessary to
evidence compliance with the conditions set forth in Article 8 as may be
reasonably requested by Buyers; and
(L) the registration rights agreements in substantially
the forms of Exhibits G-1 and G-2.
(ii) Buyers shall deliver to Sellers:
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(A) a certificate in substantially the form attached
hereto as Exhibit J executed by the Secretary of Buyer Parent certifying as of
the Closing Date: (w) a true and correct copy of (1) the Declaration of Trust,
and other organizational documents of Buyer Parent and Buyer OP (each of which
shall be certified by the Secretary of State of the applicable jurisdiction) and
(2) the Buyer Partnership Agreement, (x) a true and correct copy of the Bylaws
of Buyer Parent, (y) a true and correct copy of the resolutions of the board of
trustees of Buyer Parent authorizing the execution, delivery and performance of
this Agreement (and all documents, agreements and instruments contemplated
hereby, by Buyers and the consummation of the transactions contemplated hereby
and thereby, and that such resolutions are in full force and effect and are the
only resolutions in effect with respect to the subject matter thereof, and (z)
incumbency matters;
(B) a certificate in substantially the form attached
hereto as Exhibit K executed by (i) the President and Chief Executive Officer or
any Vice President and (ii) the Chief Financial Officer of Buyer Parent
certifying that, as of the Closing Date, the conditions set forth in Sections
7.1, 7.2 and 7.4 (which have not been waived by Sellers) have been satisfied;
(C) a certificate of the Secretary of State of their
States of formation certifying as of a recent date the good standing of Buyers
in such State;
(D) all other Transaction Documents to which Buyers are
a party;
(E) such other documents and instruments necessary to
evidence compliance with the conditions set forth in Article 7 as may be
reasonably requested by Sellers;
(F) the Board Designation Letter in substantially the
form of Exhibit T attached hereto; and
(G) the registration rights agreements in substantially
the forms of Exhibits G-1 and G-2.
(iii) Each of the parties shall deliver such documents,
certificates and other items described or contemplated in Articles 7 and 8.
(e) Conditional Delivery of Closing Documents. In order to expedite
Closing, each party shall have the right to execute and deliver closing
documents (substantially in the forms required by this Agreement and dated as of
the Closing Date) to the other party prior to Closing. Each such delivery prior
to Closing shall be subject to the conditions subsequent (without the necessity
of the delivering party repeating such conditions upon any such delivery) that
(a) each such delivery shall be effective only upon the completion of Closing in
accordance with this Agreement, and (b) if this Agreement is terminated for any
reason or if Closing is not completed on or prior to the Closing Date, then the
receiving party shall promptly return all such Closing documents to the
delivering party.
(f) Security Deposits. Sellers shall deliver to Buyers the security
deposits relating to the Acquired Equity Interests and the Contributed Assets in
accordance with Section 2.4(d).
3.3 Other Closing Matters. Each of the parties shall take such other
actions required hereby to be performed by it prior to or on the Closing Date,
including, without limitation, satisfying the conditions set
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forth in Articles 7 and 8 and after the Closing Date to carry out, evidence and
confirm the intended purposes of this Agreement. Sellers shall take all
additional reasonable steps as may be necessary or desirable to put Buyers in
possession of, and in operational control of, the Acquired Equity Interests and
the Contributed Assets.
3.4 Effectiveness of Acts and Deliveries. All acts and deliveries
prescribed by this Article 3 will be deemed to occur in the order as may be
reasonably required by Sellers, and none of such acts or deliveries will be
effective until the last of the acts and deliveries has occurred.
3.5 Contractual Obligations. Anything in this Agreement to the
contrary notwithstanding, neither this Agreement nor the consummation of the
transactions contemplated hereby shall constitute an agreement to assign, or any
assignment of, any Contract or Permit of a Transferring Party or any claim or
right or any benefit arising thereunder or resulting therefrom if an attempted
transfer or assignment thereof, without the consent of a third party thereto or
any Governmental Authority, would constitute a breach thereof, be unlawful or in
any way adversely affect the respective rights or obligations arising thereunder
of Buyers or Sellers or any Subsidiary thereof that is a party thereto. In the
case of an agreement to assign or an assignment, if any such consent is not
obtained, or if the attempted assignment would be ineffective or would adversely
affect the respective rights or obligations of Buyers or Sellers thereunder, (a)
Sellers shall use their reasonable efforts (provided that Buyers have agreed to
reimburse Sellers for the actual reasonable out-of-pocket costs associated with
such efforts in a manner reasonably satisfactory to Sellers and Buyers) (i) to
provide to Buyers the benefits under any such Contract or Permit (including,
without limitation, engaging Buyers as a subcontractor or enforcing for the
benefit of Buyers (at Buyers' expense) of any and all rights of Sellers against
a third party thereto arising out of the breach or cancellation by such third
party or otherwise) as if such Contract or Permit had been assigned to Buyers
and (ii) to obtain as soon as practicable the consent or approval of any such
third party or government agency to the assignment of such Contract or Permit
and to transfer such Contract or Permit to Buyers (and any transfer or
assignment to Buyers of any property or property rights of any Contract or
Permit that shall require the consent or approval of any third party or
government agency shall be made subject to such consent or approval being
obtained) and (b) Buyers will fulfill (through subcontract relationships with
Sellers or otherwise) Sellers' obligations under such Contracts or Permits.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF SELLERS
As an inducement to Buyers to enter into this Agreement, AAPT Seller,
solely with respect to itself, the Acquired Entity and the Acquired
Subsidiaries, and each CAP Seller, jointly and severally with respect to all CAP
Sellers and the Contributed Assets held by CAP Sellers, makes, as of the date
hereof, the following representations and warranties to Buyers, except as
otherwise set forth in the written schedules to this Agreement (the "Seller
Disclosure Schedules") executed by each Seller and delivered to Buyers on or
prior to the date hereof, a copy of which is included herewith, which set forth
the exceptions to the representations and warranties contained in this Article 4
and certain other information called for by this Agreement (unless otherwise
specified, (1) each reference in this Agreement to any numbered schedule is a
reference to that numbered schedule which is included in the Seller Disclosure
Schedules and (2) no disclosure made in any particular numbered schedule of the
Seller Disclosure Schedules shall be deemed made in any other numbered schedule
of the Seller Disclosure Schedules unless expressly made therein (by
cross-reference or otherwise).
4.1 Organization of Sellers; Subsidiaries.
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(a) Each Seller, the Acquired Entity and each Acquired Subsidiary
(all of which are identified on Schedule 4.1(a)) (i) is a trust, corporation or
partnership duly organized, or formed, as the case may be, validly existing and
in good standing under the laws of the state of its incorporation or formation,
(ii) is duly qualified as a foreign trust, corporation or partnership in good
standing under the laws of each jurisdiction set forth on Schedule 4.1(a), and
there are no additional jurisdictions where its ownership or lease of real
property or the conduct of its business requires such qualification and the
failure to be so qualified would reasonably be expected to result in a material
adverse effect on such trust, corporation or partnership, (iii) has the
requisite trust, corporate or partnership power and authority and the legal
right to own, transfer, pledge, mortgage or otherwise encumber and operate its
properties, to lease the property it operates under lease and to conduct its
business as now being conducted, except to the extent it would not, individually
or in the aggregate, reasonably be expected to result in a material adverse
effect, and (iv) is in compliance with its certificate or articles of
incorporation, declaration of trust, bylaws, certificate of limited partnership
or partnership agreement, as applicable, except to the extent such
non-compliance with organizational documents is identified on Schedule 4.1(a).
The organizational chart appended to Schedule 4.1(a) showing the ownership
structure of the Acquired Entity and each Acquired Subsidiary is true and
accurate in all material respects.
(b) Except as set forth on Schedule 4.1(b), none of the Acquired
Entity or any CAP Seller owns, beneficially or of record, any Equity Interests
in, or has any other direct or indirect interest in, any corporation,
partnership, limited liability company, joint venture or other Person involved
in the Transferring Parties' Operations (other than in an Acquired Subsidiary).
(c) Sellers are not "foreign persons" and will deliver to Buyers, at
the Closing, a statement certifying that they are not "foreign persons" within
the meaning of the Code.
(d) AAPT was formed for the primary purpose of owning and operating
commercial real estate projects.
(e) Each of the transparent (wholly owned) and subsidiary (partially
owned) partnerships own commercial real estate projects (the "Specified
Projects"). Additionally, each of the wholly owned corporate subsidiaries
(Qualified REIT subsidiaries) own commercial real estate projects (the "Specific
Projects"). The applicable wholly owned corporate subsidiary's by-laws and
amendments have been duly executed and the shares of stock of each wholly owned
corporate subsidiary are effective on the date hereof.
(f) AAPT duly and timely made or will make the election specified in
Section 856(c)(1) of the Code, to be a REIT for federal income tax purposes
commencing with its taxable year ended December 31, 1997.
(g) AAPT has been managed at all times by one or more trustees or
directors, and the beneficial ownership of AAPT has been at all times evidenced
by transferable shares.
(h) AAPT has ensured that after the calendar year ended December 31,
1997, the beneficial ownership of AAPT was not held by less than 100 persons for
30 days or more.
(i) For the portion of the year ended December 31, 1998 beginning on
January 1, 1998 and ending on the Closing Date (such portion, the "Pre-Closing
Partial Period"), AAPT has ensured that at no time during the last half of such
calendar year, was more than 50 percent in value of the AAPT's outstanding
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shares of beneficial ownership owned directly or indirectly by five or fewer
individuals within the meaning of Code Section 856(h).
(j) AAPT's taxable year for federal income tax purposes is a calendar
year.
(k) AAPT is not chartered or supervised as a bank, savings and loan,
or similar association under state or federal law.
(l) AAPT has not operated as a small business investment company under
the Small Business Investment Act of 1958.
(m) AAPT has not operated as a business development corporation; i.e.,
it was not created by or pursuant to an act of a state legislature for the
purpose of promoting, maintaining, and assisting the economy within such state
by making loans that generally would not be made by banks.
(n) AAPT has not engaged in the business of issuing life insurance,
annuity contracts, or contracts of health or accident insurance.
(o) AAPT has not at any time been a party to a tax-free reorganization
with another corporation and does not hold any asset the disposition of which
could be subject to Section 1374 of the Code.
(p) AAPT does not have any, nor has it succeeded to, any earnings and
profits of any corporation accumulated during a non-REIT year.
4.2 Power; Authorization; Enforceable Obligations. The execution, delivery
and performance by each Seller of this Agreement, the other Transaction
Documents to which each of them is a party and all instruments and documents to
be delivered by each of them on the Closing Date, and the consummation by each
Seller of the transactions contemplated by the foregoing (a) are within each
Seller's trust, corporate or partnership power, as applicable, (b) have been
duly authorized by all necessary action including, without limitation, approval
by shareholders, (c) are not and will not be in contravention of any Sellers'
Declaration of Trust, certificate or articles of incorporation or bylaws or
other organizational documents, (d) do not and will not conflict with or violate
any law or regulation, or any judgment, order or decree of any court or other
Governmental Authority applicable to any Seller, or Transferring Party, (e) will
not conflict with or result in the material breach or termination of, result in
the loss of material rights or benefits under, constitute a material default
under, accelerate any performance required by or give rise to any obligation to
purchase or repurchase any Indebtedness under any Material Contract to which any
Transferring Party is a party or by which any Transferring Party is bound,
except as disclosed in Schedule 4.2, (f) will not result in the creation or
imposition of any Encumbrance upon any of the property of a Transferring Party
(other than those created by a Transaction Document) and (g) except as disclosed
on Schedule 7.4, do not and will not require on the part of any Transferring
Party the consent or approval of, or any filing with or other notification of,
any Governmental Authority, any holder of Indebtedness, any party to a Material
Contract or any other Person. This Agreement has been, and at or prior to the
Closing Date, each of the other Transaction Documents to which any Seller is a
party shall have been, duly executed and delivered by each Seller. This
Agreement constitutes (and from after the Closing Date each Transaction Document
to which any Seller is a party shall constitute) a legal, valid and binding
obligation of each Seller, enforceable against each Seller in accordance with
its terms (subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar affecting creditors' rights and remedies
generally, and subject, as to enforceability, to
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judicial discretion and general principles of equity, including principles of
commercial reasonableness, good faith and fair dealing (regardless of whether
enforcement is sought in a proceeding at law or in equity)).
4.3 Absence of Certain Changes or Events. Since December 31, 1997, except
as set forth on Schedule 4.3, disclosed on the Balance Sheet or consented to in
writing by Buyers: (a) there has been no adverse change and (b) no Transferring
Party has made or suffered any:
(i) sale, assignment, lease (other than in the ordinary course of
business consistent with past practices of Seller), or transfer of any material
asset, except pursuant to Section 6.1 with respect to Tenant Leases;
(ii) cancellation, termination or material amendment of any Material
Contract;
(iii) material damage or destruction (whether or not covered by
insurance) affecting any material assets to be transferred pursuant hereto;
(iv) mortgage, pledge or other Encumbrance of any material asset other
than Permitted Encumbrances; or
(v) agreement (either written or oral) by such Transferring Party to
do any of the foregoing.
4.4 Real Property.
(a) With respect to the Acquired Entity and the Acquired Subsidiaries,
Schedule 4.4(a)(1), and with respect to the CAP Sellers, Schedule 4.4(a)(2),
contains an accurate and complete list, as of the date of this Agreement, of
(i)(A) all fee interests in real property and buildings, improvements and
structures owned by such Transferring Parties and (B) all leasehold estates (the
"Leasehold Estates") in real property and buildings, improvements and structures
owned by such Transferring Parties, in each case, that are being transferred to
Buyers hereunder (all of such fee interests, Leasehold Estates, buildings,
improvements and structures, together with all easements, rights of way,
privileges, appurtenances and other rights pertaining thereto, being the "Real
Property"), and (ii) the location of, and the status of approval process, if
any, for the development acreage of, such Real Property. Schedules 4.4(a)(1) and
4.4(a)(2) also identify each of the operative documents creating a Leasehold
Estate (the "Real Property Leases"). The applicable Transferring Party has good
and indefeasible title in fee simple (or as otherwise specified in Schedules
4.4(a)(1) and 4.4(a)(2)) to all of the Real Property set forth in such Schedules
and owns all Leasehold Estates set forth in such Schedules.
(b) Except as described in Schedule 4.4(b), and except for the
Construction Property, to Sellers' knowledge, all of the buildings and
structures located on the Real Property are in operating condition and repair
(normal wear and tear excepted and taking into account the respective ages of
such buildings, structures, building systems and equipment, and excepting
immaterial operating conditions and items of repair), suitable for the purposes
for which they are being used and each has adequate public rights of ingress and
egress for the operation of the Transferring Parties' Operations and for the
normal and customary uses of the tenants of such buildings or structures.
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(c) No party holding an interest superior to any Leasehold Estate has
given notice of, or made a claim with respect to or against Sellers, as to any
material breach or default, in any material respect, by any Transferring Party
with respect to such superior interest, other than in respect of such a breach
or default which has been cured.
(d) Except as set forth in Schedule 4.4(d), no Transferring Party is
obligated under or a party to any Purchase\Put Option relating to any Real
Property listed in Schedules 4.4(a)(1) and 4.4(a)(2).
(e) Except as set forth in Schedule 4.4(e), (1) to the knowledge of
the Sellers, no condemnation, zoning or other land-use regulation proceedings,
including, without limitation, resolutions of intent, which would materially
detrimentally affect the use and operation of all or any portion of any Real
Property for its present or intended purpose or the value of all or any portion
of the Real Property and the Transferring Parties' Operations conducted thereon
have been instituted or threatened, and (2) no Seller or Transferring Party has
received any written notice of any such material proceedings affecting all or
any material portion of any Real Property.
(f) Except as set forth in Schedules 4.4(e) and (f), and except for
the Construction Property, the use being made of each building that constitutes
Real Property is in substantial conformity with the certificate of occupancy
issued for the facilities located on such Real Property, other than as would
not, individually or in the aggregate, reasonably be expected to result in a
material adverse effect. Except as set forth in Schedules 4.4(e) and (f), all
required certificates and permits of such type have been issued and are in full
force and effect.
(g) Except as set forth in Schedule 4.4(g), no Transferring Party has
received any written notice or, to Sellers' best knowledge, is otherwise aware
of any expiration of, pending expiration of, changes to, or pending changes to
any special exception, conditional use permit, variance or similar land use
approval with respect to any Real Property, other than as would not,
individually or in the aggregate, reasonably be expected to result in a material
adverse effect.
(h) Except (i) as permitted pursuant to a Permitted Encumbrance and
(ii) for members of the public with respect to public areas of the Real
Property, to the Sellers' knowledge, no Person has any right, as member, tenant,
occupant or otherwise, to use, lease and/or occupy any portion of the Real
Property, and there are no written or, to the Sellers' knowledge, oral
agreements between any Transferring Party and any other Person providing for
such occupancy or use of any portion of the Real Property.
(i) Schedule 4.4(i) sets forth a true, correct and complete list of
all Tenant Leases, including a list of all tenants (including, without
limitation, any licensees, assignees or other occupants and, to Sellers'
knowledge, any subtenants), rents (including any prepaid amounts), expiration
dates, renewal rights, termination rights and all material amendments and
modifications thereto. True, correct and complete copies of all of the documents
comprising each Tenant Lease are contained in files that have been made
available in full to Buyers. Each Tenant Lease is the legal, valid and binding
obligation of a Transferring Party, is in full force and effect and is
enforceable against such Transferring Party. Except as indicated in Schedule
4.4(i) and except as assigned as collateral for the indebtedness described on
Schedules 1.1(a), 1.1(b), 1.1(e) or 1.1(f), none of the Tenant Leases and none
of the rents or their charges payable thereunder is currently assigned
(collaterally or otherwise), pledged, encumbered or otherwise hypothecated by
any Transferring Party. No holder of any assignment of Tenant Leases has
asserted or exercised any of its rights under Tenant Leases. Except as set forth
on Schedule 4.4(i) or Schedule 4.11, no Transferring Party and, to the knowledge
of Sellers,
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no tenant under any Tenant Lease, is in default of material obligations
thereunder, and, to the Sellers' knowledge, no event has occurred which, with
the giving of notice or passage of time or both, would constitute a default of
such material obligations by any Transferring Party and any tenant thereunder
(in each case, without investigation). Except as set forth in Schedule 4.4(i) or
Schedule 4.11, no written notice has been received by any Transferring Party
from any tenants, licensees or occupants under any Tenant Lease asserting any
claim, cause of action or right of offset against the landlord under any Tenant
Lease or asserting any defense to payment of any sum or performance of any
obligation due under any Tenant Lease, in each case in an amount in excess of
$50,000 (any of the foregoing, a "Tenant Claim"), and, to the knowledge of
Sellers, no such Tenant Claim exists. Except as set forth in Schedule 2.4(g)(i)
or Schedule 4.4(i), to the Sellers' knowledge, no brokerage fees, commissions,
tenant improvements or capital improvements (including free rent and reduced
rent) with respect to any of the Tenant Leases are due and payable (or may
become due and payable) in connection with any Tenant Lease. To Sellers'
knowledge, except as set forth on Schedule 2.4(g)(i), there are no construction
or capital improvements which are in process at the Real Property or which are
committed to commence prior to December 31, 1998 (other than ordinary course
repair items which are reimbursable from Tenants under Tenant Leases).
(j) Other than with respect to unimproved land and the Construction
Property, to Sellers' knowledge, all utilities, useable public sanitary and
storm sewers, public water facilities, electric facilities and, if any, gas
facilities (collectively, the "Utilities") required for the operation of the
Real Property either enter the Real Property through adjoining public streets
or, if they pass through adjoining public land, do so in accordance with valid
public easements or private easements which will inure to the benefit of Buyers.
All of said Utilities are installed and operating and all installation,
connection and "tap-in" charges have been paid in full or will be paid for in
full in the ordinary course.
(k) Except as disclosed on Schedule 4.4(k), to Sellers' knowledge, all
material charges, fees and assessments (including condominium fees), and any and
all other material sums due under declarations, cross-easements and agreements
with third parties to which the Real Property or any portion thereof may be
subject, have been paid and are being paid on a current basis.
(l) None of the Real Property is currently used for farming,
agriculture or similar purposes.
4.5 Tangible Personal Property.
(a) Set forth on Schedule 4.5 is a general description of all items of
tangible personal property owned by any Transferring Party that (i) are material
to their Operations, (ii) have a fair market value in excess of $100,000 or
(iii) are automobiles, and that (A) are located in such Transferring Party's
offices or (B) are located elsewhere and are used primarily in their Operations.
(b) To the knowledge of Sellers, each Transferring Party has valid
title to all of the items of tangible personal property listed on Schedule 4.5,
free and clear of all Encumbrances other than Permitted Encumbrances.
(c) To Sellers' knowledge, none of the artwork, if any, being a part
of , or included within, the Acquired Equity Interest or the Contributed Assets,
was prepared on a "work for hire" basis and none of the artwork was commissioned
after 1991.
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4.6 Intangible Personal Property. To the knowledge of Sellers, each
Transferring Party either owns, free and clear of all Encumbrances other than
Permitted Encumbrances, the right, title and interest in, to and under, or has
acquired in connection with the acquisition of equipment or software an implied
license to use, any and all intellectual property which is utilized in their
Operations. To the knowledge of Sellers, the use of such intellectual property
by each Transferring Party does not conflict with, infringe upon or violate any
patent, trademark, trade name, registration, copyright, copyright registration
or any pending application relating thereto of any other Person. No Transferring
Party has received written notice of any outstanding or threatened, judicial or
adversary proceedings, disputes or other disagreements with respect to any of
such intellectual property.
4.7 Material Contracts.
(a) Schedule 4.7(a) contains a true, correct and complete list of all
Material Contracts (other than Permitted Encumbrances) to which any Transferring
Party is a party. Each such Material Contract is a legal, valid and binding
agreement of the Transferring Party that is a party thereto, enforceable against
it in accordance with its terms (subject to applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and similar laws affecting
creditors' rights and remedies generally, and subject, as to enforceability, to
judicial discretion and general principles of equity, including principles of
commercial reasonableness, good faith and fair dealing (regardless of whether
enforcement is sought in a proceeding at law or in equity)), and, to the
knowledge of Sellers, each such Material Contract is a legal, valid and binding
agreement against the other parties thereto (subject to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and similar laws
affecting creditors' rights and remedies generally, and subject, as to
enforceability, to judicial discretion and general principles of equity,
including principles of commercial reasonableness, good faith and fair dealing
(regardless of whether enforcement is sought in a proceeding at law or in
equity)). The reserves required under Article IX of the Grande A and Grande B
Loan Agreements, respectively, are fully funded in accordance with the terms of
such Agreements.
(b) Except as set forth in Schedule 4.7(b), to the knowledge of
Sellers:
(i) no Transferring Party is in breach of or in default under
any Material Contract or has given or received written notice thereof;
(ii) the Transferring Parties are not in breach of any Contracts
(other than Tenant leases and Material Contract(s)) which breach, individually
or in the aggregate, would reasonably be expected to result in liability of
$100,000 or more.
(iii) there has not occurred any event which, after the giving of
notice or the lapse of time or both, would constitute a default under, or result
in a breach of, any such Material Contract;
(iv) none of the rights of any Transferring Party under any of
the Material Contracts will be subject to termination or modification as a
result of the consummation of the transactions contemplated by this Agreement or
any of the other Transaction Documents; and
(v) no consent or approval of any Person is required under any
Material Contract to which a Transferring Party is a party to the consummation
of the transactions contemplated hereby and by the other Transaction Documents.
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(c) The "Separateness Covenants" set forth in the Declaration of Trust
of AAPT are not required pursuant to any contractual obligation or requirement
of Seller (other than such requirement as may be imposed under the Grande A Loan
Documents).
4.8 Environmental Matters. Except as set forth on Schedule 4.8
(a) to the knowledge of Sellers, the operations of each Seller, each
Transferring Party, their employees and their tenants relating to their
Operations are, and all of the Real Property is, in compliance in all material
respects with all applicable Environmental Laws;
(b) to the knowledge of Sellers, each Seller, each Transferring Party
and each of their tenants, has obtained all material Permits required under all
applicable Environmental Laws necessary to operate their Operations at the Real
Property as currently conducted;
(c) no Seller or Transferring Party is a party to or is obliged under,
and no Real Property is the subject of, any outstanding written order, judgment
or decree with any Governmental Authority or other Person respecting any
material violation of Environmental Laws relating to their Operations;
(d) no Seller or Transferring Party has received any written notice,
including potentially responsible party notices or information requests pursuant
to the federal Superfund law or any applicable Environmental Law, alleging that
such Seller or Transferring Party may be in violation, in any material respect,
of any Environmental Law or may have any material liability under any
Environmental Law relating to their Operations;
(e) to the knowledge of Sellers, there are no investigations of any
Seller or Transferring Party involving Environmental Laws, relating to such
Seller or Transferring Party or any of their tenants, or to their operations, or
currently owned, operated or leased property pending or threatened;
(f) to the knowledge of Sellers, no Hazardous Substances have been
stored, except in accordance with applicable law, or have been released or
discharged by Sellers or by any prior owner or operator, into the environment
at, on or under the Real Property which storage or release could result in a
material liability to Seller; and
(g) to the knowledge of Sellers, no Hazardous Substance has been
disposed of by Seller, or on Sellers' behalf, or by any prior owner or operator,
at, on or under the Real Property or, if generated at the Real Property, at any
off-site location, except in accordance with applicable laws which disposal
could result in a material liability to Seller.
4.9 Permits. To the knowledge of Sellers, each Transferring Party has all
material Permits required to conduct their Operations as now being conducted and
to operate the Facilities (other than the Construction Property). To the
knowledge of Sellers, all such Permits are valid and in full force and effect
except as listed on Schedule 4.9. To the knowledge of Sellers, each Transferring
Party has not violated and is in material compliance with all such Permits and
no Transferring Party has received any written notice to the effect that it is
not in compliance with, or that they are in violation of, any such Permits.
4.10 Financial Statements, etc. (a) The Financial Statements have been
prepared from the Books and Records of the Acquired Entity, in the case of the
AAPT Financial Statements, of the particular property
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in the case of the CAP Financial Statements, or the particular Partially-Owned
Partnership, in the case of the Partially-Owned Partnership Financial
Statements, each in accordance with GAAP applied on a basis consistent with
prior accounting periods (except as may be stated in the notes thereto), (b)
true and correct copies of the Financial Statements have been provided to
Buyers, (c) the AAPT Financial Statements fairly present the financial position
of the AAPT Seller and the Acquired Subsidiaries on a consolidated basis as of
their respective dates and the results of operations and changes in financial
position and cash flows for the respective periods then ended, (d) the CAP
Financial Statements fairly present the financial position of each property
listed on Schedule 4.4(a)(2) (other than the Construction Property) as of their
respective dates and the results of operations and changes in financial position
and cash flows of such properties for the respective periods then ended, and (e)
the Partially Owned Partnership Financial Statements fairly present the
financial position of each Partially Owned Partnership as of their respective
dates and the results of operations and changes in financial position and cash
flows for the respective periods then ended.
4.11 No Litigation. (a) Except as disclosed in Schedule 4.11, none of the
Transferring Parties has received any written material allegation or charge and
there is no action, order, writ, injunction, judgment or decree outstanding or
any claim, suit, litigation, proceeding, labor dispute, arbitration,
governmental audit or investigation (collectively, "Actions") of any nature,
civil, criminal, regulatory or otherwise, in law or in equity, pending or, to
the knowledge of Sellers, threatened, against or affecting any Transferring
Party relating to their Operations, before or by any federal, state, municipal
or other governmental or nongovernmental department, commission, board, bureau,
agency, court or other instrumentality, or by any private person or entity; and
(b) there is no Action or proceeding pending to which any Transferring Party is
a party or, to the knowledge of Sellers, threatened, before a court or other
Governmental Authority to restrain, prohibit or otherwise challenge the
transactions contemplated by this Agreement or any of the other Transaction
Documents, nor has any governmental or quasi-governmental agency or regulatory
body notified in writing any Transferring Party that the consummation of the
transactions contemplated hereby or by the other Transaction Documents would
constitute a violation of the laws of the United States or the laws of the
jurisdiction to which such court or governmental or quasi-governmental agency or
regulatory body is subject or that it intends to commence proceedings to
restrain the consummation of such transactions, to force divestiture if the same
are consummated, or to modify the terms or results of such transactions.
4.12 Liabilities. To the knowledge of Sellers, there are no material
liabilities, obligations or commitments of any nature (whether absolute or
contingent, liquidated or unliquidated, due or to become due, accrued or
unaccrued, matured or unmatured) relating to their Operations, other than (a)
liabilities which are reflected and reserved against in the Balance Sheet which
have not been paid or discharged since the date thereof, (b) liabilities arising
under any Contracts, Permits, and other commitments, obligations and matters
described in the Seller Disclosure Schedules in accordance with their terms (and
under those Contracts which are not required to be disclosed on the Seller
Disclosure Schedules), and (c) liabilities incurred since the Balance Sheet Date
in the ordinary course of business. Schedule 4.12 accurately and completely
lists on a loan by loan basis: (i) the outstanding principal balance of the
Transferred Indebtedness as of June 30, 1998, (ii) the interest rate borne by
the Transferred Indebtedness, (iii) the maturity date of the Transferred
Indebtedness and (iv) any right of any lender of any of the Transferred
Indebtedness to participate in any sale or refinancing proceeds relating to any
of the properties identified on Schedules 4.4(a)(1) and 4.4(a)(2). Sellers have
discharged or otherwise made provisions to discharge or bond over those
Permitted Encumbrances consisting of Encumbrances of carriers, warehousemen,
mechanics and materialmen (other than with respect to the Construction Property
and unfiled mechanics liens for work with respect to which payment will be made
in the ordinary course).
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4.13 Compliance with Applicable Law. Except as set forth on Schedule 4.13,
since June 1997, neither the conduct of their Operations nor the ownership,
operation, lease, use, maintenance or condition of any of the properties and
assets of any Transferring Party (including all or any portion of the Real
Property) has violated, in any material respect, any applicable federal, state,
local or other laws, statutes, ordinances, regulations (including, without
limitation, any laws or regulations relating to zoning, immigration,
discrimination, leasing (including, without limitation, requirements as to rent
and tenant mix), labor or employment practices), or any applicable order, writ,
injunction or decree of any court, commission, board, bureau, agency,
instrumentality or other Governmental Authority (collectively, "Laws"). No
representation or warranty is made in this Section 4.13 with respect to
compliance with laws, statutes, ordinances, regulations or rules relating to the
matters covered in Section 4.8 ("Environmental Matters").
4.14 No Brokers. Except as set forth on Schedule 4.14, none of any Seller
nor any Transferring Party has employed or made any agreement with any broker,
finder or similar agent or any Person or firm which will result in the
obligation of Buyers or any of Buyers' Affiliates to pay any finder's fee,
brokerage fees or commission or similar payment in connection with the sale of
the Acquired Equity Interests or the Contributed Assets to Buyers as
contemplated hereby.
4.15 Labor Matters. Except as set forth on Schedule 4.15:
(a) No Transferring Party is a party to any labor or collective
bargaining agreement applicable to their Operations and there are no labor or
collective bargaining agreements which pertain to any of the employees of any
Transferring Party and which is applicable to their Operations.
(b) There are no strikes, work stoppages, slowdowns, lockouts,
arbitrations or grievances or other labor disputes pending or, to the knowledge
of Sellers, threatened, against or involving any Transferring Party applicable
to their Operations. There are no unfair labor practice charges, grievances or
complaints pending or, to the knowledge of Sellers, threatened by or on behalf
of any employee or group of employees of any Transferring Party applicable to
their Operations.
(c) There are no complaints, charges or claims against any
Transferring Party pending or threatened, with any public or Governmental
Authority applicable to their Operations, based on, arising out of, in
connection with, or otherwise relating to the employment or termination of
employment by such Transferring Party, of any individual.
(d) Each Transferring Party is in compliance, in all material
respects, with all applicable Laws, regulations and orders relating to the
employment of labor, including all such Laws, regulations and orders relating to
wages, hours, WARN, collective bargaining, discrimination, civil rights, safety
and health, workers' compensation and the collection and payment of withholding
and social security taxes and any similar Tax, in each case, with respect to
their Operations.
(e) There are not employees or former employees of any Transferring
Party absent from work on a leave of absence, leave under the Family and Medical
Leave Act (or any state or local ordinance providing similar reinstatement
rights), or military service who would be entitled to reinstatement upon
application to Buyers at the conclusion of such leave.
4.16 ERISA. Except as set forth on Schedule 4.16:
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(a) As of the Closing, no Seller or Transferring Party will maintain
any Plan (other than the insured group health Plans maintained by Atlantic
American Properties Management II, Inc. as in effect on the date of this
Agreement) under which Buyers would have any obligation or liability
post-Closing. No Seller or Transferring Party maintains, contributes to or has
any liability (whether direct or indirect, including, without limitation, as a
result of an indemnification obligation) under, or with respect to, and no ERISA
Affiliate has any liability which has or will create any material obligation by,
or result in any liability to, Buyers with respect to or under, any Plan. No
liability (whether direct or indirect, including, without limitation, as a
result of an indemnification obligation) with respect to any Plan has been or is
expected to be incurred by any Seller, any Transferring Party, any ERISA
Affiliate or their Operations under or pursuant to Title I or IV of ERISA or the
penalty, excise tax or joint and several liability provisions of the Code
relating to employees and employee compensation and employee benefit plans that
could, following the Closing, become or remain a liability of their Operations
or Buyers or of any employee compensation arrangement or employee benefit plan
established or contributed to by Buyers, and, except as otherwise provided
herein, no event, transaction or condition has occurred or exists that could
result in any such liability to their Operations or, following the Closing,
Buyers.
(b) Neither the execution and delivery by each Seller of this
Agreement and the other Transaction Documents to which each of them is a party
and the consummation by each Seller of the transactions contemplated by the
foregoing will result in the acceleration or creation of any rights of any
Person to benefits under any Plan (including, without limitation, the
acceleration of the vesting or exercisability of any stock options or restricted
stock, the acceleration of the accrual or vesting under any Plan or the
acceleration or creation of any right under any severance, parachute or change
in control agreement) which could result in a liability to Buyers.
(c) There is no action, order, writ, injunction, judgment or decree
outstanding or claim, suit, litigation, proceeding, arbitration, governmental
audit or investigation relating to or seeking benefits under any Plan that is
pending or, to the knowledge of Sellers, threatened or anticipated against any
Seller, any Transferring Party, any ERISA Affiliate or any Plan (other than
claims for benefits in the ordinary course).
(d) Except pursuant to Section 9.7, neither any provision of any Plan
or Contract (whether or not written), nor any transaction, condition or other
event exists or has occurred that would require either Buyer, the Acquired
Entity or the Acquired Subsidiary to provide any compensation, payments or
benefits (including severance payments) to or on behalf of any former or current
employee of any Transferring Party.
(e) None of the assets to be acquired by Buyers constitute assets of
an employee benefit plan which would result in any portion of the transactions
contemplated hereby constituting a "prohibited transaction" within the meaning
of ERISA or the Code.
(f) Notwithstanding anything to the contrary in this Agreement, Buyers
shall have no obligation to hire any Seller or Transferring Party employees.
4.17 Tax Matters. Except as disclosed on Schedule 4.17:
(a) All Tax Returns required to be filed by the Acquired Entity prior
to the Closing Date have been or will be filed (or caused to be filed) on a
timely basis (taking into account any extensions of time) and all Taxes shown to
be due thereon have been or will be paid (or cause to be paid) or shown as a
liability
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on the Balance Sheet, except to the extent such Taxes are being contested in
good faith by appropriate proceedings and are disclosed on Schedule 4.17.
(b) Sellers have no knowledge of any dispute or claim reasonably
likely to involve more than $250,000 that is currently pending with any taxing
authority in connection with any Tax Return of the Acquired Entity. Except as
disclosed on Schedule 4.17, no waivers of statutes of limitation with respect to
any such Tax Returns have been given by or requested from the Acquired Entity.
Except to the extent shown on the Seller Disclosure Schedules, all deficiencies
asserted or assessments made as a result of any examinations have been fully
paid, or are fully reflected as a liability in the financial statements of the
Acquired Entity, or are being contested and an adequate reserve therefor has
been established and is reflected on the Balance Sheet.
(c) After the Closing, none of the Acquired Entity or any Acquired
Subsidiary will be a party to or bound by (nor will any such Acquiring Entity or
Acquiring Subsidiary become a party to or bound by) any tax-sharing or
tax-allocation agreement by virtue of any agreement or understanding (other than
this Agreement) which existed prior to the Closing Date, and, as of the Closing
Date, such Acquiring Entity or Acquiring Subsidiary will have complied with all
such tax-sharing or tax-allocation agreements and all amounts required to be
paid by any Acquiring Entity or Acquiring Subsidiary pursuant to any such
agreement will have been paid.
(d) AAPT intends to make a valid election to be treated as a "real
estate investment trust" for U.S. federal income tax purposes within the meaning
of Section 856(a) of the Code, commencing with its taxable year ended on
December 31, 1997.
(e) Commencing with its taxable year ended December 31, 1997 and
through the date of this Agreement, AAPT has at all times satisfied the
requirements for qualification as a "real estate investment trust" (within the
meaning of Section 856(c) of the Code) for purposes of Section 856-860 of the
Code.
(f) Each of any Acquired Subsidiary that is organized as a
partnership or limited liability company will be treated as a partnership and
not as an association taxable as a corporation or a publicly traded partnership
for federal income tax purposes.
(g) At least 75 percent of the gross income of AAPT for the year ended
December 31, 1997 was derived and is expected to be derived for the Pre-Closing
Partial Period from sources specified in Code Section 856(c)(3). These sources
include but are not limited to (a) rents from the Specified Projects or other
commercial real estate properties to be acquired in the future, (b) gain from
the sale or other disposition of all or a portion of the Specified Projects or
other commercial real estate properties acquired in the future (including
interests in real property and interests in mortgages on real property), other
than property that is stock in trade of AAPT or other property which would
properly be included in the inventory of AAPT if on hand at the close of its
taxable year, or property held by AAPT primarily for sale to customers in the
ordinary course of its trade or business (collectively, "Dealer Property') (as
further described in Paragraph (l) below) and (c) income attributable to stock
or debt instruments acquired in connection with the temporary investment of new
capital received by AAPT in exchange for its shares of beneficial interest or in
a public offering of its debt obligations having maturities of at least five
years, provided that such income is received or accrued during the one-year
period beginning on the date on which AAPT receives such new capital (such
source income is hereafter referred to as the "Temporary Investment of New
Capital"). For purposes of all representations with respect to income contained
herein, AAPT shall be treated as receiving (i) a proportionate
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share of all income received by the transparent and subsidiary partnerships in
accordance with AAPT's capital interest ("Capital Interest") in transparent and
subsidiary partnership interest, and (ii) all income received by any wholly
owned corporate subsidiary in which AAPT has owned 100 percent of the stock at
all times during the period of such wholly owned corporate subsidiary's
existence.
(h) At least 95 percent of the gross income of AAPT for calendar year
ended December 31, 1997 was derived and is expected to be derived for the
Pre-Closing Partial Period from sources specified in Code Section 856(c)(2).
These sources include those specified in Code Section 856(c)(3), as described in
Paragraph (g) above, plus interest and dividends from any source and gain from
the sale or disposition of stock or securities other than Dealer Property.
(i) For tax years beginning before January 1, 1998, less than 30
percent of the gross income of AAPT for each taxable year was derived from the
sale or other disposition of (a) stock or securities held for less than one
year, (b) property in a transaction that is a prohibited transaction (as defined
in Code Section 857(b)(6)(B)(iii)), and (c) real property (including interests
in real property and interests in mortgages on real property held for less than
four years, other than property compulsorily or involuntarily converted within
the meaning of Code Section 1033, and property acquired by AAPT through
foreclosure and which satisfies the requirements set forth in Code Section
856(e).
(j) AAPT, the transparent and subsidiary partnerships, and wholly
owned corporate subsidiaries have held all of the Specified Projects and other
commercial real estate properties (and all of their other respective assets) for
investment purposes and not as (a) stock in trade or other property of a kind
which would properly be included in inventory if on hand at the close of the
taxable year, or (b) property held primarily for sale to customers in the
ordinary course of the trade or business of AAPT, transparent and subsidiary
partnerships, and wholly owned corporate subsidiaries, as the case may be, and
that the amount of income from prohibited transactions (within the meaning of
Code Section 857(b)(6)(B)(iii)), if any, for either the calendar year ended
December 31, 1997 or the Pre-Closing Partial Period will not be material.
(k) AAPT, the transparent and subsidiary partnerships, a wholly owned
corporate subsidiaries do not own more than 10 percent of the voting stock
interest of any corporation other than a "qualified REIT Subsidiary" within the
meaning of Code Section 856(i). AAPT intends to take all necessary measures to
ensure that the stock interest owned by AAPT, transparent and subsidiary
partnerships and wholly owned corporate subsidiaries, in any such corporation
will not exceed 10 percent of the voting securities of such corporation and that
the value of the stock interest will not exceed 5 percent of the value of AAPT's
total assets.
(l) With respect to the gross income tests described in Paragraphs (g)
and (h) above:
(i) None of the rents received by AAPT, the transparent and
subsidiary partnerships, and wholly owned corporate subsidiaries under their
existing leases is based on the net income or profits of any person, including
any tenants at any of the Properties (the "Lessee") and any subtenants thereof,
which would cause AAPT to fail to satisfy the gross income tests described in
Paragraphs (g) and (h) above.
(ii) AAPT does not own, directly or indirectly, 10 percent or
more within the meaning of Code Section 856(d) of the beneficial interests in
any Lessee, which would cause AAPT to fail to
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satisfy the gross income tests described in Paragraphs (g) and (h) above. In
determining ownership, the attribution rules of Code Section 318 (as modified by
Code Section 856(d)(5)) will be taken into account.
(iii) AAPT is not a party to a lease of real property where the
rent under such lease attributable to personal property is greater than 15
percent of the total rent to be received under the lease to the extent that such
rental would cause AAPT to fail to satisfy the gross income tests described in
Paragraphs (g) and (h) above.
(iv) Except as provided in the next sentence, neither AAPT,
transparent and subsidiary partnerships, or wholly owned subsidiaries furnish or
provide any services ("Non REIT Services") to a Lessee other than services that
are usually and customarily rendered in connection with the rental space or
occupancy only and are not otherwise considered rendered to the Lessee. To the
extent that AAPT has rendered any Non REIT Services to the Lessees, either
directly or through the transparent and subsidiary partnership, or wholly owned
corporations, AAPT has retained an independent contractor within the meaning of
Code Section 856(d)(3) (from whom none of AAPT, the transparent and subsidiary
partnerships, or wholly owned corporate subsidiaries will derive or receive any
income) to furnish or perform such services and such services are customary for
the geographic market in which they have been provided so that AAPT has not
failed to satisfy the gross income tests described in Paragraphs (g) and (h)
above.
(v) AAPT, the transparent and subsidiary partnerships, and the
wholly owned corporations have kept sufficient records to enable AAPT to make
the filings required under Treas. Reg. section 1.856-4(b)(4) (relating to the
receipt of rents from any person in which AAPT, directly or indirectly, owns any
proprietary interest) and Treas. Reg. section 1.856.4 (b)(5)(iv) (relating to
the use of unrelated independent contractors), and AAPT has made such required
filings.
(m) AAPT has exercised ordinary business care and prudence in
attempting to comply with the gross income tests set forth in Code Section
856(c).
(n) At least 75 percent of the value of the total gross assets of AAPT
has consisted, at the close of each quarter of each taxable year of AAPT, of (a)
cash and cash items (including receivables), (b) Government securities, (c) the
Specified Projects, (d) other commercial real estate properties acquired in the
future (including interests in real property and interests in mortgages on real
property), (e) shares (or transferable certificates of beneficial interest) in
other qualified real estate investment trusts, and (f) stock or debt instruments
acquired in connection with the Temporary Investment of New Capital received by
AAPT in exchange for its capital stock or in a public offering of its debt
obligations having maturities of at least five years, and held for not longer
than the one-year period beginning on the date on which AAPT receives such new
capital. For purposes of all representations with respect to assets contained
herein, AAPT is treated as owning, (i) its proportionate share of assets owned
by any transparent and subsidiary partnership in which AAPT directly owns an
interest (as determined in accordance with AAPT's directly owned Capital
Interest in such transparent and Subsidiary Partnership), and (ii) the assets of
any wholly owned corporation in which AAPT owns 100 percent of the stock and the
direct interests in such entities are not treated as "securities."
(o) Not more than 25 percent of the value of its total assets has
consisted, at the close of each quarter of each taxable year of AAPT, of
securities (other than Government securities and securities described in items
(e) and (f) of Paragraph (n) above or the last sentence of Paragraph (n) above),
limited in respect of any one issuer to an amount not greater than 5 percent of
the value of the total assets of AAPT and to not more than 10 percent of the
outstanding voting securities of such issuer.
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(p) AAPT, the transparent and subsidiary Partnerships, awholly owned
corporate subsidiaries have revalued their assets at the end of each quarter of
each taxable year (if any) in which securities of another issuer (other than a
REIT or a qualified REIT subsidiary or an entity taxed as a Partnership for
federal income tax purposes) were acquired by any such entity, respectively, and
eliminated within 30 days after the end of each such quarter any discrepancy
between the value of AAPT's various investments and the requirements of the 75
percent and 25 percent asset tests described in Paragraphs (n) and (o) above,
respectively, to the extent such discrepancy is attributable in whole or in part
to acquisitions during such quarter.
(q) AAPT has kept and has retained sufficient records so as to be able
to show that AAPT has complied during each of its taxable years with the asset
tests contained in Code Section 856(c)(5) and described in Paragraphs (n) and
(o) above.
(r) AAPT has exercised ordinary business care and prudence in
attempting to comply with the asset tests set forth in Code Section 856(c)(5).
(s) AAPT has distributed in calendar year 1997 to its stockholders an
amount equal to at least 95 percent of its real estate investment trust taxable
income (as defined in Code Section 857(b)(2) and as determined without regard to
the deduction for dividends paid and by excluding any net capital gain) plus 95
percent of the excess of AAPT's net income from foreclosure property, if any,
over the tax imposed on such income by Code Section 857(b)(4)(A), less any
excess noncash income (within the meaning of Code Section 857(e)).
(t) AAPT has taken all necessary measures within its control to avoid
the imposition of the 4 percent excise tax pursuant to Code Section 4981 for the
year ended December 31, 1997. The excise tax is imposed on AAPT if it does not
distribute to its stockholders by the end of each calendar year (or by January
31 of the following calendar year in connection with a dividend declared in
October, November or December to shareholders of record in such a month) an
amount equal to at least the sum of (i) 85 percent of AAPT's ordinary income for
such calendar year, (ii) 95 percent of AAPT's capital gain net income for such
calendar year, and (iii) any undistributed ordinary income or capital gain net
income from prior years.
(u) The distributions by AAPT have been made pro rata, with no
preference to any share as compared with other shares of the same class.
(v) AAPT has demanded by January 30, 1998 for the year ended December
31, 1997 written statements (the "Written Statements") with respect to ownership
of shares of AAPT's stock, from those stockholders (if any) determined as
follows: (i) if AAPT has 200 or less stockholders of record of its shares of
stock on any dividend record date, demands shall be made of each record holder
holding of record one-half of one percent or more of the shares of any class of
its stock; (ii) if AAPT has between 201 and 1,099 stockholders of record of its
shares of stock on any dividend record date, demands shall be made of each
record holder holding of record one percent or more of the shares of any class
of its stock; and (iii) if AAPT has 2,000 or more stockholders of record of its
shares of stock on any dividend record date, demands shall be made of each
record holder holding of record five percent or more of the shares of any class
of its stock. AAPT has requested that the Written Statements (a) disclose the
actual ownership of the shares of stock held by AAPT's stockholders of record of
whom demand was made, and (b) show the maximum number of shares of AAPT's stock
actually or constructively (through application of the attribution rules of
Section 544, as modified by Code Section 856(h)(1)(B)) owned by each of the
actual owners of AAPT's shares of stock identified in the
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Written Statements at any time during the last half of AAPT's immediately
preceding taxable year. AAPT has maintained copies of the Written Statements, as
part of the permanent records of AAPT within the Internal Revenue District in
which AAPT is required to file its tax return, and has kept the Written
Statements at all times available for inspection by any internal revenue
officer or employee.
4.18 Capitalization. (a) The authorized, issued and outstanding Equity
Interests in the Acquired Entity and each Acquired Subsidiary is set forth on
Schedule 4.18. With respect to such Equity Interests, Sellers make the following
representations and warranties:
(i) Such Equity Interests are owned, beneficially and of record by
the Persons specified on Schedule 4.18 in each case free and clear of all
Encumbrances;
(ii) All of the outstanding Equity Interests or interests of each of
such Persons has been validly issued, is free from preemptive rights and, in the
case of corporations, fully paid and non-assessable;
(iii) Except as set forth on Schedule 4.18, there is no existing
option, warrant, call, right, commitment, subscription, instrument or other
agreement of any character requiring or relating to, and there are no securities
outstanding which upon conversion or exchange would require or relate to, the
issuance, sale, purchase, redemption or transfer of any Equity Interests in the
Acquired Entity or any Acquired Subsidiary or other securities convertible into,
exchangeable for or evidencing the right to subscribe for or purchase any Equity
Interests in any such Person; and
(iv) Except as set forth on Schedule 4.18, there is no voting trust
or other voting agreement with respect to the Acquired Entity or any Acquired
Subsidiary or any agreement (other than the Transaction Documents) relating to
the issuance, sale, redemption, transfer or other disposition of the Equity
Interests in any such Person.
(b) Each of the partnership agreements governing the Partially Owned
Partnerships, each as amended up through the date hereof, are in full force and
effect as of the date hereof and true and correct copies of such partnership
agreements and the amendments thereto have been delivered to Buyers. Schedule
4.18 accurately and completely sets forth the percentage interest owned,
directly or indirectly, by AAPT or a CAP Seller, as applicable in each Partially
Owned Partnership as of the date hereof. All interests of Sellers, and to
Sellers' knowledge, all interest of other Persons, in the Partially Owned
Partnerships have been duly authorized and validly issued and are fully paid and
non-assessable, free and clear of all Encumbrances except as set forth in
Schedule 4.18. As of the date hereof, the capital accounts of the partners in
each of the Partially Owned Partnerships are set forth on Schedule 4.18 and no
partner has been asked to make a capital contribution to either of the Partially
Owned Partnerships other than contributions that have been made in full as of
the date hereof. Sellers have no reason to believe that additional capital calls
will be made under the partnership agreements relating to either of the
Partially Owned Partnership. Sellers have no knowledge of a breach by any
partner of its obligations under the partnership agreements of either of the
Partially Owned Partnerships.
4.19 Securities Laws Matters. Each of the Sellers (a) is acquiring the
Preferred Shares and Preferred Units contemplated hereby solely for the purpose
of investment and not with a view to, or for resale in connection with, any
distribution thereof in violation of the Securities Act, (b) has had the
opportunity to ask questions of the officers and trustees of, and has had access
to information concerning Buyers and their business, (c) is an "accredited
investor" as defined in Rule 501(a) under the Securities Act, (d) has such
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knowledge, sophistication and experience in business and financial matters so as
to be capable of independently evaluating the merits and risks of the investment
and the consummation of the transactions contemplated hereby, (e) has so
evaluated the merits and risks of such investment and the consummation of the
transactions contemplated hereby, (f) is able to bear the economic risk of such
investment, (g) has reviewed Buyer Parent's filings with the SEC, (h) is able to
afford complete loss of such investment, and (i) acknowledges that the
certificates evidencing the Preferred Shares and Preferred Units, and the
certificates evidencing the common shares of beneficial interest of Buyer Parent
issuable upon redemption or conversion thereof, shall bear a legend indicating
that such securities have not been registered under the Securities Act or any
applicable state securities laws and the transferability thereof is subject to
compliance with the Securities Act and applicable state securities laws and (j)
represents that it is making an investment in the Preferred Shares and Preferred
Units without the influence of any general advertising or general solicitation
by Buyers. Sellers will not, directly or indirectly, offer, transfer, sell,
assign, pledge, hypothecate or otherwise dispose of all or any part of such
Preferred Shares, Preferred Units or common shares of beneficial interest of
Buyer Parent issuable upon conversion or redemption thereof (or solicit any
offers to buy, purchase, or otherwise acquire such Preferred Shares, Preferred
Units or common shares of beneficial interest of Buyer Parent issuable upon
conversion or redemption thereof), except in compliance with the Securities Act.
Sellers are residents of the states identified beside their names on Schedule
4.19. Sellers further acknowledge that common shares of beneficial interest of
Buyer Parent issuable upon conversion or redemption of Preferred Shares and
Preferred Units are to be issued in a transaction exempt from registration under
Section 5 of the Securities Act by virtue of Section 4(2) of the Securities Act
and agree not to take actions that would make such exemption unavailable. None
of the Sellers holds more than 4.99% of the outstanding common shares of
beneficial interest of Buyer Parent.
4.20 Disclaimer. Except as set forth in this Article 4, no Seller is
making any representations or warranties of any kind whatsoever, whether
express, implied or statutory, as to any matters concerning the assets to be
transferred pursuant hereto (including, without limitation, the Transferring
Parties), the Sellers' and the Transferring Parties' Books and Records, their
Operations or the Real Property. Buyers and their Affiliates specifically
acknowledge and agree that they have been given a full opportunity to examine
the Sellers' and the Transferring Parties' Books and Records (other than
Privileged Materials), their Operations and Real Property and, except as set
forth in this Agreement (including the representations and warranties set forth
in this Article 4 and the indemnification provisions relating thereto as to
which Buyers are expressly relying upon in connection with the execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby), are relying upon their own independent
investigation and analysis of the Sellers' and the Transferring Parties' Books
and Records (other than Privileged Materials), their Operations and Real
Property as they deem necessary or appropriate.
4.21 [Intentionally Deleted].
4.22 Transaction with Affiliates. Except as set forth on Schedule 4.22, no
Affiliate of any of the Sellers is a party to any contract, agreement or
arrangement with the Acquired Entity or any Acquired Subsidiary that relates to
the AAPT Operations, including, without limitation, any contract, agreement or
other arrangement providing for the furnishing of services by, or the rental or
use of real or personal property from, any such party or any entity in which
such party has a substantial interest other than Tenant Leases and other than
the lease in which the Acquired Entity or the Acquired Subsidiaries is the
tenant.
4.23 Insurance. Schedule 4.23 sets forth a complete and accurate list of
all insurance policies and fidelity and other bonds (showing as to each policy
or bond the carrier or issuer, identifying number, coverage
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limits, expiration date and a general description of the type of coverage
provided) maintained by the Transferring Parties (with respect to their
respective Operations). All of such insurance policies are in full force and
effect, and none of the Transferring Parties is in material default with respect
to its obligations under any of such insurance policies, including the
obligation to pay any premium or make any other payment necessary or appropriate
to maintain such coverage in full force and effect. Such insurance provides
coverage which is of the type and amounts customarily carried by Persons
conducting businesses similar to the Sellers' respective Operations and as
otherwise may be required by law and by any and all Material Contracts. Except
as set forth in Schedule 4.23, there is no claim pending under any of such
policies or bonds as to which coverage has been denied or disputed by the
underwriters of such policies or bonds, or in respect of which such underwriters
have reserved their rights, and there have not been any such claims within the
last year. All such policies or comparable policies shall be kept in full force
and effect through the Closing.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF BUYERS
As an inducement to Sellers to enter into this Agreement, Buyer Parent
and Buyer OP, jointly and severally, make, as of the date hereof, the following
representations and warranties to each Seller, except as otherwise set forth in
the written schedules to this Agreement (the "Buyer Disclosure Schedules")
executed by Buyers and delivered to Sellers on or prior to the date hereof, a
copy of which is included herewith, which set forth the exceptions to the
representations and warranties contained in this Article 5 and certain other
information called for by this Agreement (unless otherwise specified, (1) each
reference in this Agreement to any numbered schedule is a reference to that
numbered schedule which is included in the Buyer Disclosure Schedules and (2) no
disclosure made in any particular numbered schedule of the Buyer Disclosure
Schedules shall be deemed made in any other numbered schedule of the Buyer
Disclosure Schedules unless expressly made therein (by cross-reference or
otherwise).
5.1 Organization of Buyers/Subsidiaries. Buyers and each of their
Subsidiaries (each of which are identified in Schedule 5.1(a)) (a) is a trust,
corporation, limited liability company or partnership duly organized, or formed,
as the case may be, validly existing and in good standing under the laws of its
state of incorporation or formation, (b) is duly qualified as a foreign trust,
corporation, limited liability company or partnership in good standing under the
laws of each jurisdiction set forth on Schedule 5.1(a), and there are no
additional jurisdictions where its ownership or lease of real property or the
conduct of its business requires such qualification and the failure to be so
qualified would reasonably be expected to result in a material adverse effect on
such trust, corporation, limited liability company or partnership, (c) has the
requisite trust, corporate, limited liability company or partnership power and
authority and the legal right to own, transfer, pledge, mortgage or otherwise
encumber and operate its properties, to lease the property it operates under
lease and to conduct its business as now being conducted, except to the extent
it would not, individually or in the aggregate, reasonably be expected to result
in a material adverse effect, and (d) is in compliance with its declaration of
trust, certificate or articles of incorporation, bylaws, limited liability
company certificate and agreement, certificate of limited partnership or
partnership agreement, as applicable, except to the extent such non-compliance
with organizational documents is identified on Schedule 5.1(a). Buyers have
furnished to Sellers true and complete copies of their Declaration of Trust,
By-laws, Certificate of Limited Partnership and the Buyer Partnership Agreement,
as applicable, as amended or supplemented to the date of this Agreement.
5.2 Power; Authorization; Enforceable Obligations. The execution, delivery
and performance by Buyers of this Agreement, the other Transaction Documents to
which it is a party and all instruments and
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documents to be delivered by it on the Closing Date, and the consummation by
Buyers of the transactions contemplated by the foregoing (a) are within Buyers'
trust or limited partnership power, as applicable, (b) have been duly authorized
by all necessary action of Buyers, (c) are not and will not be in contravention
of Buyers' Declaration of Trust, By-laws and the Buyer Partnership Agreement or
other governing documents, (d) do not and will not conflict with or violate any
law or regulation, or any judgment, order or decree of any court or other
Governmental Authority applicable to Buyers or any of their Subsidiaries, (e)
will not conflict with or result in the material breach or termination of,
result in the loss of material rights or benefits under, constitute a material
default under, accelerate any performance required by or give rise to any
obligation to purchase or repurchase any Indebtedness under any Material
Contract to which Buyers or any of their Subsidiaries is a party or by which
Buyers or any of their Subsidiaries is bound, except as disclosed in
Schedule 5.2, (f) will not result in the creation or imposition of any
Encumbrance upon any of the property of Buyers or any of their Subsidiaries and
(g) except for the filing of a Supplemental Listing Application with the New
York Stock Exchange covering common shares of beneficial interest of Buyer
Parent issuable upon redemption or exchange of Preferred Shares or Preferred
Units and except for the filing by Buyers of a Current Report on Form 8-K with
the SEC in connection with the transactions contemplated hereby, do not and will
not require on the part of Buyers or any of their Subsidiaries the consent or
approval of, or any filing with or other notification of, any Governmental
Authority, any holder of Indebtedness or any other Person. This Agreement has
been, and at or prior to the Closing Date, each of the other Transaction
Documents to which Buyers are a party shall have been, duly executed and
delivered by Buyers. This Agreement constitutes (and from and after the Closing
Date each Transaction Document to which Buyers are a party shall constitute) a
legal, valid and binding obligation of Buyers, enforceable against Buyers in
accordance with its terms (subject to applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and similar laws affecting
creditors' rights and remedies generally, and subject, as to enforceability, to
judicial discretion and general principles of equity, including principles of
commercial reasonableness, good faith and fair dealing (regardless of whether
enforcement is sought in a proceeding at law or in equity)).
5.3 Capitalization. Upon the issuance of the Preferred Shares and the
Preferred Units pursuant to this Agreement and assuming Buyer Parent does not
issue additional shares of beneficial interest and Buyer OP does not issue
additional partner interests between the date hereof and the Closing Date, the
authorized, issued and outstanding interests in Buyers shall be as set forth on
Schedule 5.3. All such outstanding interests have been offered and sold in
compliance with all applicable laws (including, without limitation, Federal and
state securities laws). Nothing in this Agreement shall restrict the ability of
Buyer Parent to issue additional shares of beneficial interest or Buyer OP to
issue additional partner interests.
5.4 Valid Issuance of Preferred Shares and Preferred Units. The Preferred
Shares being issued to AAPT Seller and the Preferred Units being issued to CAP
Sellers hereunder each, when issued, sold and delivered in accordance with the
terms hereof for the consideration set forth herein, shall be duly and validly
issued, fully paid and nonassessable and free and clear of any Encumbrances of
any kind whatsoever, other than Encumbrances imposed by the Securities Act and
applicable state securities laws.
5.5 No Registration Under the Securities Act. Assuming the continuing
accuracy of AAPT Seller's and CAP Sellers' representations set forth in Section
4.19 and compliance by each CAP Seller with any transfer restrictions set forth
in the Buyer Partnership Agreement or in the legends on the certificates
evidencing the Preferred Shares and the Preferred Units, the offer, sale and
delivery of the Preferred Shares or the Preferred Units by Buyers to AAPT Seller
and CAP Sellers, respectively, in the manner contemplated by this Agreement will
be exempt from the registration requirements of Section 5 of the Securities Act.
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5.6 No Litigation. (a) There is no injunction, writ, preliminary
restraining order or other order in effect or, to the knowledge of Buyers,
threatened, of any nature issued by a court or other Governmental Authority of
competent jurisdiction directing that the transactions provided for herein and
in the other Transaction Documents to which either Buyer is a party not be
consummated as provided herein; and (b) there is no action or proceeding pending
or, to the knowledge of Buyers, threatened, before a court or other Governmental
Authority to restrain, prohibit or otherwise challenge the transactions
contemplated by this Agreement or any of the other Transaction Documents (or
seeking substantial damages from Buyers or any of their Affiliates as a result
thereof), nor has any governmental or quasi-governmental agency or regulatory
body notified Buyers that the consummation of the transactions contemplated
hereby or by the other Transaction Documents would constitute a violation of the
laws of the United States or the laws of the jurisdiction to which such court or
governmental or quasi-governmental agency or regulatory body is subject or that
it intends to commence proceedings to restrain the consummation of such
transactions, to force divestiture if the same are consummated, or to modify the
terms or results of such transactions.
5.7 No Brokers. Except as set forth on Schedule 5.7, neither Buyer nor any
of their officers, trustees, employees, shareholders, partners or Affiliates has
employed or made any agreement with any broker, finder or similar agent or any
Person or firm which will result in the obligation of Sellers or any of Sellers'
Affiliates to pay any finder's fee, brokerage fees or commission or similar
payment in connection with the transactions contemplated hereby.
5.8 Investment Intention of Buyers. Each Buyer (a) is acquiring the
Acquired Equity Interests pursuant to Article 2 of this Agreement solely for the
purpose of investment and not with a view to, or for resale in connection with,
any distribution thereof in violation of the Securities Act, (b) has had the
opportunity to ask questions of the officers and directors of, and has had
access to information concerning Sellers, the Acquired Entity, the Acquired
Subsidiaries, and their Operations, (c) is an "accredited investor" as defined
in Rule 501(a) under the Securities Act, (d) has such knowledge, sophistication
and experience in business and financial matters so as to be capable of
independently evaluating the merits and risks of the investment and the
consummation of the transactions contemplated hereby, (e) has so evaluated the
merits and risks of such investment and the consummation of the transactions
contemplated hereby, (f) is able to bear the economic risk of such investment
and (g) is able to afford complete loss of such investment. Neither Buyer will,
directly or indirectly, offer, transfer, sell, assign, pledge, hypothecate or
otherwise dispose of all or any part of such Acquired Equity Interests (or
solicit any offers to buy, purchase, or otherwise acquire such Acquired Equity
Interests), except in compliance with the Securities Act, it being acknowledged
that immediately after the Closing, Buyer Parent shall transfer the AAPT Equity
Interests acquired by it to Buyer OP.
5.9 Financing. Buyers have received commitment letters dated July 30, 1998
from NationsBank, N.A. and NationsBanc Mortgage Capital Corp. pursuant to which
such lenders have committed to provide Buyers with funds to enable Buyers to
purchase the Acquired Equity Interests and the Contributed Assets and pay the
AAPT Purchase Price and the CAP Consideration to Sellers.
5.10 Purchase Price Not Assets of Employee Benefit Plan. No portion of the
AAPT Purchase Price constitutes assets of an employee benefit plan which would
result in any portion of the transactions contemplated hereby constituting a
"prohibited transaction" within the meaning of ERISA or the Code.
5.11 [Intentionally Deleted.]
5.12 [Intentionally Deleted.]
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5.13 Net Worth. Each Buyer has a Consolidated Net Worth of at least
$25,000,000.
5.14 Real Estate Investment Trust. Buyer Parent made a valid election to be
treated as a "real estate investment trust" for U.S. federal income tax
purposes, within the meaning of Section 856(a) of the Code, commencing with its
taxable year ended on December 31, 1986, and has at all times so qualified.
5.15 Financial Statements. The audited combined financial statements for
the year ended December 31, 1997 and the unaudited combined financial statements
for the three months ended March 31, 1998 (collectively, the "Buyer Financial
Statements") have been provided to Sellers and the Buyer Financial Statements
fairly present the financial position of Buyers and their Subsidiaries on a
consolidated basis as of the respective dates, and the results of operations and
changes in financial position and cash flows for the respective periods,
indicated therein, in accordance with GAAP applied on a basis consistent with
prior accounting periods (except as may be stated in the notes thereto).
5.16 Liabilities. To the knowledge of Buyers, there are no material
liabilities, obligations or commitments of any nature (whether absolute or
contingent, liquidated or unliquidated, due or to become due, accrued or
unaccrued, matured or unmatured) relating to their Operations, other than (a)
liabilities which are reflected and reserved against in the balance sheet that
is a part of the Buyer Financial Statements which have not been paid or
discharged since the date thereof, (b) liabilities arising under any Contracts,
Permits, and other commitments described in the Buyer Disclosure Schedules (and
under those Contracts which are not required to be disclosed on the Buyer
Disclosure Schedules), (c) liabilities incurred since the Balance Sheet Date in
the ordinary course of business consistent with past practice (including,
without limitation, liabilities related to acquisitions) and (d) liabilities,
obligations or commitments disclosed by Buyer Parent prior to the date of this
Agreement in filings with the SEC.
5.17 No Material Misrepresentations or Omission. Buyer Parent's filings
with the SEC on Form 10-K under the Exchange Act for the fiscal year ended
December 31, 1997 and on Form 10-Q under the Exchange Act for the fiscal quarter
ended March 31, 1998, as of the date such filings were made, do not contain any
untrue statements of a material fact or omit to state a material fact necessary
in order to make the statements made, in light of the circumstances under which
they were made, not misleading.
5.18 Resolutions. The Board of Trustees of Buyer Parent has adopted
resolutions to exempt Sellers from (i) the ownership limitations set forth in
Buyer Parent's Declaration of Trust and (ii) the "business combination" statute
of the Maryland General Corporation Law.
ARTICLE 6
COVENANTS OF BUYERS AND SELLERS
Buyers and Sellers covenant and agree with each other that from the
date hereof through the Closing:
6.1 Maintenance of Operations Prior to Closing.
(a) Sellers shall carry on their Operations in Sellers' ordinary
course, consistent with past practice (subject to the provisions of Section 6.3
hereof). Without limiting the generality of the foregoing, Sellers through the
Closing Date will (i) maintain the material assets to be transferred pursuant
hereto in their current state of repair, substantially in conformity with
Sellers' maintenance practices prevailing on the date
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hereof, excepting normal wear and tear (subject to Sections 2.4 and 6.1(d));
(ii) use reasonable efforts to preserve its current material business
relationships with customers, suppliers, distributors and others having material
business dealings with their Operations; (iii) use reasonable efforts to collect
accounts receivable; and (iv) pay accounts payable in the ordinary course of
business.
(b) Prior to the Closing, without the prior written consent of Buyers
(such consent deemed to have been given if Buyers fail to respond in writing
within five (5) Business Days of their receipt of Sellers' request for consent
hereunder and, with respect to Section 6.1(b)(vi), after August 29, 1998, such
consent not to be withheld if such action is consistent (i) with Buyers' past
leasing practices and (ii) Sellers' fiduciary duty to preserve the value of its
assets), Sellers shall not with respect to their Operations:
(i) except as set forth in Section 9.7(c) below, amend or enter
into any employment or severance Contract, Plan or arrangement with any former,
current or future employee of their Operations which following the Closing would
become an obligation of Buyer;
(ii) dispose of any material assets to be transferred pursuant
hereto (other than dividends of cash or accounts receivable to Sellers or
Affiliates of Sellers to the extent provided in Section 2.3(f) and other than in
connection with the exercise of Purchase\Put Options, the Asset Sale Proceeds
resulting therefrom to be (A) retained by the Acquired Entity or any Acquired
Subsidiary or (B) included in the Contributed Assets);
(iii) encumber (other than Permitted Encumbrances) any material
asset to be transferred pursuant hereto (other than pursuant to refinancings as
permitted by (v) below);
(iv) alter from Sellers' accounting methods, principles or
practices prevailing on the date of this Agreement, any accounting methods,
principles or practices that would affect the Financial Statements;
(v) enter into, modify, extend or amend or take any action with
respect to the Transferred Indebtedness other than as set forth on Schedule
6.1(b)(v) (it being understood that Buyers and Sellers shall cooperate in
approving the terms of the Transferred Indebtedness to be refinanced as set
forth on Schedule 6.1(b)(v));
(vi) enter into or amend any Tenant Lease; or
(vii) enter into any Contract with respect to any of the
foregoing.
(c) Buyers agree to review any action that requires Buyers' consent
under this Section 6.1 as promptly as practicable following receipt of written
notice from Sellers.
(d) Prior to Closing without the prior written consent of Buyers,
Sellers shall not, with respect to their respective Operations, make any
expenditures with respect to Leasing Costs and Cap/Ex Requirements other than
expenditures that Sellers, the Acquired Entity or the Acquired Subsidiaries are
required to make under contractual obligations of Sellers, the Acquired Entity
or the Acquired Subsidiaries and other than ordinary course repair items which
are reimbursable charges from tenants (it being understood that Schedule
2.4(g)(i) shall specify (such specification to be agreed upon within 10 days
after the date hereof) which Leasing Costs and Cap/Ex Requirements that Buyers
have provided their consent prior to fund such
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expenditures). Sellers shall provide Buyers with at least 48 hours notice for
any such expenditures made pursuant to contractual obligations as to which
Buyers have not provided their consent (unless emergency circumstances prevent
such advance notice, in which case notice shall be provided as soon as
practicable thereafter).
(e) Prior to the Closing, the Acquired Entity or the Acquired
Subsidiaries as appropriate shall cause to be filed sales and use tax returns
required to be filed by it (including returns specified on Schedule 4.17).
6.2 Investigation by Buyers.
(a) Except with respect to Privileged Materials, Sellers shall
allow Buyers, their counsel, accountants and other Representatives, during
regular business hours (and subject at all times to the confidentiality
obligations set forth in the Confidentiality Agreement), to make such inspection
of the assets to be transferred pursuant hereto and the Facilities and to
inspect and make copies of Contracts, Books and Records and all other documents
and information reasonably requested by Buyers and related to the Transferring
Parties' Operations.
(b) Subject to the limitations contained in paragraph (a) above,
Buyers may enter upon any of the Real Property from time to time prior to the
Closing Date, accompanied by an agent of Sellers who shall make themselves
reasonably available, for purposes of conducting such inspections,
investigations and/or studies as Buyers deem reasonably necessary, including,
without limitation, financial reviews, physical inspections and lease reviews.
In the event, after the date hereof, Buyers receive new information relating to
any material environmental hazards that may exist on any Real Property (which
information is not set forth in any environmental reports delivered to Buyers by
Sellers prior to the date hereof), Buyers may also perform environmental reviews
and testing (any such environmental reviews and testing to be performed in a
manner consistent with good engineering practices and only by licensed engineers
reasonably acceptable to Sellers) ("Additional Environmental Testing"), which
activities include test borings and soil and water samplings, upon receipt of
Sellers' written consent (a "Sellers Environmental Consent"). Buyers may also
perform Additional Environmental Testing on the Real Property identified on
Schedule 6.2(b)(v). Any Additional Environmental Testing shall be completed on
or prior to the date that is thirty days after the date hereof. In the event
Sellers fail to provide a Sellers Environmental Consent to Buyers within five
(5) Business Days of the written request therefor by Buyers, Buyers may elect to
remove the assets to which such written request relates from the assets to be
transferred pursuant to this Agreement (such removed assets, the "Environmental
Carved-Out Assets") and the AAPT Purchase Price or the CAP Consideration, as
applicable, shall be adjusted in accordance with Section 2.1(b) or 2.2(b), as
applicable (such purchase price to be mutually agreed upon by the parties, or if
no such agreement is reached, by a reputable third party appraiser to be
selected in good faith by the parties).
(c) Buyers' access to the Real Property shall be subject to the
rights of the tenants of any of the Real Property, who shall not be unreasonably
disturbed during any such inspection by Buyers. Buyers shall not engage in any
activity in or about the Real Property which directly or indirectly violates the
terms of any governmental or quasi-governmental statute, rule, regulation, order
or practice. Buyers shall not make any physical changes to any of the Real
Property, except for test borings and soil and water samplings in accordance
with Section 6.2(b) above. Buyers may contact any governmental or
quasi-governmental authorities concerning the Real Property without the prior
written approval of Sellers. Sellers shall have the
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opportunity to observe any and all action taken by Buyers or their
representatives, consultants and agents pursuant to this Section 6.2.
(d) Each Buyer agrees to indemnify, defend and hold harmless Sellers
from and against all physical damage to any of the Real Property, Fixtures and
Equipment, personal injury and/or any other claims or liability which may occur
as a result of Buyers' (or Buyers' representatives, consultants and agents)
entry or activities upon any of the Real Property. Each Buyer agrees to keep and
hold confidential any and all reports, summaries, studies or results that are
the product of its investigations of the Real Property, and not to disclose such
reports without Sellers' written consent or unless required to do so by
applicable law. The provisions of this Section 6.2(d) shall survive termination
of this Agreement.
(e) Buyers, or any of Buyers' consultants performing
physical tests on the Real Property, shall maintain public liability insurance
policies (naming each Seller as additional named insured with respect to any
liability occurring on the Real Property of such Seller), with combined single
limit coverage of at least $1,000,000, insuring against claims arising as a
result of the inspections of Buyers, their representatives, consultants and
agents at any of the Real Property. A certificate of insurance evidencing the
foregoing coverage shall be delivered to Sellers prior to Buyers' or any of
Buyers' representatives, consultants and agents' entry on to any of the Real
Property.
(f) In the event Closing does not occur with respect to one or more
parcels of Real Property, Buyers shall promptly return to Sellers any documents
obtained from Sellers or Sellers' agents and deliver to Sellers, without charge,
copies of all written test results, studies, reports and similar materials
obtained by or on behalf of Buyers relating to such Real Property.
6.3 Consents and Reasonable Efforts. Each of the parties hereto covenants
and agrees, upon the terms and subject to the conditions contained herein, to
use all reasonable efforts to take, or cause to be taken, all actions and to do,
or cause to be done, all things necessary or advisable to consummate and make
effective the transactions contemplated hereby in accordance with the terms
hereof provided that nothing contained herein shall require either party or any
of its Affiliates to (A) defend or bring any lawsuit should it determine, in its
sole discretion, that it is not in its interests to do so or (B) sell, transfer,
divest or otherwise dispose of any of its respective business, assets or
properties (other than such disposition pursuant to Article 2 of this Agreement)
in connection with this Agreement or any other transactions contemplated hereby.
6.4 Notification of Certain Matters. Between the date hereof and the
Closing Date, each party shall give prompt written notice to the other of (i)
the occurrence, or failure to occur, of any event which occurrence or failure
would be likely to cause any material representation or warranty contained in
this Agreement or in any exhibit or schedule hereto to be untrue or inaccurate
in any material respect, (ii) any Material Adverse Change and (iii) any failure
of any party or, in the case of Sellers, the Acquired Entity, the Acquired
Subsidiaries, or Representatives of any such Person to comply with, perform or
satisfy any material covenant, condition or agreement to be complied with,
performed by or satisfied by it under this Agreement or any exhibit or schedule
hereto; provided that such disclosure shall not be deemed to cure, or to relieve
any party of any liability or obligation with respect to, any breach of a
representation, warranty, covenant or agreement or to satisfy any condition
hereunder.
6.5 Repayment of Certain Loans. On or prior to the Closing Date, all
Repaid Indebtedness will be repaid by Sellers.
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6.6 Notification of Potential Breaches of Representations and Warranties.
Each of Buyers and Sellers shall use its good faith efforts to notify the other
party in writing of its discovery of any matter that would render any of such
party's or the other party's representations and warranties contained herein
untrue or incorrect in any material respect.
6.7 Risk of Loss. From the date hereof until the Closing, all risk of loss
or damage to, or condemnation of, the assets of the Transferring Parties shall
be borne by Buyers. If any portion of such assets is destroyed or damaged by
fire or any other cause (other than use, wear or loss in the ordinary course of
business) or condemned or taken by any Governmental Authority on or prior to the
Closing, Sellers shall give written notice to Buyers as soon as practicable
thereafter, but in any event within five calendar days after discovery of such
damage or destruction or condemnation or taking and the amount of insurance or
condemnation awards, if any, covering such assets (collectively, the "Insurance
Proceeds"). All Insurance Proceeds less amounts, if any, used to restore any
portion of the Real Property or leased property, as the case may be, shall be
transferred or otherwise assigned to Buyers at the Closing. Notwithstanding
anything to the contrary in this Section 6.7, in the event the aggregate amount
of losses or damages to, or condemnations of, the assets to be transferred
pursuant to this Agreement not covered by Insurance Proceeds results
individually or in combination with other matters or occurrences in a Material
Adverse Effect, Buyers may elect to terminate this Agreement pursuant to Section
10.1(a)(iv).
6.8 Supplemental Application. Promptly following the execution and
delivery of this Agreement, Buyers will file a Supplemental Listing Application
with the New York Stock Exchange and use its best efforts to obtain the approval
for listing of the common shares of beneficial interest of Buyer Parent that are
issuable upon the exchange or redemption of the Preferred Shares and the
Preferred Units.
6.9 Transfer Certificates. Sellers shall deliver all or any transfer
certificates required by the applicable governmental authorities in connection
with the transfer of the Real Property, or the acquisition of the Acquired
Entity or any of the Acquired Subsidiaries.
6.10 SEC Matters. Buyers shall use its best efforts to ensure that the
issuance of the Preferred Units shall be (i) exempt from the registration
requirements of the Securities Act and (ii) either exempt from, registered
pursuant to, or qualified under any applicable state securities or "blue sky"
requirements.
6.11 REIT Status. Buyers shall take all actions necessary for AAPT to
remain qualified as a "real estate investment trust" (within the meaning of
Section 856(c) of the Code) for purposes of Sections 856 through 860 of the
Code.
6.12 Labor. Each Transferring Party shall provide to its employees all
notices or payments that may be required under WARN and/or similar state or
local statue or ordinance relating to loss or transfer of employment, if any,
prior to the Closing Date.
6.13 Remaining Interests. Immediately prior to the Closing, Prometheus
shall either (i) acquire all the Remaining Interests or (ii) if requested by
Buyers, cause such Remaining Interests to be conveyed directly by the holders of
such Remaining Interests to Buyers or their designees (such Remaining Interests
in each case to be conveyed free and clear of all Encumbrances).
6.14 Certain Letter. Sellers agree to provide Ernest T. Brown with a notice
substantially in the form of Exhibit L within five Business Days following the
date of this Agreement.
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ARTICLE 7
CONDITIONS TO SELLERS' OBLIGATIONS
The obligations of Sellers to sell the Acquired Equity Interests and
contribute the Contributed Assets to Buyers on the Closing Date and to
consummate the transactions contemplated hereby are subject to the satisfaction,
on or prior to the Closing Date, of each of the following conditions any of
which may be waived by Sellers in accordance with Section 10.9:
7.1 Representations, Warranties and Covenants. All representations and
warranties of Buyers contained in this Agreement shall be true and correct at
and as of the Closing Date as if such representations and warranties were made
at and as of the Closing Date, and Buyers shall have performed all agreements
and covenants required hereby to be performed by it prior to or at the Closing
Date, except for such breaches of representations, warranties, agreements and
covenants which would not result, individually or in the aggregate, in a
Material Adverse Change.
7.2 No Proceedings or Litigation. No Actions by any Governmental Authority
or other Person shall have been instituted or threatened for the purpose of
enjoining or preventing, or which question the validity or legality of, any of
the transactions contemplated hereby, except for such Actions which would not
result, individually or in the aggregate, in a Material Adverse Change. There
shall not be an injunction in effect instituted by any Governmental Authority
that enjoins the transaction contemplated hereby.
7.3 Transaction Documents. Buyers shall have executed and delivered to
Sellers the Transaction Documents to which Buyers are a party.
7.4 Consents. The consents set forth on Schedule 7.4 from third parties,
Governmental Authorities, and any other entity or Person denoted as consents
constituting conditions to Sellers' obligations to close shall have been
obtained and be effective; provided that if any of the consents set forth on
Schedule 7.4 which are denoted as Sellers' conditions to closing have not been
obtained (a "Sellers Missing Consent"), Buyers may cause Sellers (assuming all
other conditions to Sellers' obligations to close have been satisfied) to close
(i) with respect to all assets to be transferred pursuant hereto other than the
assets to which such Missing Consent relates (the "Sellers Carved-Out Assets"),
provided that Buyers shall remain obligated for the one-year period following
the Closing Date to purchase the Sellers Carved-Out Assets for the purchase
price allocated to such Sellers Carved-Out Assets (such purchase price to be
mutually agreed upon by the parties, or if no such agreement is reached, by a
reputable third party appraiser to be selected in good faith by the parties)
(and otherwise on the same terms and conditions as set forth herein) as soon as
practicable following the date such Sellers Missing Consent is obtained (and the
parties agree to amend and modify this Agreement as may be necessary to give
effect to the deferred closing with respect to such Sellers Carved-Out Asset) or
(ii) notwithstanding the election by Sellers to cause Buyers to close only with
respect to the assets that are not Buyer Carved-Out Assets pursuant to Section
8.3, with respect to all assets that are the subject of this Agreement (other
than Environmental Carved-Out Assets) by providing Sellers with indemnification
(reasonably acceptable to Sellers) with respect to any liability resulting from
closing without receiving such Sellers Missing Consent. For the avoidance of
doubt, in the event Buyers elect to close in accordance with this Section 7.4,
Sellers shall be required to close in accordance with such election
notwithstanding the failure to secure all of the consents set forth on Schedule
7.4.
7.5 Documents; Certificates. Buyers shall have furnished Sellers with the
documents and certificates pursuant to Section 3.2(d)(ii).
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7.6 Deliver of Certificate to Goldman Sachs. Buyers shall have delivered to
Goldman Sachs Mortgage Company officer's certificates as required under Section
6.1(j)(ii) of each of the Grande Loan Documents.
7.7 Supplemental Listing Application. Prior to the Closing Date, the common
shares of beneficial interest of Buyer Parent issuable upon conversion or
redemption of the Preferred Shares and the Preferred Units shall have been
approved for listing with the New York Stock Exchange, upon official notice of
issuance.
7.8 Issuance of the Preferred Shares and the Preferred Units. The issuance
of the Preferred Shares and the Preferred Units shall be (i) exempt from the
registration requirements of the Securities Act and (ii) either exempt from,
registered pursuant to, or qualified under, any applicable state securities or
"blue sky" requirements.
7.9 Letter Agreements. Buyers shall have duly executed and delivered to
Sellers a copy of each of the 7350 Tilghman Drive Letter and the 8260 Greensboro
Drive Letter.
ARTICLE 8
CONDITIONS TO BUYERS' OBLIGATIONS
The obligations of Buyers to purchase the Acquired Equity Interests and
the Contributed Assets and to consummate the transactions contemplated hereby
are subject to the satisfaction, on or prior to the Closing Date, of each of the
following conditions, any of which may be waived by Buyers in accordance with
Section 10.9:
8.1 Representations, Warranties and Covenants. All representations and
warranties of Sellers contained in this Agreement shall be true and correct at
and as of the Closing Date as if such representations and warranties were made
at and as of the Closing Date and Sellers shall have performed all agreements
and covenants required hereby to be performed by them prior to or at the Closing
Date, except for such breaches of representations, warranties, agreements and
covenants which would not result, individually or in the aggregate, in a
Material Adverse Change.
8.2 No Proceedings or Litigation. No Actions by any Governmental Authority
or other Person shall have been instituted or threatened for the purpose of
enjoining or preventing, or which question the validity or legality of, any of
the transactions contemplated hereby, except for such Actions which would not
reasonably be expected to result, individually or in the aggregate, in a
Material Adverse Change. There shall not be an injunction in effect instituted
by any Governmental Authority that enjoins the transaction contemplated hereby.
8.3 Consents. The consents set forth on Schedule 8.3(i) from third parties,
Governmental Authorities, and any other entity or Person denoted as consents
constituting conditions to Buyers' obligations to close shall have been obtained
and be effective; provided that if any of the consents set forth on Schedule
8.3(i) which are denoted as Buyers' conditions to closing have not been obtained
(a "Buyer Missing Consent"), Sellers may cause Buyers (assuming all other
conditions to Sellers' obligations to close have been satisfied) to close (i)
with respect to all assets to be transferred pursuant hereto other than the
assets to which such Buyer Missing Consent relates (the "Buyer Carved-Out
Assets"), provided that Buyers shall remain obligated for the
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one-year period following the Closing Date to purchase the Buyer Carved-Out
Assets for the purchase price allocated to such Buyer Carved-Out Assets (such
purchase price to be mutually agreed upon by the parties, or if no such
agreement is reached by a reputable third party appraiser to be selected in good
faith by the parties) (and otherwise on the same terms and conditions as set
forth herein) as soon as practicable following the date such Buyer Missing
Consent is obtained (and the parties agree to amend and modify this Agreement as
may be necessary to give effect to the deferred closing with respect to the
Buyer Carved-Out Asset) or (ii) with respect to all assets that are the subject
of this Agreement (other than Environmental Carved-Out Assets) by providing
Buyers with indemnification (reasonably acceptable to Buyers) with respect to
any liability resulting from closing without receiving such Buyer Missing
Consent. For the avoidance of doubt, in the event Sellers elects to close in
accordance with this Section 8.3, Buyers shall be required to close in
accordance with such election notwithstanding the failure to secure all of the
consents set forth on Schedule 8.3(i). The consents set forth on Schedule 8.3(i)
shall include (i) certificates from partners in the Partially Owned Partnerships
evidencing admission to the Partially Owned Partnerships and such other matters
as may be reasonably requested by Buyer, and (ii) a waiver of the purchase
option by Capital One in Westmoreland Plaza in a form reasonably acceptable to
Buyers to the extent the same is in effect at the Closing Date and not otherwise
waived.
8.4 Material Changes. Since December 31, 1997, there shall have been no
Material Adverse Change.
8.5 Transaction Documents. Sellers shall have executed and delivered to
Buyers the Transaction Documents to which any Seller is a party.
8.6 Documents; Certificates. Sellers shall have furnished Buyers with the
documents and certificates pursuant to Section 3.2(d)(i).
8.7 Indebtedness. Sellers shall have repaid all of the Repaid Indebtedness
on or prior to the Closing.
8.8 Estoppel Certificates. At or prior to the Closing, estoppel
certificates shall have been obtained from tenants leasing at least an aggregate
of 75% of the aggregate rentable space at all of the Real Property, including
those identified on Schedule 8.8(i) (the "Identified Tenants"), and from the
ground lessors identified on Schedule 8.8(ii). The estoppel certificates shall
be substantially in the form attached hereto as Schedule 8.8(iii) (the "Required
Form"); provided, however, that if a tenant or ground lessor refuses to sign an
estoppel certificate in the Required Form but signs an estoppel certificate that
contains such information as the tenant or ground lessor from whom the
applicable request is made is obligated under its lease to execute and deliver,
the estoppel certificate shall be deemed to be acceptable, but only if it does
not contain any information materially inconsistent with the representations and
warranties of Sellers contained herein. In the event Sellers are unable to
deliver an acceptable Estoppel Certificate, they may, in lieu thereof, deliver
their certificate containing the information set forth on the Required Form in
respect of the applicable tenant or ground lessor, which certificate shall serve
as Sellers' representation and warranty as to the facts stated therein, which
representation and warranty shall survive for a period of one year following the
Closing Date.
8.9 Supplemental Listing Application. Prior to the Closing Date, the common
shares of beneficial interest of Buyer Parent issuable upon conversion or
redemption of the Preferred Shares and Preferred Units shall have been approved
for listing with the New York Stock Exchange, upon official notice of issuance.
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8.10 Issuance of Preferred Units. The issuance of the Preferred Units shall
be (i) exempt from the registration requirements of the Securities Act and (ii)
either exempt from, registered pursuant to, or qualified under any applicable
state securities or "blue sky" requirements.
8.11 Management Agreements. All of the interests of Atlantic American
Properties Management, Inc. (which hold the Bell Atlantic Management Agreement
and the CCM Management Agreement) shall have been transferred to an Affiliate of
the Acquired Entity, other than the Acquired Subsidiaries.
8.12 Outstanding Equity Interests. The Acquired Equity Interests shall be
the only Equity Interests on AAPT outstanding on the Closing Date.
8.13 Letter Agreements. Sellers shall have duly executed and delivered to
Buyers a copy of each of the 7350 Tilghman Drive Letter and the 8260 Greensboro
Drive Letter.
8.14 Assumption, Modification and Release Agreement. Sellers shall deliver
to Buyers agreements in substantially the forms set forth on Exhibits O-1, O-2,
O-3, O-4 and O-5 or in such other form as requested by the applicable lender and
acceptable to Buyer, executed by each lender that holds a mortgage on any of the
Real Property that will be sold or contributed directly or indirectly at the
Closing (including through the acquisition of the Acquired Equity Interests)
subject to such mortgage.
8.15 Representation Letter From Recipients of Preferred Units and Preferred
Shares. Each of the Sellers and LF Strategic Realty Investors L.P. that is to
receive any Preferred Shares or Preferred Units pursuant to this Agreement shall
have executed and delivered to Buyer Parent a letter with form of Exhibit P
hereto.
ARTICLE 9
ACTIONS BY SELLERS
AND BUYERS AFTER THE CLOSING
9.1 Survival. Other than the representations contained in Sections 4.2,
4.19, 5.2 and 5.4 (which shall survive indefinitely) all representations and
warranties set forth in this Agreement shall survive until 5:00 p.m. (New York
time) on the day that is the first anniversary of the Closing Date or, if such
day is not a Business Day, then the next Business Day; provided, however, all
representations and warranties of the Sellers relating to the Construction
Property shall survive until 5:00 p.m. (New York time) on the day that is the
first anniversary of the closing under the Construction Property Purchase
Agreement. Unless expressly stated herein to the contrary, all covenants shall
survive indefinitely.
9.2 Indemnifications.
(a) (i) From and after the Closing, Buyers shall, jointly and
severally, indemnify, save and hold Sellers and each of their Subsidiaries,
Affiliates, directors, officers, employees, successors, transferees and
assignees (each, a "Seller Indemnified Party"), harmless from and against any
and all costs, losses (including, without limitation, diminutions in value),
charges, liabilities, obligations, damages (whether actual or consequential),
lawsuits, actions, judgments, deficiencies, demands, fees, claims, settlements
and expenses (whether arising out of third-party claims or otherwise),
including, without limitation, interest, penalties, reasonable attorneys' fees
and expenses and all amounts paid in the investigation, defense or settlement of
any
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of the foregoing and costs of enforcing this indemnity (collectively, "Losses")
incurred in connection with, arising out of, resulting from or relating to
(1) any breach of a representation or warranty of Buyers contained in Article 5
of this Agreement so long as the claim therefor is asserted prior to expiration
of the survival period set forth in Section 9.1, (2) any breach by Buyers of any
of their agreements contained herein, (3) any Assumed Liability or any liability
of the Acquired Entity and the Acquired Subsidiaries, (4) all liabilities of
AAPT and its Subsidiaries under the Bell Atlantic Purchase Agreement (except to
the extent provided in Section 2.11(b)) and (5) all liabilities under the RF
Purchase Agreement with respect to the Contributed Assets relating to the period
from and after the Closing Date (each, a "Seller Indemnified Claim"). The rights
to indemnification under Section 9.2(a) relating to a breach of Article 11
hereof shall be subject to the provisions of Section 11.5 below.
(ii) Promptly after receipt by any party hereto of notice of
commencement of any Action, or the assertion by any third party of any Seller
Indemnified Claim, with respect to which any Seller Indemnified Party is
entitled to indemnification under this Section 9.2(a), such party shall use its
best efforts to notify each other party hereto in writing of the commencement of
such Action or the assertion of such Seller Indemnified Claim, but the failure
to notify the indemnifying party shall not relieve the indemnifying party of its
indemnification obligations hereunder, except to the extent the indemnifying
party is actually prejudiced by such failure to notify. In case any such Action
is brought or any such Seller Indemnified Claim is asserted, Buyers shall be
entitled, but shall not be required, to participate (at its own expense) in the
defense thereof or Buyers, at their option, may elect to take charge of and
control the defense of any such Action or Seller Indemnified Claim, provided
that Buyers shall agree to pursue the defense of such Action or Seller
Indemnified Claim in good faith by appropriate actions or proceedings promptly
taken or instituted and diligently pursued. If Buyers elect to assume the
defense of any Action or Seller Indemnified Claim, then such Seller Indemnified
Party shall be entitled to participate (at its own expense) in said defense.
(iii) From and after the Closing, (A) AAPT Seller shall indemnify,
save and hold Buyers and each of their Subsidiaries, Affiliates, trustees,
officers, employees, successors, transferees and assignees (each, a "Buyer
Indemnified Party"), harmless from and against any and all Losses incurred in
connection with, arising out of, resulting from or relating to (1) any breach of
a representation or warranty of AAPT Seller contained in Article 4 of this
Agreement so long as the claim therefor is asserted prior to expiration of the
survival period set forth in Section 9.1, (2) any breach by AAPT Seller of any
of its agreements contained herein, (3) any liability referred to in Section
2.11(b) hereof and (4) any compensation or payments or benefits (including
severance payments and obligations under the Savings Plan, exclusive of the
benefit payments thereunder and customary administrative costs incurred to
terminate the Savings Plan) to or on behalf of any person employed by the
Acquired Entity or any of the Acquired Subsidiaries on or prior to the Closing
Date with respect to periods of employment occurring on or prior to the Closing
Date (each an "AAPT Indemnified Claim") and (B) each CAP Seller, jointly and
severally, shall indemnify and hold each Buyer Indemnified Party harmless from
and against any and all Losses incurred in connection with, arising out of,
resulting from or relating to (1) any breach of a representation or warranty by
any CAP Seller contained in Article 4 of this Agreement so long as the claim
therefor is asserted prior to expiration of the survival period set forth in
Section 9.1, (2) any breach by any CAP Seller of any of their agreements
contained herein, (3) any Excluded Liabilities related to CAP Sellers and (4)
any compensation or payments or benefits (including severance payments and
obligations) to or on behalf of any person employed by any CAP Seller on or
prior to the Closing Date with respect to periods of employment occurring on or
prior to the Closing Date (each, a "CAP Indemnified Claim" and, together with
the AAPT Indemnified Claims, the "Buyer Indemnified Claims").
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(iv) Promptly after receipt by any party hereto of notice of
commencement of any Action, or the assertion by any third party of any Buyer
Indemnified Claim, with respect to which any Buyer Indemnified Party is entitled
to indemnification under this Section 9.2(a)(ii), such party shall use its best
efforts to notify each other party hereto in writing of the commencement of such
Action or the assertion of such Buyer Indemnified Claim, but the failure to
notify the indemnifying party shall not relieve the indemnifying party of its
indemnification obligations hereunder, except to the extent the indemnifying
party is actually prejudiced by such failure to notify. In case any such Action
is brought or any such Buyer Indemnified Claim is asserted, Sellers shall be
entitled, but shall not be required, to participate (at their own expense) in
the defense thereof or Sellers, at their option, may elect to take charge of and
control the defense of any such Action or Buyer Indemnified Claim, provided that
Sellers shall agree to pursue the defense of such Action or Buyer Indemnified
Claim in good faith by appropriate actions or proceedings promptly taken or
instituted and diligently pursued. If Sellers elect to assume the defense of any
Action or Buyer Indemnified Claim, then such Buyer Indemnified Party shall be
entitled to participate (at its own expense) in said defense.
(b) Settlement of Claims. Sellers and Buyers shall not be liable for
any settlement of any action or proceeding effected without its written consent,
but if settled with its written consent (which consent shall not be unreasonably
withheld or delayed), the indemnifying party agrees to indemnify and hold all
parties indemnified under this Agreement harmless from and against any and all
Losses by reason of such settlement in accordance with this Section 9.2(b).
(c) Restriction on Indemnification. In no event shall Buyers be liable
to any Seller Indemnified Party for damages pursuant to Section 9.2(a)(i)(1)
until the aggregate amount of damages pursuant to such Section for which the
Buyers is obligated to provide indemnity exceeds $1,000,000 (the "Buyer
Indemnity Deductible"), after which Buyers shall have liability for the amount
of such resulting Losses in excess of $1,000,000, but in no event shall Buyers'
liability under Section 9.2(a)(i)(1) exceed an aggregate amount of $10,000,000,
not including the amount of the Buyer Indemnity Deductible (the "Buyer Indemnity
Cap") (other than with respect to a breach of the representations contained in
Sections 5.2 and 5.4 as to which to the Buyer Indemnity Deductible and the Buyer
Indemnity Cap shall not apply). In no event shall Sellers be liable to any Buyer
Indemnified Party for damages pursuant to Sections 9.2(a)(iii)(A)(1) or
9.2(a)(iii)(B)(1) until the aggregate amount of damages pursuant to such
Sections for which Sellers (taken collectively) are obligated to provide
indemnity exceeds $1,000,000 (the "Sellers Indemnity Deductible), after which
AAPT Seller, for itself, or the CAP Sellers, for themselves, jointly and
severally, shall have liability for the amount of such resulting Losses in
excess of $1,000,000, but in no event shall Sellers' liability under Sections
9.2(a)(iii)(A)(1) or 9.2(a)(iii)(B)(1) exceed an aggregate amount of
$10,000,000, not including the amount of the Sellers Indemnity Deductible (the
"Sellers' Indemnity Cap") (other than with respect to a breach of the
representations contained in Sections 4.2 and 4.19 as to which to the Seller
Indemnity Deductible of the Seller Indemnity Cap shall not apply). For the
avoidance of doubt, the Buyer Indemnity Deductible and the Sellers Indemnity
Deductible and Buyer Indemnity Cap and Seller Indemnity Cap set forth in this
Section 9.2(c) shall not affect Buyers' or Sellers' payment obligations in
connection with Article 2 (other than as provided in Sections 2.4(g)(ii)),
Sections 9.2(a)(i)(2)-(5), 9.2(a)(iii)(A)(2)-(4) or 9.2(a)(iii)(B)(2)-(4), or
Article 11, as applicable.
(d) Notification of Breaches. No party to this Agreement shall be
entitled to any indemnification with respect to any breach or inaccuracy of any
representation, warranty or covenant under this Agreement if such party has
actual knowledge (with no duty of inquiry) prior to the date hereof of such
breach or inaccuracy of the applicable representation, warranty or covenant. In
addition to the foregoing,
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Buyers hereby release CAP Sellers from any and all statutory or common law
contribution rights or obligations, or other similar claims for contribution,
under any Environmental Laws.
(e) Survival of Indemnification. Each of the parties hereto agrees
that the indemnifications provided for pursuant to this Section 9.2 shall
survive the Closing.
(f) Characterization of Indemnity Payments. The parties to this
Agreement hereby acknowledge that all amounts paid and received pursuant to this
Section 9.2 are adjustments to the AAPT Purchase Price and the CAP
Consideration, as applicable.
(g) Maintenance of Net Worth. AAPT Seller agrees to maintain, during
the period beginning on the Closing Date until the first anniversary of the
Closing Date, a net worth of at least $10,000,000 less the amount of any amounts
paid to Buyers pursuant to its obligations under Section 9.2(a)(iii). CAP
Sellers agree to maintain, during the period beginning on the Closing Date until
(i) if the Construction Property Option is exercised, the first anniversary of
the sale of the Construction Property by Sellers to Buyer (or an appointee
thereof) (or if Buyer breaches its obligations under the construction Property
Purchase Agreement, the date such agreement is terminated by Sellers in
accordance with its terms) or (ii) if the Construction Property Option is not
exercised, the later of (x) the first anniversary of the Closing Date or (y) the
expiration of the Construction Property Option, a collective net worth of at
least $10,000,000 less the amount of any amounts paid to Buyers pursuant to its
obligations under Section 9.2(a)(iii). Notwithstanding the foregoing, the
obligation to maintain the net worth of the AAPT Sellers and the CAP Sellers
shall be extended in the event any claim is filed prior to the applicable one
year periods referred to in this Section until the final disposition of such
claim; provided that, to the extent the claim is less than $10.0 million, the
obligation to maintain the net worth shall be limited to the amount of the claim
plus twenty percent.
9.3 Further Assurances. Each of Buyers and Sellers shall use
commercially reasonable efforts to take all actions and to do all things
necessary, proper or advisable to consummate and make effective the transactions
contemplated by this Agreement (including, without limitation, satisfying the
closing conditions in Articles 7 and 8 hereto); provided that nothing contained
herein shall require either party or any of its Affiliates to (A) defend or
bring any lawsuit should it determine, in its sole discretion, that it is not in
its interests to do so or (B) sell, transfer, divest or otherwise dispose of any
of its respective business, assets or properties in connection with this
Agreement or any other transactions contemplated hereby. Following the Closing,
each party agrees to execute such documents, instruments or conveyances and take
such actions as may be reasonably requested by the other party and otherwise
cooperate in a reasonable manner with such other party, its Affiliates and their
respective Representatives in connection with any action that may be necessary
or advisable to carry out the provisions hereof or transactions contemplated
hereby.
9.4 Tax Cooperation and Realty Transfer Taxes.
(a) Mutual Assistance Regarding Taxes. Sellers, on the one hand, and
Buyers, on the other, agree to provide each other such assistance (including
access to Books and Records) as may be reasonably required by either of them in
connection with the preparation of any Tax Return, any audit or other
examination by any taxing authority or any judicial or administrative proceeding
related to any liability for Taxes (including any refunds of Taxes) and each
will provide the other with any records or information relevant to such Tax
Return, audit or examination, proceeding or determination as are in its
possession or subject to its control. Such assistance shall include making
employees available on a mutually convenient basis to provide additional
information and explanation of any material provided pursuant hereto. All
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information provided pursuant to this Section 9.4(a) shall be held in
confidence, and not be disclosed to others for any reason whatsoever, except to
the extent such disclosure is required in order to effect the intent of this
Section 9.4(a) or such disclosure is required by law. For a period of seven
years from the Closing Date, neither Buyers nor Sellers shall destroy any
records related to the their Operations necessary for Tax Return preparation or
support in audits or other tax proceedings for any period up to and including
the Closing Date without the prior written consent of the other. Each of Buyers
and Sellers agree that AAPT shall make a valid election to be treated as a "real
estate investment trust" for U.S. federal income tax purposes within the meaning
of Section 856(a) of the Code, commencing with its taxable year ended on
December 31, 1997, and will take all actions reasonably necessary to cause such
election to be made.
(b) Realty Transfer Taxes. Buyers shall pay 100% of any realty
transfer Taxes payable in connection with the consummation of the transactions
contemplated hereby (except as provided in the 7350 Tilghman Drive Letter).
9.5 Maintenance of Books and Records. Each of Sellers and Buyers shall
preserve, until the seventh anniversary of the Closing Date, all records
possessed or to be possessed by such party relating to any of the assets,
liabilities or business of their Operations prior to the Closing Date. After the
Closing Date, where there is a legitimate purpose, such party shall provide the
other with access, upon prior reasonable written request specifying the need
therefor, during regular business hours, to (a) the Personnel of such party and
(b) the books of account and records of such party, but, in each case, only to
the extent relating to the assets, liabilities or business of the Transferring
Parties' Operations prior to the Closing Date, and the other party and its
Representatives shall have the right to make copies of such books and records;
provided, however, that the foregoing right of access shall not be exercisable
in such a manner as to interfere unreasonably with the normal operations and
business of such party; and, provided further, that, as to so much of such
information as constitutes trade secrets or confidential business information of
such party, the requesting party and its officers, directors, trustees and
representatives will use due care to not disclose such information except (i) as
required by law, (ii) with the prior written consent of such party, which
consent shall not be unreasonably withheld, or (iii) where such information
becomes available to the public generally or becomes generally known to
competitors of such party through sources other than the requesting party or its
Affiliates, Personnel or Representatives. The party requesting access to any
such books and records, information or Personnel shall bear all of the
out-of-pocket costs and expenses (including without limitation, attorneys' fees,
but excluding reimbursement for salaries and employee benefits) reasonably
incurred in connection with providing access to such books and records,
information and Personnel. Such records may nevertheless be destroyed by a party
if such party sends to the other party written notice of its intent to destroy
records, specifying with particularity the contents of the records to be
destroyed, and the records may then be destroyed after the 30th day after such
notice is given unless the other party objects to the destruction, in which case
the party seeking to destroy the records shall deliver such records to the
objecting party (which party shall be responsible for the costs of delivery).
9.6 Payment Received. Sellers and Buyers each agree that after the Closing
they will hold and will promptly transfer and deliver to the other, from time to
time as and when received by them, any cash, checks with appropriate
endorsements (using their reasonable efforts not to convert such checks into
cash), or other property that they may receive on or after the Closing which
properly belongs to the other party, including, without limitation, any
insurance proceeds, and will account to the other for all such receipts.
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9.7 Employee Matters.
(a) Employment. Buyers shall have no obligation to offer employment
to any employee of Sellers or any Transferring Party. If a Buyer elects to make
an offer of employment to any such employee, such offer may but need not be (1)
for the same position as held by the employee with Sellers or a Transferring
Party immediately prior to the Closing and/or (2) at the same compensation rate
as paid by the Sellers or a Transferring Party to such employee immediately
prior to the Closing. All such offers of employment and the actual employment of
any such employee shall be subject to Buyers' right, in their sole discretion,
to establish and modify from time to time the terms and conditions of such
employment and to terminate any such employee at any time. Except as Buyers may
expressly provide, all such employees shall be treated as new, at-will employees
of Buyers from their date of employment.
(b) Group Health Continuation. Buyers agree that they will and will
cause the Acquired Entity and Acquired Subsidiaries to comply with COBRA after
the Closing Date with respect to all Qualified Beneficiaries (as that term is
used in COBRA) who experience a Qualifying Event (as that term is used in COBRA)
in connection with this transaction or who are Qualified Beneficiaries as of the
Closing Date.
(c) Termination of 401(k) Plan. No later than effective on the
Closing Date, Sellers shall terminate the Atlantic American Property Management
Inc. Savings Plan (the "Savings Plan") provided that Buyer will perform such
administrative functions as required in connection with such termination.
9.8 Insurance. From and after the Closing Date, Sellers shall indemnify,
save and hold Buyers harmless from and against any and all Losses arising from
Insured Events to the extent of proceeds actually received by any Seller from
insurance carriers on account of such Losses, and Sellers shall exercise
commercially reasonable efforts to collect such proceeds. "Insured Events" shall
mean incidents occurring prior to the Closing Date which result in Losses
covered by director and officer, property or liability policies carried by any
Seller or by any parent corporation of any Seller for the benefit of such
Seller. Buyers hereby agree to reimburse Sellers for all documented, actual
out-of-pocket costs associated with such indemnification in a manner reasonably
satisfactory to Sellers and to cooperate with Sellers and the insurance carriers
in pursuing the claim.
9.9 Waiver of Liability. None of Buyers' or Sellers' Representatives have
made, will make or be deemed to have made, in this Agreement or in any
Transaction Document, any representation, warranty, promise, covenant or
statement of any nature hereunder or with respect to the transactions
contemplated hereby.
9.10 LF Strategic Realty Investors L.P. Guarantee. LF Strategic Realty
Investors L.P. hereby unconditionally guarantees to each Buyer that Sellers
shall perform their obligations under Section 9.2(g) of this Agreement in
accordance with their terms.
ARTICLE 10
MISCELLANEOUS
10.1 Termination.
(a) Termination. This Agreement may be terminated at any time prior to
Closing:
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(i) By unanimous written consent of Buyers and Sellers;
(ii) By Buyers if the Closing shall not have occurred on or
before Buyer Termination Date because of the failure of any of the conditions
set forth in Article 8 to be satisfied (for reasons other than Buyers' failure
to comply with its obligations hereunder);
(iii) By Sellers if the Closing shall not have occurred on or
before Seller Termination Date because of the failure of any of the conditions
set forth in Article 7 to be satisfied (for reasons other than Sellers' failure
to comply with their obligations hereunder); or
(iv) By Buyers in accordance with the last sentence of Section
6.7.
(b) In the Event of Termination. In the event of termination of this
Agreement:
(i) Each party shall redeliver all documents, work papers and
other material of any other party relating to the transactions contemplated
hereby, whether obtained before or after the execution hereof, to the party
furnishing the same;
(ii) Subject to Section 10.13 below, the confidentiality
provisions set forth in the Confidentiality Agreement and incorporated pursuant
to Section 10.2 shall survive and remain in full force and effect, and none of
the information described therein received by any party with respect to the
business of any other party or its Affiliates shall be disclosed to any third
party except as permitted therein; and
(iii) In the event that this Agreement shall be terminated
pursuant to Section 10.1(a) hereof, all obligations of the parties hereto under
this Agreement shall terminate, and there shall be no liability of any party
hereto to any other party with each party hereto bearing its own expenses
incurred in connection with the negotiation, preparation, execution and
performance of this Agreement, except as follows: (A) in the event this
Agreement is terminated by Buyers pursuant to Section 10.1(a)(ii) and all of the
closing conditions set forth in Article 7 have been satisfied (other than the
conditions relating to the actual delivery of documents by Buyers at the
Closing), Buyers shall have the right (1) to receive the return of the Escrow
Deposit (including accrued interest thereon) and (2) in the case of the failure
of the transactions contemplated by this Agreement to close due to a breach of a
representation, warranty, covenant or agreement by Sellers, to receive (a) the
reasonable fees paid by Buyers to update the existing surveys and (b) Buyers'
actual, documented out-of-pocket costs and expenses incurred in connection with
this Agreement and the transactions contemplated hereby, (the fees, costs and
expenses set forth in (a) and (b) not to exceed $25,000 per Real Property) and
(B) in the event this Agreement is terminated pursuant to Section 10.1(a)(iii)
and all of the closing conditions set forth in Article 8 have been satisfied
(other than the conditions relating to the actual delivery of documents by
Sellers at the Closing), Sellers shall be entitled to the Escrow Deposit
(including accrued interest). In the event this Agreement terminates for any
other reason, the Escrow Deposit (including all accrued interest) shall be
returned to Buyer. The parties agree that the payment of the Escrow Deposit to
Sellers will constitute liquidated damages and shall be in lieu of any other
relief to which Sellers might otherwise be entitled for Buyers' failure to
consummate this Agreement. If this Agreement is terminated as provided herein,
all filings, applications and other submissions made pursuant to the terms
hereof shall, to the extent practicable, be withdrawn from the agency or other
Persons to which they were made. Notwithstanding anything to the contrary in
this Section 10.1(b)(iii), in the event the Buyer Termination Date has occurred
and all of the closing conditions set forth in Article 7 have been satisfied (it
being understood that the conditions set forth in Section 7.4 shall also be
deemed satisfied for the purposes of this sentence if Buyer exercises its
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rights pursuant to the proviso contained in the first sentence thereof), Buyers
may seek specific performance of Sellers' obligations to convey the Real
Property and other assets in accordance with this Agreement in lieu of
exercising its rights under Section 10.1(b)(iii)(A).
10.2 Confidentiality. Subject to Section 10.13 below, the covenants,
terms and conditions of the Confidentiality Agreement are incorporated herein
by reference and shall continue in full force and effect until the Closing, at
which time such terms and the obligations of Buyers under this Section 10.2
shall terminate; provided, however, that such terms and obligations shall
terminate only in respect of that confidential information relating primarily
to the Transferring Parties' Operations. From and after the date hereof,
Sellers shall use reasonable care not to disclose, submit or file with any
third party, confidential information relating to the Transferring Parties'
Operations, except where disclosure may be required by law or as may be
necessary for Sellers to enforce its rights or fulfill its obligations under
this Agreement or to Tenants prior to Closing in the ordinary course of
business consistent with past practice, and Buyers shall use reasonable care
not to disclose, submit or file with any third party, confidential information
relating to Sellers (other than with respect to the Transferring Parties'
Operations), except where disclosure may be required by law or as may be
necessary for Buyers to enforce their rights or fulfill their obligations
under this Agreement. In accordance with Section 10.1(b)(ii), the
confidentiality obligations incorporated herein shall survive any termination
of this Agreement.
10.3 Assignment. Neither this Agreement nor any of the rights or
obligations hereunder may be assigned by any party without the prior written
consent of all other parties to this Agreement (provided that Buyers may assign
or transfer, in whole or in part, their rights hereunder to an Affiliate of
Buyers without the prior consent of all the parties hereto if Buyers remain
bound by the terms and conditions of this Agreement). Subject to the foregoing,
this Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective Representatives, heirs, legatees, successors and
permitted assigns, and no other Person shall have any right, benefit or
obligation hereunder.
10.4 Notices. All notices, requests, demands and other communications which
are required or may be given under this Agreement shall be in writing and shall
be deemed to have been duly given when received if personally delivered; the
earlier of (a) the next Business Day, or (b) four hours after it is transmitted
provided the expiration of such fourth hour occurs before 5:00 p.m. Eastern
standard time if transmitted by telecopy, electronic or digital transmission
method with telephonic or electronic confirmation of receipt; the Business Day
after if sent for next Business Day delivery to a domestic address by recognized
overnight delivery service (e.g., Federal Express); and upon receipt or refusal
of delivery, if sent by certified or registered mail, return receipt requested.
In each case notice shall be sent to:
If to Sellers, addressed to:
Atlantic American Properties Trust.
c/o Lazard Freres Real Estate Investors, L.L.C.
30 Rockefeller Plaza, 63rd Floor
New York, NY 10020
Telecopy No.: (212) 332-5980
Attention: Murry N. Gunty
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With a required copy to:
Latham & Watkins
885 Third Avenue
Suite 1000
New York, NY 10022
Telecopy No.: (212) 751-4864
Attention: R. Ronald Hopkinson and James I. Hisiger
If to Buyer Parent or Buyer OP:
Brandywine Realty Trust
Newtown Square Corporate Campus
16 Campus Boulevard
Suite 150
Newtown Square, PA 19073
Telecopy No.: (610) 325-5682
Attention: Gerard H. Sweeney, President and Chief Executive
Officer
With required copies to:
Brandywine Realty Trust
Newtown Square Corporate Campus
16 Campus Boulevard
Suite 150
Newtown Square, PA 19073
Telecopy No.: (610) 325-4628
Attention: Brad A. Molotsky, General Counsel
and
Pepper Hamilton LLP
3000 Two Logan Square
Eighteenth and Arch Streets
Philadelphia, PA 19103-2799
Telecopy No.: (215) 981-4750
Attention: Michael H. Friedman
or to such other place and with such other copies as either party may designate
as to itself by written notice to the others.
10.5 [Intentionally Deleted]
10.6 [Intentionally Deleted]
10.7 Indemnification. Sellers agree to (a) assign, at the Closing, all
indemnification rights under the Bell Atlantic Purchase Agreement and the RF
Purchase Agreement against the sellers thereunder related to the assets and
liabilities transferred to Buyers and (b) take all actions reasonably
necessary for Buyers to
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realize any benefits from such assignment, provided that Buyers shall reimburse
Sellers for any reasonable actual out-of-pocket costs incurred by Sellers in
connection with its obligations under this Section 10.7.
10.8 Choice of Law; Waiver of Trial by Jury. This Agreement shall be
construed, interpreted and the rights of the parties determined in accordance
with the laws of the State of New York (without reference to its choice of law
provisions) except to the extent of real estate conveyancing issues, in which
case such issues shall be construed, interpreted and the rights of the parties
determined in accordance with the laws of the state in which the applicable
property is located. Each party irrevocably consents to the service of any and
all process in any action or proceeding arising out of or relating to this
Agreement by the mailing of copies of such process to each party at its address
specified in Section 10.4. The parties hereto irrevocably submit to the
non-exclusive jurisdiction of the United States District Courts for the Southern
District of New York and for the Eastern District of Pennsylvania (or, if
subject matter jurisdiction in that court is not available, in any state court
located within the City of New York or the City of Philadelphia) over any
dispute arising out of or relating to this Agreement or any agreement or
instrument contemplated hereby or entered into in connection herewith or any of
the transactions contemplated hereby or thereby. Each party hereby irrevocably
agrees that all claims in respect of such dispute or proceeding may be heard and
determined in such courts. The parties hereby irrevocably waive, to the fullest
extent permitted by applicable law, any objection which they may now or
hereafter have to the laying of venue of any such dispute brought in such court
or any defense of inconvenient forum in connection therewith. The parties hereto
waive the right to a jury trial in connection with any suit, action or
proceeding seeking enforcement of such party's rights under this Agreement.
10.9 Entire Agreement; Amendments and Waivers. This Agreement, together
with all exhibits and schedules hereto, constitutes the entire agreement among
the parties pertaining to the subject matter hereof and supersedes all prior
agreements, understandings, negotiations and discussions, whether oral or
written, of the parties (except to the extent specifically provided for herein).
No amendment, supplement, modification or waiver of this Agreement shall be
binding unless executed in writing by the party to be bound thereby. No waiver
of any of the provisions of this Agreement shall be deemed or shall constitute a
waiver of any other provision hereof (whether or not similar), nor shall such
waiver constitute a continuing waiver unless otherwise expressly provided.
10.10 Multiple Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
10.11 Invalidity. If any provision of this Agreement shall for any reason
be held invalid or unenforceable, the invalidity or unenforceability of any such
provision shall in no way affect the validity or enforceability of any other
provision of this Agreement, provided, however, if the invalidity or
unenforceability of any provision shall materially deprive either party of the
economic benefit intended to be conferred by this Agreement, the parties shall
negotiate in good faith to restructure this Agreement in a manner whereby the
economic effect is as nearly as possible the same as the economic effect of this
Agreement prior to such invalidity or unenforceability.
10.12 Titles. The titles, captions or headings of the Articles and Sections
herein are inserted for convenience of reference only and are not intended to be
a part of or to affect the meaning or interpretation of this Agreement.
10.13 Publicity. The parties agree that upon the execution and delivery of
this Agreement, Buyer, Buyer OP, and Sellers or an Affiliate thereof, shall
issue a joint press release in substantially the form of
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Exhibit Q attached hereto. Except as provided in the preceding sentence, no
party shall issue any press release or make any public statement regarding the
transactions contemplated hereby prior to Closing, without the prior approval of
the other party, and the parties hereto shall issue a mutually acceptable press
release promptly after Closing; provided that nothing herein shall restrict any
party from making any disclosure which it or its counsel reasonably deems
necessary in order to fulfill such party's disclosure obligations imposed by
law. At any time after the date hereof, Buyers may file a copy of this
Agreement, and any and all Exhibits hereto, as an exhibit to any filings it may
make with the SEC and may disclose information relating to the transactions
contemplated by this Agreement in any filing it may make with the SEC and in any
prospectus it may prepare in connection with the offering of securities.
10.14 Fees and Expenses. Subject to the provisions of Section 10.1(b)(iii),
the parties shall be responsible for the following fees and expenses: (a)
Sellers shall pay all of the fees, costs and expenses incurred by Sellers
incident to or in connection with the negotiation, preparation, execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby; (b) Buyers shall pay all of the fees, costs
and expenses incurred by Buyers incident to or in connection with the
negotiation, preparation, execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated hereby and Buyers shall
pay all fees, costs and expenses referred to in the letter, dated as of July 23,
1998, from Gerard H. Sweeney to Murry N. Gunty regarding the cost of the
AAPT\CAP audit ("SEC 3-14 Audit"); (c) realty transfer Taxes shall be paid as
provided in Section 9.4; and (d) Buyers shall pay 100% of the title commitment
fees (other than the 20% non-imputation fee, which shall be split equally
between Buyers and Sellers (the amount to be paid by Sellers in connection with
the non-imputation fee not to exceed $100,000)), surveys for the Real Property,
environmental reports, engineering reports and all other due diligence by Buyers
in connection with the consummation of the transactions contemplated hereby.
Buyers shall be entitled to a dollar for dollar credit to the AAPT Purchase
Price to the extent AAPT or any of the Acquired Subsidiaries are responsible for
any such fees or costs which pursuant to this Agreement are the responsibility
of Sellers.
10.15 No Third-Party Beneficiaries. Nothing in this Agreement, express or
implied, is intended to or shall (a) confer on any Person other than the parties
hereto and their respective successors or assigns any rights (including
third-party beneficiary rights) remedies, obligations or liabilities under or by
reason of this Agreement or (b) constitute the parties hereto as partners or as
participants in a joint venture. This Agreement shall not provide third parties
with any remedy, claim, liability, reimbursement, cause of action or other right
in excess of those existing without reference to the terms of this Agreement.
10.16 Knowledge. Whenever a statement herein is qualified by "to the
knowledge," or a similar phrase, it shall mean the actual knowledge of Seller
Personnel or Buyer Personnel, as applicable. The term "Seller Personnel" shall
mean each of Murry N. Gunty, Jim Still, Carol Chiodo and Brent Sinnett. The term
"Buyer Personnel" shall mean Anthony Nichols, Sr., Gerard H. Sweeney, Mark S.
Kripke and Brad A. Molotsky.
10.17 Reservation of Claims. Notwithstanding anything to the contrary set
forth in this Agreement or any Transaction Document, the assets acquired
pursuant hereto shall not include, and Sellers specifically reserve for their
and their Affiliates' benefit, which pursuant to this Agreement are the
responsibility of Sellers and all claims that may now exist or hereafter arise,
whether known or unknown, against any officer, director, employee, insider,
accountant, attorney, underwriters or other person employed or engaged by
Sellers, or any other Person, who has caused or may have caused a loss to
Sellers or any Seller Affiliate to the extent such loss does not constitute a
loss with respect to an asset acquired pursuant hereto following the date
hereof.
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10.18 Limitation of Liability.
(a) No recourse shall be had for any obligation of Buyer Parent or
Buyer OP under this Agreement or under any document executed in connection
herewith or pursuant hereto, or for any claim based thereon or otherwise in
respect thereof, against any past, present or future trustee, shareholder,
partner, officer or employee of Buyer Parent or Buyer OP (other than against
Buyer Parent in its capacity as a shareholder of Buyer OP), 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 the Sellers
and any other party claiming by, through or under the Sellers.
(b) No recourse shall be had for any obligation of Sellers under this
Agreement or under any document executed in connection herewith or pursuant
hereto, or for any claim based thereon or otherwise in respect thereof, against
any past, present or future trustee, director, shareholder, partner, officer or
employee of Sellers, 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 Buyers and any other party claiming by, through
or under Buyers.
10.19 SEC Reporting Requirements. For the period of time commencing on the
date hereof and continuing through the first anniversary of the Closing Date
hereunder, the Sellers shall, from time to time, upon reasonable advance written
notice from Buyer Parent or Buyer OP, provide Buyer OP and Buyer Parent and
their representatives with access to all financial and other information,
whether or not then in Sellers' possession pertaining to the period from January
1, 1997 through the Closing Date, which information is relevant and reasonably
necessary, in the opinion of the outside, third party accountants of Buyer OP
and Buyer Parent (the "Accountants"), to enable Buyer OP and Buyer Parent and
the Accountants to file financial statements in compliance (at Buyer's cost)
with any or all of (a) Rule 3-05 or 3-14 of Regulation S-X of the SEC; (b) any
other rule issued by the SEC and applicable to Buyer OP and Buyer Parent; and
(c) any registration statement, report or disclosure statement filed with the
SEC by or on behalf of Buyer OP and Buyer Parent. In connection with the SEC
3-14 Audit, Sellers shall deliver to the Accountants a representation letter
(the "Letter") in the form attached hereto as Schedule 10.19, if requested by
Buyer. Sellers shall cooperate with Buyers to cause any SEC audit requirements
to be completed and delivered to Buyer within a reasonable time period to insure
that all SEC filing requirements are met.
10.20 Like Kind Exchange. In the event Buyers request AAPT Seller to sell
directly to Buyer or its designee one or more of the properties owned by an
Acquired Subsidiary for a cash price immediately prior to the Closing, AAPT
Seller agrees to cooperate with Buyers to facilitate such sale, with a
corresponding adjustment to the AAPT Purchase Price, subject in any event to
AAPT being satisfied, in its discretion, that implementation of such an
arrangement is effected in a manner that does not adversely affect it
(including, but not limited to, imposing any additional costs on Seller).
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ARTICLE 11
DEBT ALLOCATIONS AND CONTRIBUTION GUARANTEES; RESTRICTIONS
ON SALE AND REFINANCING OF CONTRIBUTED ASSETS
11.1 Allocation of Nonrecourse Debt. The parties intend that, immediately
following the contribution of the Contributed Assets at the Closing, CAP Sellers
shall be allocated, for purposes of determining CAP Sellers' adjusted tax basis
in their aggregate interest in Buyer OP, nonrecourse debt of Buyer OP and its
Subsidiaries, by operation of Section 752 of the Code and the Treasury
Regulations thereunder and the Buyer Partnership Agreement, with respect to each
Contributed Asset, other than as a result of the CAP Sellers Contribution
Obligation (as defined below), in the amount set forth on Schedule 11.1 attached
hereto. The aggregate amount of nonrecourse debt to be so allocated to CAP
Sellers, as set forth on Schedule 11.1, is referred to herein as the "Aggregate
Allocated Debt." Neither Buyer OP nor CAP Sellers makes any representation or
warranty to the other as to whether the IRS will agree with such allocation or,
if the IRS does not so agree, whether the IRS would prevail in such contrary
position. The parties recognize that the IRS might contend either that a larger
amount of the existing nonrecourse debt of Buyer OP must be allocated to CAP
Sellers, in which event a lesser amount of the existing nonrecourse debt of
Buyer OP would be allocated to the other partners of Buyer OP, or,
alternatively, that a larger amount of the existing nonrecourse debt of Buyer OP
must be allocated to the other partners of Buyer OP, in which event a lesser
amount of the existing nonrecourse debt of Buyer OP would be allocated to CAP
Sellers. Buyer OP agrees that its Tax Returns for the tax year in which the
contribution of the Contributed Assets occurs shall reflect the allocation to
CAP Sellers of an amount of indebtedness not less than $88 million (the
"Combined Allocated Debt Amount"). Buyer OP's Tax Returns for each subsequent
year ending on or before December 31, 2003 shall continue to reflect the
allocation to CAP Sellers of an amount of indebtedness determined on the same
basis as that used to compute the indebtedness allocable to CAP Sellers for the
year in which the contribution of the Contributed Assets to Buyer OP occurs,
except to the extent that such allocations are affected by any material changes
that occur after the date hereof in the U.S. federal income tax laws or the
relevant facts. Buyer OP (i) shall notify CAP Sellers of the commencement of any
administrative proceedings by the IRS with respect to the Tax Returns of Buyer
OP or any Subsidiary for such years, (ii) shall permit CAP Sellers to
participate in such administrative proceedings or subsequent judicial
proceedings to the extent either of such proceedings relate both to CAP Sellers
and to matters addressed in this Agreement and (iii) shall not settle any aspect
of such proceedings described in clause (ii) that materially affects the U.S.
federal or state income tax liability of CAP Sellers without CAP Sellers's
consent, which consent shall not be unreasonably withheld.
11.2 Contribution Obligations With Respect to Debt.
(a) Prior to October 31, 2000, Buyer OP shall notify CAP Sellers as to
the amount of the then existing debt of Buyer OP that would be allocated to CAP
Sellers if the Contribution Agreement referred to in Section 11.2(c) below was
cancelled. In addition, prior to October 31, 2000, Buyer OP shall provide CAP
Sellers with a schedule, which must be satisfactory to CAP Sellers in their sole
discretion, identifying specific outstanding indebtedness of Buyer OP and its
Subsidiaries that are treated as partnerships or are disregarded for federal
income tax purposes (the "Transparent Subsidiaries"), in an aggregate amount
equal to at least $10 million. Commencing December 30, 2000, CAP Sellers shall
be permitted, at their option, and if CAP Sellers so elect Buyer OP shall be
obligated to enter into with respect to all or a portion of such indebtedness
(up to a maximum principle amount of $10 million) one or more Contribution
Agreements (the "CAP Sellers Contribution Obligation") in substantially the form
attached as Exhibit S attached hereto. No partner in Buyer OP or any affiliate
of any such partner, other than CAP Sellers, any CAP Sellers Subsidiary or a
wholly-owned Transparent Subsidiary of Buyer OP as to which no Partner of Buyer
OP has any liability,
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<PAGE>
shall be personally liable for, or bear or incur, directly or indirectly, with
respect to that portion of any indebtedness (a "Covered Loan") that is subject
to a CAP Sellers Contribution Agreement, whether by guaranty, the pledge of
collateral, or otherwise, in a manner that would cause such portion of
indebtedness not to be properly allocable to the CAP Sellers under Section 752
of the Code and the Treasury Regulations promulgated thereunder.
(b) To the extent that, at any time on or after December 30, 2000, but
prior to January 2, 2004, (the "Lockout Expiration Date"), Buyer OP or any of
its Transparent Subsidiaries refinances any Covered Loan, or principal is repaid
on the portion of any Covered Loan with respect to which CAP Sellers have
entered into a Contribution Agreement, CAP Sellers shall be entitled to enter
into one or more CAP Sellers Contribution Agreements with respect to other debt
of Buyer OP or any of its Transparent Subsidiaries, and the portion of debt that
is to be guaranteed by CAP Sellers shall meet the conditions described in the
last sentence of Section 11.2(a), so that the total amount of all Covered Loans
following any such refinancing or principal repayment is equal to $10 million,
or such lesser amount as CAP Sellers determine is necessary to avoid recognition
of taxable gain pursuant to Section 731 of the Code (the lesser of such amount
or $10 million, the "Minimum Coverage Amount"), it being understood and agreed
however that in the event that such other debt does not exist, or such other
debt is less than the Minimum Coverage Amount or the portion of the Minimum
Coverage Amount then being repaid or refinanced, the applicable portion of such
debt may not be repaid or such amount must be refinanced by Buyer OP. Any debt
for which CAP Sellers enters into a CAP Sellers Contribution Agreement pursuant
to this Agreement shall be deemed to be a Covered Loan.
(c) Prior to the Closing Date, CAP Sellers and Buyer OP shall execute
and deliver a Contribution Agreement in substantially the form attached as
Exhibit S of the entire amount of the loan (the "Grande B Loan") represented by
the Grande B Loan Agreement. Prior to January 2, 2001, Buyer OP shall not,
directly or indirectly, or cause or permit any Subsidiary to, modify, refinance,
or repay any amount of the Grande B Loan without the prior written consent of
CAP Sellers.
11.3 Restrictions on Sales of Contributed Assets and Certain Refinancings.
(a) Subject to Section 11.3(c), until the Lockout Expiration Date,
Buyer OP shall not, directly or indirectly, or cause or permit any Subsidiary
to, sell, exchange or otherwise dispose of any of the Contributed Assets or any
indirect interest (including, without limitation, any interest of Buyer OP or
any Subsidiary of Buyer OP in any Subsidiary that owns any Contributed Assets,
whether by liquidation, merger or otherwise).
(b) (i) Until the Lockout Expiration Date, Buyer OP shall not,
directly or indirectly, or cause or permit any Subsidiary to, modify, refinance
or repay any principal amount of any indebtedness that is either (a) secured to
any extent by Contributed Assets or otherwise allocable to CAP Sellers by
operation of Section 752 of the Code or (b) a Covered Loan, without the prior
written consent of CAP Sellers, unless (x) in the case of indebtedness described
in clause (a), the aggregate amount of the Partnership's nonrecourse liabilities
that would be allocated to CAP Sellers by operation of Section 752 of the Code
and the regulations thereunder and the Buyer Partnership Agreement other than as
a result of the CAP Sellers Contribution Obligation after giving effect to such
repayment or refinancing would equal or exceed $10 million or (y) in the case of
indebtedness described in clause (b), Buyer OP complies with the provisions of
Section 11.2(b) provided, however, that any such refinancing that has the effect
of accelerating principal repayments would meet the requirements of this Section
11.3(b) if such acceleration were treated as a payment prior to maturity.
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<PAGE>
(ii) For the purposes of this Section 11.3(b), any transaction or
other event, including, without limitation, any modification of indebtedness, in
which any partner of Buyer OP or any affiliate of any such partner other than
CAP Sellers or any CAP Sellers Subsidiary would become personally liable for, or
would bear or incur, directly or indirectly, the "risk of loss" with respect to
any indebtedness that is either secured by a Contributed Asset or is a Covered
Loan, whether by guaranty, the pledge of collateral, or otherwise, in a manner
that would cause such indebtedness not to be considered a Nonrecourse Liability
(as such term is defined in the Buyer Partnership Agreement) shall be considered
a refinancing of such indebtedness for purposes of this Section 11.3(b), and
Buyer OP shall not permit such action to occur unless, and only if, such deemed
refinancing of such indebtedness would not violate Section 11.2(a).
(c) Section 11.3(a) shall not apply to any transaction involving any
Real Property that is transferred to Buyer OP pursuant to the Contribution
(which property is referred to as the "Exchanged Property"), if such transaction
qualifies as a like-kind exchange under Section 1031 of the Code or an
involuntary conversion under Section 1033 of the Code in which no gain is
recognized by Buyer OP or the Subsidiary thereof owning such property or CAP
Sellers as holders of the Preferred Units issued hereunder, as the case may be,
as long as the following conditions are satisfied: (v) in the case of a Section
1031 like-kind exchange, such exchange is not with a "related party" within the
meaning of Section 1031(f)(3) of the Code; (w) the property received in exchange
for the Exchanged Property (referred to as the "Replacement Property") is
acquired in the same taxable year of Buyer OP or such Subsidiary in which the
disposition of the Exchanged Property occurs and the requirements of Section
11.3(b) would be satisfied immediately after such exchange occurs (treating the
exchange as having resulted in a refinancing of all debt secured by the
Exchanged Property for purposes of making such determination); (x) all of the
restrictions of this Section 11.3 shall apply to the Replacement Property and
the indebtedness outstanding with respect to the Replacement Property shall be
treated in the same manner and to the extent set forth in this Section 11.3; and
(y) as of the closing of such transaction, after giving effect thereto, the
ratio of the amount of secured indebtedness allocated to the Replacement
Property to the fair market value of the Replacement Property shall not exceed
80%. Additionally, Section 11.3(a) shall not apply to a contribution by Buyer OP
of Real Property that is transferred to Buyer OP pursuant to the Contribution to
a partnership that is an Affiliate of Buyer OP if (i) such transaction qualifies
for treatment under Section 721 of the Code; (ii) no gain or loss is recognized
by Buyer OP on the transaction; (iii) the transferee partnership covenants and
agrees in writing (and agrees to indemnify CAP Sellers for any breach of such
covenant and agreement), for the benefit of CAP Sellers as holders of the
Preferred Units received by it pursuant to the terms hereof, that all of the
restrictions of this Section 11.3 shall apply to such Real Property and the
indebtedness outstanding with respect thereto in the same manner and to the
extent otherwise set forth in this Section 11.3; and (iv) Buyer OP shall not be
released from (and shall be jointly and severally liable for damages resulting
from a breach by the successor partnership from) any and all obligation pursuant
to this Article 11.
(d) Section 11.3(a) shall not apply to any transaction that involves
either a merger or consolidation of Buyer OP or a Subsidiary thereof with or
into another entity that qualifies as a "partnership" for federal income tax
purposes (the "Successor Partnership") or a transfer of all or substantially all
of the assets of Buyer OP or such Subsidiary to a Successor Partnership and
dissolution of Buyer OP or such Subsidiary, as the case may be, in connection
therewith (in either case, a "Consolidation Transaction") so long as no gain or
income is recognized by Buyer OP or such Subsidiary with respect to any Real
Property that is transferred to Buyer OP pursuant to the Contribution or by CAP
Sellers as holders of the Preferred Units issued hereunder in connection with
such Consolidation Transaction, provided that (w) the requirements of Section
11.3(b) would be satisfied immediately after the Consolidation Transaction
occurs (treating the Consolidation Transaction as having resulted in a
refinancing of all debt of Buyer OP or such Subsidiary for purposes of
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<PAGE>
making such determination) and (x) the Successor Partnership covenants and
agrees in writing (and agrees to indemnify CAP Sellers for any breach of such
covenant and agreement), for the benefit of CAP Sellers as holders of the
Preferred Units received by it pursuant to the terms hereof, that all of the
restrictions of this Section 11.3 shall apply to such Real Property and the
indebtedness outstanding with respect thereto in the same manner and to the
extent otherwise set forth in this Section 11.3; and (y) as of the closing of
such transaction, after giving effect thereto, the Leverage Ratio of the
Successor Partnership (or the successor thereto following such transaction)
shall not exceed 80%.
11.4 Maintenance of Combined Allocated Debt Amount. Until the Lockout
Expiration Date, Buyer OP shall not take, or permit any Subsidiary to take, any
action after the Closing Date that results in the amount of indebtedness that
Buyer OP will allocate to CAP Sellers following any such action, in accordance
with Section 752 of the Code and the regulations thereunder and the Buyer
Partnership Agreement, to be reduced to an amount less than the Combined
Allocated Debt Amount.
11.5 Damages Limited to Monetary Damages. CAP Sellers' remedies for any
breach by Buyer OP (or its successors in interest) of any provision of this
Article 11 shall be limited to monetary (as opposed to equitable) damages, being
the amount of taxes (including interest and penalties) imposed on CAP Sellers
and their direct and indirect owners, including taxes imposed on CAP Sellers and
their direct and indirect owners resulting from the receipt by CAP Sellers of
indemnification payments hereunder.
11.6 Choice of Section 704(c) Method. Buyer OP covenants and agrees that
the "traditional method," as defined in Treasury Regulation Section 1.704-3(b),
of allocating income, gain, loss and deduction to account for the variation
between the fair market value and adjusted basis of the Contributed Assets
contributed to Buyer OP by CAP Sellers shall be used (1) with respect to the
contribution of the Contributed Assets and (2) with respect to any revaluation
of such assets pursuant to Treasury Regulation Sections 1.704- 1(b)(2)(iv)(f),
1.704-1(b)(2)(iv)(g), and 1.704-3(a)(6) and the corresponding provisions of the
Buyer OP partnership agreement.
[signature pages follow]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed on their respective behalf, by their respective
officers thereunto duly authorized, all as of the day and year first above
written.
<TABLE>
<CAPTION>
SELLERS BUYERS
<S> <C>
PROMETHEUS AAPT HOLDINGS, L.L.C. BRANDYWINE REALTY TRUST
By: LF STRATEGIC REALTY INVESTORS L.P.,
as sole member
By: LAZARD FRERES REAL ESTATE INVESTORS
L.L.C.,
as general partner
By: __________________________ By: __________________________
Name: Name: Gerard H. Sweeney
Title: Title: President and Chief Executive Officer
COMMONWEALTH ATLANTIC OPERATION BRANDYWINE OPERATING PARTNERSHIP, L.P.
PROPERTIES INC.
By: __________________________ By: BRANDYWINE REALTY TRUST, as general partner
Name:
Title:
By: __________________________
Name: Gerard H. Sweeney
Title: President and Chief Executive Officer
COMMONWEALTH ATLANTIC LAND IV INC.
By: __________________________
Name:
Title:
COMMONWEALTH ATLANTIC LAND II INC.
By: __________________________
Name:
Title:
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
COMMONWEALTH ATLANTIC DEVELOPMENT INC.
By: __________________________
Name:
Title:
COMMONWEALTH ATLANTIC LAND COMPANY
By: __________________________
Name:
Title:
For purposes of Section 9.10 only,
LF STRATEGIC REALTY INVESTORS L.P.
By: Lazard Freres Real Estate Investors L.L.C.,
as general partner
By: __________________________
Name:
Title:
</TABLE>
<PAGE>
EXHIBIT 10.2
__________ AMENDMENT TO AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
BRANDYWINE OPERATING PARTNERSHIP, L.P.
THIS ________ AMENDMENT, dated as of _________, 1998 (the
"Amendment"), amends the Amended and Restated Agreement of Limited Partnership
Agreement (as heretofore amended to date, the "Partnership Agreement") of
BRANDYWINE OPERATING PARTNERSHIP, L.P., a Delaware limited partnership (the
"Partnership"). Capitalized terms used herein but not defined herein shall
have the meanings given to such terms in the Partnership Agreement.
BACKGROUND
A. Pursuant to the Partnership Agreement, Brandywine Realty Trust
(the "General Partner"), as the general partner of the Partnership, has the
power and authority to issue additional Partnership Interests and Units in one
or more newly created classes of Partnership Interests to persons on such
terms and conditions as the General Partner may deem appropriate.
B. The General Partner, pursuant to the exercise of such power and
authority and in accordance with the Partnership Agreement, has determined to
execute this Amendment to the Partnership Agreement to create a new class of
Partnership Interests designated as the Series A Preferred Mirror Units having
designations, preferences and other rights which are substantially the same as
the economic rights of the 7.25% Series A Cumulative Convertible Preferred
Shares of the General Partner (the "Series A Preferred Shares") and to
evidence the issuance of such additional Partnership Interests to the General
Partner in exchange for the General Partner's contribution to the Partnership
of [the net proceeds of the sale of the Series A Preferred Shares pursuant to
that certain Purchase and Contribution Agreement, dated as of ___________,
1998, by and among the General Partner, the Partnership and the other
signatories thereto] [the Series A Preferred Shares].
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained and other good and valuable consideration, the
receipt, adequacy and sufficiency of which are hereby acknowledged, the
parties hereto, intending to be legally bound, hereby amend the Partnership
Agreement as follows:
1. In accordance with the Partnership Agreement, the Partnership
Agreement is hereby amended to establish, and to issue to the General Partner,
the Series A Preferred Mirror Units having the designations, preferences and
other rights set forth below:
(a) Designation and Number. A class of Partnership Interests
designated as Series A Preferred Mirror Units is hereby established. The
number of Series A Preferred Mirror Units shall be _________ . The stated
value of each Series A Preferred Mirror Unit shall be $50.00 (the "Stated
Value").
<PAGE>
(b) Rank. The Series A Preferred Mirror Units will, with respect
to distribution rights and rights upon liquidation, dissolution or winding up
of the Partnership, rank (a) senior to the Class A Units and all Partnership
Interests ranking junior to the Series A Preferred Mirror Units; (b) on a
parity with all Partnership Interests issued by the Partnership the terms of
which specifically provide that such Partnership Interests rank on a parity
with the Series A Preferred Mirror Units including the Partnership Interests
designated as Class B Preferred Units; and (c) junior to all Partnership
Interests issued by the Partnership the terms of which specifically provide
that such Partnership Interests rank senior to the Series A Preferred Mirror
Units.
(c) Distributions.
(i) Pursuant to Section 6.1 of the Partnership Agreement,
holders of Series A Preferred Mirror Units shall be entitled to receive, out
of funds legally available therefor, cumulative quarterly cash distributions
equal to the amount of the cumulative quarterly cash distributions payable on
the Series A Preferred Shares. Such distributions shall be payable quarterly
in arrears on or before the date on which distributions on the Series A
Preferred Shares are payable (each a "Series A Preferred Mirror Unit
Distribution Payment Date").
(ii) No distributions on Series A Preferred Mirror Units shall
be authorized or paid or set apart for payment by the Partnership at such time
as the terms and provisions of any agreement of the Partnership, including any
agreement relating to its indebtedness, prohibits such authorization, payment
or setting apart for payment or provides that such authorization, payment or
setting apart for payment would constitute a breach thereof, or a default
thereunder, or if such authorization or payment shall be restricted or
prohibited by law.
(iii) Notwithstanding the foregoing, distributions with
respect to the Series A Preferred Mirror Units will accrue whether or not the
terms and provisions set forth in Section 1(c)(ii) at any time prohibit the
current payment of distributions, whether or not there are funds legally
available for such distributions and whether or not such distributions are
authorized. Accrued but unpaid distributions on the Series A Preferred Mirror
Units will accumulate as of the Series A Preferred Mirror Unit Distribution
Payment Date on which they first become payable.
(iv) When distributions are not paid in full (or a sum
sufficient for such full payment is not so set apart) upon the Series A
Preferred Mirror Units and any other Partnership Interests ranking on a parity
as to distributions with the Series A Preferred Mirror Units, all
distributions authorized upon the Series A Preferred Mirror Units and any
other Partnership Interests ranking on a parity as to distributions with the
Series A Preferred Mirror Units shall be authorized pro rata so that the
amount of distributions authorized per Partnership Unit of Series A Preferred
Mirror Units and such other Partnership Interests shall in all cases bear to
each other the same ratio that accrued distributions per Partnership Unit on
the Series A Preferred Mirror Units and such other Partnership Interests
(which shall not include any accrual
-2-
<PAGE>
in respect of unpaid distributions for prior distribution periods if such
other Partnership Interests do not have a cumulative distribution) bear to
each other. No interest, or sum of money in lieu of interest, shall be payable
in respect of any distribution payment or payments on Series A Preferred
Mirror Units which may be in arrears.
(v) Except as provided in Section 1(c)(iv), unless full
cumulative distributions on the Series A Preferred Mirror Units have been or
contemporaneously are authorized and paid or authorized and a sum sufficient
for the payment thereof is set apart for payment for all past distribution
periods and the then current distribution period, no distributions (other than
in Partnership Interests ranking junior to the Series A Preferred Mirror Units
as to distributions and upon liquidation) shall be authorized or paid or set
aside for payment nor shall any other distribution be authorized or made upon
the Class A Units or any other Partnership Interests ranking junior to or on a
parity with the Series A Preferred Mirror Units as to distributions or upon
liquidation, nor shall any Class A Units or any other Partnership Interests
ranking junior to or on a parity with the Series A Preferred Shares as to
distributions or upon liquidation be redeemed, purchased or otherwise acquired
for any consideration (or any moneys be paid to or made available for a
sinking fund for the redemption of any such units or other Partnership
Interests) by the Partnership or any other entity controlled directly or
indirectly by the Partnership (except by conversion into or exchange for
Partnership Interests ranking junior to the Series A Preferred Mirror Units as
to distributions and upon liquidation).
(vi) Holders of the Series A Preferred Mirror Units shall not
be entitled to any distribution, whether payable in cash, property or
Partnership Units in excess of full cumulative distributions on the Series A
Preferred Mirror Units as described above. Any distribution payment made on
the Series A Preferred Mirror Units shall first be credited against the
earliest accrued but unpaid distribution due with respect to such Series A
Preferred Mirror Units which remains payable.
(d) Liquidation Preference.
(i) Upon any voluntary or involuntary liquidation, dissolution
or winding up of the affairs of the Partnership, the holders of Series A
Preferred Mirror Units then outstanding are entitled to be paid out of the
assets of the Partnership available for distribution to the Partners pursuant
to Section 13.5(a) of the Partnership Agreement a liquidation preference equal
to the Stated Value per Series A Preferred Mirror Unit, plus an amount equal
to any accrued and unpaid distributions to the date of payment, before any
distribution of assets is made to holders of Class A Units and GP Units or any
other Partnership Interests that rank junior to the Series A Preferred Mirror
Units as to liquidation rights.
(ii) In the event that, upon any such voluntary or involuntary
liquidation, dissolution or winding up, the available assets of the
Partnership are insufficient to pay the amount of the liquidating
distributions on all outstanding Series A Preferred Mirror Units
-3-
<PAGE>
and the corresponding amounts payable on all other Partnership Interests
ranking on a parity with the Series A Preferred Mirror Units in the
distribution of assets, then such assets shall be allocated among the Series A
Preferred Mirror Units, as a class, and each class or series of such other
such Partnership Interests, as a class, in proportion to the full liquidating
distributions to which they would otherwise be respectively entitled.
(iii) After payment of the full amount of the liquidating
distributions to which they are entitled, the holders of Series A Preferred
Mirror Units will have no right or claim to any of the remaining assets of the
Partnership.
(iv) The consolidation or merger of the Partnership with or
into any other partnership, corporation, trust or entity or of any other
partnership, corporation, trust or other entity with or into the Partnership,
or the sale, lease or conveyance of all or substantially all of the property
or business of the Partnership, shall not be deemed to constitute a
liquidation, dissolution or winding up of the Partnership for purposes of this
Section 1(d).
(e) Redemption. In connection with a redemption by the General
Partner, pursuant to the exercise of a Cash Redemption Right (as defined in
the General Partner's Declaration of Trust, as amended (the "Declaration of
Trust")), of any or all of the Series A Preferred Shares, the Partnership
shall provide cash to the General Partner for such purpose which shall be
equal to redemption price of the Series A Preferred Shares to be redeemed and
one Series A Preferred Mirror Unit shall be canceled with respect to each
Series A Preferred Share so redeemed. In connection with a redemption by the
General Partner, pursuant to the exercise of a Share Redemption Right (as
defined in the Declaration of Trust), of any or all of the Series A Preferred
Shares, the Partnership shall issue to the General Partner a number of Class A
Units equal to the number of Common Shares issued in payment of the redemption
price of the Class A Preferred Shares so redeemed, and one Series A Preferred
Mirror Unit for each Series A Preferred Share so redeemed shall be canceled.
From and after the date on which the Series A Preferred Shares are redeemed,
the Series A Preferred Mirror Units so canceled shall no longer be outstanding
and all rights hereunder, to distributions or otherwise, with respect to such
Series A Preferred Mirror Units shall cease.
(f) Conversion. In connection with, and at the time of, the
conversion of all or any Series A Preferred Shares into Common Shares, a
number of Series A Preferred Mirror Units equal to the number of Series A
Preferred Shares so converted shall be converted into a number of Class A
Units equal to the number of Common Shares issuable upon such conversion.
(g) Allocations. Allocations of the Partnership's items of income,
gain, loss and deduction shall be allocated among holders of Series A
Preferred Mirror Units in accordance with Article VII of the Partnership
Agreement.
-4-
<PAGE>
2. Section 13.5(a) of the Partnership Agreement is amending
redesignating subparagraph (iv) as subparagraph (v) and inserting the
following new subparagraph (iv):
(iv) Next, to the holders of Partnership Interests that are entitled
to any preference in distribution upon liquidation in accordance with the
rights of any such class or series of Partnership Interests (and, within each
such class or series, to each holder thereof pro rata based on the proportion
of the total number of outstanding units of such class or series represented
by such holder's units of such series or class); and
3. Section 7.2 of the Partnership Agreement is amending by inserting the
following new subparagraph (g):
(g) Priority Allocation. All or a portion of the Net Income of the
Partnership for the Fiscal Year, if any, shall be specially allocated to the
Partners holding Series A Preferred Mirror Units and Series B Preferred Units
in proportion to the cumulative distributions each has received pursuant to
Sections 6.1, 6.2, and 13.5 hereof and, with respect to the Partners holding
Series A Preferred Mirror Units, Section 1(c) and 1(d) of the _____Amendment
to this Agreement or, with respect to Partners holding Series B Preferred
Units, Section 1.C and 1.D of the _____ Amendment to this Agreement, from the
commencement of the Partnership to the end of such Fiscal Year, in an amount
equal to the excess, if any, of the sum of (i) the aggregate Net Loss
allocated to such Partners pursuant to Section 7.1(b) hereof for all prior
Fiscal Years, if any, and (ii) the aggregate distributions received by such
Partners pursuant to Sections 6.1, 6.2, and 13.5 of this Agreement and, with
respect to Partners holding Series A Preferred Mirror Units, Section 1(c) and
1(d) of the ______Amendment to this Agreement or, with respect to Partners
holding Series B Preferred Units, Section 1C and 1D of the _____Amendment,
from the commencement of the Partnership to the end of such Fiscal Year, over
the aggregate items of Net Income allocated to such Partners pursuant to this
Section 7.1(g) for all prior Fiscal Years.
4. Except as expressly set forth in this Amendment to the Partnership
Agreement, the Partnership Agreement is hereby ratified and confirmed in each
and every respect.
-5-
<PAGE>
IN WITNESS WHEREOF, this Amendment to the Partnership Agreement has
been executed and delivered as of the date first above written.
GENERAL PARTNER:
BRANDYWINE REALTY TRUST
By:______________________________
Name: Gerard H. Sweeney
Its: President and Chief Executive Officer
-6-
<PAGE>
EXHIBIT 10.3
__________ AMENDMENT TO AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
BRANDYWINE OPERATING PARTNERSHIP, L.P.
THIS ________ AMENDMENT, dated as of _________, 1998 (the
"Amendment"), amends the Amended and Restated Agreement of Limited Partnership
Agreement (as heretofore amended to date, the "Partnership Agreement") of
BRANDYWINE OPERATING PARTNERSHIP, L.P., a Delaware limited partnership (the
"Partnership"). Capitalized terms used herein but not defined herein shall
have the meanings given to such terms in the Partnership Agreement.
BACKGROUND
Pursuant to the Partnership Agreement, Brandywine Realty
Trust (the "General Partner"), as the general partner of the Partnership, has
the power and authority to issue additional Partnership Interests and Units in
one or more newly created classes of Partnership Interests to persons on such
terms and conditions as the General Partner may deem appropriate.
The General Partner, pursuant to the exercise of such power
and authority and in accordance with the Partnership Agreement, has determined
to execute this Amendment to the Partnership Agreement to create a new class
of Partnership Interests to be designated as Series B Preferred Units and to
evidence the issuance of such additional Partnership Interests and the
admission of the other signatories hereto as Limited Partners of the
Partnership in exchange for certain contributions of interests in real estate
and real estate related assets that are being made to the Partnership on the
date hereof pursuant to that certain Purchase and Contribution Agreement,
dated as of ________ , 1998, among the Partnership and the other signatories
thereto.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained and other good and valuable consideration, the
receipt, adequacy and sufficiency of which are hereby acknowledged, the
parties hereto, intending to be legally bound, hereby amend the Partnership
Agreement as follows:
1. In accordance with the Partnership Agreement, the
Partnership Agreement is hereby amended to establish, and to issue to the
Persons set forth on Schedule A attached hereto, the Series B Preferred Units
having the designations, preferences and other rights set forth below:
A. Designation and Number. A class of Partnership
Interests designated as Series B Preferred Units is hereby established. The
number of Series B Preferred Units shall be ________ . The stated value of a
Series B Preferred Unit shall be $50.00 (the "Stated Value").
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B. Rank. The Series B Preferred Units shall, with respect
to distribution rights and rights upon liquidation, dissolution or winding up
of the Partnership, rank (i) senior to the Class A Units and to all
Partnership Interests ranking junior to the Series B Preferred Units; (ii) on
a parity with all Partnership Interests issued by the Partnership the terms of
which specifically provide that such Partnership Interests rank on a parity
with the Series B Preferred Units including the Partnership Interests
designated as Series A Preferred Mirror Units; and (iii) junior to all
Partnership Interests the terms of which specifically provide that such
Partnership Interests rank junior to the Series B Partnership Units.
C. Distributions.
(i) Pursuant to Section 6.1 of the Partnership
Agreement, the holders of Series B Preferred Units shall be entitled to
receive, out of funds legally available for that purpose, cumulative
distributions payable in cash in an amount per Series B Preferred Unit equal
to the greater of (a) $0.9063 per quarter (equivalent to $3.625 per annum) or
(b) the cash distributions paid or payable on the number of Class A Units, or
portion thereof, into which a Series B Preferred Unit is convertible, in each
case with appropriate proration for partial quarters. The amount referred in
clause (b) of this subsection C(i) with respect to each Distribution Period
(as defined in subsection J below) shall be determined as of the applicable
Distribution Payment Date (as defined in subsection J below) by multiplying
the number of Class A Units, or portion thereof calculated to the fourth
decimal point, into which a Series B Preferred Unit would be convertible at
the opening of business on such Distribution Payment Date (based on the
Conversion Price (as defined in subsection G below) then in effect) by the
quarterly cash distribution payable or paid by the Partnership for such
Distribution Period in respect of a Class A Unit outstanding as of the record
date for the payment of distributions on the Class A Units with respect to
such Distribution Period or, if different, with respect to the most recent
quarterly period for which distributions with respect to the Class A Units
have been declared by the Partnership. Such distributions shall be cumulative
from the Issue Date (as defined in subsection J below), whether or not in any
Distribution Period or Periods such distributions shall be authorized or there
shall be funds of the Partnership legally available for the payment of such
distributions, and shall be payable quarterly in arrears on the Distribution
Payment Dates, commencing on the first Distribution Payment Date after the
Issue Date. Each such distribution shall be payable in arrears to the holders
of record of the Series B Preferred Units, as they appear on the records of
the Partnership at the close of business on a record date which shall be not
less than 10 and not more than 60 days prior to the applicable Distribution
Payment Date and shall be fixed by the Partnership, acting through the General
Partner, to coincide with the record date for the regular quarterly
distributions, if any, payable by the Partnership with respect to the Class A
Units. Accumulated, accrued and unpaid distributions for any past Distribution
Periods may be authorized and paid at any time, without reference to any
regular Distribution Payment Date, to holders of record on a given date, which
date shall not precede by more than 45 days the payment date thereof, as may
be fixed by the Partnership, acting through the General Partner. The amount of
accumulated, accrued and unpaid distributions on any Series B Preferred Unit,
or fraction thereof,
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at any date shall be the amount of any distributions thereon calculated at the
applicable rate to and including such date, whether or not earned or
authorized, which have not been paid in cash. The amount of distributions
payable per Series B Preferred Unit for the initial Distribution Period, or
any other period shorter or longer than a full Distribution Period, shall be
computed ratably on the basis of four 90-day quarters and a 364-day year.
(ii) No distribution on the Series B Preferred Units
shall be authorized or paid or set apart for payment by the Partnership at
such time as the terms and provisions of any agreement of the Partnership,
including any agreement relating to its indebtedness, prohibits such
authorization, payment or setting apart for payment or provides that such
authorization, payment or setting apart for payment would constitute a breach
thereof, or a default thereunder, or if such authorization or payment shall be
restricted or prohibited by law. No interest, or sum of money in lieu of
interest, shall be payable in respect of any distribution payment or payments
on the Series B Preferred Units which may be in arrears.
Notwithstanding the foregoing, distributions on the Series B
Preferred Units shall accumulate whether or not any of the foregoing
restrictions exist, whether or not there are funds legally available for the
payment thereof and whether or not such distributions are authorized.
Accumulated but unpaid distributions on the Series B Preferred Units shall not
bear interest and holders of the Series B Preferred Units shall not be
entitled to any distributions in excess of full cumulative distributions. Any
distribution payment made on the Series B Preferred Units shall first be
credited against the earliest accumulated but unpaid distribution due with
respect to such Series B Preferred Units which remains payable.
(iii) Except as provided in subsection C(iv) below, no
distributions (other than in Class A Units or Partnership Interests ranking
junior to the Series B Preferred Units as to distributions and upon
liquidation, dissolution or winding up of the Partnership) shall be authorized
or paid or set aside for payment nor shall any other distribution be
authorized or made upon the Class A Units or any other Partnership Interests
ranking, as to distributions or upon liquidation, dissolution or winding up of
the Partnership, on a parity with or junior to the Series B Preferred Units
for any period unless full cumulative distributions have been or
contemporaneously are authorized and paid or authorized and a sum sufficient
for the payment thereof set apart for such payment on the Series B Preferred
Units for all past distribution periods and the then current distribution
period, nor shall any Class A Units, or any Partnership Interests ranking
junior to or on a parity with the Series B Preferred Units as to distributions
or upon liquidation, dissolution or winding up of the Partnership, be
redeemed, purchased or otherwise acquired for any consideration (or any monies
be paid to or made available for a sinking fund for the redemption of any such
Partnership Interests) by the Partnership or any other entity controlled
directly or indirectly by the Partnership (except by conversion into or
exchange for Partnership Interests ranking junior to the Series B Preferred
Units as to distributions and upon liquidation, dissolution or winding up of
the Partnership or for the repurchase of Class A Units held by employees,
officers or consultants of the
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Partnership (or their permitted transferees) that are subject to restrictive
share purchase agreements under which the Partnership has the option or
obligation to repurchase such shares upon the occurrence of certain events,
such as termination of employment).
(iv) When distributions are not paid in full (or a sum
sufficient for such full payment is not so set apart) upon the Series B
Preferred Units and any other Partnership Interests ranking on a parity as to
distributions with the Series B Preferred Units, all distributions authorized
with respect to the Series B Preferred Units and any other Partnership
Interests ranking on a parity as to distributions with the Series B Preferred
Units shall be authorized pro rata so that the amount of distributions
authorized with respect to the Series B Preferred Units and such other
Partnership Interests shall in all cases bear to each other the same ratio
that accumulated distributions with respect to the Series B Preferred Units
and such other Partnership Interests (which shall not include any accumulation
in respect of unpaid distributions for prior distribution periods if such
Partnership Interests do not have a cumulative distribution) bear to each
other.
(v) Holders of Series B Preferred Units shall not be
entitled to any distribution, whether payable in cash, property or shares, in
excess of full cumulative distributions on the Series B Preferred Units as
described above. Accumulated but unpaid distributions on the Series B
Preferred Units will accumulate as of the Distribution Payment Date on which
they first become payable.
D. Liquidation Preference.
(i) Upon any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the Partnership, the holders of
the Series B Preferred Units shall be entitled to receive out of the assets of
the Partnership available for distribution to the Partners pursuant to Section
13.5(a) of the Partnership Agreement a liquidation preference equal to the
Stated Value per Series B Preferred Unit, plus an amount equal to any
accumulated and unpaid distributions to the date of payment, before any
distribution of assets is made to holders of Class A Units, GP Units or any
other Partnership Interests that rank junior to the Series B Preferred Units
as to liquidation rights.
(ii) If upon any such voluntary or involuntary
liquidation, dissolution or winding up of the Partnership, the assets of the
Partnership are insufficient to pay the amount of such liquidating
distributions on all outstanding Series B Preferred Units and the
corresponding amounts payable on all other Partnership Interests ranking on a
parity with the Series B Preferred Units in the distribution of assets, then
such assets shall be allocated among the Series B Preferred Units, as a class,
and each class or series of such other Partnership Interests, as a class, in
proportion to the full liquidating distributions to which they would otherwise
be respectively entitled.
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(iii) Written notice of any such liquidation,
dissolution or winding up of the Partnership, stating the payment date or
dates when, and the place or places where, the amounts distributable in such
circumstances shall be payable, shall be given by first class mail, postage
pre-paid, not less than 30 nor more than 60 days prior to the payment date
stated therein, to each record holder of the Series B Preferred Units at the
respective addresses of such holders as the same shall appear on the records
of the Partnership.
(iv) After payment of the full amount of the
liquidating distributions to which they are entitled, the holders of Series B
Preferred Units shall have no right or claim to any of the remaining assets of
the Partnership.
(v) None of a consolidation or merger of the
Partnership with or into any other partnership, corporation, trust or entity
or of any other partnership, corporation, trust or other entity with or into
the Partnership, or the sale, lease or conveyance of all or substantially all
of the property or business of the Partnership shall be considered a
liquidation, dissolution or winding up of the Partnership.
E. Redemption.
(i) Cash Redemption Right. On and after January 2,
2004 and, in addition, at any time after the Issue Date that the Current
Market Price (as defined in subsection J below) of the Common Shares (as
defined in subsection J below) has equaled or exceeded 120% of the Conversion
Price for any 60 consecutive Trading Days (as defined in subsection J below),
the Partnership, upon giving notice as provided below, may redeem the Series B
Preferred Units, in whole or in part, for a redemption price per Series B
Preferred Unit payable in cash equal to the Stated Value (the "Cash Redemption
Right").
(ii) Class A Unit Redemption Right. If (i) at any time
during the period commencing on the Issue Date and ending on January 1, 2004,
the Current Market Price of the Common Shares has equaled or exceeded 120% of
the Conversion Price for any 60 consecutive Trading Days or (ii) at any time
on or after January 2, 2004, the Current Market Price of the Common Shares has
equaled or exceeded 110% of the Conversion Price for 60 consecutive Trading
Days, the Partnership, upon giving notice as provided below, may redeem the
Series B Preferred Units, in whole or in part, for such number of Class A
Units as equals the Stated Value of the Series B Preferred Units to be
redeemed divided by the Conversion Price as of the opening of business on the
date set for such redemption (the " Class A Unit Redemption Right").
(iii) Limitations on Redemption.
(a) The Partnership may exercise the Cash
Redemption Right provided that the redemption price (other than the portion
thereof consisting of accumulated
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and unpaid distributions) is payable solely out of the sale proceeds of other
Partnership Interests (or of rights or options to purchase Partnership
Interests) or proceeds contributed to the Partnership from the sale of equity
securities of the General Partner, and from no other source. For purposes of
the preceding sentence, "equity securities" means any equity securities,
shares, interest, participation or other ownership interests (however
designated) and any rights (other than debt securities convertible into or
exchangeable for equity securities) or options to purchase any of the
foregoing.
(b) If fewer than all of the outstanding Series
B Preferred Units are to be redeemed, the Series B Preferred Units to be
redeemed shall be determined pro rata or by lot or in such other manner as
determined by the Partnership, acting through the General Partner.
(c) Notwithstanding anything to the contrary
contained herein, unless full cumulative distributions on all Series B
Preferred Units shall have been or contemporaneously are authorized and paid
or authorized and a sum sufficient for the payment thereof set apart for
payment for all past distribution periods and the current distribution period,
no Series B Preferred Units shall be redeemed unless all outstanding Series B
Preferred Units are simultaneously redeemed or exchanged; provided, however,
that the foregoing shall not prevent the purchase or acquisition of Series B
Preferred Units pursuant to a purchase or exchange offer made on the same
terms to holders of all outstanding Series B Preferred Units. In addition,
unless full cumulative distributions on all outstanding Series B Preferred
Units have been or contemporaneously are authorized and paid or authorized and
a sum sufficient for the payment thereof set apart for payment for all past
distributions periods and the then current distribution period, the
Partnership shall not purchase or otherwise acquire directly or indirectly any
Series B Preferred Units or any Partnership Interests ranking junior to or on
a parity with the Series B Preferred Units as to distributions or upon
liquidation, dissolution or winding up of the Partnership (except by
conversion into or exchange for Partnership Interests ranking junior to the
Series B Preferred Units as to distributions and upon liquidation, dissolution
or winding up of the Partnership or for the repurchase of Class A Units held
by employees, officers or consultants of the Partnership (or their permitted
transferees) that are subject to restrictive share purchase agreements under
which the Partnership has the option or obligation to repurchase such shares
upon the occurrence of certain events, such as termination of employment).
(d) Immediately prior to any redemption of
Series B Preferred Units, the Partnership shall pay, in cash, any accumulated
and unpaid distributions through the Redemption Date (as defined in subsection
E(iv) below), unless a Redemption Date falls after a Distribution Record Date
and on or prior to the corresponding Distribution Payment Date, in which case
each holder of Series B Preferred Units at the close of business on such
Distribution Record Date shall be entitled to the distribution payable on such
Series B Preferred Units on the corresponding Distribution Payment Date
notwithstanding the redemption of such Series B Preferred Units on or prior to
such Distribution Payment Date. Except as provided above, the
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<PAGE>
Partnership will make no payment or allowance for unpaid distributions,
whether or not in arrears, on Series B Preferred Units for which a notice of
redemption has been given.
(iv) Procedures for Redemption.
(a) Notice of redemption shall be mailed, not
less than 30 nor more than 60 days, prior to the date fixed for redemption set
forth in such notice (the "Redemption Date") to each holder of record of
Series B Preferred Units to be redeemed, notifying such holder of the
Partnership's election to redeem such Series B Preferred Units. Such notice
shall mailed to such holder's address as the same appears on the records of
the Partnership. No failure to give such notice or any defect therein or in
the mailing thereof shall affect the validity of the proceedings for the
redemption of any Series B Preferred Units except as to the holder to whom
notice was defective or not given.
(b) In addition to any information required by
law, such notice shall state: (1) the Redemption Date, (2) with respect to the
Cash Redemption Right, the cash redemption price per Series B Preferred Unit
and, with respect to the Class A Unit Redemption Right, the number of Class A
Units to be issued with respect to each Series B Preferred Unit, (3) the
number of Series B Preferred Units to be redeemed (and, if fewer than all the
Series B Preferred Units are to be redeemed from such holder, the number of
Series B Preferred Units to be redeemed from such holder), (4) the place or
places where certificates for such Series B Preferred Units are to be
surrendered for payment of the redemption price in cash, with respect to the
Cash Redemption Right, and in certificates representing Class A Units, with
respect to the Share Redemption Right, (5) that distributions on the Series B
Preferred Units to be redeemed will cease to accumulate on such Redemption
Date and (6) the date upon which the holder's conversion rights, if any, as to
such Series B Preferred Units shall terminate.
(c) On or after the Redemption Date, each holder
of Series B Preferred Units to be redeemed shall present and surrender the
certificates evidencing its Series B Preferred Units to the Partnership at the
place designated in the notice of redemption and thereupon the redemption
price (in cash or Class A Units, as applicable) of such Series B Preferred
Units shall be paid to or on the order of the person whose name appears on
such certificate evidencing Series B Preferred Units as the owner thereof and
each surrendered certificate shall be canceled. If fewer than all the Series B
Preferred Units evidenced by any such surrendered certificate are to be
redeemed, a new certificate shall be issued evidencing the unredeemed Series B
Preferred Units.
(d) From and after the Redemption Date (unless
the Partnership defaults in payment of the redemption price), all
distributions on the Series B Preferred Units designated for redemption in
such notice shall cease to accumulate and all rights of the holders thereof,
except the right to receive the redemption price thereof (including all
accumulated and
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<PAGE>
unpaid distributions up to the Redemption Date), shall cease and terminate and
such Series B Preferred Units shall not thereafter be transferred (except with
the consent of the General Partner) on the Partnership's books, and such
Series B Preferred Units shall not be deemed to be outstanding for any purpose
whatsoever. At its election, the Partnership, acting through its General
Partner, prior to a Redemption Date, may irrevocably deposit the redemption
price (including accumulated and unpaid distributions) of the Series B
Preferred Units so called for redemption in trust for the holders thereof with
a bank or trust company, in which case the redemption notice to holders of the
Series B Preferred Units to be redeemed shall (i) state the date of such
deposit, (ii) specify the office of such bank or trust company as the place of
payment of the redemption price and (iii) require such holders to surrender
the certificates evidencing such Series B Preferred Units at such place on or
about the date fixed in such redemption notice (which may not be later than
the Redemption Date) against payment of the redemption price (including all
accumulated and unpaid distributions to the Redemption Date). At the close of
business on a Redemption Date relating to the Partnership's Class A Unit
Redemption Right, each holder of Series B Preferred Units to be so redeemed
(unless the Trust defaults in the delivery of the Class A Units payable on
such Redemption Date) shall be deemed to be the record holder of the number of
Class A Units into which such Series B Preferred Units are to be so redeemed,
regardless of whether such holder has surrendered the certificates evidencing
the Series B Preferred Units. Any monies or Class A Units so deposited which
remain unclaimed by the holders of the Series B Preferred Units at the end of
two years after the Redemption Date shall be returned by such bank or trust
company to the Trust.
F. Voting Rights.
(i) Holders of the Series B Preferred Units shall not
have any voting rights, except as described below.
(ii) Whenever distributions on any Series B Preferred
Units shall be in arrears for six or more quarterly periods (a "Preferred
Distribution Default"), the holders of the outstanding Series B Preferred
Units shall be entitled to elect two individuals (the "Preferred Unit
Representatives"), which individuals shall be entitled to vote on their behalf
on the matters set forth in subparagraph (iv) below. Such election shall be
held at a special meeting called by the holders of record of at least 10% of
the outstanding Series B Preferred Units.
(iii) If and when all accumulated distributions and
the distribution for the current distribution period on the Series B Preferred
Units shall have been paid in full or set aside for payment in full, the
holders of Series B Preferred Units, acting through the Preferred Unit
Representatives, shall be divested of the voting rights set forth in
subsection F(iv) below (subject to revesting in the event of each and every
Preferred Distribution Default) and the term of office of each Preferred Unit
Representative so elected shall terminate. So long as a Preferred Distribution
Default shall continue, any vacancy in the office of a Preferred Unit
Representative may be filled by written consent of the Preferred Unit
Representative remaining in office, or if there is no such remaining
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<PAGE>
representative, by vote of holders of a majority of the outstanding Series B
Preferred Units. Any Preferred Unit Representative may be removed at any time
with or without cause by the vote of, and shall not be removed otherwise than
by the vote of, the holders of record of a majority of the outstanding Series
B Preferred Units when they have the voting rights set forth in subsection
F(iv) below.
(iv) For so long as a Preferred Distribution Default
shall continue, any action to be taken by the Partnership at the direction of
the General Partner and as to which the General Partner may act only upon
authorization by its Board of Trustees (the "Board") may only be taken if such
action is approved by a majority in number of the members of Board and the
Preferred Unit Representatives voting together as a group.
(v) So long as any Series B Preferred Units remain
outstanding, the Partnership shall not, without the affirmative vote or
consent of the holders of at least two-thirds of Series B Preferred Units
outstanding at the time, given in person or by proxy, either in writing or at
a meeting, (a) authorize or create, or increase the authorized or issued
amount of, any class or series of Partnership Interests ranking prior to
Series B Preferred Units with respect to the payment of distributions or the
distribution of assets upon voluntary or involuntary liquidation, dissolution
or winding up of the Partnership or reclassify any previously designated
Partnership Interests into such Partnership Interests, or create, authorize or
issue any obligation or Partnership Interests convertible or exchangeable into
or evidencing the right to purchase any such Partnership Interests; or (b)
amend, alter or repeal the provisions of the Partnership Agreement, whether by
merger, consolidation or otherwise, or consummate a merger or consolidation
involving the Partnership (any such merger or consolidation, an "Event"), so
as to materially and adversely affect any right, preference, privilege or
voting power of such Series B Preferred Units or the holders thereof;
provided, however, with respect to the occurrence of any of the Events set
forth in (b) above, the occurrence of any such Event shall not be deemed to
materially adversely affect such rights, preferences, privileges or voting
powers of holders of Series B Preferred Units if immediately after any such
Event (i) in which the Partnership is the surviving entity, there are
outstanding no equity securities ranking as to distribution rights or
liquidation preference senior to the Series B Preferred Units other than the
securities of the Partnership outstanding prior to such Event, (ii) in which
the Partnership is not the surviving entity, as a result of the Event, the
holders of the Series B Preferred Units receive shares of stock or other
equity securities with preferences, rights and privileges substantially
similar to the preferences, rights and privileges of the Series B Preferred
Units and there are outstanding no shares of stock or other equity securities
of the surviving entity ranking as to distribution rights or liquidation
preference senior to the Series B Preferred Units other than the securities
issued in respect of securities of the Partnership outstanding prior to such
Event or (iii) whether or not the Partnership is the surviving entity, there
are no outstanding equity securities of the Partnership or its successor
(other than securities of the Partnership outstanding prior to such Event, or
securities issued in respect of securities of the Partnership outstanding
prior to such Event) ranking as to distribution rights or liquidation
preference senior to the Series B Preferred Units; and
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provided further that any increase in the amount of authorized Preferred Units
or the creation or issuance of any class or series of Preferred Units (other
than the Series B Preferred Units), in each case ranking on a parity with or
junior to the Series B Preferred Units with respect to payment of
distributions and the distribution of assets upon voluntary or involuntary
liquidation, dissolution or winding up of the Partnership, shall not be deemed
to materially and adversely affect such rights, preferences, privilege or
voting powers.
(vi) Notwithstanding anything to the contrary
contained herein, the creation or issuance of any series of Preferred Units
that is subject to mandatory redemption at a scheduled date or dates or that
has the benefit of a sinking fund or that is subject to redemption at the
option of the Partnership or the holder but that otherwise ranks on a parity
with or junior to the Series B Preferred Units with respect to payment of
distributions and the distribution of assets upon voluntary or involuntary
liquidation, dissolution or winding up of the Partnership shall not require
the affirmative vote or consent of all or any of the holders of the Series B
Preferred Units.
(vii) The foregoing voting provisions shall not apply
if, at or prior to the time when the act with respect to which such vote would
otherwise be required shall be effected, all outstanding Series B Preferred
Units shall have been converted, redeemed or called for redemption upon proper
notice and sufficient funds or Class A Units, as applicable, shall have been
deposited in trust to effect such redemption.
G. Conversion.
(i) Each whole (but not fractional) Series B Preferred
Unit shall be convertible at any time, at the option of the holder thereof,
into such number of Class A Units as is equal to the quotient that results
from dividing (i) the sum of (X) the Stated Value plus (Y) accrued and unpaid
distributions on such Class B Preferred Unit (other than such accrued and
unpaid distributions that the General Partner elects to pay in cash at the
time of conversion) by (ii) a conversion price (the "Conversion Price") of
$28.00 per Series B Preferred Unit; provided, however, that if the average
Current Market Price of the Common Shares during the 60-Trading Day period
ending on December 31, 2003 is $23.00 or lower then the Conversion Price shall
automatically be reduced from $28.00 to $26.50, subject to adjustment as
described in subsection G(v) below; provided, further, that the right to
convert Series B Preferred Units called for redemption pursuant to subsection
E above shall terminate at the close of business on the Redemption Date,
unless the Partnership shall default in making payment of the redemption
price.
(ii) To exercise the conversion right, the holder of
each Series B Preferred Unit to be converted shall surrender the certificate
evidencing such Series B Preferred Unit, duly endorsed or assigned to the
Partnership or in blank, at the principal office of the Partnership
accompanied by written notice to the Partnership that the holder thereof
elects to convert such Series B Preferred Unit. Unless the Class A Units
issuable on conversion are to be issued in the same name
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as the name in which such Series B Preferred Unit is registered, in which case
the Partnership shall bear the related taxes, each Series B Preferred Unit
surrendered for conversion shall be accompanied by instruments of transfer, in
form satisfactory to the General Partner, duly executed by the holder or such
holder's duly authorized attorney and an amount sufficient to pay any transfer
or similar tax (or evidence reasonably satisfactory to the General Partner
demonstrating that such taxes have been paid).
(iii) Each conversion shall be deemed to have been
effected immediately prior to the close of business on the date on which the
certificates for Series B Preferred Units shall have been surrendered and such
notice (and if applicable, payment of an amount equal to the distribution
payable on such shares) received by the Partnership as aforesaid, and the
person or persons in whose name or names any certificate or certificates for
Class A Units shall be issuable upon such conversion shall be deemed to have
become the holder or holders of record of the Class A Units evidenced thereby
at such time on such date, and such conversion shall be at the Conversion
Price in effect at such time and on such date unless the unit transfer books
of the Partnership shall be closed on that date, in which event such person or
persons shall be deemed to have become such holder or holders of record at the
close of business on the next succeeding day on which such unit transfer books
are open, but such conversion shall be at the Conversion Price in effect on
the date on which such shares have been surrendered and such notice received
by the Partnership.
(iv) Holders of Series B Preferred Units at the close
of business on a Distribution Record Date shall be entitled to receive the
distribution payable on such Series B Preferred Units on the corresponding
Distribution Payment Date notwithstanding the conversion of such Series B
Preferred Units following such Distribution Record Date and prior to such
Distribution Payment Date. However, certificates evidencing Series B Preferred
Units surrendered for conversion during the period between the close of
business on any Distribution Record Date and ending with the opening of
business on the corresponding Distribution Payment Date (except shares
converted after the issuance of a notice of redemption with respect to a
Redemption Date during such period or coinciding with such Distribution
Payment Date) shall be accompanied by payment of an amount equal to the
distribution payable on such Series B Preferred Units on such Distribution
Payment Date. A holder of Series B Preferred Units on a Distribution Record
Date who (or whose transferee) tenders any such Series B Preferred Units for
conversion into Class A Units on such Distribution Payment Date shall receive
the distribution payable by the Partnership on such Series B Preferred Units
on such date, and the converting holder need not include payment of the amount
of such distribution upon surrender of certificates representing such Series B
Preferred Units for conversion. Except as provided above, the Partnership
shall make no payment or allowance for unpaid distributions, whether or not in
arrears, on converted Series B Preferred Units or for distribution on the
Class A Units that are issued upon such conversion.
As promptly as practicable after the surrender of
certificates for Series B Preferred Units as aforesaid, the Partnership shall
issue and shall deliver at such office to such holder, or on
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such holder's written order, a certificate or certificates for the number of
full Class A Units issuable upon the conversion of such Series B Preferred
Units in accordance with the provisions of this Subsection G.
(v) Reclassification of Class A Units; Conversion
Price Adjustment.
(a) In the event of any adjustment to the number
of outstanding Class A Units pursuant to Section 15.4 of the Partnership
Agreement, the Conversion Price in effect at the opening of business on the
day following the day on which such adjustment becomes effective shall be
adjusted so that the holder of any Series B Preferred Units thereafter
surrendered for conversion shall be entitled to receive the number of Class A
Units that such holder would have been entitled to receive after the effective
date of such adjustment had such Series B Preferred Units been converted
immediately prior to the effective date of such adjustment.
(b) If the Trust shall issue after the Issue Date
rights, options or warrants to all holders of Common Shares entitling them
(for a period expiring within 45 days after the record date mentioned below)
to subscribe for or purchase Common Shares at a price per share less than the
Fair Market Value per Common Share on the record date fixed for the
determination of shareholders entitled to receive such rights, options or
warrants (any of the foregoing being hereinafter in this subsection (b) called
the "Securities"), then the Conversion Price shall be adjusted so that it
shall equal the price determined by multiplying (I) the Conversion Price in
effect immediately prior to the close of business on the record date fixed for
the determination of shareholders entitled to receive such distribution by
(II) a fraction, the numerator of which shall be the sum of (A) the number of
Common Shares outstanding on the close of business on the record date fixed
for the determination of shareholders entitled to receive such distribution
and (B) the number of shares that the aggregate proceeds to the Trust from the
exercise of such rights, options or warrants for Common Shares would purchase
at such Fair Market Value, and the denominator of which shall be the sum of
(A) the number of Common Shares outstanding on the close of business on the
record date fixed for the determination of shareholders entitled to receive
such distribution and (B) the number of additional Common Shares offered for
subscription or purchase pursuant to such rights, options or warrants. Such
adjustment shall become effective immediately upon the opening of business on
the business day next following the record date fixed for the determination of
shareholders entitled to receive such distribution (subject to paragraph (j)
below). In determining whether any rights, options or warrants entitle the
holders of Common Shares to subscribe for or purchase Common Shares at less
than such Fair Market Value, there shall be taken into account any
consideration received by the Trust upon issuance and upon exercise of such
rights, options or warrants, the value of such consideration, if other than
cash, to be determined by the General Partner, whose determination shall be
conclusive. For the purposes of this subsection (b), if in connection with the
distribution of a Security to the holders of the Common Shares an adjustment
is made to
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<PAGE>
the Conversion Price pursuant to subsection G(v)(a) above, no additional
adjustment to the Conversion Price need be made pursuant to this subsection
(b).
(c) No adjustment in the Conversion Price shall be
required unless such adjustment would require a cumulative increase or
decrease of at least 1% in such price; provided, however, that any adjustments
that by reason of this subsection (c) are not required to be made shall be
carried forward and taken into account in any subsequent adjustment until
made; and provided, further, that any adjustment shall be required and made in
accordance with the provisions of this subsection G(v) (other than this
subsection (c)) not later than such time as may be required in order to
preserve the tax-free nature of a distribution to the holders of Common
Shares. Notwithstanding any other provisions of this subsection G(v), the
Partnership shall not be required to make any adjustment of the Conversion
Price as a result of the issuance of any Common Shares by the Trust pursuant
to any plan providing for the reinvestment of distributions or interest
payable on securities of the Trust and the investment of additional optional
amounts in Common Shares under such plan. All calculations under this
subsection G(v) shall be made to the nearest cent with ($.005 being rounded
upward) or to the nearest one-tenth of a share (with .05 of a share being
rounded upward), as the case may be. Anything in this subsection G to the
contrary notwithstanding, the Partnership shall be entitled, to the extent
permitted by law, to make such reductions in the Conversion Price, in addition
to those required by this subsection G, as the General Partner in its
discretion shall determine to be advisable in order that any share
distributions, subdivision of shares, reclassification or combination of
shares, distribution of rights, options or warrants to purchase shares or
securities, or a distribution of other assets (other than cash distributions)
hereafter made by the Trust to its shareholders shall not be taxable.
(d) If the Partnership shall be a party to any
transaction (including, without limitation, a merger or consolidation, sale of
all or substantially all of the Partnership's assets or (each of the foregoing
being referred to herein as a "Transaction"), in each case as a result of
which Class A Units shall be converted into the right to receive shares,
stock, securities or other property (including cash or any combination
thereof), each Series B Preferred Unit which is not converted into the right
to receive shares, stock, securities or other property in connection with such
Transaction shall thereafter be convertible into the kind and amount of
shares, stock, securities and other property (including cash or any
combination thereof) receivable upon the consummation of such Transaction by a
holder of that number of Class A Units into which one Series B Preferred Unit
was convertible immediately prior to such Transaction. The Partnership shall
not be a party to any Transaction unless the terms of such Transaction are
consistent with the provisions of this subsection G(v), and it shall not
consent or agree to the occurrence of any Transaction until the Partnership
has entered into an agreement with the successor or purchasing entity, as the
case may be, for the benefit of the holders of the Series B Preferred Units
that will contain provisions enabling the holders of the Series B Preferred
Units that remain outstanding after such Transaction to convert into the
consideration received by holders of Class A Units at the
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<PAGE>
Conversion Price in effect immediately prior to such Transaction. The
provisions of this subsection G(v) shall similarly apply to successive
Transactions.
H. Transfer Restrictions. The Series B Preferred Units
are subject to the restrictions on transferability set forth in Article XI of
the Partnership Agreement. In addition, except to Affiliates or upon the
written consent of the General Partner (such consent not to be unreasonably
withheld), none of the Series B Preferred Units, the Class A Units issuable
upon conversion or redemption of the Series B Preferred Units (the "Underlying
Class A Units"), nor the Common Shares issuable upon redemption of the
Underlying Class A Units may be sold, assigned, exchanged, pledged or
otherwise transferred prior to January 2, 2004. This subsection H shall not
restrict a sale of the direct or indirect equity interests of the holders of
the Series B Preferred Units. Any Series B Preferred Units, Underlying Class A
Units and Common Shares issued upon redemption of Underlying Class A Units
shall bear a restrictive legend evidencing the transfer restrictions set forth
in this subsection H.
I. Allocations. Allocations of the Partnership's items of
income, gain, loss and deduction shall be allocated among holders of Series B
Preferred Units in accordance with Article VII of the Partnership Agreement.
J. Definitions.
"Common Shares" shall mean the common shares of beneficial
interest, par value $.01 per share, of the Trust.
"Current Market Price" of publicly traded Common Shares or
any other class of shares of beneficial interest or other security of the
Trust or any other issuer for any day shall mean the last reported sales
price, regular way, on such day, or, if no sale takes place on such day, the
average of the reported closing bid and asked prices on such day, regular way,
in either case as reported on the New York Stock Exchange ("NYSE") or, if such
security is not listed or admitted for trading on the NYSE, on the principal
national securities exchange on which such security is listed or admitted for
trading or, if not listed or admitted for trading on any national securities
exchange, on the NASDAQ National Market or, if such security is not quoted on
such NASDAQ National Market, the average of the closing bid and asked prices
on such day in the over-the-counter market as reported by NASDAQ or, if bid
and asked prices for such security on such day shall not have been reported
through NASDAQ, the average of the bid and asked prices on such day as
furnished by any NYSE member firm regularly making a market in such security
selected for such purpose by Partnership, acting through the General Partner.
"Distribution Payment Date" shall mean, with respect to each
Distribution Period, the fifteenth day of January, April, July and October in
each year, commencing, on ______________, 1998; provided, however, that if any
Distribution Payment Date falls on any day other than a
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<PAGE>
business day, the distribution payment due on such Distribution Payment Date
shall be paid on the business day immediately following such Distribution
Payment Date.
"Distribution Periods" shall mean quarterly distribution
periods commencing on January 1, April 1, July 1 and October 1 of each year
and ending on and including the day preceding the first day of the next
succeeding Distribution Period (other than the initial Distribution Period,
which shall commence on the Issue Date and end on and include _____________,
1998).
"Issue Date" shall mean the date on which Series B Preferred
Units are first issued by the Partnership.
"Trading Day" shall mean any day on which the securities in
question are traded on the NYSE or, if such securities are not listed or
admitted for trading on the NYSE, on the principal national securities
exchange on which such securities are listed or admitted or, if not listed or
admitted for trading on any national securities exchange, on the NASDAQ
National Market or, if such securities are not quoted on such NASDAQ National
Market, in the applicable securities market in which the securities are
traded.
The "Trust" means Brandywine Realty Trust, a Maryland real
estate investment trust.
2. The Partnership Agreement is hereby amended to reflect
the admission as a Limited Partners on the date hereof of the Persons set
forth on Schedule A attached hereto (the "Admitted Partners") and the
ownership by such Persons of the number of Series B Preferred Units listed
opposite each Person's name on Schedule A. Attached as Schedule B is a list of
the Partners of the Partnership prior to the admission of the Admitted
Partners, together with the number and class of Partnership Interests owned by
such partners.
3. The "Redemption Right" granted to holders of Class A
Units in Article XV of the Partnership Agreement shall not be exercisable by
the holders of the Class A Units issuable upon redemption or conversion of
Series B Preferred Units until the first anniversary of the date hereof,
except that if a Change of Control (as defined below) of the General Partner
occurs, the foregoing restriction on exercise of the Redemption Right shall
automatically terminate with respect to all of such Class A Units.
As used herein, the term "Change of Control" shall mean:
(i) the acquisition in one or more transactions by any
"Person" (as the term person is used for purposes of Sections 13(d) or 14(d)
of the Exchange Act) of "Beneficial ownership" (within the meaning of Rule
13d-3 promulgated under the Exchange Act) of twenty-five percent (25%) or more
of the combined voting power of the General Partner's then outstanding voting
securities (the "Voting Securities"), provided that for purposes of this
clause (i) Voting
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<PAGE>
Securities acquired directly from the General Partner by any Person shall be
excluded from the determination of such Person's Beneficial ownership of
Voting Securities (but such Voting Securities shall be included in the
calculation of the total number of Voting Securities then outstanding); or
(ii) approval by shareholders of the General Partner
of:
(A) a merger, reorganization or consolidation involving
the General Partner if the shareholders of the General Partner immediately
before such merger, reorganization or consolidation do not or will not own
directly or indirectly immediately following such merger, reorganization or
consolidation, more than fifty percent (50%) of the combined voting power of
the outstanding voting securities of the General Partner resulting from or
surviving such merger, reorganization or consolidation in substantially the
same proportion as their ownership of the Voting Securities outstanding
immediately before such merger, reorganization or consolidation; or
(B) a complete liquidation or dissolution of the General
Partner; or
(C) an agreement for the sale or other disposition of all
or substantially all of the assets of the General Partner; or
(iii) acceptance by shareholders of the General
Partner of shares in a share exchange if the shareholders of the General
Partner immediately before such share exchange do not or will not own directly
or indirectly immediately following such share exchange more than fifty
percent (50%) of the combined voting power of the outstanding voting
securities of the entity resulting from or surviving such share exchange in
substantially the same proportion as their ownership of the Voting Securities
outstanding immediately before such share exchange.
4. By execution of this Amendment to the Partnership
Agreement by the General Partner, the Admitted Partners agree to be bound by
each and every term of the Partnership Agreement as amended from time to time
in accordance with the terms of the Partnership Agreement. The General Partner
confirms that the provisions in Section 18.1(a) of the Partnership Agreement
shall apply to the Admitted Partners notwithstanding Section 18.7 of the
Partnership Agreement.
5. On the date of this Amendment, each of the Admitted
Partners shall execute and deliver to Brandywine Realty Trust an Irrevocable
Proxy coupled with an Interest in the form set forth on Exhibit 1 hereto
attached.
6. Except as expressly set forth in this Amendment to the
Partnership Agreement, the Partnership Agreement is hereby ratified and
confirmed in each and every respect.
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<PAGE>
IN WITNESS WHEREOF, this Amendment to the Partnership
Agreement has been executed and delivered as of the date first above written.
GENERAL PARTNER:
BRANDYWINE REALTY TRUST
By: ________________________________________________
Name: Gerard H. Sweeny
Its: President and Chief Executive Officer
ADMITTED PARTNER:
____________________________________________________
By:_________________________________________________
Name:
Title:
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<PAGE>
SCHEDULE "A"
ADMITTED NUMBER OF SERIES B
PARTNERS PREFERRED UNITS
-------- ------------------
<PAGE>
SCHEDULE "B"
BRANDYWINE OPERATING PARTNERSHIP, L.P.
OUTSTANDING PARTNERSHIP INTERESTS
AS OF _______ , 1998
NUMBER OF
PARTNERSHIP
INTERESTS
LIMITED PARTNERS (ALL CLASS A UNITS)
- ---------------- -------------------
<PAGE>
NUMBER OF
PARTNERSHIP
LIMITED PARTNER INTERESTS
- --------------- -----------
Brandywine Realty Trust [ ] Series A
Preferred Mirror Units
NUMBER OF
PARTNERSHIP
GENERAL PARTNER INTERESTS
- --------------- -----------
Brandywine Realty Trust [ ] GP Units
<PAGE>
IRREVOCABLE PROXY COUPLED WITH AN INTEREST
KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby
irrevocably constitutes and appoints the General Partner, any Liquidating
Trustee, and authorized officers and attorneys-in-fact of each, and each of
those acting singly, in each case with full power of substitution, as its true
and lawful agent and attorney-in-fact, with full power and authority in its
name, place and stead to: execute, swear to, acknowledge, deliver, file and
record in the appropriate public offices (i) all certificates, documents and
other instruments (including, without limitation, this Agreement and the
Certificate and all amendments or restatements thereof) that the General
Partner or the Liquidating Trustee deems appropriate or necessary to form,
qualify or continue the existence or qualification of the Partnership as a
limited partnership (or a partnership in which the limited partners have
limited liability) in the State of Delaware and in all other jurisdictions in
which the Partnership may conduct business or own property; (ii) all
instruments that the General Partner deems appropriate or necessary to reflect
any amendment, change, modification or restatement of this Agreement in
accordance with the terms of this Agreement; (iii) all conveyances and other
instruments or documents that the General Partner deems appropriate or
necessary to reflect the dissolution and liquidation of the Partnership
pursuant to the terms of this Agreement, including, without limitation, a
certificate of cancellation; and (iv) all instruments relating to the
admission, withdrawal, removal or substitution of any Partner pursuant to the
provisions of this Agreement, or the Capital Contribution of any Partner. The
foregoing power of attorney is irrevocable and a power coupled with an
interest, in recognition of the fact that each of the Partners will be relying
upon the power of the General Partner to act as contemplated by this Agreement
in any filing or other action by it on behalf of the Partnership, and it shall
survive the death, incapacity or incompetency of a Limited Partner to the
effect and extent permitted by law and the Transfer of all or any portion of
such Limited Partner's Partnership Units and shall extend to such Limited
Partner's heirs, distributees, successors, assigns and personal
representatives.
IN WITNESS WHEREOF, the undersigned has executed and
delivered this Proxy on this ____ day of __________, 1998.
_____________________________________
By: ________________________________
Name:
Title:
<PAGE>
EXHIBIT 10.4
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement"), dated
as of the ___ day of ___________, 1998, is entered into by and among
BRANDYWINE REALTY TRUST, a Maryland real estate investment trust (the
"Trust"), BRANDYWINE OPERATING PARTNERSHIP, L.P., a Delaware limited
partnership (the "Partnership"), and the persons and entities listed on
Schedule I attached hereto (each an "Investor" and, collectively, the
"Investors"; it being understood that such term shall also include such
Investor's heirs, personal representatives, successors and assigns).
RECITALS
WHEREAS, the Trust, the Partnership and certain other
persons and entities are parties to that certain Purchase and Contribution
Agreement, dated as of ________, 1998 (the "Acquisition Agreement"), pursuant
to which the Partnership has agreed to issue preferred units of limited
partner interests in the Partnership designated Series B Preferred Units (the
"Preferred Units"), which are convertible into common units of limited partner
interests in the Partnership designated Class A Units (the "Common Units");
WHEREAS, pursuant to the Partnership Agreement (as defined
below), the Common Units are redeemable for cash or common shares of
beneficial interest, par value $.01 per share, of the Trust (the "Common
Shares") upon the terms and subject to the conditions contained therein;
WHEREAS, as a condition to their agreement to accept
Preferred Units as consideration pursuant to the Acquisition Agreement, the
Investors have required, and the Trust has agreed to grant, the registration
rights provided for herein with respect to the Registrable Securities (as
defined below).
NOW, THEREFORE, in consideration of the premises and the
mutual agreements herein contained, and for good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties
hereto agree as follows:
1. Definitions. In addition to the definitions set forth
above (and in addition to other capitalized terms not otherwise defined herein
having the meanings set forth in the Acquisition Agreement), the following
terms, as used herein, have the following meanings:
"Majority Investors" means Investors who, as of the
applicable time, beneficially own a majority in number of the outstanding
Registrable Securities (calculated on the assumption that all Preferred Units
and Common Units held by the Investors have been converted into or redeemed for
Common Shares) and who provide the notice to effect a registration pursuant to
Section 2.2 hereof.
<PAGE>
"Maximum Offering" means that number of Registrable
Securities that the managing underwriter advises the Majority Investors can be
sold without materially and adversely affecting an underwritten public offering
to be effected pursuant to Section 2.2 hereof.
"Partnership Agreement" means the Amended and Restated
Agreement of Limited Partnership of the Partnership, dated as of November 18,
1997, as previously amended and as the same may hereafter be amended, modified
or restated from time to time.
"Registrable Securities" means any Common Shares issued or
issuable upon redemption of the Common Units that are issued or issuable upon
redemption or conversion of the Preferred Units; provided, that any of such
securities shall cease to constitute Registrable Securities once: (i) a
registration statement covering such securities has been declared effective by
the SEC and such securities have been sold or transferred by an Investor
pursuant to such effective registration statement; (ii) such securities may be
sold by an Investor pursuant to Rule 144(k) under the Securities Act; or (iii)
such securities are sold by an Investor pursuant to Rule 144 under the
Securities Act.
"Registration Expenses" means all expenses incident to the
Trust's performance of or compliance with Article 2, including, without
limitation, all registration and filing fees, all application and listing fees,
all fees and expenses of complying with securities or blue sky laws, and
printing expenses (including reasonable messenger and delivery service
expenses), all fees and disbursements of counsel for the Trust and of the
Trust's independent public accountants, but excluding (i) fees and disbursements
of counsel, accountants or other advisors for the Investors, (ii) any brokerage
discounts or underwriting commissions, or similar fees, payable in connection
with a sale of Registrable Securities, and (iii) the out-of-pocket or internal
costs and expenses incurred by or on behalf of any Investor, including, without
limitation, any expenses incurred by or on behalf of any representatives of any
Investors in connection with their participation any "roadshow" presentations
(the expenses referred to in clauses (i) through (iii) are the "Selling
Expenses").
"Remaining Investors" means those Investors, on a
particular date, who are not the Majority Investors.
"Rule 144" means Rule 144 under the Securities Act, as
amended from time to time (or any successor statute).
"SEC" means the United States Securities and Exchange
Commission.
"Securities Act" means the Securities Act of 1933, as
amended.
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<PAGE>
2. Registration Rights.
2.1 Registration Requirement.
2.1.1 Required Registration of Registrable Securities.
The Trust shall prepare and file with the SEC no later than October 1, 2003, and
shall thereafter use its commercially reasonable efforts (a) to cause to become
effective as soon as practicable, subject to the reasonable cooperation of the
Investors, a "shelf" registration statement under the Securities Act covering
the reoffer and resale of the Registrable Securities by the Investors in an
offering to be made on a continuous basis pursuant to Rule 415 under the
Securities Act and (b) to keep such registration statement effective until the
earlier of (i) the sale of all the Registrable Securities covered thereby
pursuant to such registration statement or (ii) the date on which the
Registrable Securities covered thereby cease to be "Registrable Securities" as
defined herein.
2.1.2 Registration Statement Form S-3. Registrations
under this Section 2.1 shall only be required to be made on Form S-3. In the
event the Trust is not eligible to use Form S-3 to register the Registrable
Securities, it may delay the filing of the applicable registration statement
until that date on which the Trust is again eligible to file a Form S-3.
2.1.3 Expenses. The Trust shall pay the Registration
Expenses and the Investors shall pay the Selling Expenses incurred in connection
with the registration effected pursuant to this Section 2.1.
2.2 Demand Registration.
2.2.1 Demand Registration of Registrable Securities. At
anytime after October 1, 2003, the Majority Investors may send written notice to
the Trust requesting that the Trust cause to be filed with the SEC a
registration statement under the Securities Act covering the reoffer and resale
of the Registrable Securities by the Investors in an underwritten public
offering. Within 15 Business Days after the effective date of such notice, the
Trust shall notify in writing the Remaining Investors of the filing and shall
include in any such registration any Registrable Securities sought to be
included by any Remaining Investors who so notify the Trust in writing, within
15 Business Days after the effective date of the notice from the Trust, of their
election to include Registrable Securities in such registration statement.
Within 60 days after the effective date of the notice from the Majority
Investors, the Trust shall file a registration statement on such form as
selected by the Trust seeking to register the Registrable Securities so
requested to be registered by all Investors as provided above, and the Trust
shall use commercially reasonable efforts to cause to become effective such
registration statement, subject to the reasonable cooperation of the Investors
participating as selling shareholders in such registration. Notwithstanding
anything in this Section 2.2 to the contrary, if the managing underwriter of any
public offering to be effected pursuant to this Section 2.2 shall inform the
Majority Investors of its belief that the number of Registrable Securities
requested by all Investors to be included in such registration would materially
and adversely affect the underwritten public offering, then each Investor who
has elected to participate as a selling
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<PAGE>
shareholder in such registration as provided above shall include in such
registration, that number of Registrable Securities obtained by multiplying
the Maximum Offering by a fraction obtained by dividing (i) the number of the
Registrable Securities that such Investor sought to include in such
registration by (ii) the total number of securities proposed to be included in
such registration by all Investors.
2.2.2 Expenses. The Trust shall pay the Registration
Expenses in connection with any registration effected pursuant to Section 2.2
and the Investors participating in a registration effected pursuant to Section
2.2 shall pay the Selling Expenses in connection with any such registration
effected pursuant to Section 2.2.
2.2.3 Effective Registration Statement. Notwithstanding
anything to the contrary herein, a registration requested pursuant to this
Section 2.2 shall not be deemed to have been effected unless a registration
statement with respect thereto has become effective and either (i) it remains
continuously effective, without interruption by any stop order for a period of
180 days following the effective date of such registration or (ii) the sale of
at least a majority of the Registrable Securities which such registration
statement initially sought to register is completed pursuant thereto. Any
registration statement filed pursuant to this Section 2.2 may be withdrawn, at
anytime prior to it being declared effective by the SEC, by the Majority
Investors giving written notice of such withdrawal to the Trust, and will count
as one of the effective registration statements for purposes of Section 2.3.1
below; provided, if the Investors reimburse the Trust for all of the
Registration Expenses incurred in connection with any such withdrawn
registration statement, it shall not count as one of the effective registration
statements for purposes of Section 2.3.1 below; and, provided, further,
notwithstanding any such notice of withdrawal given by the Majority Investors,
Investors who otherwise were participating as selling shareholders in such
registration, by giving written notice to the Trust and the managing underwriter
of any such offering, within three Business Days after the effective date of the
withdrawal notice from the Majority Investors, may suspend such withdrawal by
agreeing to offer and sell, pursuant to such registration statement, that number
of Registrable Securities equal to at least a majority of the Registrable
Securities as to which the registration statement, as originally filed, sought
to register.
2.2.4 Selection of Underwriters. In connection with
each underwritten public offering effected pursuant to this Section 2.2, the
Majority Investors shall select the managing underwriter subject to the approval
of the Trust, which approval shall not be unreasonably withheld by the Trust.
2.3 Limitations on Registration.
2.3.1 In no event shall the Trust be required to effect
more than one (1) registration pursuant to Section 2.1 and more than three (3)
registrations pursuant to Section 2.2.
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<PAGE>
2.3.2 Notwithstanding anything herein, if the Trust
reasonably believes that the filing of a registration statement with the SEC
would adversely affect the contemplated activities of the Trust, then the Trust
may postpone the filing of the applicable registration statement, require that
the Investors not effect offers and sales pursuant to an effective registration
statement or otherwise suspend its obligation to amend, modify or update a filed
registration statement, for a period not in excess of 90 days in any 365-day
period (or, in the event the filing any such postponement is in connection with
a proposed underwritten public offering of the Trust's securities, for such
longer period (not to exceed an additional 30 days) as may be reasonably
requested by the managing underwriter for such proposed offering).
2.3.3 Notwithstanding anything herein, if the filing of
a registration statement pursuant to this Agreement would require the Trust to
include in a filing with the SEC financial statements of probable or completed
acquisitions in order that such registration statement be in compliance with
rules and regulations of the SEC, then the Trust may delay the filing of such
registration statement until it has included the requisite financial statements
(including any necessary pro forma financial information) in a filing with the
SEC. The Trust shall use its commercially reasonable efforts to file such
financial statements as soon as practicable.
2.3.4 The Trust shall not be required to file a
registration statement pursuant to Section 2.2 which would become effective
within 180 days following the effective date of a registration statement (other
than a registration statement filed on Form S-4 or S-8) filed by the Trust with
the SEC pertaining to any public offering for the account of any Investor.
2.3.5 Notwithstanding anything to the contrary
contained in this Agreement, the obligations of the Trust under this Section 2
shall terminate at such time as none of the Investors beneficially own (which,
for purposes of this Agreement shall be determined with reference to Rule 13d-3
promulgated under the Securities Exchange Act of 1934, as amended) Registrable
Securities.
2.4 Registration Procedures.
2.4.1 In connection with the registration of any
Registrable Securities under the Securities Act as provided in this Section 2,
the Trust shall:
(i) prepare and file with the SEC the requisite
registration statement to effect such registration and thereafter use
commercially reasonable efforts to cause such registration statement to become
and remain effective as provided in Section 2.1 or 2.2, as applicable;
(ii) subject to Section 2.3, use commercially
reasonable efforts to prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such
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<PAGE>
registration statement effective and to comply with provisions of the
Securities Act with respect to the disposition of all Registrable Securities
covered by such registration statement until all of such Registrable
Securities have been sold thereunder;
(iii) furnish to the Investors such number of
conformed copies of such registration statement and of each such amendment and
supplement thereto (in each case including all exhibits), such number of copies
of the prospectus contained in such registration statement (including each
preliminary prospectus and any summary prospectus) and any other prospectus
filed under Rule 424 under the Securities Act, in conformity with the
requirements of the Securities Act, and such number of copies of such other
documents as the Investors may reasonably request;
(iv) use commercially reasonable efforts (x) to
register or qualify all Registrable Securities under such other securities or
Blue Sky laws of such States of the United States of America where an exemption
is not available and as the Investors shall reasonably request, (y) to keep such
registration or qualification in effect for so long as such registration
statement remains effective, and (z) to take any other action which may
reasonably be necessary or advisable to enable the Investors to consummate the
disposition in such jurisdictions of the Registrable Securities to be sold by
the Investors, except that the Trust shall not for any such purpose be required
to qualify generally to do business as a foreign trust in any jurisdiction
wherein it would not, but for the requirements of this paragraph (iv), be
obligated to be so qualified or to consent to general service of process in any
such jurisdiction;
(v) notify the Investors upon discovery that, or
upon the happening of any event as a result of which, the prospectus included in
the registration statement filed pursuant to this Agreement, as then in effect,
includes an untrue statement of a material fact or omits to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading, in the light of the circumstances under which they were made,
and at the request of the Investors, use its best efforts to promptly prepare
and furnish to the Investors such number of copies of a supplement to or an
amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such securities, such prospectus shall not
include an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances under which they were made;
(vi) use commercially reasonable efforts to list
all Registrable Securities covered by such registration statement on any
national securities exchange or over-the-counter market, if any, on which the
Common Shares are then listed.
(vii) use commercially reasonable efforts to (i)
comply with all applicable rules and regulations of the SEC and (ii) in
accordance with Section 11(a) of the Securities Act and Rule 158 thereunder,
make available to its securityholders, as soon as reasonable practicable, an
earnings statement covering the period of at least 12 months, but not
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more than 18 months, beginning with the first quarter after the effective date
of the registration statement covering the Registrable Securities.
The Investors agree that upon receipt of any
notice from the Trust of the happening of an event of the kind described in
Section 2.4.1(v), the Investors shall forthwith discontinue their disposition of
Registrable Securities pursuant to the registration statement relating to such
Registrable Securities until the Investors' receipt of the copies of the
supplemented or amended prospectus contemplated by Section 2.4.1(v).
2.4.2 In connection with the registration of any
Registrable Securities under the Securities Act pursuant to Section 2.1, the
Trust may include in any such registration securities of the Trust held by
persons or entities that have registration rights granted under that certain
Registration Rights Agreement, dated as of the date hereof, by and among the
Trust, the Partnership and the other signatories thereto (the "AAPT Registration
Rights Agreement").
2.5 Rule 144. The Trust will use commercially reasonable
efforts during the term of this Agreement to (i) file with the SEC such
information as is specified under Rule 144 for so long as there are beneficial
owners of Registrable Securities and (ii) take all other action as may be
required as a condition to the availability of Rule 144.
2.6 Information Blackout. At any time when a registration
statement effected pursuant to this Section 2 relating to Registrable Securities
is effective, upon written notice from the Trust to the Investors that the Trust
has determined in good faith that sale of Registrable Securities pursuant to the
registration statement would require disclosure by the Trust of non-public
material information not otherwise required, in the judgment of the Trust, to be
disclosed under applicable law, the Investors shall suspend sales of Registrable
Securities pursuant to such registration statement until the earlier of (a) 60
days after the Trust makes such good faith determination and (b) such time as
the Trust notifies the Investors that such material information has been
disclosed to the public or has ceased to be material or that sales pursuant to
such registration statement may otherwise be resumed.
2.7 Preparation.
2.7.1 Investor Review and Due Diligence. In connection
with the preparation and filing of any registration statement under the
Securities Act in which the Investors are selling shareholders, the Trust shall
give the Investors not less than 10 days prior written notice of the preparation
of such registration statement and give the Investors and their counsel the
opportunity to review and comment on the applicable portions, relating to the
Investors (including the Selling Shareholder and Plan of Distribution sections),
of the registration statement, each prospectus included therein or filed with
the SEC, and each amendment thereof or supplement thereto (provided that the
Investors shall furnish the Trust with comments on any such amendment or
supplement as promptly as the Trust shall reasonably require).
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2.7.2 Investor Information. Each Investor which
beneficially owns Registrable Securities to be registered under Section 2.1 or
2.2 shall furnish to the Trust such information as the Trust may reasonably
request and as shall be required in connection with the registration and related
proceedings referred to in this Section 2. If any Investor fails to provide the
Trust with such information within 10 days of the effective date of the Trust's
request therefor, the Trust's obligations under Section 2 with respect to such
Investor or the Registrable Securities beneficially owned by such Investor shall
be suspended until such Investor provides such information.
2.8 Underwritten Offerings. In connection with any
underwritten public offering to be effected pursuant to Section 2.2, if
requested by the underwriters for any underwritten public offering by the
Investors, the Trust shall enter into an underwriting agreement with such
underwriters for such underwritten public offering, such agreement to be
reasonably satisfactory in substance and form to the Trust, the Investors and
the underwriters, and to contain such representations and warranties by the
Trust and the Investors and such other terms as are generally prevailing in
agreements of that type, including, without limitation, customary indemnities
and contribution provisions generally prevailing in agreements of that type. The
Investors shall be a party to such underwriting agreement.
2.9 Indemnification.
2.9.1 Indemnification by the Trust. In the event of any
registration of any securities of the Trust under the Securities Act in which
the Investors are or may be selling shareholders, the Trust shall, and hereby
does, indemnify and hold harmless, to the fullest extent permitted by law, such
Investors who are selling shareholders, and their respective directors,
officers, partners, employees, agents and affiliates, and each other person who
controls any Investor within the meaning of the Securities Act (each a "Trust
Indemnified Party"), against losses, claims, damages, liabilities or judgments
(or actions or proceedings, whether commenced or threatened in respect thereof)
that arise out of or are based upon (a) any untrue statement or alleged untrue
statement of any fact contained in any registration statement under which such
securities were registered under the Securities Act, any preliminary prospectus,
final prospectus, or summary prospectus contained therein, or any amendment or
supplement thereto, or any omission or alleged omission to state therein a fact
required to be stated therein or necessary to make the statements therein in
light of the circumstances in which they were made not misleading, or (b) any
violation by the Trust, its trustees, officers, employees or agents of this
Agreement or any law applicable to and in connection with such registration, and
the Trust shall reimburse the Trust Indemnified Parties for any legal or any
other expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or judgment (or action or
proceeding in respect thereof) described in clauses (a) or (b); provided, that
the Trust shall not be liable in any such case to the extent that any such loss,
claim, damage, liability, judgment (or action or proceeding in respect thereof)
or expense arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in such registration statement,
any such preliminary prospectus, final prospectus, summary prospectus, amendment
or supplement in reliance upon and in conformity with information
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furnished to the Trust by any Investor; and provided, further, that this
indemnity obligation of the Trust shall not apply to any misstatement or
omission in any registration statement, including any amendment thereto, or in
any preliminary prospectus, if such misstatement or omission giving rise to
the claim for indemnification was corrected in the final prospectus and the
Trust made available on a timely basis to the Investors participating as
selling shareholders, or the managing underwriter of the particular public
offering, copies of the final prospectus for delivery to the purchasers of the
Registrable Securities in such offering. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf of the
Investors and shall survive the transfer of such securities by the Investors.
2.9.2 Indemnification by the Investors If any
Registrable Securities are included in any registration statement, the Investors
who beneficially own such Registrable Securities (the "Indemnifying Investors")
shall indemnify and hold harmless, to the fullest extent permitted by law, the
Trust and each trustee, officer and employee of the Trust, and each Person who
controls the Trust within the meaning of the Securities Act (the "Investor
Indemnified Parties"), against losses, claims, damages, liabilities or judgments
(or actions or proceedings, whether commenced or threatened, in respect thereof)
that arise out of or are based upon (a) any statement or alleged statement in or
omission or alleged omission from such registration statement, any preliminary
prospectus, final prospectus or summary prospectus contained therein, or any
amendment or supplement thereto, if such statement or alleged statement or
omission or alleged omission was made in reliance upon and in conformity with
information furnished to the Trust by the Investors, or (b) any violation by the
Investors, or their respective directors, officers, partners, employees, agents
and affiliate, of this Agreement or any law applicable to and in connection with
such registration, and such Investors shall reimburse the Investor Indemnified
Parties for any legal or any other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim, damage,
liability or judgment (or action or proceeding in respect thereof) described in
clauses (a) or (b). In no event shall any Indemnifying Investor, its directors,
officers or any person who controls such Indemnifying Investor be liable or
responsible for any amount in excess of the amount by which the total amount
received by such Indemnifying Investor with respect to any registration of any
securities of the Trust under the Securities Act exceeds (i) the pro rata amount
paid by such Indemnifying Investor for such securities of the Trust and (ii) the
amount of any damages that such Indemnifying Investor, its directors, officers
or any person who controls such Indemnifying Investor has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission.
2.9.3 Notice of Claims, Etc. Promptly after receipt by
an indemnified party of notice of the commencement of any action or proceeding
involving a claim referred to in the preceding paragraphs of this Section 2.9,
such indemnified party shall, if a claim in respect thereof is to be made
against an indemnifying party, immediately give written notice to the latter of
the commencement of such action; provided, that the failure of any indemnified
party to give notice as provided herein shall not relieve the indemnifying party
of its obligations under the preceding paragraphs of this Section 2.9, except to
the extent that the indemnifying party is materially prejudiced by such failure.
In case any such action is brought
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against an indemnified party, unless in such indemnified party's reasonable
judgment a conflict of interest between such indemnified and indemnifying
parties may exist in respect of such claim, the indemnifying party shall be
entitled to participate in and to assume the defense thereof, jointly with any
other indemnifying party similarly notified to the extent that the
indemnifying parties may agree, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party shall not be liable to such indemnified party for any legal
or other expenses subsequently incurred by the latter in connection with the
defense thereof other than reasonable out of pocket costs related to the
indemnified party's cooperation with the indemnifying party, unless in such
indemnified party's reasonable judgment a conflict of interest between such
indemnified and indemnifying parties arises in respect of such claim after the
assumption of the defense thereof. No indemnifying party shall be liable for
any settlement of any action or proceeding effected without its written
consent, which consent shall not be unreasonably withheld, delayed or
conditioned. Consent of the indemnified party shall be required for the entry
of any judgment or to enter into a settlement only when such judgment or
settlement does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such indemnified party of a release from all
liability in respect such claim or litigation.
2.9.4 Contribution. If the indemnification provided for
in this Section 2.9 shall for any reason be held by a court to be unavailable to
an indemnified party under Section 2.9.1 or 2.9.2 hereof in respect of any loss,
claim, damage, liability, judgment, or any action in respect thereof, then, in
lieu of the amount paid or payable under Sections 2.9.1 or 2.9.2 hereof, the
indemnified party and the indemnifying party under Sections 2.9.1 or 2.9.2
hereof shall contribute to the aggregate losses, claims, damages and liabilities
(including legal or other expenses reasonably incurred in connection with
investigating the same), (i) in such proportion as is appropriate to reflect the
relative fault of the Trust on one hand and the Investors that participated as
selling shareholders on the other that resulted in such loss, claim, damage or
liability, or action in respect thereof, or (ii) if the allocation provided by
clause (i) above is not permitted by applicable law, in such proportion as shall
be appropriate to reflect the relative benefits received by the Trust on one
hand and the Investors that participated as selling shareholders on the other,
as well as any other relevant equitable considerations. No Person shall be
obligated to contribute hereunder any amounts in payment for any settlement of
any action or claim, effected without such Person's written consent, which
consent shall not be unreasonably withheld.
2.9.5 Fraudulent Representations. No Person guilty of
fraudulent misrepresentation (within the meaning of the Securities Act) shall be
entitled to indemnity or contribution from any Person who was not guilty of such
fraudulent misrepresentation.
3. Amendments; Waivers. This Agreement may be amended only
with the written consent of the Trust and at least Investors that constitute
the Majority Investors. Except as otherwise specifically provided herein, no
delay on the part of any party hereto in exercising any right, power or
privilege hereunder shall operate as a waiver thereof, nor shall any waiver on
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the part of any party hereto of any right, power or privilege hereunder
operate as a waiver of any other right, power or privilege hereunder nor shall
any single or partial exercise of any right, power or privilege hereunder
preclude any other or further exercise thereof or the exercise of any right,
power or privilege hereunder.
4. Entire Agreement. This Agreement represents the entire
understanding and agreement among the parties hereto with respect to the
subject matter hereof and supersedes all other prior and contemporaneous
agreements and understandings, both written and oral, between the parties with
respect to the subject matter hereof.
5. Severability. If any provision of this Agreement, or the
application of such provision to any party or circumstance, shall be held
invalid, the remainder of this Agreement or the application of such provision
to other parties or circumstances, to the extent permitted by law or rules of
the SEC, shall not be affected thereby. The obligations of the Trust hereunder
shall be subject to equitable modification if and to the extent required in
order to enable the Trust to conform to any rules of the SEC or policy
positions of the SEC, as reasonably integrated by the Trust and its counsel.
6. Notices. All notices, requests and other communications
required or permitted to be given under this Agreement shall be in writing and
shall be delivered (i) in person, (ii) by U.S. overnight Express Mail, return
receipt requested, (iii) by recognized overnight delivery service providing
positive tracking of items (e.g., Federal Express), or (iv) by confirmed
telecopier, in each case addressed as follows:
If to the Trust or the Partnership, addressed to:
c/o Brandywine Realty Trust
Newtown Square Corporate Campus
16 Campus Boulevard
Suite 150
Newtown Square, PA 19073
Attention: Gerard H. Sweeney, President and Chief Executive Officer
Fax: (610) 325-5622
with a required copy in each instance to:
Brad A. Molotsky, General Counsel
Brandywine Operating Partnership, L.P.
Newtown Square Corporate Campus
16 Campus Boulevard
Suite 150
Newtown Square, PA 19073
Fax: (610) 325-5622
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<PAGE>
If to the Investors:
Addressed to such Investor as set forth on the Investor Signature
Page hereto
with a required copy in each instance to:
Latham & Watkins
885 Third Avenue
New York, NY 10020
Attention: R. Ronald Hopkinson and James I. Hisiger
Fax: (212) 751-4864
or to such other address or addresses and to the attention of such other
person or persons as any of the parties may notify the other in accordance
with the provisions of this Agreement. All such notices, requests and other
communications shall be deemed to have been sufficiently given for all
purposes hereof only if given pursuant to the foregoing requirements as to
both manner and address, and only upon receipt (or refusal to accept delivery)
by the party to whom such notice is sent. Notices by the parties may be given
on their behalf by their respective attorneys.
7. Successors and Assigns. This Agreement shall inure to the
benefit of and shall be binding upon the Trust and its successors and
permitted assigns. The rights to register securities granted by the Trust
under this Agreement may be assigned by any Investor, provided, that (a) such
transfer may otherwise be and is effected in accordance with applicable
securities laws; and (b) such assignee or transferee agrees in writing to be
bound by all of the provisions of this Agreement and executes an Investor
Signature Page in the form attached hereto. In the event of any transfer of
rights in accordance with this Section 7, the transferee shall have all of the
rights and obligations of an Investor under the terms of this Agreement.
8. Counterparts; Facsimile Signature. This Agreement may be
executed in counterparts (including by facsimile which, for all purposes,
shall be deemed to be an original), each of which for all purposes shall be
deemed to be an original and all of which together shall constitute the same
agreement.
9. Headings. The Section headings in this Agreement are for
convenience of reference only, and shall not be deemed to alter or affect the
meaning or interpretation of any provisions hereof.
10. Construction. This Agreement shall be governed, construed
and enforced in accordance with the laws of the State of New York without regard
to its principles of conflict of laws.
11. Recapitalizations, etc. In the event that any shares of
beneficial interest or other securities are issued in respect of, in exchange
for, or in substitution of, any Registrable
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Securities by reason of any reorganization, recapitalization,
reclassification, merger, consolidation, spin-off, partial or complete
liquidation, share dividend, split-up, sale of assets, distribution to
shareholders or combination of the shares of Registrable Securities or any
other similar change in the Trust's capital structure, appropriate adjustments
shall be made in this Agreement so as to fairly and equitably preserve, as far
as practicable, the original rights and obligations of the parties hereto
under this Agreement.
[Execution Page Follows]
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<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement
to be executed on the date first above written and delivered by their
respective duly authorized officers.
BRANDYWINE OPERATING
PARTNERSHIP, L.P.
By: BRANDYWINE REALTY
TRUST, its sole general partner
By: ___________________________
Name: Gerard H. Sweeney
Title: President & CEO
BRANDYWINE REALTY TRUST
By: _______________________________
Name: Gerard H. Sweeney
Title: President & CEO
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<PAGE>
INVESTOR SIGNATURE PAGE
The undersigned hereby acknowledges receipt of a copy of the
Registration Rights Agreement, dated as of _________, 1998, and hereby agrees
to be bound by the terms and conditions thereof as an Investor.
_________________________________
Name of Investor
_________________________________
Signature of Authorized Signer
_________________________________
Name & Title of Authorized Signer
Address for Notices:
__________________________________
__________________________________
__________________________________
Attention:________________________
Facsimile:________________________
Telephone:________________________
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SCHEDULE I
List of Investors
[To Come]
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<PAGE>
EXHIBIT 10.5
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement"), dated
as of the ___ day of ___________, 1998, is entered into by and among
BRANDYWINE REALTY TRUST, a Maryland real estate investment trust (the
"Trust"), BRANDYWINE OPERATING PARTNERSHIP, L.P., a Delaware limited
partnership (the "Partnership"), and the persons and entities listed on
Schedule I attached hereto (each an "Investor" and, collectively, the
"Investors"; it being understood that such term shall also include such
Investor's heirs, personal representatives, successors and assigns).
RECITALS
WHEREAS, the Trust, the Partnership and certain other
persons and entities are parties to that certain Purchase and Contribution
Agreement, dated as of ________, 1998 (the "Acquisition Agreement"), pursuant
to which the Partnership has agreed to issue 7.25% Series A Cumulative
Convertible Preferred Shares of beneficial interest, par value $.01 per share,
of the Trust (the "Preferred Shares"), which are convertible into or
redeemable for common shares of beneficial interest, par value $.01 per share,
of the Trust ("Common Shares"); and
WHEREAS, as a condition to their agreement to accept
Preferred Shares as consideration pursuant to the Acquisition Agreement, the
Investors have required, and the Trust has agreed to grant, the registration
rights provided for herein with respect to the Registrable Securities (as
defined below).
NOW, THEREFORE, in consideration of the premises and the
mutual agreements herein contained, and for good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties
hereto agree as follows:
1. Definitions. In addition to the definitions set forth
above (and in addition to other capitalized terms not otherwise defined herein
having the meanings set forth in the Acquisition Agreement), the following
terms, as used herein, have the following meanings:
"Majority Investors" means Investors who, as of the
applicable time, beneficially own a majority in number of the outstanding
Registrable Securities (calculated on the assumption that all Preferred Shares
held by the Investors have been converted into or redeemed for Common Shares)
and who provide the notice to effect a registration pursuant to Section 2.2
hereof.
"Maximum Offering" means that number of Registrable
Securities that the managing underwriter advises the Majority Investors can be
sold without materially and adversely affecting an underwritten public
offering to be effected pursuant to Section 2.2 hereof.
<PAGE>
"Registrable Securities" means (i) any Preferred
Shares issued pursuant to the Acquisition Agreement ("Preferred Registrable
Securities") and (ii) any Common Shares issued or issuable upon redemption or
conversion of the Preferred Shares ("Common Registrable Securities");
provided, that any of such securities shall cease to constitute Registrable
Securities once: (i) a registration statement covering such securities has
been declared effective by the SEC and such securities have been sold or
transferred by an Investor pursuant to such effective registration statement;
(ii) such securities may be sold by an Investor pursuant to Rule 144(k) under
the Securities Act; or (iii) such securities are sold by an Investor pursuant
to Rule 144 under the Securities Act.
"Registration Expenses" means any expenses incident
to the Trust's performance of or compliance with Article 2, including, without
limitation, all registration and filing fees, all application and listing
fees, all fees and expenses of complying with securities or blue sky laws, and
printing expenses (including reasonable messenger and delivery service
expenses), all fees and disbursements of counsel for the Trust and of the
Trust's independent public accountants, but excluding (i) fees and
disbursements of counsel, accountants or other advisors for the Investors,
(ii) any brokerage discounts or underwriting commissions, or similar fees,
payable in connection with a sale of Registrable Securities, and (iii) the
out-of-pocket or internal costs and expenses incurred by or on behalf of any
Investor, including, without limitation, any expenses incurred by or on behalf
of any representatives of any Investors in connection with their participation
any "roadshow" presentations (the expenses referred to in clauses (i) through
(iii) are the "Selling Expenses").
"Remaining Investors" means those Investors, on a
particular date, who are not the Majority Investors.
"Rule 144" means Rule 144 under the Securities Act,
as amended from time to time (or any successor statute).
"SEC" means the United States Securities and
Exchange Commission.
"Securities Act" means the Securities Act of 1933,
as amended.
2. Registration Rights.
2.1 Registration Requirement.
2.1.1 Required Registration of Registrable
Securities. The Trust shall prepare and file with the SEC no later than 90
days after the Closing, and shall thereafter use its commercially reasonable
efforts (a) to cause to become effective as soon as practicable, subject to
the reasonable cooperation of the Investors, a "shelf" registration statement
under the Securities Act covering the reoffer and resale of the Registrable
Securities by the Investors in an offering to be made on a continuous basis
pursuant to Rule 415 under the Securities Act and (b) to keep such
registration statement effective until the earlier of (i) the sale of all the
Registrable
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Securities covered thereby pursuant to such registration statement or (ii) the
date on which the Registrable Securities covered thereby cease to be
"Registrable Securities" as defined herein.
2.1.2 Registration Statement Form S-3.
Registrations under this Section 2.1 shall only be required to be made on Form
S-3. In the event the Trust is not eligible to use Form S-3 to register the
Registrable Securities, it may delay the filing of the applicable registration
statement until that date on which the Trust is again eligible to file a Form
S-3.
2.1.3 Expenses. The Trust shall pay the
Registration Expenses and the Investors shall pay the Selling Expenses
incurred in connection with the registration effected pursuant to this Section
2.1.
2.2 Demand Registration.
2.2.1 Demand Registration of Registrable
Securities. At anytime after 90 days after Closing, the Majority Investors may
send written notice to the Trust requesting that the Trust cause to be filed
with the SEC a registration statement under the Securities Act covering the
reoffer and resale of the (i) Preferred Registrable Securities, (ii) Common
Registrable Securities or (iii) all of the Registrable Securities by the
Investors in an underwritten public offering. Within 15 Business Days after
the effective date of such notice, the Trust shall notify in writing the
Remaining Investors of the filing and shall include in any such registration
any Preferred Registrable Securities and/or Common Registrable Securities, as
applicable, sought to be included by any Remaining Investors who so notify the
Trust in writing, within 15 Business Days after the effective date of the
notice from the Trust, of their election to include Registrable Securities in
such registration statement. Within 60 days after the effective date of the
notice from the Majority Investors, the Trust shall file a registration
statement on such form as selected by the Trust seeking to register the
Registrable Securities so requested to be registered by all Investors as
provided above, and the Trust shall use commercially reasonable efforts to
cause to become effective such registration statement, subject to the
reasonable cooperation of the Investors participating as selling shareholders
in such registration. Notwithstanding anything in this Section 2.2 to the
contrary, if the managing underwriter of any public offering to be effected
pursuant to this Section 2.2 shall inform the Majority Investors of its belief
that the number of Registrable Securities requested by all Investors to be
included in such registration would materially and adversely affect the
underwritten public offering, then each Investor who has elected to
participate as a selling shareholder in such registration as provided above
shall include in such registration, that number of Registrable Securities
obtained by multiplying the Maximum Offering by a fraction obtained by
dividing (i) the number of the Registrable Securities that such Investor
sought to include in such registration by (ii) the total number of securities
proposed to be included in such registration by all Investors.
2.2.2 Expenses. The Trust shall pay the
Registration Expenses in connection with any registration effected pursuant to
Section 2.2 and the Investors participating in a registration effected
pursuant to Section 2.2 shall pay the Selling Expenses in connection with any
such registration effected pursuant to Section 2.2.
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<PAGE>
2.2.3 Effective Registration Statement.
Notwithstanding anything to the contrary herein, a registration requested
pursuant to this Section 2.2 shall not be deemed to have been effected unless
a registration statement with respect thereto has become effective and either
(i) it remains continuously effective, without interruption by any stop order
for a period of 180 days following the effective date of such registration or
(ii) the sale of at least a majority of the Registrable Securities (calculated
on the assumption that all Preferred Registrable Securities, if any,
registered on such registration statement have been converted into or redeemed
for Common Shares) which such registration statement initially sought to
register is completed pursuant thereto. Any registration statement filed
pursuant to this Section 2.2 may be withdrawn, at anytime prior to it being
declared effective by the SEC, by the Majority Investors giving written notice
of such withdrawal to the Trust, and will count as one of the effective
registration statements for purposes of Section 2.3.1 below; provided, if the
Investors reimburse the Trust for all of the Registration Expenses incurred in
connection with any such withdrawn registration statement, it shall not count
as one of the effective registration statements for purposes of Section 2.3.1
below; and, provided, further, notwithstanding any such notice of withdrawal
given by the Majority Investors, Investors who otherwise were participating as
selling shareholders in such registration, by giving written notice to the
Trust and the managing underwriter of any such offering, within three Business
Days after the effective date of the withdrawal notice from the Majority
Investors, may suspend such withdrawal by agreeing to offer and sell, pursuant
to such registration statement, that number of Registrable Securities equal to
at least a majority of the Registrable Securities (calculated on the
assumption that all Preferred Registrable Securities, if any, registered on
such registration statement have been converted into or redeemed for Common
Shares) as to which the registration statement, as originally filed, sought to
register.
2.2.4 Selection of Underwriters. In
connection with each underwritten public offering effected pursuant to this
Section 2.2, the Majority Investors shall select the managing underwriter
subject to the approval of the Trust, which approval shall not be unreasonably
withheld by the Trust.
2.3 Limitations on Registration.
2.3.1 In no event shall the Trust be
required to effect more than one (1) registration pursuant to Section 2.1 and
more than one (1) registration of the Preferred Registrable Securities and one
(1) registration of the Common Registrable Securities (which, if so requested
by the Majority Investors may be satisfied in one joint registration) pursuant
to Section 2.2.
2.3.2 Notwithstanding anything herein, if
the Trust reasonably believes that the filing of a registration statement with
the SEC would adversely affect the contemplated activities of the Trust, then
the Trust may postpone the filing of the applicable registration statement,
require that the Investors not effect offers and sales pursuant to an
effective registration statement or otherwise suspend its obligation to amend,
modify or update a filed registration statement, for a period not in excess of
90 days in any 365-day period (or, in the
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event the filing any such postponement is in connection with a proposed
underwritten public offering of the Trust's securities, for such longer period
(not to exceed an additional 30 days) as may be reasonably requested by the
managing underwriter for such proposed offering).
2.3.3 Notwithstanding anything herein, if
the filing of a registration statement pursuant to this Agreement would
require the Trust to include in a filing with the SEC financial statements of
probable or completed acquisitions in order that such registration statement
be in compliance with rules and regulations of the SEC, then the Trust may
delay the filing of such registration statement until it has included the
requisite financial statements (including any necessary pro forma financial
information) in a filing with the SEC. The Trust shall use its commercially
reasonable efforts to file such financial statements as soon as practicable.
2.3.4 The Trust shall not be required to
file a registration statement pursuant to Section 2.2 which would become
effective within 180 days following the effective date of a registration
statement (other than a registration statement filed on Form S-4 or S-8) filed
by the Trust with the SEC pertaining to any public offering for the account of
any Investor.
2.3.5 Notwithstanding anything to the
contrary contained in this Agreement, the obligations of the Trust under this
Section 2 shall terminate at such time as none of the Investors beneficially
own (which, for purposes of this Agreement shall be determined with reference
to Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as
amended) Registrable Securities.
2.4 Registration Procedures.
2.4.1 In connection with the registration
of any Registrable Securities under the Securities Act as provided in this
Section 2, the Trust shall:
(i) prepare and file with the SEC
the requisite registration statement to effect such registration and
thereafter use commercially reasonable efforts to cause such registration
statement to become and remain effective as provided in Section 2.1 or 2.2, as
applicable;
(ii) subject to Section 2.3, use
commercially reasonable efforts to prepare and file with the SEC such
amendments and supplements to such registration statement and the prospectus
used in connection therewith as may be necessary to keep such registration
statement effective and to comply with provisions of the Securities Act with
respect to the disposition of all Registrable Securities covered by such
registration statement until all of such Registrable Securities have been sold
thereunder;
(iii) furnish to the Investors
such number of conformed copies of such registration statement and of each
such amendment and supplement thereto (in
-5-
<PAGE>
each case including all exhibits), such number of copies of the prospectus
contained in such registration statement (including each preliminary
prospectus and any summary prospectus) and any other prospectus filed under
Rule 424 under the Securities Act, in conformity with the requirements of the
Securities Act, and such number of copies of such other documents as the
Investors may reasonably request;
(iv) use commercially reasonable
efforts (x) to register or qualify all Registrable Securities under such other
securities or Blue Sky laws of such States of the United States of America
where an exemption is not available and as the Investors shall reasonably
request, (y) to keep such registration or qualification in effect for so long
as such registration statement remains effective, and (z) to take any other
action which may reasonably be necessary or advisable to enable the Investors
to consummate the disposition in such jurisdictions of the Registrable
Securities to be sold by the Investors, except that the Trust shall not for
any such purpose be required to qualify generally to do business as a foreign
trust in any jurisdiction wherein it would not, but for the requirements of
this paragraph (iv), be obligated to be so qualified or to consent to general
service of process in any such jurisdiction;
(v) notify the Investors upon
discovery that, or upon the happening of any event as a result of which, the
prospectus included in the registration statement filed pursuant to this
Agreement, as then in effect, includes an untrue statement of a material fact
or omits to state any material fact required to be stated therein or necessary
to make the statements therein not misleading, in the light of the
circumstances under which they were made, and at the request of the Investors,
use its best efforts to promptly prepare and furnish to the Investors such
number of copies of a supplement to or an amendment of such prospectus as may
be necessary so that, as thereafter delivered to the purchasers of such
securities, such prospectus shall not include an untrue statement of a
material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein not misleading in the light of the
circumstances under which they were made;
(vi) use commercially reasonable
efforts to list all Common Registrable Securities covered by such registration
statement on any national securities exchange or over-the-counter market, if
any, on which the Common Shares are then listed.
(vii) use commercially reasonable
efforts to (i) comply with all applicable rules and regulations of the SEC and
(ii) in accordance with Section 11(a) of the Securities Act and Rule 158
thereunder, make available to its securityholders, as soon as reasonable
practicable, an earnings statement covering the period of at least 12 months,
but not more than 18 months, beginning with the first quarter after the
effective date of the registration statement covering the Registrable
Securities.
The Investors agree that upon
receipt of any notice from the Trust of the happening of an event of the kind
described in Section 2.4.1(v), the Investors shall forthwith discontinue their
disposition of Registrable Securities pursuant to the registration
-6-
<PAGE>
statement relating to such Registrable Securities until the Investors' receipt
of the copies of the supplemented or amended prospectus contemplated by
Section 2.4.1(v).
2.4.2 In connection with the registration
of any Registrable Securities under the Securities Act pursuant to Section
2.1, the Trust may include in any such registration Common Shares held by
persons or entities that have registration rights granted under that certain
Registration Rights Agreement, dated as of the date hereof, by and among the
Trust, the Partnership and the other signatories thereto (the "CAP
Registration Rights Agreement.")
2.5 Rule 144. The Trust will use commercially
reasonable efforts during the term of this Agreement to (i) file with the SEC
such information as is specified under Rule 144 for so long as there are
beneficial owners of Registrable Securities and (ii) take all other action as
may be required as a condition to the availability of Rule 144.
2.6 Information Blackout. At any time when a
registration statement effected pursuant to this Section 2 relating to
Registrable Securities is effective, upon written notice from the Trust to the
Investors that the Trust has determined in good faith that sale of Registrable
Securities pursuant to the registration statement would require disclosure by
the Trust of non-public material information not otherwise required, in the
judgment of the Trust, to be disclosed under applicable law, the Investors
shall suspend sales of Registrable Securities pursuant to such registration
statement until the earlier of (a) 60 days after the Trust makes such good
faith determination and (b) such time as the Trust notifies the Investors that
such material information has been disclosed to the public or has ceased to be
material or that sales pursuant to such registration statement may otherwise
be resumed.
2.7 Preparation.
2.7.1 Investor Review and Due Diligence.
In connection with the preparation and filing of any registration statement
under the Securities Act in which the Investors are selling shareholders, the
Trust shall give the Investors not less than 10 days prior written notice of
the preparation of such registration statement and give the Investors and
their counsel the opportunity to review and comment on the applicable
portions, relating to the Investors (including the Selling Shareholder and
Plan of Distribution sections), of the registration statement, each prospectus
included therein or filed with the SEC, and each amendment thereof or
supplement thereto (provided that the Investors shall furnish the Trust with
comments on any such amendment or supplement as promptly as the Trust shall
reasonably require).
2.7.2 Investor Information. Each Investor
which beneficially owns Registrable Securities to be registered under Section
2.1 or 2.2 shall furnish to the Trust such information as the Trust may
reasonably request and as shall be required in connection with the
registration and related proceedings referred to in this Section 2. If any
Investor fails to provide the Trust with such information within 10 days of
the effective date of the Trust's
-7-
<PAGE>
request therefor, the Trust's obligations under Section 2 with respect to such
Investor or the Registrable Securities beneficially owned by such Investor
shall be suspended until such Investor provides such information.
2.8 Underwritten Offerings. In connection with any
underwritten public offering to be effected pursuant to Section 2.2, if
requested by the underwriters for any underwritten public offering by the
Investors, the Trust shall enter into an underwriting agreement with such
underwriters for such underwritten public offering, such agreement to be
reasonably satisfactory in substance and form to the Trust, the Investors and
the underwriters, and to contain such representations and warranties by the
Trust and the Investors and such other terms as are generally prevailing in
agreements of that type, including, without limitation, customary indemnities
and contribution provisions generally prevailing in agreements of that type.
The Investors shall be a party to such underwriting agreement.
2.9 Indemnification.
2.9.1 Indemnification by the Trust. In the
event of any registration of any securities of the Trust under the Securities
Act in which the Investors are or may be selling shareholders, the Trust
shall, and hereby does, indemnify and hold harmless, to the fullest extent
permitted by law, such Investors who are selling shareholders, and their
respective directors, officers, partners, employees, agents and affiliates,
and each other person who controls any Investor within the meaning of the
Securities Act (each a "Trust Indemnified Party"), against losses, claims,
damages, liabilities or judgments (or actions or proceedings, whether
commenced or threatened, in respect thereof) that arise out of or are based
upon (a) any untrue statement or alleged untrue statement of any fact
contained in any registration statement under which such securities were
registered under the Securities Act, any preliminary prospectus, final
prospectus, or summary prospectus contained therein, or any amendment or
supplement thereto, or any omission or alleged omission to state therein a
fact required to be stated therein or necessary to make the statements therein
in light of the circumstances in which they were made not misleading, or (b)
any violation by the Trust, its trustees, officers, employees or agents of
this Agreement or any law applicable to and in connection with such
registration, and the Trust shall reimburse the Trust Indemnified Parties for
any legal or any other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or judgment
(or action or proceeding in respect thereof) described in clauses (a) or (b);
provided, that the Trust shall not be liable in any such case to the extent
that any such loss, claim, damage, liability, judgment (or action or
proceeding in respect thereof) or expense arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission
made in such registration statement, any such preliminary prospectus, final
prospectus, summary prospectus, amendment or supplement in reliance upon and
in conformity with information furnished to the Trust by any Investor; and
provided, further, that this indemnity obligation of the Trust shall not apply
to any misstatement or omission in any registration statement, including any
amendment thereto, or in any preliminary prospectus, if such misstatement or
omission giving rise to the claim for indemnification was corrected in the
final prospectus and the Trust made available on a timely basis to the
Investors participating as selling shareholders, or the managing
-8-
<PAGE>
underwriter of the particular public offering, copies of the final prospectus
for delivery to the purchasers of the Registrable Securities in such offering.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Investors and shall survive the
transfer of such securities by the Investors.
2.9.2 Indemnification by the Investors If
any Registrable Securities are included in any registration statement, the
Investors who beneficially own such Registrable Securities (the "Indemnifying
Investors") shall indemnify and hold harmless, to the fullest extent permitted
by law, the Trust and each trustee, officer and employee of the Trust, and
each Person who controls the Trust within the meaning of the Securities Act
(the "Investor Indemnified Parties"), against losses, claims, damages,
liabilities or judgments (or actions or proceedings, whether commenced or
threatened, in respect thereof) that arise out of or are based upon (a) any
statement or alleged statement in or omission or alleged omission from such
registration statement, any preliminary prospectus, final prospectus or
summary prospectus contained therein, or any amendment or supplement thereto,
if such statement or alleged statement or omission or alleged omission was
made in reliance upon and in conformity with information furnished to the
Trust by the Investors, or (b) any violation by the Investors, or their
respective directors, officers, partners, employees, agents and affiliate, of
this Agreement or any law applicable to and in connection with such
registration, and such Investors shall reimburse the Investor Indemnified
Parties for any legal or any other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim, damage,
liability or judgment (or action or proceeding in respect thereof) described
in clauses (a) or (b). In no event shall any Indemnifying Investor, its
directors, officers or any person who controls such Indemnifying Investor be
liable or responsible for any amount in excess of the amount by which the
total amount received by such Indemnifying Investor with respect to any
registration of any securities of the Trust under the Securities Act exceeds
(i) the pro rata amount paid by such Indemnifying Investor for such securities
of the Trust and (ii) the amount of any damages that such Indemnifying
Investor, its directors, officers or any person who controls such Indemnifying
Investor has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission.
2.9.3 Notice of Claims, Etc. Promptly
after receipt by an indemnified party of notice of the commencement of any
action or proceeding involving a claim referred to in the preceding paragraphs
of this Section 2.9, such indemnified party shall, if a claim in respect
thereof is to be made against an indemnifying party, immediately give written
notice to the latter of the commencement of such action; provided, that the
failure of any indemnified party to give notice as provided herein shall not
relieve the indemnifying party of its obligations under the preceding
paragraphs of this Section 2.9, except to the extent that the indemnifying
party is materially prejudiced by such failure. In case any such action is
brought against an indemnified party, unless in such indemnified party's
reasonable judgment a conflict of interest between such indemnified and
indemnifying parties may exist in respect of such claim, the indemnifying
party shall be entitled to participate in and to assume the defense thereof,
jointly with any other indemnifying party similarly notified to the extent
that the indemnifying parties may agree, with counsel reasonably satisfactory
to such indemnified party, and after
-9-
<PAGE>
notice from the indemnifying party to such indemnified party of its election
so to assume the defense thereof, the indemnifying party shall not be liable
to such indemnified party for any legal or other expenses subsequently
incurred by the latter in connection with the defense thereof other than
reasonable out of pocket costs related to the indemnified party's cooperation
with the indemnifying party, unless in such indemnified party's reasonable
judgment a conflict of interest between such indemnified and indemnifying
parties arises in respect of such claim after the assumption of the defense
thereof. No indemnifying party shall be liable for any settlement of any
action or proceeding effected without its written consent, which consent shall
not be unreasonably withheld, delayed or conditioned. Consent of the
indemnified party shall be required for the entry of any judgment or to enter
into a settlement only when such judgment or settlement does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect such claim or
litigation.
2.9.4 Contribution. If the indemnification
provided for in this Section 2.9 shall for any reason be held by a court to be
unavailable to an indemnified party under Section 2.9.1 or 2.9.2 hereof in
respect of any loss, claim, damage, liability, judgment, or any action in
respect thereof, then, in lieu of the amount paid or payable under Sections
2.9.1 or 2.9.2 hereof, the indemnified party and the indemnifying party under
Sections 2.9.1 or 2.9.2 hereof shall contribute to the aggregate losses,
claims, damages and liabilities (including legal or other expenses reasonably
incurred in connection with investigating the same), (i) in such proportion as
is appropriate to reflect the relative fault of the Trust on one hand and the
Investors that participated as selling shareholders on the other that resulted
in such loss, claim, damage or liability, or action in respect thereof, or
(ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as shall be appropriate to reflect the
relative benefits received by the Trust on one hand and the Investors that
participated as selling shareholders on the other, as well as any other
relevant equitable considerations. No Person shall be obligated to contribute
hereunder any amounts in payment for any settlement of any action or claim,
effected without such Person's written consent, which consent shall not be
unreasonably withheld.
2.9.5 Fraudulent Representations. No
Person guilty of fraudulent misrepresentation (within the meaning of the
Securities Act) shall be entitled to indemnity or contribution from any Person
who was not guilty of such fraudulent misrepresentation.
3. Amendments; Waivers. This Agreement may be amended only
with the written consent of the Trust and at least Investors that constitute
the Majority Investors. Except as otherwise specifically provided herein, no
delay on the part of any party hereto in exercising any right, power or
privilege hereunder shall operate as a waiver thereof, nor shall any waiver on
the part of any party hereto of any right, power or privilege hereunder
operate as a waiver of any other right, power or privilege hereunder nor shall
any single or partial exercise of any right, power or privilege hereunder
preclude any other or further exercise thereof or the exercise of any right,
power or privilege hereunder.
-10-
<PAGE>
4. Entire Agreement. This Agreement represents the entire
understanding and agreement among the parties hereto with respect to the
subject matter hereof and supersedes all other prior and contemporaneous
agreements and understandings, both written and oral, between the parties with
respect to the subject matter hereof.
5. Severability. If any provision of this Agreement, or the
application of such provision to any party or circumstance, shall be held
invalid, the remainder of this Agreement or the application of such provision
to other parties or circumstances, to the extent permitted by law or rules of
the SEC, shall not be affected thereby. The obligations of the Trust hereunder
shall be subject to equitable modification if and to the extent required in
order to enable the Trust to conform to any rules of the SEC or policy
positions of the SEC, as reasonably integrated by the Trust and its counsel.
6. Notices. All notices, requests and other communications
required or permitted to be given under this Agreement shall be in writing and
shall be delivered (i) in person, (ii) by U.S. overnight Express Mail, return
receipt requested, (iii) by recognized overnight delivery service providing
positive tracking of items (e.g., Federal Express), or (iv) by confirmed
telecopier, in each case addressed as follows:
If to the Trust or the Partnership, addressed to:
c/o Brandywine Realty Trust
Newtown Square Corporate Campus
16 Campus Boulevard
Suite 150
Newtown Square, PA 19073
Attention: Gerard H. Sweeney, President and
Chief Executive Officer
Fax: (610) 325-5622
with a required copy in each instance to:
Brad A. Molotsky, General Counsel
Brandywine Operating Partnership, L.P.
Newtown Square Corporate Campus
16 Campus Boulevard
Suite 150
Newtown Square, PA 19073
Fax: (610) 325-5622
-11-
<PAGE>
If to the Investors:
Addressed to such Investor as set forth on the
Investor Signature Page hereto
with a required copy in each instance to:
Latham & Watkins
885 Third Avenue
New York, NY 10020
Attention: R. Ronald Hopkinson and James I. Hisiger
Fax: (212) 751-4864
or to such other address or addresses and to the attention of such other
person or persons as any of the parties may notify the other in accordance
with the provisions of this Agreement. All such notices, requests and other
communications shall be deemed to have been sufficiently given for all
purposes hereof only if given pursuant to the foregoing requirements as to
both manner and address, and only upon receipt (or refusal to accept delivery)
by the party to whom such notice is sent. Notices by the parties may be given
on their behalf by their respective attorneys.
7. Successors and Assigns. This Agreement shall inure to the
benefit of and shall be binding upon the Trust and its successors and
permitted assigns. The rights to register securities granted by the Trust
under this Agreement may be assigned by any Investor, provided, that (a) such
transfer may otherwise be and is effected in accordance with applicable
securities laws; and (b) such assignee or transferee agrees in writing to be
bound by all of the provisions of this Agreement and executes an Investor
Signature Page in the form attached hereto. In the event of any transfer of
rights in accordance with this Section 7, the transferee shall have all of the
rights and obligations of an Investor under the terms of this Agreement.
8. Counterparts; Facsimile Signature. This Agreement may be
executed in counterparts (including by facsimile which, for all purposes,
shall be deemed to be an original), each of which for all purposes shall be
deemed to be an original and all of which together shall constitute the same
agreement.
9. Headings. The Section headings in this Agreement are for
convenience of reference only, and shall not be deemed to alter or affect the
meaning or interpretation of any provisions hereof.
10. Construction. This Agreement shall be governed,
construed and enforced in accordance with the laws of the State of New York
without regard to its principles of conflict of laws.
11. Recapitalizations, etc. In the event that any shares of
beneficial interest or other securities are issued in respect of, in exchange
for, or in substitution of, any Registrable
-12-
<PAGE>
Securities by reason of any reorganization, recapitalization,
reclassification, merger, consolidation, spin-off, partial or complete
liquidation, share dividend, split-up, sale of assets, distribution to
shareholders or combination of the shares of Registrable Securities or any
other similar change in the Trust's capital structure, appropriate adjustments
shall be made in this Agreement so as to fairly and equitably preserve, as far
as practicable, the original rights and obligations of the parties hereto
under this Agreement.
[Execution Page Follows]
-13-
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement
to be executed on the date first above written and delivered by their
respective duly authorized officers.
BRANDYWINE OPERATING
PARTNERSHIP, L.P.
By: BRANDYWINE REALTY
TRUST, its sole general partner
By:______________________________
Name: Gerard H. Sweeney
Title: President & CEO
BRANDYWINE REALTY TRUST
By:_______________________________________
Name: Gerard H. Sweeney
Title: President & CEO
-14-
<PAGE>
INVESTOR SIGNATURE PAGE
The undersigned hereby acknowledges receipt of a copy of the
Registration Rights Agreement, dated as of _________, 1998, and hereby agrees
to be bound by the terms and conditions thereof as an Investor.
------------------------------------
Name of Investor
------------------------------------
Signature of Authorized Signer
------------------------------------
Name & Title of Authorized Signer
Address for Notices:
------------------------------------
------------------------------------
------------------------------------
Attention:__________________________
Facsimile:__________________________
Telephone:__________________________
-15-
<PAGE>
SCHEDULE I
List of Investors
[To Come]
-16-
<PAGE>
EXHIBIT 10.6
Brandywine Realty Trust
16 Campus Boulevard
Newtown Square, PA 19073
_____________ __, 1998
LF Strategic Realty Investors, L.P
30 Rockefeller Plaza, 63rd Floor
New York, NY 10020
Ladies and Gentlemen:
Reference is made to the Purchase and Contribution Agreement dated as
of ____________ __, 1998 by and among Brandywine Realty Trust (the "Trust"),
Brandywine Operating Partnership, L.P. (the "Operating Partnership"), LF
Strategic Realty Investors L.P., Prometheus AAPT and the other signatories
thereto (the "Purchase Agreement"). Unless otherwise defined herein,
capitalized terms not defined herein shall have the meanings ascribed to them
in the Purchase Agreement.
1. Initial Appointment; Designation Right. On the date
hereof, and in recognition of the benefits realized by the Trust from the sale
of certain assets owned by LF Strategic Realty Investors, L.P ("LFSRI"), and
in accordance with Sections 2.1 and 2.4 of the Declaration of Trust (the
"Declaration") of the Trust, the Board of Trustees (the "Board") has increased
the number of Trustees of the Trust from ___ to ___ and appointed [ ] to fill
the vacancy created by such increase. In further recognition of such benefits,
the Trust agrees to use commercially reasonable efforts, during the Term and
subject to compliance with applicable law and the Declaration, to cause [ ]
(or such replacement for [ ] as LFSRI may select and who is reasonably
acceptable to the Board) to be nominated for election to the Board at each
annual meeting of shareholders of the Trust and, if elected, to serve until
the next annual meeting of shareholders of the Trust and until his or her
successor is elected and qualified. The Trust's agreement contained herein
shall terminate upon expiration of the Term. Upon expiration of the Term, the
holders of a majority of the Board may, in their discretion, request such
designee to resign from the Board.
2. The Designee. The Trust acknowledges that each of Murry
Gunty and [ ] is reasonably acceptable to the Board. LFSRI acknowledges that the
Board shall be acting reasonably if (i) it refuses to nominate a person for
election to the Board pursuant to paragraph 1 above if the Trust would be
required to make any of the disclosures required by Item 401(f) of Regulation
S-K promulgated by the Securities and Exchange Commission (the "SEC") with
respect to such person in filings with the SEC or (ii) if the Designee shall
also be serving as a director or trustee or an executive of a competitor of the
<PAGE>
Trust and the Board believes that such person's membership on the Board would
pose a threat to the Trust's interests; provided, however, that in the event
that any LFSRI designee to the Board is deemed unacceptable pursuant to the
provisions of this paragraph 2, LFSRI shall have the right to propose a
replacement for such designee.
3. Attendance Right. If for any reason LFSRI's acceptable
designee to the Board is not elected to the Board during the Term, LFSRI have
the right, during the Term, to have an individual attend, in a non-voting
capacity, all meetings of the Board. Such individual shall be entitled to
receive the same notice with respect to all meetings of the Board as is
provided to voting members of the Board and shall hold all information
obtained in connection with such notices and meetings in confidence to the
same extent as if such individual was a voting member of the Board.
4. Definitions. The following terms have the meanings
specified:
a. "Affiliate" shall have the meaning specified in Rule 405
promulgated under the Securities Act of 1933, as amended.
b. "Change in Control" shall mean (i) approval by
shareholders of the Trust of: (A) a merger, reorganization or consolidation
involving the Trust if the shareholders of the Trust immediately before such
merger, reorganization or consolidation do not or will not own directly or
indirectly immediately following such merger, reorganization or consolidation,
more than fifty percent (50%) of the combined voting power of the outstanding
voting securities of the Trust resulting from or surviving such merger,
reorganization or consolidation in substantially the same proportion as their
ownership of the Voting Securities outstanding immediately before such merger,
reorganization or consolidation; or (B) a complete liquidation or dissolution of
the Trust; or (C) an agreement for the sale or other disposition of all or
substantially all of the assets of the Trust; or (ii) acceptance by shareholders
of the Trust of shares in a share exchange if the shareholders of the Trust
immediately before such share exchange do not or will not own directly or
indirectly immediately following such share exchange more than fifty percent
(50%) of the combined voting power of the outstanding voting securities of the
entity resulting from or surviving such share exchange in substantially the same
proportion as their ownership of the Voting Securities outstanding immediately
before such share exchange.
c. "Common Share" shall mean a common share of beneficial
interest, par value $.01 per share, of the Trust.
d. "Conversion Price" shall have the meaning specified in,
and shall be subject to adjustment as and to the extent provided in, the
amendment to the Amended and Restated Agreement of Limited Partnership of the
Partnership establishing the designation, preferences and other rights of the
Series B Preferred Units.
-2-
<PAGE>
e. "Designee" means [ ] or such replacement to [ ] who is
serving on the Board pursuant the agreement contained in this letter.
f. "Term" shall mean the period of time commencing on the
date hereof and ending on the earliest to occur of the following: (i) the date
that LFSRI ceases to own, directly or indirectly, any combination of (a) the
Series A Preferred Shares issued on the date hereof, (b) the Common Shares
issued on redemption or conversion of such Series A Preferred Shares, (c) the
Series B Preferred Units issued on the date hereof, (d) the Class A Common Units
issued on redemption or conversion of such Series B Preferred Units and (e) the
Common Shares issued on redemption of such Class A Common Units having an
aggregate Value at least equal to 60% of the aggregate Value of the Series A
Preferred Shares and the Series B Preferred Units issued on the date hereof and
(ii) the occurrence of a Change in Control.
g. "Value" shall be calculated by attributing (i) $50 to
each Series A Preferred Share and to each Series B Preferred Unit and (ii) an
amount equal to the then current Conversion Price of the Series B Preferred
Units to each Common Share issued upon redemption or conversion of a Series A
Preferred Share, to each Class A Unit issued on redemption or conversion of a
Series B Preferred Unit and to each Common Share issued upon redemption of a
Class A Unit (such Series A Preferred Shares, Series B Preferred Units, Class A
Units and Common Shares are collectively referred to herein as the
"Securities").
Very truly yours,
BRANDYWINE REALTY TRUST
By:__________________________
Gerard H. Sweeny
President and Chief Executive Officer
Agreed and accepted this ____ day
of ______, 1998 by:
LF STRATEGIC REALTY INVESTORS, L.P
By:____________________________________
Name:
Title:
-3-
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<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1998
<CASH> 42,394
<SECURITIES> 0
<RECEIVABLES> 6,971
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 50,690
<PP&E> 1,167,717
<DEPRECIATION> 39,723
<TOTAL-ASSETS> 1,200,409
<CURRENT-LIABILITIES> 32,218
<BONDS> 0
0
0
<COMMON> 377
<OTHER-SE> 722,338
<TOTAL-LIABILITY-AND-EQUITY> 1,200,409
<SALES> 0
<TOTAL-REVENUES> 76,232
<CGS> 0
<TOTAL-COSTS> 56,913
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11,017
<INCOME-PRETAX> 19,319
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 858
<NET-INCOME> 18,367
<EPS-PRIMARY> 0.53
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