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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report
Filed pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) March 23, 1999
BRANDYWINE REALTY TRUST
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(Exact name of registrant as specified in its charter)
MARYLAND 1-9106 23-2413352
(State or Other Jurisdiction (Commission (I.R.S. Employer
of Incorporation) file number) Identification Number)
14 Campus Boulevard, Newtown Square, Pennsylvania 19073
(Address of principal executive offices)
(610) 325-5600
(Registrant's telephone number, including area code)
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Item 5. Other Events
(i) Five Arrows Transaction:
On April 19, 1999, Brandywine Realty Trust (the "Company") entered into
an agreement with Five Arrows Realty Securities III L.L.C. ("Five Arrows"), an
investment fund managed by Rothschild Realty Inc., a member of the Rothschild
Group. The agreement provides for the sale by the Company of up to 4,375,000
preferred shares of beneficial interest, designated as 8.75% Series B Senior
Cumulative Convertible Preferred Shares (the "Series B Preferred Shares") for an
aggregate gross purchase price of $105 million ($24 per share) or $98,700,000,
net of the offering discount.
The Company will issue to Five Arrows 1,041,667 Series B Preferred
Shares at the initial draw-down on or about April 23, and may sell the remaining
3,333,333 shares at up to three additional closings during 1999. The Company has
agreed to sell a minimum of 2,291,667 shares to Five Arrows. At part of the
transaction, Five Arrows acquired a seven-year warrant (the "Warrant") to
purchase 500,000 common shares of beneficial interest ("Common Shares") at an
exercise price of $24.00 per share.
Distributions. Distributions on the Series B Preferred Shares are
cumulative from the date of issuance and are payable quarterly at the greater of
(i) $0.525 per share and (ii) the amount of the quarterly distribution payable
on the number of Common Shares into which a Series B Preferred Share is
convertible. The Series B Preferred Shares rank pari passu as to distributions
with the Company's currently outstanding 7.25% Series A Preferred Shares. The
Company may not pay distributions on the Common Shares, or other shares that
rank junior to the Series B Preferred Shares as to distributions, until all
cumulative unpaid distributions on the Series B Preferred Shares have been paid.
Conversion Feature / Antidilution Feature. Each Series B Preferred
Share is immediately convertible at the option of the holder into one Common
Share at a conversion price of $24 per Common Share. The conversion price of the
Series B Preferred Shares, and the exercise price of the Warrant, are subject to
reduction if the Company issues Common Shares or securities convertible into
Common Shares at less than $24 per share during the twenty-four month period
ending April 19, 2001, subject to exceptions, including shares issued to acquire
additional office or industrial properties and shares issued to acquire 100% of
a public company whether by merger, consolidation or exchange offer.
Liquidation Preference. The liquidation value of each Series B
Preferred Share equals $24 plus accrued distributions. The Series B Preferred
Shares rank pari passu upon liquidation with the Company's 7.25% Series A
Preferred Shares.
Mandatory Conversion into Common Shares. At any time on or after April
19, 2004, the Company may require the conversion of the Series B Preferred
Shares into Common Shares if
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the Common Shares have traded, during any consecutive 90-day period following
such date, at a price in excess of 130% of the conversion price and the Common
Shares to be issued are freely transferable and listed on the New York Stock
Exchange.
Redemption at Company's Option. The Company may, at its option, redeem
all (but not less than all) of the outstanding Series B Preferred Shares at any
time on or after April 19, 2007 for $24 per share plus accrued distributions. In
addition, the Company has the option to redeem up to $50 million of Series B
Preferred Shares prior to April 19, 2000 at a per share price of $22.44 plus
accrued distributions so long as, after the redemption, at least $55 million of
Series B Preferred Shares remain outstanding. Alternatively, the Company may
elect to issue no more than $55 million of Series B Preferred Shares on the
condition that it pays Five Arrows $0.44 for each share not issued.
Redemption upon Change of Control and Other Events. If the Company
experiences a change of control, becomes a closely-held or a Pension-held REIT,
or fails to qualify as a REIT, in each case other than through action of Five
Arrows, Five Arrows has the right to require the Company to purchase the
outstanding Series B Preferred Shares for $24.48 per share plus accrued
distributions. Under certain circumstances, the Company may, in lieu of making
such payment, revise the conversion ratio so that, based on the then current
market price of the Common Shares, each Series B Preferred Share will thereafter
be convertible into that number of Common Shares having an aggregate market
value equal to at least $28.80. In certain transactions involving a merger or
consolidation of the Company as to which holders of Series B Preferred Shares
have a separate voting right, holders who do not vote in favor of the
transaction will have the right to require the Company to redeem their shares
for $24.96 per share plus accrued distributions.
Voting Rights. Five Arrows has the right to vote on all matters as a
single class with holders of Common Shares, and as a separate class on certain
matters affecting the rights of the Series B Preferred Shares. So long as Five
Arrows beneficially owns at least 50% of the outstanding Series B Preferred
Shares, Five Arrows has the right to appoint one member to the Board of
Trustees. In the event that the Company (i) fails to pay distributions on Common
Shares equal to at least $0.32 for two consecutive quarters, (ii) reduces the
annual distribution on its Common Shares to below $1.28 per share, (iii) fails
to pay timely distributions on the Series B Preferred Shares, (iv) is in
material default of it credit facility or (v) fails to maintain a debt service
coverage ratio of at least 1.25 or a debt to market capitalization ratio no
higher .70, then Five Arrows will have the right to appoint a second member to
the Board of Trustees. In addition, certain mergers, consolidations and similar
transactions require a favorable vote of the Series B Preferred Shares. However,
because each holder of Series B Preferred Shares will have the right to require
the Company to redeem its shares, as indicated above, the documents provide that
even if holders of Series B Preferred Shares do not vote in favor of the
transaction, the Company will be permitted to consummate the transaction, and
certain specified approval rights of the Series B Preferred Shares will
thereupon terminate.
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Transfer and Certain Other Restrictions. Until April 19, 2000, Five
Arrows may not transfer the Series B Preferred Shares, the Warrant or any Common
Shares obtained upon conversion of the Series B Preferred Shares or exercise of
the Warrant, except to affiliates, who will be similarly restricted. In
addition, so long as a designee of Five Arrows occupies a seat on the Company's
Board of Trustees, Five Arrows may not increase its equity ownership in the
Company without the Company's consent or commence a tender or exchange offer or
become involved in a proxy contest.
Registration Rights. None of the Series B Preferred Shares nor the
Common Shares issuable upon conversion of the Series B Preferred Shares or upon
exercise of the Warrant has been registered under the Securities Act of 1933 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. Five Arrows may make two written demands on the Company to
register the Series B Preferred Shares, the underlying Common Shares and the
Common Shares issued or issuable upon exercise of the Warrant (collectively,
"Registrable Securities"). Five Arrows has also been granted piggyback
registration rights and the right to have the Company maintain a shelf
registration covering its securities.
Use of Proceeds. The Company expects to use the net proceeds from the
sale of Series B Preferred Shares to repay outstanding indebtedness and to fund
continued growth. The Company will contribute the net proceeds from the Series B
Preferred Shares to Brandywine Operating Partnership, L.P. (the "Operating
Partnership") in exchange for the issuance by the Operating Partnership to the
Company of a newly created class of limited partnership interest designated as
the Series C Preferred Mirror Units (the "Mirror Units"). The stated value of
each Mirror Unit is $24. The distribution rights and the distribution and
liquidation preferences of the Mirror Units "mirror" those of the Series B
Preferred Shares. Upon conversion of Series B Preferred Shares into Common
Shares, an equal number of Mirror Units will convert into an equal number of
Class A Units of the Operating Partnership. Upon redemption of Series B
Preferred Shares for cash, an equal number of Mirror Units will be canceled.
Copies of the principal documents executed by the Company in connection
with the issuance of the Series B Preferred Shares are included with this Form
8-K as exhibits 3.1, 10.1, 10.2, 10.3 and 10.4. Reference is made to these
documents for a more detailed description of the Series B Preferred Shares.
(ii) Merrill Lynch Loan:
On March 26, 1999, two subsidiaries of the Company (collectively, the
"Borrowers") closed on a mortgage loan financing (the "Financing"). Under the
Financing, the Borrowers borrowed an aggregate of $75.0 million from Merrill
Lynch Mortgage Capital, Inc. at a blended interest rate of LIBOR plus 2.50% per
annum with a maturity of March 31, 2002. To offset the risks of a variable
interest rate, the Borrowers have purchased, through Merrill Lynch, a two year
interest rate cap agreement that protects the Borrowers in the event that the
LIBOR exceeds 6.25%. The Borrowers have also obtained an interest rate agreement
that commences in two
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years and protects the Borrower until the maturity date of the Financing in the
event that the LIBOR exceeds 7%. The Financing is secured by two properties
owned by Brandywine Trenton Urban Renewal, L.L.C. located in Trenton, New
Jersey, known as 33 West State Street and Capital Center, and by three
properties which are ground leased by Brandywine Berwyn SPE, L.P. located in
Berwyn, Pennsylvania, known as 100, 200 and 300 Berwyn Park. The Financing is
nonrecourse to the Borrowers except in certain limited circumstances. The
Operating Partnership has guaranteed those limited obligations that are recourse
to the Borrowers. Seventy million dollars of the proceeds of the Financing were
used to repay the remaining amounts outstanding under the bridge loan from
NationsBank. The documentation executed to effect the Financing contains certain
covenants which the Company believes to be customary for secured, nonrecourse
real estate financings such as the Financing.
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(iii) Property Sales:
During March 1999, the Company consummated the sale of three office
properties containing approximately 323,671 net rentable square feet for an
aggregate sales price of $23.8 million. The property sales were made through
three separate transactions as follows:
o On March 23, 1999, the Company sold one office property
located in Bristol, Pa. (known as 180 Rittenhouse Circle)
containing 96,000 net rentable square feet for
approximately $8.8 million.
o On March 25, 1999, the Company sold one office property
located in Blue Bell, Pa. (known as 1720 Walton Road)
containing 15,918 net rentable square feet for
approximately $2.0 million.
o On March 31, 1999, the Company sold one office property
located in Bryn Athyn, Pa. (Buildings 1-14, Mason's Mill
Business Park) containing 211,753 net rentable square feet
for approximately $13.0 million.
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Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(c) Exhibits.
3.1 - Articles Supplementary of the Company dated April 19, 1999
creating the Company's Series B Cumulative Convertible Preferred
Shares.
10.1 -Investment Agreement dated as of April 19, 1999 between the
Company and Five Arrows.
10.2 -Warrant dated April 19, 1999 issued to Five Arrows.
10.3 -Operating Agreement dated as of April 19, 1999 between the
Company and Five Arrows.
10.4 -Agreement and Waiver dated as of April 19, 1999 between the
Company and Five Arrows.
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SIGNATURE
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Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
BRANDYWINE REALTY TRUST
Date: April 26, 1999 By: /s/ Gerard H. Sweeney
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Title: President and Chief
Executive Officer
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BRANDYWINE REALTY TRUST
ARTICLES SUPPLEMENTARY
CLASSIFYING AND DESIGNATING 4,375,000 PREFERRED
SHARES AS 8.75% SERIES B SENIOR 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
March 19, 1999, classified and designated 4,375,000 shares of the Trust's
preferred shares of beneficial interest, $.01 par value per share, as the 8.75%
Series B Senior 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 upon 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:
8.75% SERIES B SENIOR CUMULATIVE CONVERTIBLE PREFERRED SHARES
Section 1. Designation and Amount. A series of preferred
shares designated as "8.75% Series B Senior Cumulative Convertible Preferred
Shares" is hereby established and the number of shares constituting the series
so designated shall be 4,375,000 (the "Preferred Shares"). The par value of the
Preferred Shares, as set forth in the Declaration of Trust, is $.01 per share.
Section 2. Distribution Rights.
(a) General. Subject to Section 9, and in addition to any
other distributions expressly provided for herein, the Trust shall pay in cash,
when, as and if authorized by the Board, out of funds legally available therefor
as provided by the laws governing real estate investment trusts in Maryland (the
"Legally Available Funds"), distributions at the quarterly rate equal to the
Applicable Distribution Rate (as defined below) per issued and outstanding
Preferred Share, per calendar quarter. Such distributions shall be cumulative
and payable (if declared) quarterly on each January 15, April 15, July 15 and
October 15, with respect to the prior calendar quarter, commencing July 15, 1999
(except that if such date is not a Business Day (as defined below), then such
distribution will be payable on the next succeeding Business Day) to the holders
of record at the close of business on the date specified by the Board at the
time such distribution is declared no more than forty-five (45) days prior to
the date fixed for payment thereof; provided, however, that the Trust shall have
the right to declare and pay distributions at any time. Distributions shall
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begin to accrue and be cumulative from the date of issuance of such Preferred
Share to and including the first to occur of (i) the date on which the
Liquidation Value (as defined in Section 6(a)) of such Preferred Share or Put
Payment (as defined in Section 8(a)) (plus all accrued and unpaid distributions
thereon whether or not declared) is paid to the holder thereof in connection
with the liquidation of the Trust or the redemption of such Preferred Share by
the Trust, (ii) the last day of the quarter preceding the quarter in which such
Preferred Shares are converted into Common Shares (as defined in the Declaration
of Trust) hereunder if such day is after the record date for the Regular
Quarterly Distribution (as defined herein) on the Common Shares for the quarter
in which such conversion takes place, (iii) the last day of the quarter second
preceding the quarter in which such Preferred Shares are converted into Common
Shares hereunder if such day is prior to the record date for the Regular
Quarterly Distribution on the Common Shares for the quarter in which such
conversion takes place, or (iv) the date on which such share is otherwise
acquired and paid for by the Trust.
(b) Cumulative Distributions. Each of such distributions shall
be fully cumulative, to the extent not previously paid, such that Preferred
Shares on which distributions have not been paid in full on the dates set forth
above shall accrue distributions at the rate of $.525 per Preferred Share per
quarter. Distributions not paid in full on the dates set forth above shall
accrue distributions at the rate of 8.75% per annum. Any distribution payment
with respect to the Preferred Shares shall first be credited against any prior
accrued and unpaid distribution. No distributions shall be set apart for or paid
upon the Common Shares or any other equity securities of the Trust ranking
junior to the Preferred Shares as to the payment of distributions unless all
such cumulative distributions on the Preferred Shares have been paid.
(c) Ranking as to Distributions. Distributions with respect to
the Preferred Shares shall be declared and paid pari passu with the
distributions on the 7.25% Series A Cumulative Convertible Preferred Shares (the
"Series A Preferred Shares") and any other equity securities of the Trust
ranking on a parity with the Preferred Shares and Series A Preferred Shares as
to distributions.
(d) Applicable Distribution Rate. With respect to any
Preferred Share then issued and outstanding, the "Applicable Distribution Rate"
per fiscal quarter shall be equal to the greater of (i) the product of the
Regular Quarterly Distribution (as defined in Section 4(d)) payable for the
applicable quarter per Common Share and the Conversion Ratio (as defined in
Section 7(a)) and (ii) $.525. The Applicable Distribution Rate shall be pro
rated for the actual number of days in any partial quarter.
(e) Pro Rata Distribution. All distributions paid with respect
to Preferred Shares pursuant to this Section 2 shall be paid pro rata in respect
of each Preferred Share entitled thereto. In the event that the Legally
Available Funds available for the payment of distributions shall be insufficient
for the payment of the entire amount of distributions payable with respect to
Preferred Shares and any other equity securities of the Trust that rank on a
parity with the Preferred Shares as to distributions on any date on which the
Board has authorized the payment of a distribution or otherwise, the amount of
any available surplus shall be allocated for the payment of distributions with
respect to the Preferred Shares and any other equity securities of the Trust
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that rank on a parity with the Preferred Shares as to distributions pro rata
based upon the amount of accrued and unpaid distributions on such equity
securities.
(f) Business Day. For purposes hereof, the term "Business Day"
shall mean any Monday, Tuesday, Wednesday, Thursday or Friday which is not a day
on which banking institutions in New York City are authorized or obligated by
law or executive order to close.
(g) Limits. Holders of Preferred Shares shall not be entitled
to any distribution, whether payable in cash, property or shares, in excess of
the full cumulative distributions on the Preferred Shares (as used in these
Articles Supplementary, such term being deemed to include distributions on
accrued and unpaid distributions) as expressly described above, except for
distributions provided for elsewhere in these Articles Supplementary (including,
without limitation, in Section 7(d)(v) hereof).
Section 3. Certain Restrictions. Unless the distributions
(including accrued and unpaid distributions in arrears whether or not declared)
described above in Section 2, which pursuant to their terms should have been
paid, have been paid in full or declared and set apart for payment, the Trust
shall be prohibited from paying or making any distributions on, or redeeming or
purchasing or otherwise acquiring for consideration (other than consideration
consisting of Common Shares or any other equity security ranking junior to the
Preferred Shares as to distributions and upon liquidation, dissolution or
winding up) any equity securities of the Trust (without regard to its rank,
either as to distributions or upon liquidation, dissolution or winding up),
other than (i) Series A Preferred Shares of the Trust or any other preferred
shares of the Trust which rank pari passu with the Preferred Shares as to
distributions or upon liquidation, dissolution or winding up, all of which
payments shall be made pari passu with the Preferred Shares and Series A
Preferred Shares, and (ii) preferred shares of the Trust that rank senior to the
Preferred Shares as to distributions or upon liquidation, dissolution or winding
up, if the issuance of such preferred shares has been approved by the holders of
a majority of the Preferred Shares. The Trust shall not permit any subsidiary
(which term shall include any subsidiary formed as a partnership) of the Trust
to purchase or otherwise acquire for consideration or make any payment with
respect to any equity securities of the Trust if the Trust is prohibited from
purchasing or otherwise acquiring for consideration or making any payment with
respect to such shares at such time and in such manner pursuant to the prior
sentence; provided, however, that the Trust shall not be prohibited from making
a contribution of equity securities of the Trust to any of its subsidiaries.
Section 4. Voting Rights.
(a) General. Except as limited by law, the holders of the
Preferred Shares shall be entitled to vote or consent on all matters submitted
to the holders of Common Shares together with the holders of the Common Shares
as a single class; provided that the holders of Preferred Shares shall not be
entitled to vote at the 1999 annual meeting of shareholders of the Trust if the
record date for such meeting either precedes the date of these Articles
Supplementary or falls within 15 days after the date of these Articles
Supplementary.
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(b) Calculation of Votes. For the purposes of calculating the
votes cast for a particular matter when voting or consenting pursuant to Section
4(a), each Preferred Share will entitle the holder thereof to one vote for each
Common Share into which such Preferred Share is convertible as provided in
Section 7(a) herein as of the record date for such vote or consent or, if no
record date is specified, as of the date of such vote or consent.
(c) Section 4(c) Trustee. In addition to the other voting
rights described herein and the increase in the number of Trustees constituting
the Board described in Section 4(d) below, the number of Trustees constituting
the Board shall be automatically increased by one (1) member so long as Five
Arrows Realty Securities III L.L.C. and its Affiliates and/or one or more of
their respective members or partners, beneficially own in the aggregate at least
fifty percent (50%) of the outstanding Preferred Shares. The position on the
Board established pursuant to this Section 4(c) shall remain available until the
earlier of such time as (i) Five Arrows Realty Securities III L.L.C. and its
Affiliates and/or one or more of their respective members or partners, ceases to
beneficially own in the aggregate at least fifty percent (50%) of the
outstanding Preferred Shares and (ii) the occurrence of a Change of Control (as
defined in Section 8(e) and, solely for purposes of this Section 4(c), as
described in subsections (i) and (iii) thereof) if the holders of the voting
shares of equity securities of the Trust immediately prior to such occurrence
hold immediately after such occurrence less than 30% of the outstanding voting
capital stock or voting equity securities of the Trust or the Successor Entity
(as defined in Section 8(e), as the case may be). The term of any Trustee
elected pursuant to this section shall terminate immediately upon the position
created hereby not being available pursuant to the immediately preceding
sentence or in the event that the Trust redeems Preferred Shares with an
aggregate Liquidation Value of $50 million pursuant to the second sentence of
Section 5(a) hereof.
The term "Affiliate" means Rothschild Realty Inc. or the one
hundred percent (100%) member of Five Arrows Realty Securities III L.L.C.
(d) Section 4(d) Trustee. In addition to the other voting
rights described herein and the increase in the number of Trustees constituting
the Board described in Section 4(c) above, the number of Trustees constituting
the Board shall be automatically increased by one (1) member upon the first of
the following to occur: (i) the Trust's failure (A) to pay the Regular Quarterly
Distribution (as defined below) on the Common Shares for any two consecutive
quarters in an amount of at least $.32 per share (adjusted to reverse the effect
of any event set forth in Section 7 herein that would require an adjustment to
the Conversion Price (as defined below), or (B) to pay and expect to pay Regular
Quarterly Distributions on the Common Shares aggregating at least $1.28 per
share (adjusted to reverse the effect of any event set forth in Section 7 herein
that would require an adjustment to the Conversion Price) during any four
consecutive quarters based on the sum of the Regular Quarterly Distributions
paid in the quarter preceding the date of calculation and the Funds From
Operations (as defined below) of the Company estimated in good faith by the
Company for the quarter in which such calculation is made and so estimated for
the two immediately succeeding quarters (in either event, the "Distribution
Reduction Event")); (ii) the Trust's failure to pay in full the quarterly
distribution payable hereunder (whether or not declared) at any time in respect
of the Preferred Shares (the "Distribution Payment Event"); and (iii) the Trust
being in Material Default (as defined below) pursuant to the terms of its Credit
Facility (as defined below) (a "Credit Facility Event"). The position on the
Board created pursuant to this Section 4(d) shall terminate when (i) there are
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no Preferred Shares of the Trust outstanding or (ii) each of the following has
occurred and continues to occur: (A) the Distribution Reduction Cure (as defined
herein), (B) the Distribution Payment Cure (as defined herein) and (C) the
Credit Facility Cure (as defined herein). Any Trustee elected pursuant to this
section shall be deemed to have resigned upon the position created hereby not
being available pursuant to the immediately preceding sentence.
The term "Regular Quarterly Distribution" means any cash
dividend or distribution paid in any calendar quarter that does not in the
aggregate exceed the Trust's reported Funds From Operations (as currently
defined by the National Association of Real Estate Investment Trusts ("NAREIT"),
or if a new definition is adopted by NAREIT, as such definition so changes) for
the quarter relating to such dividend or distribution.
The term "Material Default" means the occurrence of (i) any of
the Credit Parties (as defined in the Credit Facility) being in default of any
of the negative covenants set forth in Section 8 of the Credit Facility, (ii)
the breach of any of the covenants under Section 7.2 of the Credit Facility,
(iii) an event which constitutes an Event of Default (as defined in the Credit
Facility) under Section 9.1(a), 9.1(d), 9.1(e), 9.1(f) or 9.1(l) of the Credit
Facility, in each case under clauses (i), (ii) and (iii), as the same may be
amended, modified or deleted prior to such default or breach, (iv) an event of
default under, or breach of, comparable provisions of any financing arrangement
which replaces, refinances or supplements the Credit Facility, (v) the Fixed
Charge Coverage Ratio (as defined in the Credit Facility as of the date hereof
and without giving effect to any amendment, modification, deletion, waiver,
termination or replacement thereof) as of the end of each fiscal quarter of the
Credit Parties for the twelve-month period ending on each such date shall be
less than 1.25 to 1.0, or (vi) the ratio of the Funded Debt (as defined in the
Credit Facility as of the date hereof and without giving effect to any
amendment, modification, deletion, waiver, termination or replacement thereof)
of the Credit Parties to the aggregate Current Market Price (as defined herein)
of the Common Shares outstanding (which shall include the Preferred Shares and
all other outstanding preferred securities or units of the Operating Partnership
(as defined below) exercisable or redeemable for or convertible into Common
Shares as if they had been exercised or redeemed for or converted into Common
Shares in accordance with their respective terms), in each case as of the end of
any fiscal quarter, shall be greater than or equal to 0.70 to 1.0.
The term "Credit Facility" means the Second Amended and
Restated Credit Agreement among the Trust and Brandywine Operating Partnership,
L.P. (the "Operating Partnership"), as borrowers, and the subsidiaries of the
borrowers, as guarantors, and the lenders identified therein, and NationsBanc
Montgomery Securities LLC, as lead arranger and book manager, and NationsBanc
Mortgage Capital Corp., as administrative agent, dated as of September 28, 1998.
(e) Election of Preferred Trustees. The holders of the
Preferred Shares shall have the special right, voting separately as a single
class, to elect as soon as practicable, a Trustee to fill each vacancy created
pursuant to Section 4(c) and/or 4(d) and to elect their respective successors at
each succeeding annual meeting of the Trust thereafter at which such successor
is to be elected. The Trustee so elected from time to time in respect of Section
4(c) shall be referred to herein as the "Section 4(c) Trustee." The Trustee so
<PAGE>
elected from time to time in respect of Section 4(d) shall be referred to herein
as the "Section 4(d) Trustee." As used herein, the term "Preferred Trustee"
shall refer to each of the Section 4(c) Trustee or the Section 4(d) Trustee, as
appropriate, and the term "Preferred Trustees" shall refer to both such
Trustees. At no time shall there be more than two Preferred Trustees on the
Board.
(f) Classification of Board. Each vacancy created upon the
Board from time to time pursuant to Section 4(c) or Section 4(d), as the case
may be, shall be apportioned among the classes of Trustees, if any, so that the
number of Trustees in each of the classes of Trustees is as nearly equal in
number as possible. The Preferred Trustees shall be classified accordingly.
(g) Cures.
(i) Upon the occurrence of a Distribution Reduction
Event, the same shall be deemed to continue to exist until such time as the
earlier to occur of (x) none of the Preferred Shares shall remain outstanding or
(y) the Regular Quarterly Distribution paid in the immediately preceding quarter
on the Common Shares shall be at least $.32 per share (adjusted to reverse the
effect of any event set forth in Section 7 that would require an adjustment to
the Conversion Price) (the "Distribution Reduction Cure").
(ii) Upon the occurrence of the Distribution Payment
Event, the same shall be deemed to continue and exist until such time as the
earlier to occur of (x) none of the Preferred Shares shall remain outstanding or
(y) all distributions, including accrued and unpaid distributions on the
Preferred Shares, whether or not declared, have been paid or made available for
payment (the "Distribution Payment Cure").
(iii) Upon the occurrence of a Credit Facility Event,
the same shall be deemed to continue and exist until such time as the earlier to
occur of (x) none of the Preferred Shares shall remain outstanding or (y) such
Credit Facility Event has been remedied or has been waived at a meeting or in
writing by the holders of a majority of the Preferred Shares (the "Credit
Facility Cure").
(h) Board Committees. If the Board has not appointed the
Section 4(c) Trustee to any given committee of the Board (other than a pricing,
investment or similar committee established by the Board to approve the final
terms of a transaction that the Board has generally authorized) then, without
the consent of the Section 4(c) Trustee, any action taken by such committee
shall be effective only if such action is ratified by the Board, and the Trust
may not enter into any agreements or take any actions based on any such action
taken by any such committee until any such action taken by any such committee
has been ratified by the Board.
(i) Voting Procedures. At each meeting of the shareholders of
the Trust at which the holders of the Preferred Shares shall have the right to
vote separately as a single class, as provided in this Section 4, the presence
in person or by proxy of the holders of record of a majority of the total number
of Preferred Shares then outstanding shall be necessary and sufficient to
constitute a quorum of such class for such election by such shareholders as a
class. At any such meeting or adjournment thereof, the absence of a quorum of
holders of Preferred Shares shall not prevent the election of Trustees other
<PAGE>
than the Preferred Trustees, and the absence of a quorum of the holders of any
other class or series of shares for the election of such other Trustees shall
not prevent the election of any Preferred Trustees by the holders of the
Preferred Shares.
(j) Vacancy. In case any vacancy shall occur among the
Trustees elected by the holders of the Preferred Shares, such vacancy shall be
filled by the vote of holders of the Preferred Shares, voting separately as a
single class, at a special meeting of such shareholders called for that purpose.
(k) Written Consent. Notwithstanding the foregoing, any action
required or permitted to be taken by holders of Preferred Shares at any meeting
of shareholders may be taken without a meeting, without prior notice and without
a vote, if a consent, in writing, setting forth the action so taken, shall be
signed by the holders of a majority of the Preferred Shares (notwithstanding any
provision of the Declaration of Trust) and shall be executed and delivered to
the Secretary of the Trust for placement among the minutes of proceedings of the
shareholders of the Trust; provided, however, that any action required or
permitted to be taken by holders of Preferred Shares at any meeting of
shareholders which would, with respect to the holders of the Preferred Shares,
amend adversely in any respect, or repeal, the distribution, conversion, voting,
redemption or liquidation rights of the Preferred Shares as set forth in these
Articles Supplementary, may be taken without a meeting, without prior notice and
without a vote, only if a unanimous consent, in writing, setting forth the
action so taken, shall be signed by each of the holders of Preferred Shares and
shall be executed and delivered to the Secretary of the Trust for placement
among the minutes of proceedings of the shareholders of the Trust.
(l) Approval by the Trust. The Trust acting through a majority
of its Trustees shall have the right to approve the nomination of each of the
Section 4(c) Trustee and the Section 4(d) Trustee, with each such approval not
to be unreasonably withheld; provided, however, that D. Pike Aloian, Matthew W.
Kaplan, John D. McGurk and James E. Quigley 3rd shall be deemed approved by the
Trust with respect to any Preferred Trustee position. A Preferred Trustee may be
asked by a majority of the other members of the Board of Trustees to resign if
such Preferred Trustee becomes a director, trustee, officer or employee of a
company whose primary business is the ownership and management of office
buildings and 35% or more of the assets of which, in the aggregate, are located
in metropolitan areas where the Trust also owns real estate assets.
(m) Restrictions. So long as Five Arrows Realty Securities III
L.L.C. or an Affiliate thereof or one of their respective current members or
partners (or an Affiliate thereof), beneficially owns at least fifty percent
(50%) of the outstanding Preferred Shares, without the consent of the holders of
at least a majority of the Preferred Shares at the time outstanding, given in
person or by proxy, at a meeting called for that purpose at which the holders of
the Preferred Shares shall vote separately as a class, or by the consent (which
shall be given by the holders of either a majority or all of the Preferred
Shares, as provided in Section 4(k) above) in writing of the holders of the
Preferred Shares (in addition to any other vote or consent of shareholders
required by law or by the Declaration of Trust), the Trust may not: (i) effect
or validate the amendment, alteration or repeal of any provision of these
Articles Supplementary or the Declaration of Trust whether by merger,
consolidation or similar transaction, or consummate a merger or consolidation
<PAGE>
involving the Trust (any such merger or consolidation, an "Event"), which would,
with respect to the holders of the Preferred Shares, amend adversely in any
material respect, or repeal, the distribution, conversion, voting, redemption,
liquidation or other rights as set forth in these Articles Supplementary
(provided, however, with respect to any of the Events set forth above, the
occurrence of any such Event shall not be deemed to materially adversely affect
or repeal such distribution, conversion, voting, redemption, liquidation or
other rights of the Preferred Shares if (a) immediately after any such Event the
Trust is the surviving entity and there are outstanding no equity securities
ranking, as to distribution rights or liquidation preference, senior to the
Preferred Shares other than the securities of the Trust outstanding prior to
such Event, or (b) immediately after any such Event the Trust is not the
surviving entity and as a result of the Event, the holders of the Preferred
Shares receive shares of equity securities with preferences, rights and
privileges substantially similar to the preferences, rights and privileges of
the Preferred Shares and there are outstanding no shares of equity securities of
the surviving entity ranking, as to distribution rights or liquidation
preference, senior to the Preferred Shares other than the securities issued in
respect of the securities of the Trust outstanding prior to such Event); (ii)
effect or validate the amendment, alteration or repeal of any provision of the
Declaration of Trust or By-Laws of the Trust so as to limit the right to
indemnification provided to any present or future member or members of the Board
elected by the holders of the Preferred Shares; (iii) other than the 4,375,000
Preferred Shares authorized herein, issue Preferred Shares (or a series of
preferred shares that would vote as a class with the Preferred Shares as to the
matters covered by this Section 4(m) or as to the election of the Section 4(c)
Trustee and the Section 4(d) Trustee) or equity securities ranking senior to the
Preferred Shares (as to distributions or upon liquidation, dissolution or
winding up); or (iv) except as provided below, permit, without the unanimous
approval of the Preferred Trustees (to the extent that at such time the holders
of the Preferred Shares are entitled to appoint one or more Preferred
Trustee(s)), any subsidiary (including, without limitation, any partnership) of
the Trust to issue or sell any equity securities or partnership interests in
such entities ("Subsidiary Partnership Interests") to or for the account of any
entity other than the Trust or a subsidiary of the Trust, and, without the
unanimous approval of the Preferred Trustees (to the extent that at such time
the holders of the Preferred Shares are entitled to appoint one or more
Preferred Trustee(s)), the Trust will not sell, dispose or otherwise transfer
Subsidiary Partnership Interests to any person (other than to or for the account
of the Trust or its subsidiaries or pursuant to contractual arrangements
currently in effect and heretofore disclosed in writing by the Trust to Five
Arrows Realty Securities III L.L.C., referring to this provision), provided,
however, that (i) the Trust, or any subsidiary of the Trust, may issue, sell or
transfer without the approval of the Preferred Trustees, equity securities or
Subsidiary Partnership Interests in an arm's-length transaction in exchange for
office or industrial property or interests in office or industrial property with
a fair value equal to or exceeding the value of the Subsidiary Partnership
Interests issued, sold or transferred and (ii) the foregoing shall not be deemed
to prohibit the Trust or a subsidiary of the Trust from pledging its interest in
a subsidiary or disposing of a subsidiary through the disposition of all of the
securities of such subsidiary. For purposes of the preceding sentence,
"subsidiary" means an entity, including a partnership, in which the Trust,
directly or indirectly, owns more than a 50% economic interest and which the
Trust has the power to control (but excluding the joint venture entities in
which the Trust, directly or indirectly, has an interest as of the date of the
initial issuance of the Preferred Shares); "fair value" of office or industrial
<PAGE>
property or interests therein, and the "value" of the Subsidiary Partnership
Interests, shall be determined in good faith by the Board; provided, however,
that if the fair value of any such transaction exceeds $20 million and is less
than $50 million, and a Preferred Trustee so requests (or, if there is then no
Preferred Trustee, then upon the written request of the holders of a majority of
the Preferred Shares submitted to the Trust within 10 days following their
receipt of written notice from the Trust, which shall be provided by the Trust
within 10 days of the Board's determination of the fair value and/or value) the
determination of the fair value and/or value shall be made by an independent
third-party appraiser of national standing mutually agreeable to the Trust and
to the Preferred Trustee or the holders of the Preferred Shares, as the case may
be; provided, further, that if the fair value of any such transaction equals or
exceeds $50 million, or equals or exceeds $20 million and involves the
acquisition of a real estate management company, and a Preferred Trustee so
requests (or, if there is then no Preferred Trustee, then upon the written
request of the holders of the Preferred Shares submitted to the Trust within 10
days following their receipt of written notice from the Trust, which shall be
provided by the Trust within 10 days of the Board's determination of the fair
value and/or value), the determination of the fair value and/or value shall be
made by an independent third-party appraiser or investment banking firm of
national standing mutually agreeable to the Trust and to the Preferred Trustee
or the holders of the Preferred Shares, as the case may be, and supported by a
fairness opinion by such third-party appraiser or investment banking firm.
Nothing in this Section 4(m) shall prevent (i) the Trust from issuing any shares
of beneficial interest of the Trust which rank junior (as to distributions and
upon liquidation, dissolution or winding up) to the Preferred Shares upon such
terms as the Board shall authorize from time to time, or (ii) the Operating
Partnership or any subsidiary of the Operating Partnership from issuing or
permitting to be transferred any partnership interests or equity interests
(including without limitation, Class A Units and GP Units) which rank junior (as
to distributions and upon liquidation, dissolution or winding up) to the Series
C Preferred Mirror Units upon such terms as the Board, in its reasonable
judgment, shall authorize, from time to time. A series of preferred shares that
ranks on a parity with or junior to the Preferred Shares or Series C Preferred
Mirror Units, as applicable, with respect to distributions and upon liquidation,
dissolution or winding up of the Trust or the Operating Partnership, as
applicable, shall be deemed to rank on a parity with or junior to the Preferred
Shares or Series C Preferred Mirror Units, as applicable, for such purpose
notwithstanding that such series is subject to mandatory redemption at a
scheduled date or dates or has the benefit of a sinking fund or is subject to
redemption at the option of the Trust or the holder.
In addition, so long as Five Arrows Realty Securities III
L.L.C. or an Affiliate thereof or one of their respective current members or
partners (or an Affiliate thereof), beneficially owns at least fifty percent
(50%) of the outstanding Preferred Shares, without the consent of either (i) the
holders of at least a majority of the Preferred Shares at the time outstanding,
given in person or by proxy, at a meeting called for that purpose at which the
holders of the Preferred Shares shall vote separately as a class, or by the
consent (which shall be given by the holders of either a majority or all of the
Preferred Shares, as provided in Section 4(k) above) in writing of the holders
of the Preferred Shares or (ii) the Preferred Trustee(s) (if at such time the
holders of the Preferred Shares are entitled to appoint one or more Preferred
Trustee(s)), the Trust may not issue additional preferred shares of beneficial
interest ranking on a parity with the Preferred Shares (as to preference with
respect to distributions or upon liquidation, dissolution or winding up) (other
than the 4,375,000 Preferred Shares authorized herein and other than additional
preferred shares of beneficial interest ranking on a parity with the Preferred
Shares (as to preference with respect to distributions or upon liquidation,
<PAGE>
dissolution or winding up) having an aggregate liquidation value up to but not
in excess of $68 million), if the aggregate liquidation value of the Preferred
Shares (which for purposes of this sentence shall be deemed to be $105,000,000,
regardless of the number of Preferred Shares then outstanding) would constitute,
immediately subsequent to the issuance, less than thirty-four percent (34%) of
the aggregate liquidation value of the sum of (x) all preferred shares of
beneficial interest, including the Preferred Shares and Series A Preferred
Shares, ranking on a parity with the Preferred Shares (as to preference with
respect to distributions or upon liquidation, dissolution or winding up) and (y)
all Series B Preferred Units of limited partnership interest ("Series B Units")
in the Operating Partnership; provided, however, that (a) the Trust may, without
the unanimous approval of the Preferred Trustee(s) or the approval or consent of
holders of Preferred Shares, issue additional preferred shares of beneficial
interest ranking on a parity with the Preferred Shares (as to preference with
respect to distributions or upon liquidation, dissolution or winding up) that
have an aggregate liquidation preference between $68 million and $150 million
even though, immediately subsequent to the issuance, the aggregate liquidation
value of the Preferred Shares would constitute less than thirty-four percent
(34%) of the aggregate liquidation value of the sum of (I) all preferred shares
of beneficial interest, including the Preferred Shares and Series A Preferred
Shares, ranking on a parity with the Preferred Shares (as to preference with
respect to distributions or upon liquidation, dissolution or winding up) and
(II) the Series B Units, but only after providing Five Arrows Realty Securities
III L.L.C. a 30-day period (or, if such 30-day period would, in the judgment of
the Board of Trustees of the Trust, adversely impact the proposed issuance, then
such shorter period (not less than 10 days) as would not, in the judgment of the
Board of Trustees, adversely impact the proposed issuance) in which to commit to
purchase an amount of the proposed preferred share issuance such that Five
Arrows Realty Securities III L.L.C. would own, immediately subsequent to such
issuance, preferred shares of beneficial interest, including the Preferred
Shares, representing at least 34% of the aggregate liquidation value of the
total preferred shares of beneficial interest ranking on a parity with the
Preferred Shares as to distributions and upon liquidation, dissolution or
winding up and Series B Units then outstanding (assuming solely for purposes of
calculating the aforesaid 34% that Five Arrows Realty Securities III L.L.C. had
purchased the amount of each prior proposed preferred share issuance it had been
offered pursuant to the foregoing provision) and (b) the Trust may, without the
unanimous approval of the Preferred Trustee(s) or the approval or consent of
holders of Preferred Shares, issue an unlimited amount of additional preferred
shares of beneficial interest ranking on a parity with the Preferred Shares (as
to preference with respect to distributions or upon liquidation, dissolution or
winding up) without regard to subclause (a) or the other restrictions of this
sentence provided that such additional shares issued by the Trust have been
rated, at the time of such issuance, at least "BB+" by Standard & Poor's
Corporation or the equivalent of another nationally-recognized statistical
rating agency. Notwithstanding the foregoing, in circumstances where the Trust's
ability to issue additional preferred shares of beneficial interest is
conditioned on the Trust providing Five Arrows Realty Securities III L.L.C. with
the opportunity to commit to purchase a portion of such preferred shares of
beneficial interest, as and to the extent provided in clause (a) of the proviso
of the preceding sentence, the preferred shares of beneficial interest that may
<PAGE>
be the subject of the proposed issuance shall be limited to issuances of
preferred shares of beneficial interest that fall within any one of the
following categories: (i) preferred shares of beneficial interest that are not
convertible into Common Shares, (ii) preferred shares of beneficial interest in
respect of which a purchase by Five Arrows Realty Securities III L.L.C. has
received approval by the shareholders of the Trust in the manner required by
then applicable rules of the principal securities exchange on which the Common
Shares are then traded or (iii) preferred shares of beneficial interest issued
following receipt by the Trust of written confirmation from the principal
exchange on which the Common Shares are then traded that a purchase of such
shares by Five Arrows Realty Securities III L.L.C. does not require shareholder
approval under rules of the exchange.
(n) Special Event. In the event that the Trust enters into a
definitive agreement negotiated at arm's length which provides for a Special
Event (as defined below), the Trust shall mail a written notice to holders of
Preferred Shares at each such holder's address appearing on the records of the
Trust, which notice shall be mailed at least 30 days prior to the scheduled
consummation of the Special Event. The mailing of such notice shall not obligate
the Trust to consummate the Special Event. Each holder of outstanding Preferred
Shares will have the right (the "Special Redemption Right") to require the Trust
to redeem, upon consummation of the Special Event, all of the Preferred Shares
held by such holder at a redemption price payable in cash in an amount equal to
the sum of (i) 104% of the Liquidation Value thereof and (ii) accrued and unpaid
distributions, whether or not declared. Each holder of Preferred Shares may
exercise its Special Redemption Right by delivering a written notice to the
Trust no later than 15 days prior to the scheduled consummation of the Special
Event indicating that the holder is exercising such Special Redemption Right
with respect to its Preferred Shares. The term "Special Event" means a merger,
consolidation or similar transaction which would require approval of holders of
outstanding Preferred Shares voting separately as a class pursuant to Section
4(m).
In the event that a holder of Preferred Shares does not
exercise its Special Redemption Right, then, notwithstanding the failure of the
number of Preferred Shares to be voted in favor of the Special Event specified
elsewhere in these Articles Supplementary, the Trust shall be permitted to
consummate the Special Event, anything herein to the contrary notwithstanding,
so long as immediately after such Special Event the following conditions are
satisfied: (i) the holders of Preferred Shares continue to hold either the
Preferred Shares or, if the Trust is not the entity surviving in the Special
Event, equity securities of the entity surviving the Special Event ("Replacement
Securities"), in either event with preferences, rights and privileges
substantially similar to the preferences, rights and privileges of the Preferred
Shares, provided, however, that (A) such preferences, rights and privileges
shall not include the preferences, rights and privileges currently existing
under (v) Section 4(c), (w) Section 4(d), (x) clause (iv) of the first paragraph
of Section 4(m), (y) the first sentence in the second paragraph of Section 4(m)
and (z) clause (ii) of Section 2.2 of the Operating Agreement (as defined
below), and (B) the requirements described under Section 4(h) shall no longer
exist, and, in either event, there are outstanding no shares of equity
securities of the surviving entity ranking, as to distribution rights or
liquidation preference, senior to the Preferred Shares or Replacement Securities
other than securities of the Trust outstanding prior to such Special Event or
securities issued in replacement of such senior securities outstanding prior to
such Special Event; (ii) in the event the Common Shares are converted in such
<PAGE>
Special Event into the right to receive shares, stock, securities or other
property (including cash or any combination thereof), each Preferred Share that
is not converted by the holder thereof into the right to receive shares, stock,
securities or other property in connection with such Special Event 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 Special Event by a holder of that number of Common
Shares into which one Preferred Share was convertible immediately prior to such
Special Event, assuming such holder of Common Shares (a) is not a person with
which the Trust consolidated or into which the Trust merged or which merged into
the Trust, as the case may be, and (b) failed to exercise his or her appraisal
rights or rights of election, if any, as to the kind or amount of shares, stock,
securities and other property (including cash) receivable in such Special Event;
(iii) provision is made for the holders of Preferred Shares to continue to have
a right, voting separately as a single class, to elect one Trustee (who shall be
deemed the Preferred Trustee for purposes hereof) or, if the Trust does not
survive the Special Event, one member of the governing body of the entity
surviving the Special Event, but only if and for so long as the Preferred Shares
or Replacement Securities represent more than five percent of the then
outstanding equity securities of the Trust or surviving entity, computed on a
fully-diluted basis to give effect to the exercise, redemption or conversion of
all securities or rights exercisable or redeemable for, or convertible into,
equity securities of the Trust or surviving entity (whether or not at the time
of computation any such securities or rights are then exercisable, redeemable or
convertible); and (iv) if the Special Event occurs before the twenty-four-month
anniversary of the initial date of issuance of the Preferred Shares, and the
Common Shares are converted or exchanged in the Special Event for other shares,
stock or securities (including shares, stock or securities of the surviving
entity), then the conversion price of the Preferred Shares or the Replacement
Securities, as applicable, shall continue to be subject to adjustment for the
remainder of such twenty-four-month period on terms comparable to those set
forth in Section 7(d)(iv) (subject to the same exceptions as are provided in
Section 7(d)(vi)), provided, however, that the issuance price below which an
adjustment to the conversion price will thereafter occur shall be changed from
the Conversion Price, as provided in Section 7(d)(iv), to a price equal to the
Conversion Price multiplied by a fraction, the numerator of which shall be one
and the denominator of which shall be the number of shares into which a Common
Share is exchangeable or converted in the Special Event. In the case of
uncertainty in the application of any provision in this subsection in any given
situation, the Board of Trustees shall have authority to determine in its
reasonable judgment the application of such provision, and any such
determination shall be final and conclusive for all purposes.
The term "Operating Agreement" means the Operating Agreement
between the Trust and Five Arrows Realty Securities III L.L.C., dated on or
about April 16, 1999.
(o) Reports. The Trust shall mail to each holder of record of
Preferred Shares, at such holder's address in the records of the Trust, within
45 days after the end of the first three fiscal quarters of each fiscal year and
within 90 days after the end of each fiscal year, its financial reports for such
fiscal period in such form and containing such independent accountants report as
set forth under the rules of the Securities and Exchange Commission irrespective
of whether the Trust is then required to file reports under such rules.
<PAGE>
Section 5. Redemption.
(a) General. The Trust may, at its option, to the extent it
shall have Legally Available Funds therefor, redeem all (but not less than all)
of the outstanding Preferred Shares, at any time on or after the date which is
the eighth anniversary of the initial date of issuance of Preferred Shares. In
addition, the Trust may, at its option, prior to the first anniversary of the
initial date of issuance of Preferred Shares, to the extent it shall have
Legally Available Funds therefor, redeem Preferred Shares with an aggregate
Liquidation Value (as defined in Section 6) of not more than $50 million at a
redemption price payable in cash in an amount equal to $22.44, plus accrued and
unpaid distributions whether or not declared; provided, however, that
immediately following any redemption permitted under this sentence, there shall
be outstanding Preferred Shares with an aggregate Liquidation Value of at least
$55 million.
(b) Notice. The option of the Trust to redeem the Preferred
Shares pursuant to this Section 5 shall be exercised by mailing of a written
notice of election (a "Redemption Notice") by the Trust to the holders of the
Preferred Shares at such holder's address appearing on the records of the Trust,
which notice shall be mailed at least 30 days (or 15 days in the case of a
redemption pursuant to the second sentence of Section 5(a)) prior to the date
specified therein for the redemption of the Preferred Shares. Any such notice
under this Section 5(b) shall state, at a minimum, the amount of Preferred
Shares to be redeemed, the date on which such redemption shall occur and the
last date on which such holder can exercise the conversion rights provided for
in Section 7 herein (the "Final Conversion Date"). Any notice which was mailed
in the manner herein provided shall be conclusively presumed to have been given
on the date mailed, whether or not the holder receives such notice.
(c) Conversion. During the period beginning on the date on
which the Trust mailed to each holder of the Preferred Shares a written notice
of election pursuant to paragraph (b) above and ending at 5:00 p.m. (New York
time) on the thirtieth day (or fifteenth day in the case of a redemption
pursuant to the second sentence of Section 5(a)) following the date of such
mailing, each holder of the Preferred Shares may exercise its conversion rights
pursuant to Section 7 herein.
(d) Redemption Price. Upon the thirtieth day (or fifteenth day
in the case of a redemption pursuant to the second sentence of Section 5(a))
following the mailing to the holder of the Preferred Shares of a written notice
of election pursuant to paragraph (b) above, the Trust shall be required, unless
such holder of Preferred Shares has exercised its conversion rights pursuant to
paragraph (c) above, to purchase from such holder of Preferred Shares (upon
surrender by such holder at the Trust's principal office of the certificate(s)
representing such Preferred Share(s)), such Preferred Shares specified in the
Redemption Notice, at a price equal to the product of (i) $24.00 per share plus
accrued and unpaid distributions (whether or not declared and accrued through
the date of payment for redemption or the date payment is made available for
payment to the holder thereof) and (ii) the number of Preferred Shares to be
redeemed as provided in the Redemption Notice (the "Redemption Price"); provided
that, in the case of a redemption pursuant to the second sentence of Section
5(a), the Redemption Price shall be the price specified in such sentence.
<PAGE>
(e) Distributions. No Preferred Share is entitled to any
distributions accruing thereon after the date on which the payments provided by
and in accordance with Section 5(d) are paid or made available for payment to
the holder thereof. On such date all rights of the holder of such Preferred
Share shall cease, and such Preferred Share shall not be deemed to be
outstanding.
Section 6. Liquidation Rights.
(a) Liquidation Payment. In the event of any liquidation,
dissolution or winding up of the Trust, whether voluntary or involuntary, then
out of the assets of the Trust before any distribution or payment to the holders
of equity securities of the Trust ranking junior to the Preferred Shares (upon
liquidation, dissolution or winding up), and on a pari passu basis with the
holders of the Series A Preferred Shares and any other equity securities ranking
on a parity with the Preferred Shares (as to preference upon liquidation,
dissolution or winding up), the holders of the Preferred Shares shall be
entitled to be paid $24.00 per share (the "Liquidation Value") plus accrued and
unpaid distributions whether or not declared, if any (or a pro rata portion
thereof with respect to fractional shares), to the date (i) of the final
distribution or (ii) that the distribution is made available; provided, however,
that if such liquidation, dissolution or winding up of the Trust occurs in
connection with or subsequent to a Change of Control (as defined in Section
8(e)), then the holders of the Preferred Shares shall be entitled to be paid (on
a pari passu basis with the holders of the Series A Preferred Shares and any
other equity securities ranking on a parity with the Preferred Shares (as to
preference upon liquidation, dissolution or winding up)) the Put Payment (as
defined herein). Except as expressly provided in this Section 6, the holders of
the Preferred Shares shall be entitled to no other or further distribution in
connection with such liquidation, dissolution or winding up.
(b) Pro Rata Distribution. If, upon any liquidation,
dissolution or winding up of the Trust, the assets of the Trust available for
distribution to the holders of Preferred Shares, the Series A Preferred Shares
and any other preferred shares ranking on a parity with the Preferred Shares (as
to preference upon liquidation, dissolution or winding up) shall be insufficient
to permit payment in full to such holders the sums which such holders are
entitled to receive in such case, then all of the assets available for
distribution to the holders of the Preferred Shares, the Series A Preferred
Shares and any other preferred shares ranking on a parity with the Preferred
Shares (as to preference upon liquidation, dissolution or winding up) shall be
distributed among and paid to the holders of Preferred Shares, the Series A
Preferred Shares and any other preferred shares ranking on a parity with the
Preferred Shares (as to preference upon liquidation, dissolution or winding up),
ratably in proportion to the respective amounts that would be payable to such
holders if such assets were sufficient to permit payment in full.
(c) Characterization of Certain Transactions. 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.
<PAGE>
(d) Distribution Determinations. In determining whether a
distribution (other than upon voluntary or involuntary liquidation, dissolution
or winding up) required for the Trust to continue to qualify as a real estate
investment trust 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.
Section 7. Conversion.
(a) Conversion Rights. Subject to and upon compliance with the
provisions of this Section 7, a holder of Preferred Shares shall have the right,
at such holder's option, at any time to convert all or a portion of such shares
into the number of fully paid and non-assessable Common Shares obtained by
multiplying the number of Preferred Shares being converted by the Conversion
Ratio (as defined below and as in effect at the time and on the date provided
for in this Section 7) by surrendering such Preferred Shares to be converted.
Such surrender shall be made in the manner provided in paragraph (b) of this
Section 7; provided, however, that the right to convert any Preferred Shares
called for redemption pursuant to Section 5 shall terminate at the close of
business on the Final Conversion Date, unless the Trust shall default in making
payment of any cash payable upon such redemption under Section 5 hereof. The
"Conversion Ratio" with respect to any Preferred Shares will initially be equal
to 1, subject to adjustment as described below, and the "Conversion Price" with
respect to any Preferred Shares will initially be equal to $24.00 per Common
Share, subject to adjustment as described below. Any adjustment to the
"Conversion Ratio" or the "Conversion Price" shall automatically adjust the
other on an equivalent basis so that the product of the two will remain at
$24.00.
(b) Manner of Conversion.
(i) In order to exercise the conversion right, the
holder of each Preferred Share to be converted shall surrender to the Trust the
certificate evidencing such share, duly endorsed or assigned to the Trust or in
blank, accompanied by written notice to the Trust that the holder thereof elects
to convert such Preferred Shares. Unless the Common Shares issuable on
conversion are to be issued in the same name as the name in which such Preferred
Shares are registered, each Preferred 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).
(ii) As promptly as practicable after the surrender
of certificates of 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 Preferred 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 paragraph (c) of this
Section 7.
<PAGE>
(iii) Each conversion shall be deemed to have been
effected immediately prior to the close of business on the date on which
certificates for Preferred Shares have been surrendered and such notice 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 Ratio in effect at such time on such date unless the share
transfer books of the Trust shall be closed on that date, in which event such
conversion shall have been deemed to have been effected and such person or
persons shall be deemed to have become the 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 Ratio in effect on the
date on which such shares shall have been surrendered and such notice received
by the Trust.
(c) Fractional Shares. No fractional shares or scrip
representing fractions of Common Shares shall be issued upon conversion of the
Preferred Shares. Instead of any fractional interest in a Common Share that
would otherwise be deliverable upon the conversion of Preferred Shares, the
Trust shall pay to the holder of such Preferred Shares an amount in cash based
upon the Current Market Price of Common Shares on the Trading Day immediately
preceding the date of conversion. If more than one Preferred Share shall be
surrendered for conversion at one time by a holder of Preferred Shares, the
number of full Common Shares issuable upon conversion thereof shall be computed
on the basis of the aggregate number of Preferred Shares so surrendered.
(d) Adjustment of Conversion Ratio. The Conversion Ratio shall
be adjusted from time to time as follows:
(i) Payment of Distributions; Subdivisions,
Combinations, Reclassifications. If the Trust shall, while any Preferred Shares
are outstanding, (A) pay or make a distribution with respect to 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 equity securities by reclassification
of its Common Shares, the Conversion Ratio in effect at the opening of business
on the day next 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 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 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 subparagraph (i) shall become effective immediately after the opening of
business on the day next following the record date (except as provided in
paragraph (h) 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.
<PAGE>
(ii) Rights, Options and Warrants. If the Trust
shall, while any Preferred Shares are outstanding, issue 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 Current Market Price
per Common Share on the record date for the determination of shareholders
entitled to receive such rights, options or warrants, then the Conversion Ratio
in effect at the opening of business on the day next following such record date
shall be adjusted to equal the ratio determined by dividing (I) the Conversion
Ratio in effect immediately prior to the opening of business on the day next
following the date fixed for such determination 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 date fixed for such determination
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 Current Market Price, and the denominator of which shall be the sum of (A)
the number of Common Shares outstanding on the close of business on the date
fixed for such determination 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 after the opening
of business on the day next following such record date (except as provided in
paragraph (h) 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 Current Market Price, 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 Board of Trustees. For the purposes of this
subparagraph (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 or distributable with each Common Share delivered or deliverable to
a person converting 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 Preferred
Share would no longer be entitled to receive such security with a Common Share,
a distribution of such securities shall be deemed to have occurred, and the
Conversion Price shall be adjusted as provided in this subparagraph (ii) (and
such day shall be deemed to be "the record date for the determination of
shareholders entitled to receive such" distribution within the meaning of this
subparagraph (ii)). In the event that any such rights, options or warrants
expire unexercised or are canceled prior to exercise, the Conversion Price (if
previously adjusted on account of the issuance of such rights, options or
warrants) shall be adjusted so that it shall equal the price it would have been
had such rights, options or warrants not been issued.
(iii) Issuance of Securities. 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) or rights, options or warrants to subscribe for or purchase any
of its securities (excluding those rights, options 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, options and warrants are referred to in
and treated under subparagraph (ii) above) (any of the foregoing being
hereinafter in this subparagraph (iii) called the "Securities"), then in each
such case each holder of Preferred Shares shall receive concurrently with the
<PAGE>
receipt by holders of the Common Shares the kind and amount of such Securities
that it would have owned or been entitled to receive had such Preferred Shares
been converted immediately prior to such distribution or related record date, as
the case may be.
(iv) Below Conversion Price Issuances. If the Trust,
before the twenty-four-month anniversary of the initial date of issuance of
Preferred Shares, shall issue any Common Shares at a price (without taking into
account customary underwriters' or placement agents' discounts), or any shares,
evidences of indebtedness or other securities which are directly or indirectly
convertible into or exchangeable for Common Shares (collectively, "Convertible
Securities") at a conversion price (or comparable term), taking into account any
consideration received by the Trust for the Convertible Securities (without
taking into account customary underwriters' or placement agents' discounts),
that is less than the then Conversion Price, or any rights, options or warrants
to subscribe for, purchase or otherwise acquire such Common Shares or
Convertible Securities at an exercise price (or comparable term), taking into
account any consideration received by the Trust for the rights, options or
warrants, that is less than the then Conversion Price, then, and in each such
case, the Conversion Price of the Preferred Shares shall be automatically
decreased to be identical to such price, conversion price or exercise price (or
shall be automatically decreased to be equivalent, with respect to converting
securities into Common Shares, to such comparable term). In no event shall the
Conversion Price be increased pursuant to this Section 7(d)(iv).
(v) Distribution of Cash. In case the Trust shall pay
or make a distribution on its Common Shares in cash exclusively (excluding
Regular Quarterly Distributions), each holder of Preferred Shares shall receive
concurrently with the receipt by holders of the Common Shares the amount of any
such distribution that it would have owned or been entitled to receive had such
Preferred Shares been converted immediately prior to such distribution or
related record date, as the case may be.
(vi) Minimum Adjustment. No adjustment in the
Conversion Ratio shall be required unless such adjustment would require a
cumulative increase or decrease of at least 1% thereof; provided, however, that
any adjustments that by reason of this subparagraph (vi) are not required to be
made shall be carried forward and taken into account in any subsequent
adjustment until made. Notwithstanding any other provisions of this Section 7
(including without limitation subparagraphs i-iv above), the Trust shall not be
required to make any adjustment of the Conversion Price or the Conversion Ratio
for (u) (1) shares issued upon the exercise of the Brandywine Realty Trust
Common Shares Purchase Warrant, dated on or about April 16, 1999 (the "Warrant")
or upon the conversion of the Preferred Shares or (2) such number of additional
shares as may become issuable upon the exercise of the Warrant or upon
conversion of the Preferred Shares by reason of adjustments required pursuant to
the anti-dilution provisions applicable to the Warrant or the Preferred Shares
as in effect on the date of such exercise or conversion, (v) the issuance of
Common Shares or securities exercisable or convertible into or redeemable for
Common Shares pursuant to the acquisition by the Trust of one hundred percent
(100%) of a public company by way of merger, consolidation or exchange offer,
(w) the issuance of Common Shares or securities exercisable or convertible into
or redeemable for Common Shares pursuant to a tender or exchange offer for one
hundred percent (100%) of a public company, (x) the exercise, conversion or
<PAGE>
redemption of options, warrants or units existing or outstanding on January 11,
1999 or the issuance of Common Shares or securities exercisable or convertible
into or redeemable for Common Shares pursuant to contractual commitments in
effect as of January 11, 1999 (all as heretofore disclosed in writing by the
Trust to Five Arrows Realty Securities III L.L.C. referring to this provision),
(y) awards to trustees or employees of the Trust or entities in which the Trust
owns, directly or indirectly, at least a 50% economic interest for recruitment
purposes or pursuant to an equity incentive plan, provided that the number of
Common Shares, plus the number of Common Shares issuable upon the exercise of
the options or warrants under the preceding clause (x) in favor of such
employees or trustees, shall not exceed 5,000,000 Common Shares (subject to
proportionate adjustment in the event of a split or combination of the Common
Shares), or (z) the issuance of Common Shares or securities exercisable or
convertible into or redeemable for Common Shares pursuant to the acquisition of
property or equity interests in property (e.g., partnership interests of a
property-owning partnership) by the Trust or a subsidiary of the Trust. 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 paragraph (d)
to the contrary notwithstanding, the Trust shall be entitled, to the extent
permitted by law, to make such reductions in the Conversion Ratio, in addition
to those required by this paragraph (d), as it 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 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, or if that is not possible, to diminish any income taxes that are
otherwise payable because of such event.
(e) Adjustment of Conversion Ratio Upon Certain Transactions.
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 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 subparagraph (d)(i) of this Section 7 applies) (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
Preferred Share that 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 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 or her appraisal rights or rights of election, if any, as to the
kind or amount of shares, stock, securities and other property (including cash)
receivable in such Transaction. The Trust shall not be a party to any
Transaction unless the terms of such Transaction are consistent with the
provisions of this paragraph (e), 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
<PAGE>
holders of the Preferred Shares that will contain provisions enabling the
holders of the Preferred Shares that remain outstanding after such Transaction
to convert into the consideration received by holders of Common Shares at the
Conversion Ratio in effect immediately prior to such Transaction.
(f) Notice of Certain Events. If:
(i) the Trust shall declare a distribution on the
Common Shares (other than the Regular Quarterly Distribution); or
(ii) the Trust shall authorize the granting to all
holders of the Common Shares of rights or warrants to subscribe for or purchase
any shares of any class or any other rights or warrants; or
(iii) there shall be any reclassification of the
Common Shares (other than any event to which subparagraph (d)(i) of this Section
7 applies) 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, or 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; or
(iv) there shall occur the involuntary or voluntary
liquidation, dissolution or winding up of the Trust, then the Trust shall cause
to be mailed to the holders of Preferred Shares, at the address as shown on the
share records of the Trust, as promptly as possible, but at least 15 Business
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 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 or warrants are to be determined or (B) the date on which such
reclassification, consolidation, merger, statutory share exchange, sale,
transfer, liquidation, dissolution or winding up is expected to become
effective, and the date as of which it is expected that holders of Common Shares
shall be entitled to exchange their Common Shares for securities or other
property, if any, deliverable upon such reclassification, 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.
(g) Notice of Adjustment of Conversion Ratio. Whenever the
Conversion Ratio is adjusted as herein provided, the Trust shall prepare a
notice of such adjustment of the Conversion Ratio setting forth the adjusted
Conversion Ratio and the effective date of such adjustment and shall mail such
notice of such adjustment of the Conversion Ratio to the holders of the
Preferred Shares at such holders' last address as shown on the share records of
the Trust.
(h) Timing of Adjustment. In any case in which paragraph (d)
of this Section 7 provides that an adjustment shall become effective on the day
next following the record date for an event, the Trust may defer until the
<PAGE>
occurrence of such event (A) issuing to the holder of 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) paying to such holder any amount
of cash in lieu of any fraction pursuant to paragraph (c) of this Section 7.
(i) No Duplication of Adjustments. There shall be no
adjustment of the Conversion Ratio in case of the issuance of any equity
securities 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 Ratio pursuant to more
than one paragraph 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. Notwithstanding the foregoing, the provisions of this Section 7 shall
similarly apply to successive transactions giving rise to any such adjustment.
(j) Other Adjustments to Conversion Ratio. If the Trust shall
take any action affecting the Common Shares, other than action described in this
Section 7, that would materially adversely affect the conversion rights of the
holders of the Preferred Shares or the value of such conversion rights, the
Conversion Ratio for the Preferred Shares may be adjusted, to the extent
permitted by law, in such manner, if any, and at such time, as the Board of
Trustees, in its sole discretion, may determine to be equitable in the
circumstances.
(k) Reservation, Validity, Listing and Securities Law
Compliance With Respect to Common Shares.
(i) The Trust covenants that it 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 Preferred Shares, the full number of Common Shares deliverable
upon the conversion of all outstanding Preferred Shares not theretofore
converted. Before taking any action which would cause an adjustment in the
Conversion Ratio such that Common Shares issuable upon the conversion of
Preferred Shares would be issued below par value of the Common Shares, the Trust
will take any trust action which may, in the opinion of its counsel, be
reasonably necessary in order that the Trust may validly and legally issue
fully-paid and nonassessable Common Shares at such adjusted Conversion Ratio.
(ii) The Trust covenants that any Common Shares
issued upon the conversion of the Preferred Shares shall be validly issued,
fully paid and non-assessable.
(iii) The Trust shall endeavor to list the Common
Shares required to be delivered upon conversion of the Preferred Shares, prior
to such delivery, upon each national securities exchange, if any, upon which the
outstanding Common Shares are listed at the time of such delivery.
<PAGE>
(iv) Prior to the delivery of any securities that the
Trust shall be obligated to deliver upon conversion of the Preferred Shares, the
Trust shall endeavor to comply with all federal and state laws and regulations
thereunder requiring the registration of such securities with, or any approval
of or consent to the delivery thereof by, any governmental authority.
(l) Transfer Taxes. 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 of the
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 holder of the Preferred Shares to be converted, 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.
(m) Certain Defined Terms. The following definitions shall
apply to terms used in this Section 7:
(i) Current Market Price. For the purpose of any computation
under this Section 7, the Current Market Price per Common
Share on any date in question shall be deemed to be the
average of the daily closing prices for the five consecutive
Trading Days preceding such date in question; provided,
however, that if an event occurs that would require an
adjustment pursuant to subsection (f) through (j), inclusive,
the Board may make such adjustment to the closing prices
during such five Trading Day period as it deems appropriate to
effectuate the intent of the adjustments in this Section 7, in
which case any such determination by the Board shall be set
forth in a resolution of the Board and shall be conclusive.
(ii) "Trading Day" shall mean a day on which the Common Shares
are traded on the New York Stock Exchange, or other national
exchange or quotation system used to determine the Current
Market Price.
(n) Mandatory Conversion at the Option of the Trust. Beginning
on the fifth anniversary of the initial date of issuance of Preferred Shares,
the Trust shall have the option, exercisable in writing by notice given within
10 days of the end of the 90-day period hereinafter referred to, to require all
holders of Preferred Shares to convert all of such holders' Preferred Shares
into Common Shares at the then Conversion Ratio and in accordance with the terms
of this Section 7 if: (i) either (A) the Common Shares issuable upon the
conversion of the Preferred Shares are eligible to be sold pursuant to an
existing effective registration statement of the Trust (provided that for the
135-day period following such conversion, the Trust shall not be permitted to
exercise any rights it may have to delay or prohibit the sale of such Common
Shares) or (B) the holders of the Common Shares issuable upon the conversion of
the Preferred Shares are not "affiliates" (as such term is defined in Rule 144
under the Securities Act of 1933, as amended) of the Trust; (ii) the Common
Shares issuable upon the conversion of the Preferred Shares are listed on the
New York Stock Exchange; and (iii) the closing trading price per Common Share is
greater than 130% of the then Conversion Price during any consecutive 90-day
period following the fifth anniversary of the initial issuance of Preferred
Shares.
<PAGE>
Section 8. Change of Control and Put Option.
(a) Subject to the last sentence of this Section 8(a), if a
Change of Control (as defined in paragraph (e) of this Section 8) or Put Event
(as defined in paragraph (f) of this Section 8) occurs, in either case as a
result of the voluntary (and not legally compelled) act, omission or
participation of the Trust, which act, omission or participation the Trust had
the discretion under existing laws and regulations to refrain from, then each
holder of Preferred Shares will have the right to require that the Trust, to the
extent it shall have Legally Available Funds therefor, redeem such holder's
Preferred Shares at a redemption price payable in cash in an amount equal to
102% of the Liquidation Value thereof, plus accrued and unpaid distributions
whether or not declared, if any (the "Put Payment"), to the date of purchase or
the date payment is made available (the "Put Date") pursuant to the offer
described in paragraph (b) below (the "Put Offer"). If a Change of Control or
Put Event occurs that is not the result of such voluntary act, omission or
participation of the Trust, the Trust may elect to make the foregoing Put
Payment but may, in its discretion, elect not to make the foregoing Put Payment
by not commencing the Put Offer on the Put Date, in which event the Conversion
Ratio shall be revised to the greater of (i) 120% of the then current Conversion
Ratio so that each Preferred Share will be convertible into 120% of the number
of Common Shares into which it would otherwise have been convertible and (ii) a
fraction the denominator of which is 83.33% of the Current Market Price and the
numerator of which is $24.00. Notwithstanding the foregoing, if the Securities
and Exchange Commission or its staff, by written communication to the Trust,
indicates that the provisions of the first sentence of this Section 8(a) would
preclude the Trust from treating the Preferred Shares as equity on its financial
statements, then the Trust shall have the right, in lieu of application of the
first sentence of this Section 8(a), to apply the Conversion Ratio revision
alternative set forth in the second sentence of this Section 8(a).
(b) Within 15 days following the Trust becoming aware that an
event has occurred that has resulted in any Change of Control or Put Event, in
either case as a result of the voluntary (and not legally compelled) act,
omission or participation of the Trust, which act, omission or participation the
Trust had the discretion under existing laws and regulations to refrain from,
the Trust shall mail a notice to each holder of Preferred Shares, at such
holder's address as appearing in the records of the Trust, stating (i) that a
Change of Control or Put Event, as applicable, has occurred and that such holder
has the right to require the Trust to redeem such holder's Preferred Shares in
cash, (ii) the date of redemption (which shall be a Business Day, no earlier
than 30 days and no later than 60 days from the date such notice is mailed, or
such later date as may be necessary to comply with the requirements of
applicable law including the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and in no event shall such date be earlier than 20 business
days after the notice was mailed pursuant to the second sentence of Section 5(b)
herein), (iii) the redemption price for the redemption, and (iv) the
instructions determined by the Trust, consistent with this paragraph, that a
holder must follow in order to have its Preferred Shares redeemed.
(c) On the Put Date, the Trust will, to the extent lawful,
accept for payment Preferred Shares or portions thereof tendered pursuant to the
Put Offer and pay an amount equal to the Put Payment in respect of all Preferred
<PAGE>
Shares or portions thereof so tendered. The Trust shall promptly mail to each
holder of Preferred Shares to be redeemed the Put Payment for such Preferred
Shares.
(d) Notwithstanding anything else herein, to the extent they
are applicable to any Put Offer, the Trust will comply with Section 14 of the
Exchange Act and the provisions of Regulation 14D and 14E and any other tender
offer rules under the Exchange Act and any other federal and state securities
laws, rules and regulations and all time periods and requirements shall be
adjusted accordingly.
(e) "Change of Control" means each occurrence, other than any
such occurrence which would otherwise constitute a Special Event as defined in
Section 4(n), of any of the following: (i) the acquisition, directly or
indirectly, by any individual or entity or group (as such term is used in
Section 13(d)(3) of the Exchange Act) of beneficial ownership (as defined in
Rule 13d-3 under the Exchange Act, except that such individual or entity shall
be deemed to have beneficial ownership of all shares that any such individual or
entity has the right to acquire, whether such right is exercisable immediately
or only after passage of time) of more than 33-1/3% of the aggregate outstanding
voting power of the shares of equity securities of the Trust (other than when
such acquisition is made by Five Arrows Realty Securities III L.L.C. or an
Affiliate thereof or one of their respective members or partners); (ii) other
than with respect to the election, resignation or replacement of the Preferred
Trustees, during any period of two consecutive years, individuals who at the
beginning of such period constituted the Board of Trustees of the Trust
(together with any new Trustees whose election by such Board of Trustees or
whose nomination for election by the shareholders of the Trust was approved by a
vote of at least 66-2/3% of the Trustees of the Trust (excluding Preferred
Trustees) then still in office who were either Trustees at the beginning of such
period, or whose election or nomination for election was previously so approved)
cease for any reason to constitute a majority of the Board of Trustees of the
Trust then in office; and (iii) (A) the Trust consolidates with or merges into
another entity (the "Merger Entity") or conveys, transfers or leases all or
substantially all of its assets (including, but not limited to, real property
investments) to any individual or entity (the "Acquiring Entity", and, together
with the Merger Entity, the "Successor Entity"), or (B) any entity consolidates
with or merges into the Trust, which in either event (A) or (B) is pursuant to a
transaction in which the outstanding voting shares of equity securities of the
Trust are reclassified or changed into or exchanged for cash, securities or
other property (unless the holders of the voting shares of equity securities of
the Trust immediately prior to such transaction hold immediately after such
transaction more than 50% of the outstanding voting capital stock or voting
equity securities of the Successor Entity).
(f) "Put Event" means any occurrence the result of which is
that (i) the Trust fails to qualify as a real estate investment trust as
described in Section 856 of the Internal Revenue Code of 1986, as amended (the
"Code"), other than as a result of any action, or unreasonable failure to act,
by any holder of Preferred Shares; (ii) the Trust becomes a "closely-held" REIT
as defined in Section 856(h) of the Code, other than as a result of any action,
or unreasonable failure to act, by any holder of Preferred Shares; (iii) the
Trust becomes a "Pension-held REIT" as defined in Section 856(h)(3)(D) of the
Code, other than as a result of any action, or unreasonable failure to act, by
any holder of Preferred Shares; or (iv) the Trust ceases to be engaged primarily
<PAGE>
in the business of acquiring, developing, redeveloping, leasing and managing
suburban office and industrial properties directly, or through subsidiaries, as
carried on as of the date hereof and described in the Trust's Annual Report on
Form 10-K as filed with the Securities and Exchange Commission for the year
ended December 31, 1998.
Section 9. Restrictions on Ownership Transfer to Preserve Tax
Benefit.
(a) The Preferred Shares shall be governed by the restrictions
on ownership and transfer set forth in of Article 6 of the Declaration of Trust.
(b) So long as Preferred Shares are outstanding, without the
consent of the holders of at least a majority of the Preferred Shares at the
time outstanding, given in person or by proxy, at a meeting called for that
purpose at which the holders of the Preferred Shares shall vote separately as a
class, or by unanimous written consent in writing of all holders of the
Preferred Shares, the Trust will not effect or validate any amendment,
alteration or repeal of any Section of the Declaration of Trust, so as to
increase in any respect the restrictions or limitations on ownership applicable
to the Preferred Shares pursuant thereto.
Section 10. Conversion and Excess Shares. Preferred Shares
converted into Excess Shares pursuant to Article 6 of the Declaration of Trust
shall be governed by Article 6 of the Declaration of Trust.
Section 11. Miscellaneous.
(a) Exchange or Market Transactions. Nothing in Section 9,
Section 10 or this Section 11 shall preclude the settlement of any transaction
entered into through the facilities of the New York Stock Exchange or any other
national securities exchange or automated inter-dealer quotation system.
(b) Severability. If any provision of Section 9, Section 10 or
this Section 11 or any application of any such provision is determined to be
invalid by any federal or state court having jurisdiction over the issues, the
validity of the remaining provisions shall not be affected and other
applications of such provisions shall be affected only to the extent necessary
to comply with the determination of such court.
(c) Mailings. All mailings shall be made by overnight United
States mail or by another overnight courier service.
(d) Reacquired Shares. Any Preferred Shares purchased or
otherwise acquired by the Trust shall upon their cancellation become authorized
but unissued preferred shares of beneficial interest and may be classified again
and reissued as part of a new series or class of preferred shares of beneficial
interest to be created by the Board pursuant to its power contained in the
Declaration of Trust, subject to conditions and restrictions on issuance set
forth herein.
SECOND: The Preferred Shares have been classified and
designated by the Board under the authority contained in the Declaration of
Trust.
<PAGE>
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.
IN WITNESS WHEREOF, BRANDYWINE REALTY 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 by its Secretary on
this 19th day of April, 1999.
BRANDYWINE REALTY TRUST
By: /s/ Gerard H. Sweeney
--------------------------------------------
Name: Gerard H. Sweeney
Title: President and Chief Executive Officer
ATTEST:
By: /s/ Brad A. Molotsky
------------------------
Name: Brad A. Molotsky
Title: Secretary
[Trust Seal]
<PAGE>
INVESTMENT AGREEMENT
between
BRANDYWINE REALTY TRUST
and
FIVE ARROWS REALTY SECURITIES III L.L.C.
----------------------
Dated as of April 19, 1999
----------------------
<PAGE>
INVESTMENT AGREEMENT
INVESTMENT AGREEMENT dated as of April 19, 1999 between
Brandywine Realty Trust, a Maryland real estate investment trust (the
"Company"), and Five Arrows Realty Securities III L.L.C., a limited liability
company organized under the laws of the State of Delaware (the "Investor").
WHEREAS, the Company wishes to issue the Preferred Shares and
Warrant (each as defined herein) to the Investor, and the Investor wishes to
purchase, acquire and accept the Preferred Shares and Warrant from the Company
(the "Investment");
NOW, THEREFORE, in consideration of the premises and the
mutual covenants herein contained and for other good and valuable consideration,
the receipt and adequacy of which are hereby acknowledged, the parties hereto,
intending to be legally bound, hereby agree as follows:
ARTICLE 1 DEFINED TERMS.
Section 1.1 Defined Terms. The following terms shall, unless
the context otherwise requires, have the meanings set forth in this Section 1.1.
"Adverse Consequences" means all actions, suits, proceedings,
hearings, investigations, charges, complaints, claims, demands, injunctions,
judgments, orders, decrees, rulings, damages, dues, penalties, fines, costs,
amounts paid in settlement, liabilities, obligations, taxes, liens, losses,
expenses, and fees, including court costs and reasonable attorneys' fees and
disbursements.
"Affiliate" means, with respect to any Person, (a) any member
of the Immediate Family of such Person or a trust established for the benefit of
such member, (b) any beneficiary of a trust described in (a), (c) any Entity
which, directly or indirectly through one or more intermediaries, is deemed to
be the beneficial owner of 10% or more of the voting equity of such Person for
the purposes of Section 13(d) of the Exchange Act, (d) any officer of such
Person or any member of the Board of Directors or Board of Trustees of such
Person, or (e) any Entity which, directly or indirectly through one or more
intermediaries, controls, is controlled by, or is under common control with,
such Person, including such Person or Persons referred to in the preceding
clause (a) or (d); provided, however, that none of the Investor, Rothschild or
their respective Affiliates nor any of their respective officers, directors,
partners, members or Affiliates nor any Preferred Trustee (as such term is
defined in the Articles Supplementary) shall be considered an Affiliate of the
Company or its Subsidiaries for purposes of this Agreement.
"Agreement" means this Investment Agreement, as originally
executed and as hereafter from time to time supplemented, amended and restated.
<PAGE>
"Agreement and Waiver" means the Agreement and Waiver, dated
as of the date of the initial Closing, between the Company and the Investor in
the form of Exhibit A attached hereto.
"Articles Supplementary" means the Articles Supplementary
classifying 4,375,000 preferred shares of beneficial interest of the Company,
par value $.01 per share, as 8.75% Series B Senior Cumulative Convertible
Preferred Shares of the Company in the form of Exhibit B attached hereto.
"Benefit Plan" means a defined benefit plan as defined in
Section 3(35) of ERISA that is subject to Title IV of ERISA (other than a
Multiemployer Plan) and in respect of which the Company or any ERISA Affiliate
is or within the immediately preceding six (6) years was an "employer" as
defined in Section 3(5) of ERISA.
"Business Day" means any Monday, Tuesday, Wednesday, Thursday
or Friday which is not a day on which banking institutions in New York City are
authorized or obligated by law or executive order to close.
"Charter" means the Declaration of Trust of the Company as
currently in effect and as amended in the future in a manner that is not
inconsistent with the terms of the Operative Instruments.
"Code" means the Internal Revenue Code of 1986, as amended
from time to time, or any successor statute thereto.
"Common Shares" means the common shares of beneficial
interest, par value $.01 per share, of the Company.
"Confidential Information" means the identity of the Company
in the context of the Investment, the existence and contents of discussions
regarding the Investment and information concerning the assets, operations,
business, records, projections and prospects of the Company; provided, however,
that the term "Confidential Information" does not include information that (i)
is or becomes available to the public other than as a result of disclosure by
any of the Investor or Rothschild or any of their respective representatives,
(ii) was available to the Investor or Rothschild or was within the Investor's or
Rothschild's knowledge prior to its disclosure by the Company to the Investor or
Rothschild, or (iii) becomes available to the Investor or Rothschild from a
source other than the Company, provided that such source is not known by the
Investor or Rothschild to be bound by a confidentiality agreement with the
Company or its representative.
"Entity" means any general partnership, limited partnership,
corporation, joint venture, trust, business trust, real estate investment trust,
limited liability company, cooperative or association.
<PAGE>
"Environmental Claim" means any complaint, summons, citation,
notice, directive, order, claim, litigation, investigation, judicial or
administrative proceeding, judgment, letter or other communication from any
governmental agency, department, bureau, office or other authority, or any third
party alleging violations of Environmental Laws or Releases of Hazardous
Materials.
"Environmental Laws" means the Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA"), 42 U.S.C. ss.ss. 9601 et
seq., as amended; the Resource Conservation and Recovery Act ("RCRA"), 42 U.S.C.
ss.ss. 6901 et seq., as amended; the Clean Air Act ("CAA"), 42 U.S.C. ss.ss.
7401 et seq., as amended; the Clean Water Act ("CWA"), 33 U.S.C. ss.ss. 1251 et
seq., as amended; the Occupational Safety and Health Act ("OSHA"), 29 U.S.C.
ss.ss. 655 et seq. and any other federal, state, local or municipal laws,
statutes, regulations, rules or ordinances imposing liability or establishing
standards of conduct for protection of the environment.
"Environmental Liabilities" means any monetary obligations,
losses, liabilities (including strict liability), damages, punitive damages,
treble damages, costs and expenses (including all reasonable out-of-pocket fees,
disbursements and expenses of counsel, reasonable out-of-pocket expert and
consulting fees and reasonable out-of-pocket costs for environmental site
assessments, remedial investigation and feasibility studies), fines, penalties,
sanctions and interest incurred as a result of any Environmental Claim filed by
any governmental authority or any third party against the Company or its
Subsidiaries or any predecessors in interest which relate to any violations of
Environmental Laws, Response Actions, Releases or threatened Releases of
Hazardous Materials from or onto (i) any assets, properties or businesses
presently or formerly owned by the Company, its Subsidiaries or a predecessor in
interest, or (ii) any facility which received Hazardous Materials generated by
the Company, its Subsidiaries or a predecessor in interest.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and any successor statute of similar import, and regulations
thereunder, in each case as in effect from time to time. References to sections
of ERISA shall be construed also to refer to any successor sections.
"ERISA Affiliate" means any (i) corporation which is a member
of the same controlled group of corporations (within the meaning of Section
414(b) of the Code) as the Company, (ii) partnership or other trade or business
(whether or not incorporated) under common control (within the meaning of
Section 414(c) of the Code) with the Company, or (iii) member of the same
affiliated service group (within the meaning of Section 414(m) of the Code) as
the Company, any corporation described in clause (i) above or any partnership or
trade or business described in clause (ii) above.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
<PAGE>
"GAAP" means United States generally accepted accounting
principles, as in effect from time to time.
"Hazardous Materials" include (a) any element, compound, or
chemical that is defined, listed or otherwise classified as a contaminant,
pollutant, toxic pollutant, toxic or hazardous substances, extremely hazardous
substance or chemical, hazardous waste, medical waste, biohazardous or
infectious waste, special waste, or solid waste under Environmental Laws; (b)
petroleum, petroleum-based or petroleum-derived products; (c) electrical
equipment containing polychlorinated biphenyls at a level greater than 50 ppm;
(d) any substance exhibiting a hazardous waste characteristic including but not
limited to corrosivity, ignitibility, toxicity or reactivity) as well as any
radioactive or explosive materials; and (e) asbestos-containing materials.
"Immediate Family" means, with respect to any Person, such
Person's spouse, parents, parents-in-law, descendants, nephews, nieces,
brothers, sisters, brothers-in-law, sisters-in-law, stepchildren, sons-in-law
and daughters-in-law.
"Lien" means and includes any lien, security interest, pledge,
charge, option, right of first refusal, claim, mortgage, lease, easement or any
other encumbrance whatsoever.
"Material Adverse Effect," when used with reference to events,
acts, failures or omissions to act, or conduct of a specified Person, means that
such events, acts, failures or omissions to act, or conduct would have a
material adverse effect on (i) the condition (financial or otherwise), earnings,
business affairs or business prospects of such Person and its consolidated
subsidiaries, considered as one enterprise, or (ii) the ability of such Person
to perform its obligations under the Operative Instruments.
"Multiemployer Plan" means a "multiemployer plan" as defined
in Section 4001(a)(3) of ERISA and subject to Title IV of ERISA which is, or
within the immediately preceding six (6) years was, contributed to by the
Company or any ERISA Affiliate.
"Operating Agreement" means the Operating Agreement, dated as
of the initial Closing Date, between the Company and the Investor, in the form
of Exhibit C attached hereto.
"Operative Instruments" means this Agreement, the Warrant, the
Articles Supplementary, the Operating Agreement, and the Agreement and Waiver.
"PBGC" means the Pension Benefit Guaranty Corporation,
established by ERISA.
"Permit" means a permit, license, consent, order or approval
by any federal, state or local governmental agency.
"Person" means any individual or Entity.
<PAGE>
"Plan" means an employee benefit plan defined in Section 3(3)
of ERISA in respect of which the Company or any ERISA Affiliate is, or within
the immediately preceding six (6) years was, an "employer" as defined in Section
3(5) of ERISA.
"Preferred Shares" means the preferred shares of beneficial
interest, par value $.01 per share, of the Company designated in the Articles
Supplementary as 8.75% Series B Senior Cumulative Convertible Preferred Shares.
"REIT" means a real estate investment trust described in
Section 856 of the Code.
"Release" means any spilling, leaking, pumping, emitting,
emptying, discharging, injecting, escaping, leaching, migrating, dumping, or
disposing of Hazardous Materials (including the abandonment or discarding of
barrels, containers or other closed receptacles containing Hazardous Materials)
into the environment in reportable quantities under applicable Environmental
Laws.
"Response Action" means all actions taken to (i) clean up,
remove, remediate, contain, treat, monitor, assess, evaluate or in any other way
address Hazardous Materials in the environment as required by Environmental
Laws; (ii) prevent or minimize a Release or threatened Release of Hazardous
Materials so they do not migrate or endanger or threaten to endanger to cause
substantial danger to public health or welfare or the environment as required by
42 U.S.C. ss. 9601; (iii) perform pre-remedial studies and investigations and
post-remedial operation and maintenance activities as required by 42 U.S.C. ss.
9601; or (iv) any other actions authorized by 42 U.S.C. ss. 9601.
"Reportable Event" means any of the events described in
Section 4043(b) of ERISA (other than events for which the notice requirements
have been waived).
"Representatives" means, with respect to any Person, the
directors, trustees, officers, employees, Affiliates, representatives
(including, but not limited to, financial advisors, attorneys and accountants),
agents or potential sources of financing of such person.
"Rothschild" means Rothschild Realty Inc., a Delaware
corporation.
"SDAT" means the State Department of Assessment and Taxation
of Maryland.
"SEC" means the Securities and Exchange Commission or any
successor regulatory authority.
"Securities Act" means the Securities Act of 1933, as amended.
"Subsidiary" of any Person or Entity means an Entity in which
such Person or Entity has the power or right, whether by the direct or indirect
ownership of shares or other equity interests, by contract or otherwise, to
elect a majority of the directors of a corporation or the trustees of a real
<PAGE>
estate investment trust, to select the managing partner of a partnership, or
otherwise to select, or have the power to remove and then select, a majority of
those persons exercising governing authority over such Entity. A limited
partnership shall be deemed to be a Subsidiary of a Person or Entity if such
Person or Entity or a Subsidiary of such Person or Entity serves as a general
partner thereof. A trust shall be deemed to be a Subsidiary of a Person or
Entity if such Person or Entity or a Subsidiary of such Person or Entity serves
as any trustee thereof or any Person having the right to select any such
trustee.
"Termination Event" means (i) a Reportable Event with respect
to any Benefit Plan (with respect to which the 30-day notice requirement has not
been waived); (ii) the withdrawal of the Company or any ERISA Affiliate from a
Benefit Plan during a plan year in which the Company or any ERISA Affiliate was
a "substantial employer" as defined in Section 4001(a)(2) of ERISA; (iii)
providing a written notice of intent to terminate a Benefit Plan to affected
parties of a distress termination described in Section 4041(c) of ERISA; or (iv)
the institution by the PBGC of proceedings to terminate a Benefit Plan.
"Warrant" means the warrant, in the form of Exhibit D attached
hereto, to purchase 500,000 Common Shares, as such number may be adjusted.
Section 1.2 Terms Defined Herein. In addition to the terms
defined in Section 1.1 above, the following terms shall, unless the context
otherwise requires, have the meanings set forth in the section set forth next to
such term:
Defined Term Section
- ------------ -------
Accredited Investor....................................................5.2
Balance Sheet..........................................................4.17
Breach.................................................................4.20
Closing................................................................2.1
Discount...............................................................2.1
Excess Shares..........................................................4.9
Indemnified Party......................................................10.4.3
Indemnifying Party.....................................................10.4.3
Liabilities............................................................4.17
1998 10-K..............................................................4.2
1999 Proxy Statement...................................................4.8
Preferred Shares.......................................................4.9
Purchase Price.........................................................2.1
Third Party Claim......................................................10.4.3
<PAGE>
ARTICLE 2 SALE AND PURCHASE OF PREFERRED SHARES AND WARRANT.
Section 2.1 Sale of Preferred Shares. At the closings provided
for in Article 3 hereof (each, a "Closing"): (i) the Company shall issue and
sell an aggregate of up to 4,375,000 Preferred Shares to the Investor, as
hereinafter provided, and shall deliver to the Investor a share certificate or
certificates evidencing all of the Preferred Shares, registered in the
Investor's or its nominee's name; and (ii) the Investor shall purchase, acquire
and accept such Preferred Shares for $24.00 per share, less the Discount, as
defined below (the "Purchase Price"). The term "Discount" shall mean a discount
per share of 6.00% of $24.00, or a discount per share of $1.44.
Section 2.2 Payment for the Preferred Shares. At the Closings
and in accordance with the provisions set forth in Article 3, the Purchase Price
shall be paid by the Investor to the Company in United States dollars by wire
transfer of funds immediately available to such account(s) as the Company shall
designate in a written notice delivered to the Investor not less than five (5)
Business Days prior to the applicable Closing Date.
Section 2.3 Issuance of Warrant. At the first Closing provided
for in Article 3, (i) the Company shall issue the Warrant and shall deliver to
the Investor a certificate evidencing the Warrant, registered in the Investor's
or its nominee's name, and (ii) the Investor shall acquire and accept the
Warrant.
Section 2.4 Placement Fee. At each Closing, the Company shall
pay to Rothschild Realty Inc. a placement fee equal to $0.56 for each Preferred
Share issued at such Closing.
Section 2.5 Transfer Taxes. The Company shall pay all stock
transfer taxes, recording fees and other sales, transfer, use, purchase or
similar taxes resulting from the Investment.
ARTICLE 3 CLOSINGS.
Section 3.1 Closings. The Company shall be entitled to
designate up to four Closings, the first of which shall provide for the issuance
and sale of at least 1,041,667 Preferred Shares, and any subsequent Closing
shall provide for the issuance and sale of at least 208,334 Preferred Shares,
provided that all of the Closings together shall provide for the issuance and
sale of an aggregate of at least 2,291,667 Preferred Shares. Each Closing of the
sale and purchase of the Preferred Shares shall take place at the offices of
Schulte Roth & Zabel LLP, 900 Third Avenue, New York, New York 10022, at 10:00
a.m., New York City time.
Section 3.2 Closing Dates. Each Closing shall occur on such
date as the Company notifies the Investor on not less than ten (10) Business
Days' notice or at such other time as the Company and the Investor mutually
agree in writing (each, a "Closing Date"); provided, however, that if the sale
of at least 2,291,667 Preferred Shares as provided for herein shall not have
occurred before December 31, 1999, the Closing for such Preferred Shares as
<PAGE>
shall not have previously been so sold shall occur on such date. If the Company
shall not have sold an aggregate of 4,375,000 Preferred Shares to the Investor
on or before December 31, 1999 (other than by reason of an event subject to
Section 3.3), the Company shall, on such date, pay to the Investor by wire
transfer in immediately available funds an amount equal to the product of (x)
$0.44 and (y) the difference between (A) 4,375,000 and (B) the number of
Preferred Shares which the Company has sold to the Investor pursuant to this
Agreement (which in no event shall be less than 2,291,667 shares).
Section 3.3 Cancellation of Subsequent Closings. In the event
that a Change of Control or a Put Event (each as defined in the Articles
Supplementary) occurs prior to the sale by the Company to the Investor of
4,375,000 Preferred Shares pursuant to this Agreement, and the Investor notifies
the Company that it elects to cancel the remaining Closings, any further
Closings shall be canceled and the Company shall immediately pay to the Investor
by wire transfer in immediately available funds an amount equal to the product
of (x) $.50 multiplied by (y) the difference between (A) 4,375,000 and (B) the
number of Preferred Shares which the Company has sold to the Investor pursuant
to this Agreement.
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company hereby represents and warrants to the Investor as
follows:
Section 4.1 Due Formation or Incorporation and Status of the
Company and Subsidiaries.
Section 4.1.1 Due Formation or Incorporation. The
Company and each of its Subsidiaries has been duly formed or organized and is
validly existing and in good standing under the laws of the state of their
respective formation or organization and are qualified or licensed, and in good
standing, as a foreign trust, corporation, general partnership, limited
partnership or limited liability company authorized to do business in each other
jurisdiction in which its ownership of properties or its conduct of business
requires such qualification or licensing, except where the failure to be so
qualified or licensed, or in good standing, as a foreign trust, corporation,
general partnership, limited partnership or limited liability company would not
have a Material Adverse Effect on the Company.
Section 4.1.2 REIT Status. As of the date hereof, the
Company qualifies as a REIT under the Code and has taken no action or omitted to
take any action, the effect of which reasonably could be expected to disqualify
the Company as a REIT under the Code. As of the date hereof, the Company is not
a "Pension-held REIT" as defined in Section 856(h)(3)(D) of the Code.
Section 4.2 Authority. The Company has the trust power and
authority to own, lease and operate its properties, directly or indirectly, and
to conduct its business as presently conducted and as contemplated by the Annual
Report on Form 10-K as filed by the Company under the Exchange Act for the year
ended December 31, 1998 (the "1998 10-K").
<PAGE>
Section 4.3 Valid Agreement of the Company. The execution,
delivery and performance of this Agreement, the Warrant, the Operating Agreement
and the Agreement and Waiver have each been duly authorized by the Company. This
Agreement has been, and the Warrant, the Operating Agreement and Agreement and
Waiver, upon the Closing, will be, executed and delivered by the Company. This
Agreement represents, and the Warrant, the Operating Agreement and Agreement and
Waiver, upon the Closing will represent, the valid and binding obligations of
the Company, enforceable against the Company in accordance with their respective
terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the enforcement
of creditors' rights generally and by general principles of equity (whether
enforcement is sought by proceedings in equity or at law).
Section 4.4 No Default. The execution and delivery of the
Operative Instruments by the Company and the performance by the Company of its
obligations do not (or if not yet executed, upon the execution and delivery
thereof will not) (a) violate the Charter or By-Laws of the Company; (b) violate
or constitute a breach of or default under any mortgage, indenture, loan
agreement, promissory note or other agreement to which the Company or any of its
Subsidiaries is a party, or by which any of them is bound, or to which any
property of the Company or any of its Subsidiaries is subject; or (c) conflict
with or violate any law or any regulation, rule, order or decree of any
governmental body, court or administrative agency having jurisdiction over the
Company or any of its Subsidiaries or the properties of any of them; except, in
the case of clauses (b) and (c) above, for such breaches, defaults, conflicts or
violations which would not, individually or in the aggregate, have a Material
Adverse Effect on the Company or on the ability of the Company to consummate the
transactions contemplated hereby and thereby.
Section 4.5 No Required Consents. The execution and delivery
of the Operative Instruments by the Company and the performance by the Company
of its obligations to be performed at or prior to the related Closing do not
require any filing or registration with, or the receipt of any consent by, any
governmental or regulatory authority by the Company or its Subsidiaries other
than (a) any which have already been obtained or waived, (b) approval by the New
York Stock Exchange of a Supplemental Listing Application and (c) such consents
as may be required under the Securities Act, the regulations promulgated
thereunder or applicable state securities laws, which prior to the related
Closing will have been obtained or waived.
Section 4.6 Reservation of Shares. The Company has duly
reserved solely for purposes of issuance (i) upon conversion of the Preferred
Shares the Common Shares into which the Preferred Shares may be converted from
time to time, and (ii) upon exercise of the Warrant the Common Shares underlying
the Warrant.
Section 4.7 Validity of Preferred Shares. The Company has duly
authorized the issuance and delivery of 4,375,000 Preferred Shares pursuant to
this Agreement and, upon delivery thereof and receipt by the Company of the
Purchase Price therefor, the Preferred Shares will be duly authorized, validly
<PAGE>
issued, fully paid and nonassessable. The Preferred Shares have the
distribution, conversion, voting and other terms set forth in the Articles
Supplementary and, to the extent not inconsistent therewith, as set forth in the
Charter and By-Laws of the Company.
Section 4.8 Disclosure. The Company has heretofore delivered
to the Investor the Proxy Statement relating to its 1999 Annual Meeting of
Shareholders (the "1999 Proxy Statement") and the 1998 10-K.
Section 4.8.1 No Misstatement or Omission. At the
time of filing, the 1999 Proxy Statement and the 1998 10-K complied in all
material respects with the requirements of the Exchange Act and the rules and
regulations promulgated by the SEC thereunder. The 1999 Proxy Statement and the
1998 10-K do not, as of their respective dates, contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements made not misleading in light of the
circumstances under which they were made.
Section 4.8.2 Financial Statements. The financial
statements, including the notes thereto, and supporting schedules included in
the 1998 10-K have been prepared in conformity with GAAP applied on a consistent
basis (except as otherwise noted therein) and present fairly the financial
position of the Company and its Subsidiaries as of the dates indicated and the
results of their operations for the periods shown.
Section 4.8.3 Subsequent Events. Since the respective
dates as of which information is given in the 1998 10-K, except as otherwise
stated in any Current Report on Form 8-K filed by the Company, or in the press
releases, listed on Schedule 4.8.3 hereto and other than changes in general
economic conditions or industry conditions, there has not been any change in the
condition (financial or otherwise) or in the earnings, business affairs or
business prospects of the Company and its Subsidiaries considered as one
enterprise, whether or not arising in the ordinary course of business, which
would have a Material Adverse Effect on the Company.
Section 4.9 Capitalization. The authorized shares of
beneficial interest of the Company consist of: (i) 100,000,000 Common Shares,
par value $.01 per share; and (ii) 10,000,000 preferred shares, par value $.01
per share, of which 4,375,000 shares have been duly classified as 8.75% Series B
Senior Cumulative Convertible Preferred Shares, par value $.01 per share (the
"Preferred Shares"). Schedule 4.9 sets forth the issued and outstanding shares
of beneficial interest of the Company as of the date hereof. Except as set forth
on Schedule 4.9 hereto, there are no other shares of beneficial interest of the
Company outstanding and no other outstanding options, warrants, convertible or
exchangeable securities, subscriptions, rights (including preemptive rights),
share appreciation rights, calls or commitments of any character whatsoever to
which the Company is a party or may be bound requiring the issuance or sale of
any shares of beneficial interest of the Company, and there are no contracts or
other agreements by which the Company is or may become bound to issue additional
shares of its beneficial interest or any options, warrants, convertible or
exchangeable securities, subscriptions, rights (including preemptive rights),
share appreciation rights, calls or commitments of any character whatsoever
relating to such shares.
<PAGE>
Section 4.10 Litigation. Except as set forth on Schedule 4.10
or in the 1998 10-K, the Company has not received any notice of any outstanding
judgments, rulings, orders, writs, injunctions, awards or decrees of any court
or any foreign, federal, state, county or local government or any other
governmental, regulatory or administrative agency or authority or arbitral
tribunal against or involving the Company or any of its Subsidiaries which is
currently in effect. Except as set forth on Schedule 4.10, neither the Company
nor any of its Subsidiaries is a party to, or to the knowledge of the Company,
threatened with, any litigation or judicial, governmental, regulatory,
administrative or arbitration proceeding.
Section 4.11 ERISA. (a) Each Plan is in substantial compliance
with the applicable provisions of ERISA and the Code, (b) no Termination Event
has occurred nor is reasonably expected to occur with respect to any Benefit
Plan, (c) the most recent annual report (Form 5500 Series) with respect to each
Plan, including Schedule B (Actuarial Information) thereto, copies of which have
been filed with the Internal Revenue Service, is complete and correct in all
material respects and fairly presents the funding status of such Benefit Plan,
and since the date of such report there has been no material adverse change in
such funding status, (d) no Benefit Plan had an accumulated (whether or not
waived) funding deficiency or permitted decreases which would create a
deficiency in its funding standard account within the meaning of Section 412 of
the Code at any time during the previous 60 months, and (e) no Lien imposed
under the Code or ERISA exists or is likely to arise on account of any Benefit
Plan within the meaning of Section 412 of the Code. Neither the Company nor any
of its ERISA Affiliates has incurred any withdrawal liability under ERISA with
respect to any Multiemployer Plan, and the Company is not aware of any facts
indicating that the Company or any of its ERISA Affiliates may in the future
incur any such withdrawal liability. Except as required by Section 4980B of the
Code or as set forth on Schedule 4.11, the Company does not maintain a welfare
plan (as defined in Section 3(1) of ERISA) which provides benefits or coverage
after a participant's termination of employment. Neither the Company nor any of
its ERISA Affiliates have incurred any liability under the Worker Adjustment and
Retraining Notification Act. All Plans in existence on the Closing Date are set
forth on Schedule 4.11 hereto.
Section 4.12 Environmental Matters. To the best knowledge of
the Company and its Subsidiaries (which for purposes of this Section 4.12 means
the actual knowledge of the President and Chief Executive Officer, each of the
Senior Vice Presidents and the Regional Vice Presidents and the General Counsel
of the Company, whose knowledge is based upon the Phase I and Phase II reports
obtained by the Company and provided to the Investor):
(a) The operations and properties of the Company and its
Subsidiaries are in material compliance with Environmental Laws;
(b) Except as set forth on Schedule 4.12, there has been no
Release (i) at any assets, properties or businesses currently owned or operated
by the Company, any of its Subsidiaries or any predecessor in interest; (ii)
from adjoining properties or businesses onto or under the Company's properties;
<PAGE>
or (iii) from or onto any facilities which received Hazardous Materials
generated by the Company, any of its Subsidiaries or any predecessor in interest
that would result in any Environmental Liabilities;
(c) Except as set forth on Schedule 4.12, no Environmental
Claims have been asserted against the Company, any of its Subsidiaries or any
predecessor in interest nor does the Company or any of its Subsidiaries have
knowledge or notice of any threatened or pending Environmental Claims;
(d) No Environmental Claims have been asserted against any
facilities that may have received Hazardous Materials generated by the Company,
any of its Subsidiaries or any predecessor in interest;
(e) The Company has conducted Phase I Environmental Site
Assessments on all of the material assets, properties and businesses owned or
operated by the Company and its Subsidiaries and has delivered or made available
to the Investor true and complete copies of all material environmental reports,
studies, investigations or material correspondence with any governmental agency
in their possession regarding any Environmental Liabilities at the assets,
properties or businesses of the Company or any of its Subsidiaries; and
(f) To the extent that any of the assets, properties or
businesses owned or operated by the Company or any of its Subsidiaries are
located in "wetlands" regulated under Environmental Laws, the Company and its
Subsidiaries are in material compliance with Environmental Laws regulating those
"wetlands."
Section 4.13 Investment Company. The Company is not, and upon
the issuance and sale of the Preferred Shares and Warrant as herein contemplated
will not be, an "investment company" or an Entity "controlled" by an "investment
company" as such terms are defined in the Investment Company Act of 1940, as
amended.
Section 4.14 Taxes. The Company has filed all federal, state,
local or foreign tax returns that are required to be filed or has duly requested
extensions thereof and has paid all taxes required to be paid by it and any
related assessments, fines or penalties, except for any such tax, assessment,
fine or penalty that is being contested in good faith and by appropriate
proceedings or where the failure to make any such filing or payment would not be
reasonably expected to have a Material Adverse Effect on the Company; and
adequate charges, accruals and reserves have been provided for in the financial
statements of the Company in respect of all material federal, state, local and
foreign taxes for all periods as to which the tax liability of the Company has
not been finally determined or remains open to examination by applicable taxing
authorities. The Company is not currently under review by any federal or state
taxing authority.
Section 4.15 Insurance. The Company carries or is entitled to
the benefits of insurance in such amounts and covering such risks as is
reasonably sufficient under the circumstances and is consistent with comparable
businesses and all such insurance is in full force and effect.
<PAGE>
Section 4.16 Affiliated Transactions. Except as set forth on
Schedule 4.16, the 1998 10-K or the 1999 Proxy Statement describe all
transactions with, or payments to, any Affiliate in excess of $60,000 in the
aggregate (other than reimbursement of expenses and compensation payable to
employees or officers or trustees' fees payable to the Company's trustees).
Except as set forth on Schedule 4.16, neither the Company, nor any officer or
trustee of the Company, nor any of its Subsidiaries, or any Affiliate of any of
the foregoing, or any member of the Immediate Family of any of the foregoing:
(i) owns, directly or indirectly, any interest in (excepting not more than five
(5) percent stock holdings held solely for investment purposes in securities of
any Person which are listed on any national securities exchange or regularly
traded in the over-the-counter market) or is an owner, sole proprietor,
shareholder, partner, director, officer, employee, consultant or agent of any
person which is a competitor, lessor, lessee, customer or supplier of the
Company or any of its Subsidiaries; (ii) owns, directly or indirectly, in whole
or in part, any property, patent, trademark, service mark, trade name,
copyright, franchise, invention, permit, license or secret or confidential
information which the Company or any of its Subsidiaries is using or the use of
which is necessary for the business of the Company or any of its Subsidiaries;
or (iii) has any cause of action or other suit, action or claim whatsoever
against, or owes any amount to, the Company or any of its Subsidiaries, in each
case (i) through (iii) except for those in the ordinary course of business. For
purposes of this Section 4.16, the term "Affiliate" shall not include any Person
that is a partner or member in any Subsidiary of the Company if such Person (but
for this sentence) would be an Affiliate of the Company solely by virtue of such
partner or member position.
Section 4.17 Liabilities. Except as set forth on Schedule 4.17
or as reflected in the consolidated balance sheet of the Company at December 31,
1998 (the "Balance Sheet") as included in the 1998 10-K for the year ended
December 31, 1998, the Company and its Subsidiaries do not have any material
direct or indirect indebtedness, liability, claim, loss, damage, deficiency,
obligation or responsibility, fixed or unfixed, choate or inchoate, liquidated
or unliquidated, secured or unsecured, subordinated or unsubordinated, matured
or unmatured, accrued, absolute, contingent or otherwise, including, without
limitation, liabilities on account of taxes, other governmental, regulatory or
administrative charges or lawsuits brought, whether or not of a kind required by
GAAP to be set forth on a financial statement (collectively, "Liabilities"),
that were not fully and adequately reflected or reserved against on the Balance
Sheet of the Company or incurred in the ordinary course of business since
December 31, 1998 (less Liabilities that have been discharged in the ordinary
course of business since the date of the Balance Sheet of the Company).
Section 4.18 Agreement and Waiver. The Board of Trustees of
the Company has authorized the Company to enter into and perform the Agreement
and Waiver.
Section 4.19 Integration. Neither the Company nor any Person
or Entity acting on behalf of the Company has offered, transferred, pledged,
sold or otherwise disposed of any Preferred Shares, any interest in the
Preferred Shares or any other similar security to, or solicited any offer to buy
<PAGE>
or accept a transfer, pledge or other disposition of any Preferred Share, any
interest in any Preferred Share or any such other similar security from, or
otherwise approached or negotiated with respect to any Preferred Share, or any
other similar security with, any Person in any manner, or made any general
solicitation by means of general advertising or in any other manner, or taken
any other action, in each case that would constitute a distribution of the
Preferred Shares under the Securities Act and would disqualify the issuance and
sale of the Preferred Shares without a registration statement by the Company to
the Investor pursuant to Section 4(2) of the Securities Act. Assuming the
correctness of the representations and warranties of the Investor in Article 5,
the Investment is exempt from registration under applicable federal and state
securities laws.
Section 4.20 No Event of Default. No event has occurred and is
continuing and no condition exists which constitutes a breach, an event of
default, or otherwise gives any other party the rights to accelerate or require
payment of any obligation, or with the passage of time would constitute such an
event (a "Breach"), under any agreement or instrument to which the Company or
any of its Subsidiaries is a party that could reasonably be expected to have a
Material Adverse Effect on the Company. Neither the Company nor any of its
Subsidiaries has received any notice that an event has occurred and is
continuing or that a condition exists which constitutes a Breach under any
agreement or instrument to which the Company or any of its Subsidiaries is a
party that could reasonably be expected to have a Material Adverse Effect on the
Company.
Section 4.21 No Brokers. In connection with the Investment,
the Company has not retained or become obligated to any broker or finder except
Legg Mason Wood Walker Inc. and Legg Mason Real Estate Services.
Section 4.22 Full Disclosure. All documents and other papers
delivered to the Investor by or on behalf of the Company in connection with this
Agreement and the transactions contemplated hereby are true, complete, accurate
and authentic and, when taken together with the Company's representations and
warranties set forth in this Agreement, do not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements made, in light of the circumstances
under which they were made, not misleading.
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF THE INVESTOR.
In order to induce the Company to enter into this Agreement
and to consummate the transactions contemplated hereby, the Investor hereby
represents and warrants to, and covenants with, the Company as follows:
Section 5.1 Organization. The Investor has been duly organized
and is validly existing and in good standing under the laws of the State of
Delaware, and has all requisite power and authority under such laws to carry on
its business as now conducted.
<PAGE>
Section 5.2 Accredited Investor. The Investor is an
"Accredited Investor," as such term is defined in Rule 501(a) of Regulation D
promulgated under the Securities Act.
Section 5.3 Valid Agreements of the Investor. The Investor has
all right, limited liability company power and authority to enter into this
Agreement and the Operating Agreement and to consummate the transactions
contemplated hereby and thereby. All action on the part of the Investor, its
officers, managers and members necessary for the authorization, execution and
delivery of the Operative Instruments and the performance of all obligations of
the Investor hereunder have been taken or will be taken prior to the Closing.
Each of the Operative Instruments to which the Investor is a party has been duly
authorized, executed and delivered by the Investor, and constitutes a legal,
valid and binding obligation of the Investor, enforceable against the Investor
in accordance with its terms, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights generally and by general
principles of equity (whether enforcement is sought by proceedings in equity or
at law).
Section 5.4 No Default. The execution and delivery of this
Agreement and the Operating Agreement by the Investor and the performance by the
Investor of its obligations thereunder do not (or if not yet executed, upon the
execution and delivery thereof will not) (a) violate the organizational
documents of the Investor; (b) violate or constitute a breach of or default
under any mortgage, indenture, loan agreement, promissory note or other
agreement to which the Investor is a party, or by which the Investor is bound,
or to which any property of the Investor is subject; or (c) conflict with or
violate any law or any regulation, rule, order or decree of any governmental
body, court or administrative agency having jurisdiction over the Investor or
its properties except with respect to clauses (b) and (c) where such conflict,
breach, default or violation would not reasonably be expected to have a Material
Adverse Effect on the Investor.
Section 5.5 No Brokers. In connection with the Investment, the
Investor has not retained or become obligated to any broker or finder.
Section 5.6 Investment Company. The Investor is not, and upon
the purchase of the Preferred Shares and Warrant as herein contemplated, will
not be, an "investment company" or an Entity "controlled" by an "investment
company" as such terms are defined in the Investment Company Act of 1940, as
amended.
Section 5.7 Knowledge and Experience. The Investor has such
knowledge and experience in financial and business matters that the Investor is
capable of evaluating the merits and risks involved in connection with the
Investment.
Section 5.8 Registration. The Preferred Shares and Warrant to
be acquired by the Investor pursuant to this Agreement and the Common Shares to
be received upon conversion of the Preferred Shares and exercise of the Warrant
are being acquired by the Investor for its own account for purposes of
investment and not with a view to, or intention of, distribution thereof in
violation of the Securities Act, or any applicable state securities laws.
<PAGE>
Section 5.9 Current Share Ownership. The Investor and its
Affiliates collectively are the beneficial owners on the date hereof of less
than five percent (5%) of the outstanding Common Shares.
ARTICLE 6 COVENANTS AND UNDERTAKINGS.
Section 6.1 Closings. The Company shall use its reasonable
best efforts to comply with all conditions precedent to the Closings, including,
without limiting the foregoing, the Company shall cause the Articles
Supplementary to have been adopted, to have been filed with the SDAT and to
become effective.
Section 6.2 Expenses of Rothschild Realty, Inc. Except as set
forth in Section 6.3, the Company agrees to reimburse Rothschild at each Closing
for its reasonable out-of-pocket expenses documented to the reasonable
satisfaction of the Company. All such amounts paid pursuant to this Section 6.2
shall be paid by wire transfer of funds immediately available in New York City
to such account(s) as Rothschild shall designate in a written notice delivered
to the Company not less than two Business Days prior to the initial Closing
Date; provided, however, that the Investor, on behalf of the Company, may
directly pay out of the Purchase Price payable hereunder such fees and expenses
to Rothschild; provided further that the aggregate of all such out-of-pocket
expenses for all Closings including, without limitation, the fees and expenses
of counsel to the Investor provided for in Section 6.3 hereof, shall not exceed
$100,000.
Section 6.3 Fees and Expenses of Counsel to the Investor.
Subject to the limitation set forth in Section 6.2, the Company agrees to pay to
counsel to the Investor, at each Closing, reasonable fees and expenses in
connection with services rendered and expenses incurred in connection with the
issuance and sale of Preferred Shares and the Warrant to the Investor. All such
amounts paid pursuant to this Section 6.3 shall be paid by wire transfer of
funds immediately available in New York City to such account(s) as counsel to
the Investor shall designate in a written notice delivered to the Company not
less than two Business Days prior to each Closing Date; provided, however, that
the Investor, on behalf of the Company, may directly pay out of the Purchase
Price hereunder such fees and expenses to counsel to the Investor.
Section 6.4 Use of Proceeds. The Company shall use the
proceeds from the sale of the Preferred Shares to the Investor at each Closing
to purchase an identical number of Series C Preferred Mirror Limited Partnership
Units of Brandywine Operating Partnership, LP (the "Operating Partnership"), as
set forth in the Eighth Amended and Restated Agreement of Limited Partnership of
the Operating Partnership in the Form of Exhibit E attached hereto.
Section 6.5 Transfer Restrictions. The certificates
representing the Preferred Shares and Warrant and the Common Shares received
upon conversion of the Preferred Shares and the exercise of the Warrant shall
bear the following legend:
<PAGE>
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE
SECURITIES LAWS, AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR AN EXEMPTION
THEREFROM.
The Investor may not sell, transfer or dispose of any of the
Preferred Shares, the Warrant or the Common Shares received upon conversion of
the Preferred Shares or exercise of the Warrant (except pursuant to an effective
registration statement under the Securities Act) without first delivering to the
Company an opinion of counsel (reasonably acceptable in form and substance to
the Company) that neither registration nor qualification under the Securities
Act and applicable state securities laws is required in connection with such
transfer and the written agreement of the transferee to be bound by the
provisions of this Section 6.5.
ARTICLE 7 CONDITIONS PRECEDENT TO THE OBLIGATION
OF THE INVESTOR TO CLOSE.
The obligation of the Investor to complete each Closing is
subject, at its option, to the fulfillment on or prior to the related Closing
Date (unless otherwise provided) of the following conditions, any one (1) or
more of which may be waived by it in its sole discretion:
Section 7.1 Representations and Covenants. The representations
and warranties of the Company contained in this Agreement shall be true,
complete and accurate in all material respects on and as of the related Closing
Date with the same force and effect as though made on and as of the related
Closing Date, except for changes contemplated or permitted by this Agreement and
except to the extent that any representation or warranty is made as of a
specified date, in which case, such representation and warranty shall be true
and correct in all material respects as of such date. The Company shall have
performed and complied in all material respects with all covenants and
agreements required by this Agreement to be performed or complied with by the
Company on or prior to the related Closing Date. The Company shall have
delivered to the Investor a certificate, dated the related Closing Date and
signed by the President and Chief Financial Officer of the Company, to the
foregoing effect and stating that all conditions to the Investor's obligations
hereunder have been satisfied.
Section 7.2 Good Standing Certificates. The Company shall have
delivered to the Investor: (i) copies of its Charter, including all amendments
thereto, certified by the SDAT; (ii) a certificate from the SDAT to the effect
that the Company is in good standing and listing all charter documents of the
Company on file in such state; and (iii) a certificate from the Secretary of
State or other appropriate official in each State in which the Company is
qualified to do business to the effect that the Company is in good standing in
such State.
<PAGE>
Section 7.3 Governmental Permits and Approvals. Any and all
Permits necessary for the consummation of the transactions contemplated hereby
shall have been obtained and a copy thereof shall have been delivered to the
Investor except for (a) notice requirements which may be fulfilled subsequent to
the Closing Date and (b) consents, permits, approvals, authorizations, filings
and declarations the failure to obtain or to undertake which will not adversely
affect the ability of the Company to perform its obligations under the Operative
Agreements or any agreement executed in accordance therewith or would not have a
Material Adverse Effect on the Company or its Subsidiaries.
Section 7.4 Legislation. No legislation shall have been
proposed, and approved by a legislative committee, or enacted, and no statute,
law, ordinance, code, rule or regulation shall have been adopted, revised or
interpreted, by any foreign, federal, state, county or local government or any
other governmental, regulatory or administrative agency or authority, which
would require, upon or as a condition to the acquisition of the Preferred Shares
or the Warrant by the Investor, the divestiture or cessation of the conduct of
any business presently conducted by the Company, on the one hand, or by the
Investor, on the other hand, or which, in the good faith judgment of the
Investor, may, individually or in the aggregate, have a Material Adverse Effect
on it or on the Company in the event that the transactions contemplated hereby
are consummated.
Section 7.5 Legal Proceedings. No suit, action, claim,
proceeding or investigation shall have been instituted or threatened by or
before any court or any foreign, federal, state, county or local government or
any other governmental, regulatory or administrative agency or authority seeking
to restrain, prohibit or invalidate the issuance or sale of the Preferred Shares
or the Warrant to the Investor hereunder or the consummation of the transactions
contemplated hereby or to seek damages in connection with such transactions.
Section 7.6 Third Party Consents. All consents, waivers,
licenses, variances, exemptions, franchises, permits, approvals and
authorizations from parties to any contracts and other agreements (including any
amendments and modifications thereto) with the Company which may be required in
connection with the performance by the Company of its obligations under this
Agreement or to assure such contracts and other agreements continue in full
force and effect after the consummation of the transactions contemplated hereby
(without any Breach by the Company or any of its Subsidiaries) shall have been
obtained.
Section 7.7 Share and Warrant Certificates. The Company shall
have tendered to the Investor the share certificate or certificates evidencing
the Preferred Shares, and the certificates for the Warrant, to be purchased on
such Closing Date in accordance with Section 3.1 hereof, registered in the
Investor's name.
Section 7.8 Approval of Counsel to the Investor. The Company
shall furnish to counsel for the Investor such certificates and documents as may
reasonably be requested by counsel to the Investor to enable such counsel to
pass on or evaluate the satisfaction of the conditions set forth in this
<PAGE>
Article 7. All actions and proceedings hereunder and all documents and other
papers required to be delivered by the Company hereunder or in connection with
the consummation of the transactions contemplated hereby, and all other related
matters, shall have been reasonably approved by counsel to the Investor, as to
their form and substance.
Section 7.9 Articles Supplementary. The Articles Supplementary
shall have been accepted for record by the SDAT.
Section 7.10 Operating Agreement. The Company shall have
executed and delivered to the Investor the Operating Agreement.
Section 7.11 Opinion of Counsel. The Investor shall have
received a favorable opinion letter, dated as of the related Closing Date, from
Pepper Hamilton LLP to the effect of the matters contained in Exhibit F. In
rendering such opinion, Pepper Hamilton LLP shall be permitted to rely upon
Ballard Spahr Andrews & Ingersoll, LLP as to matters of Maryland law.
Section 7.12 Listing of Common Shares. The Common Shares
issuable upon conversion of the Preferred Shares and exercise of the Warrant
shall have been approved for listing on the New York Stock Exchange.
Section 7.13 Expenses of Rothschild Realty, Inc. Rothschild
shall have been reimbursed for the expenses to be paid by the Company as
described under Section 6.2.
Section 7.14 Fees and Expenses of Counsel to the Investor.
Provided that counsel to the Investor shall have provided to the Company a copy
of their invoice at least three (3) days prior to the related Closing, counsel
to the Investor shall have received the fees and disbursements to be paid by the
Company as described under Section 6.3.
Section 7.15 Agreement and Waiver. The Company shall have
executed and delivered to the Investor the Agreement and Waiver.
Section 7.16 Subsequent Events. Since the respective dates as
of which information is given in the 1998 10-K, there has not been any change in
the condition (financial or otherwise) or in the earnings, business affairs or
business prospects of the Company and its Subsidiaries considered as one
enterprise, whether or not arising in the ordinary course of business, which has
had, or could reasonably be expected to have, a Material Adverse Effect on the
Company.
Section 7.17 Trustee and Officer Insurance. The Company shall
have in place director and officer insurance as provided under Section 2.4 of
the Operating Agreement.
Section 7.18 Use of Proceeds. The Company shall provide
evidence reasonably acceptable to the Investor that the transaction described in
Section 6.4 has occurred.
<PAGE>
Section 7.19 Section 4(d) Trustee. None of the events
enumerated in Section 4(d) of the Articles Supplementary which provide for the
election of the Section 4(d) Trustee (as defined in the Articles Supplementary)
shall have occurred.
ARTICLE 8 CONDITIONS PRECEDENT TO THE OBLIGATION OF
THE COMPANY TO CLOSE.
The obligation of the Company to complete each Closing is subject, at
its option, to the fulfillment on or prior to the related Closing Date of the
following conditions, any one (1) or more of which may be waived it in its sole
discretion:
Section 8.1 Representations and Covenants. The representations
and warranties of the Investor contained in this Agreement shall be true,
complete and accurate in all material respects on and as of the related Closing
Date with the same force and effect as though made on and as of the related
Closing Date, except for changes contemplated or permitted by this Agreement and
except to the extent that any representation or warranty is made as of a
specified date, in which case, such representation and warranty shall be true,
complete and accurate in all material respects as of such date. The Investor
shall have performed and complied in all material respects with all covenants
and agreements required by this Agreement to be performed or complied with by it
on or prior to the related Closing Date. The Investor shall have delivered to
the Company a certificate, dated the related Closing Date and signed by an
officer of the Investor to the foregoing effect and stating that all conditions
to the Company's obligations hereunder have been satisfied.
Section 8.2 Governmental Permits and Approvals. Any and all
Permits necessary for the consummation of the transactions contemplated hereby
shall have been obtained.
Section 8.3 Legal Proceedings. No suit, action, claim,
proceeding or investigation shall have been instituted or threatened before any
court or any foreign, federal, state, county or local government or any other
governmental, regulatory or administrative agency or authority seeking to
restrain, prohibit or invalidate the sale of the Preferred Shares or the Warrant
to the Investor hereunder or the consummation of the transactions contemplated
hereby or to seek damages in connection with such transactions.
Section 8.4 Third Party Consents. All consents, waivers,
licenses, variances, exemptions, franchises, permits, approvals and
authorizations from parties to any contracts and other agreements (including any
amendments and modifications thereto) with the Investor which may be required in
connection with the performance by the Investor of its obligations under this
Agreement shall have been obtained.
Section 8.5 Purchase Price. The Investor shall have tendered
payment for the Preferred Shares in the amount and in the manner specified in
Section 3.1 hereof.
<PAGE>
Section 8.6 Approval of Counsel to the Company. The Investor
shall furnish to counsel for the Company such certificates and documents as may
reasonably be requested by counsel to the Company to enable such counsel to pass
on or evaluate the satisfaction of the conditions set forth in this Article 8.
All actions and proceedings hereunder and all documents or other papers required
to be delivered by the Investor hereunder or in connection with the consummation
of the transactions contemplated hereby, and all other related matters, shall be
subject to the reasonable approval of Pepper Hamilton LLP, counsel to the
Company, as to their form and substance.
Section 8.7 Listing of Common Shares. The Common Shares
issuable upon conversion of the Preferred Shares and exercise of the Warrant
shall have been approved for listing on the New York Stock Exchange.
ARTICLE 9 ASSIGNMENT.
Section 9.1 Assignability by Investor. Subject to the terms of
the Agreement and Waiver, the Investor may, without the consent or approval of
the Company, but with written notice to the Company, assign its rights and
obligations under this Agreement to a Person to whom the Investor assigns its
interest in the Preferred Shares or the Warrant, pro rata based upon the
percentage of the Preferred Shares or the Warrant transferred, provided that
such assignee agrees in writing to be bound by the terms of this Agreement.
Section 9.2 Assignability by the Company. Without the prior
written consent of the Investor, in the sole and absolute discretion of the
Investor, the Company may not assign or delegate its rights or obligations
hereunder except in connection with a merger or consolidation of the Company or
a sale by the Company of all or substantially all of its assets or a similar
transaction, so long as the consummation of such merger, consolidation, sale or
similar transaction is in compliance with any applicable terms of the Operative
Instruments (including, without limitation, Section 7(a) of the Operating
Agreement and Section 4(m) of the Articles Supplementary).
Section 9.3 Binding Agreement. Subject to the provisions of
Sections 9.1 and 9.2, this Agreement shall be binding upon the heirs, successors
and assigns of the parties.
ARTICLE 10 MISCELLANEOUS.
Section 10.1 Applicable Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of New York as applied
between residents of such State entering into contracts to be performed wholly
within such State.
Section 10.2 Notices. All notices hereunder shall be in
writing and shall be given: (a) if to the Company, at 14 Campus Boulevard, Suite
100, Newtown Square, Pennsylvania 19073, Attention: President and Chief
<PAGE>
Executive Officer and General Counsel, or such other address or addresses of
which the Investor shall have been given notice, with copies to Pepper Hamilton
LLP, 3000 Two Logan Square, Eighteenth and Arch Streets, Philadelphia,
Pennsylvania 19103-2799, Attention: Michael Friedman, Esq., or such other
address of which the Investor shall have been given notice; and (b) if to the
Investor, at Rothschild Realty Inc., 1251 Avenue of the Americas, New York, New
York 10020, Attention: D. Pike Aloian, or such other address of which the
Company shall have been given notice, with copies to Schulte Roth & Zabel LLP,
900 Third Avenue, New York, New York 10022, Attention: Marc Weingarten, Esq., or
such other address of which the Company shall have been given notice. Any notice
shall be deemed to have been given if personally delivered or sent by United
States mail or by commercial courier or delivery service or by telegram or telex
and shall be deemed received, unless earlier received, (i) if sent by certified
or registered mail, return receipt requested, three business days after deposit
in the mail, postage prepaid, (ii) if sent by United States Express Mail or by
commercial courier or delivery service, one Business Day after delivery to a
United States Post Office or delivery service, postage prepaid, (iii) if sent by
telegram, telex or facsimile transmission, when receipt is acknowledged by
answerback, and (iv) if delivered by hand, on the date of receipt.
Section 10.3 Entire Agreement; Amendments. This Agreement and
other agreements referred to herein set forth the entire understanding of the
parties hereto with respect to the subject matter hereof and thereof and
supersede any prior agreements or understandings with respect to the subject
matter hereof and thereof, and this Agreement shall not be amended except by an
instrument in writing executed by the Company and the Investor.
Section 10.4 Remedies for Breaches of This Agreement.
Section 10.4.1 Survival of Certain Provisions. All of
the representations and warranties of the Company contained in Article 4 above
and all of the covenants and undertakings of the Company contained in Article 6
above shall survive the Closings hereunder and continue in full force and effect
until the second anniversary of the final Closing, provided that the
representations and warranties contained in Sections 4.11, 4.12 and 4.14 shall
survive the Closings hereunder and continue in full force and effect until the
expiration of the applicable statutes of limitation.
Section 10.4.2 Indemnification Provisions. In the
event that either the Company or the Investor breaches any of its
representations, warranties, and covenants contained herein, provided that the
non-breaching party makes a written claim for indemnification against the
breaching party pursuant to Section 10.2, then the breaching party agrees to
indemnify the non-breaching party from and against the entirety of any Adverse
Consequences the non-breaching party may suffer through and after the date of
the claim for indemnification (including any Adverse Consequences the
non-breaching party, its members or shareholders may suffer after the end of any
applicable survival period, provided that notice of any claim is delivered prior
to the end of the survival period) resulting from, arising out of, relating to,
in the nature of, or caused by such breach; provided that the Company's
obligation to indemnify the Investor shall not exceed the sum of (i) the amount
<PAGE>
of funds invested in the Company by the Investor at any time a claim for
indemnification is made and (ii) legal fees and collection costs associated with
any such claim. In addition to the indemnification rights provided for herein,
the non-breaching party shall also have the right to all such remedies to which
it is entitled as a matter of law or equity. No failure or delay by the
non-breaching party in exercising any right, power or privilege shall operate as
a waiver thereof nor shall any single or partial exercise thereof preclude any
other or further exercise of any right, power or privilege.
Section 10.4.3 Matters Involving Third Parties.
(i) If any third party shall notify any party
entitled to be indemnified hereunder (the "Indemnified Party") with
respect to any matter (a "Third Party Claim") which may give rise to a
claim for indemnification against the Company or the Investor (the
"Indemnifying Party") under this Section 10.4, then the Indemnified
Party shall promptly notify each Indemnifying Party thereof in writing;
provided, however, that no delay on the part of the Indemnified Party
in notifying any Indemnifying Party shall relieve the Indemnifying
Party from any obligation hereunder unless (and then solely to the
extent) the Indemnifying Party thereby is prejudiced.
(ii) Any Indemnifying Party will have the right to
assume the defense of the Third Party Claim with counsel of his or its
choice reasonably satisfactory to the Indemnified Party at any time
within 15 days after the Indemnified Party has given notice of the
Third Party Claim; provided, however, that the Indemnifying Party must
conduct the defense of the Third Party Claim actively and diligently
thereafter in order to preserve its rights in this regard; and provided
further that the Indemnified Party may retain separate co-counsel at
its sole cost and expense and participate in the defense of the Third
Party Claim.
(iii) So long as the Indemnifying Party has assumed
and is conducting the defense of the Third Party Claim in accordance
with Section 10.4.3(ii) above, the Indemnifying Party will not consent
to the entry of any judgment or enter into any settlement with respect
to the Third Party Claim without the prior written consent of the
Indemnified Party (not to be withheld unreasonably) unless the judgment
or proposed settlement involves only the payment of money damages by
one or more of the Indemnifying Parties and does not impose an
injunction or other equitable relief upon the Indemnified Party.
(iv) So long as the Indemnifying Party has assumed
and is conducting the defense of the Third Party Claim in accordance
with Section 10.4.3(ii) above, the Indemnified Party will not consent
to the entry of any judgment or enter into any settlement with respect
to the Third Party Claim without the prior written consent of the
Indemnifying Party (not to be withheld unreasonably).
<PAGE>
(v) In the event none of the Indemnifying Parties
assumes and conducts the defense of the Third Party Claim in accordance
with Section 10.4.3(ii) above, (A) the Indemnified Party may defend
against, and consent to the entry of any judgment or enter into any
settlement with respect to, the Third Party Claim in any manner he or
it reasonably may deem appropriate (and the Indemnified Party need not
consult with, or obtain any consent from, any Indemnifying Party in
connection therewith) and (B) the Indemnifying Parties will remain
responsible for any Adverse Consequences the Indemnified Party may
suffer resulting from, arising out of, relating to, in the nature of,
or caused by the Third Party Claim to the fullest extent provided in
this Section 10.4.
Section 10.5 Confidentiality. The Investor shall not use any
Confidential Information for any purpose other than evaluating the Investment
and the Investor will not divulge, furnish or make available to any other person
or entity other than the Investor's legal counsel, accountants and designated
advisors, and a limited number of the Investor's officers and employees and the
officers and employees of any member of the Investor, solely to the extent
necessary in connection with the evaluation and consummation of the Investment;
such persons and entities shall be informed by the Investor of the confidential
nature of the Confidential Information and shall be directed to treat such
Confidential Information confidentially. Except as required by law, without the
prior written consent of the other party or until such time as a mutually
agreeable public announcement is made, no party hereto will disclose to any
Person other than its Affiliates, attorneys, accountants and other advisors
either the fact that discussion or negotiations are taking place concerning the
Investment or any of the terms, conditions or other facts with respect to the
Investment, including status or that the Confidential Information has been made
available to the Investor and its Representatives.
In the event that the Investor is requested or required (by
interrogatories, requests for information or documents, subpoena, civil
investigative demand or similar process) to disclose any of the Confidential
Information, the Investor will provide the Company with prompt notice of such
request or requirements, and the Investor shall cooperate with the Company in
seeking to legally avoid such disclosure. If, in the absence of a protective
order, the Investor is legally compelled, in the opinion of its counsel, to
disclose any of the information, the Company shall either seek and obtain
appropriate protective orders against such disclosure or shall hereby be deemed
to waive the Investor's compliance with the provisions of this Agreement to the
extent necessary to satisfy such request or requirement.
Section 10.6 Standstill. Subject to the provisions of the
sentence next following, the Investor agrees that for such period of time as it
and its Affiliates beneficially own at least fifty percent (50%) of the
outstanding Preferred Shares, none of the Investor, Rothschild, any of their
officers, members, partners, stockholders or subsidiaries and its Affiliates
shall (a) acquire, offer to acquire, or agree to acquire, directly or
indirectly, by purchase or otherwise, or sell short, any securities, direct or
indirect rights or options to acquire any securities, or securities or
instruments convertible into voting securities, of the Company, without the
consent of the Company (provided, however, that the foregoing shall not prohibit
<PAGE>
the acquisition of securities of the Company as provided in Articles 2 and 3 of
this Agreement); (b) make, or in any way participate, directly or indirectly, in
any "solicitation" of "proxies" to vote (as such terms are used in the proxy
rules of the SEC) securities of the Company, or seek to advise or influence any
person or entity with respect to any voting of any securities of the Company;
(c) form, join or in any way participate in a "group" within the meaning of
Section 13(d)(3) of the Exchange Act, with respect to any voting securities of
the Company; (d) make any public announcement with respect to or make or submit
a proposal or offer (with or without conditions) for the securities or assets of
the Company or any extraordinary transaction involving the Company or any of its
Subsidiaries; (e) submit or effect any filing or application, or seek to obtain
any permit, consent or agreement, approval or other action, required by or from
any regulatory agency with respect to an acquisition of the Company or any of
its securities or assets; (f) otherwise act alone or in concert with others to
seek to control the management, board of trustees or policies of the Company; or
(g) propose any of the foregoing unless and until such proposal is specifically
invited by the Company. Based on the representations by Rothschild to the
Company that Affiliates of Rothschild (which representation Rothschild hereby
reaffirms) not under control of Rothschild and The Public Employees Retirement
System of Ohio ("OPERS") have no access to any of the internal information or
files of Rothschild and receive no information, recommendations or advice from
Rothschild, the Company agrees that the prohibitions of the preceding sentence
shall not apply to any Affiliates of Rothschild that are not under the control
of Rothschild and are engaged in the regular business of trading in publicly
traded securities or to OPERS, so long as such affiliates and OPERS have not
received, or been given access to, any of the Confidential Information and have
not received any instructions, recommendations or advice pertaining to an
investment in or control of the Company from any party having access to any of
the Confidential Information.
Section 10.7 Lock-Up. For a period of one year, commencing on
the date of this Agreement, the Investor shall not sell, transfer, convey,
assign, pledge or hypothecate any of the Preferred Shares or the Warrant or any
Common Shares obtained upon conversion of any Preferred Shares or exercise of
the Warrant; provided that this Section 10.7 shall not apply to any sale,
transfer, conveyance, assignment, pledge or hypothecation between the Investor
and any of its Affiliates or between or among Affiliates of the Investor;
provided, however, that all such Affiliates shall be similarly restricted for
such one-year period.
Section 10.8 Termination. This Agreement may be terminated at
any time prior to the date on which all of the Preferred Shares have been sold
hereunder:
(a) by the mutual written consent of the Investor and the
Company;
(b) by the Investor if the entire amount of Preferred Shares
to be sold by the Company to the Investor pursuant hereto has not been sold on
or prior to December 31, 1999; provided that the Investor is not in material
breach of any of its representations, warranties, covenants or agreements
contained in this Agreement. In the event of termination by the Investor
pursuant to this Section 10.8, written notice thereof shall forthwith be
delivered to the Company;
<PAGE>
(c) by the Investor, if there is a material breach of any
material representation or warranty set forth in Article 4 hereof or any
covenant or agreement to be complied with or performed by the Company pursuant
to the terms of this Agreement, provided that the Investor may not terminate
this Agreement prior to the Closing unless the Company has not cured such breach
after 10 days' notice thereof; or
(d) by the Company, if there is a material breach of any
material representation or warranty set forth in Article 5 hereof or any
covenant or agreement to be complied with or performed by the Investor pursuant
to the terms of this Agreement, provided that the Company may not terminate this
Agreement prior to the Closing unless the Investor has not cured such breach
after 10 days' notice thereof.
Section 10.9 Counterparts. This Agreement may be executed in
more than one counterpart, each of which may be executed by fewer than all the
parties, with the same effect as if the parties executed one counterpart as of
the day and year first above written.
Section 10.10 Attorneys' Fees. In any action or proceeding
brought to enforce any provisions of this Agreement, or where any provision
hereof is validly asserted as a defense, the successful party shall be entitled
to recover reasonable attorneys' fees in addition to its reasonable costs and
expenses and any other available remedy.
Section 10.11 Non-Recourse. No recourse shall be had for any
of the obligations of the Company hereunder or for any claim based thereon or
otherwise in respect thereof, against any past, present or future trustee,
shareholder, officer or employee of the Company, whether by virtue of any
statute or rule of law, or by the enforcement of any assessment or penalty or
otherwise, all of such liability being expressly waived and released by the
Investor on behalf of itself and its Affiliates.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have hereunto set their
hands and seals as of the day and year first above written.
BRANDYWINE REALTY TRUST
By: /s/ Gerard H. Sweeney
--------------------------------------
Name: Gerard H. Sweeney
Title: President and Chief Executive Officer
FIVE ARROWS REALTY SECURITIES III L.L.C.
By: /s/ D. Pike Aloian
--------------------------------------
Name: D. Pike Aloian
Title: Manager
The undersigned hereby acknowledges the terms hereof and
hereby agrees to be bound by the following sections hereof: Sections 10.5 and
10.6.
ROTHSCHILD REALTY INC.
By: /s/ D. Pike Aloian
--------------------------------------
Name: D. Pike Aloian
Title:
<PAGE>
THIS WARRANT AND ANY SECURITIES ACQUIRED UPON EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES
LAW OF ANY STATE AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND
APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION TO THE
REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH LAWS. THIS WARRANT AND SUCH
SECURITIES MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT IN
COMPLIANCE WITH THE CONDITIONS SPECIFIED IN THIS WARRANT AND IN THE INVESTMENT
AGREEMENT, DATED AS OF APRIL 19, 1999, BETWEEN BRANDYWINE REALTY TRUST (THE
"COMPANY") AND FIVE ARROWS REALTY SECURITIES III L.L.C., A COPY OF WHICH WILL BE
MADE AVAILABLE BY THE COMPANY UPON REQUEST.
BRANDYWINE REALTY TRUST
COMMON SHARES PURCHASE WARRANT
No. W-1 April 19, 1999
Void after April 19, 2006 Warrant to Purchase 500,000
Common Shares
BRANDYWINE REALTY TRUST, a Maryland real estate investment
trust (the "Company"), for value received, hereby certifies that FIVE ARROWS
REALTY SECURITIES III L.L.C., or registered assigns (the "Holder"), is entitled
to purchase from the Company 500,000 duly authorized, validly issued, fully paid
and nonassessable shares of beneficial interest, par value $.01 per share, of
the Company (the "Common Shares"), at a purchase price, subject to Section 3.2
herein, of $24.00 per share, at any time or from time to time prior to 5:00
P.M., New York City time, on April 19, 2006 (the "Expiration Date"), all subject
to the terms, conditions and adjustments set forth below in this Warrant.
This Warrant is originally issued pursuant to the terms of a
certain Investment Agreement, dated as of the date hereof, between the Company
and Five Arrows Realty Securities III L.L.C. (the "Purchase Agreement").
Capitalized terms used herein and not otherwise defined herein shall have the
meanings assigned such terms in the Purchase Agreement.
1. Definitions. As used herein, unless the context otherwise
requires, the following terms shall have the meanings indicated:
"Additional Common Shares" shall mean all Common Shares issued
or sold (or, pursuant to Section 3.3, deemed to be issued) by the Company after
the date hereof, and prior to the twenty-fourth month anniversary of the date
this Warrant is originally issued, whether or not subsequently reacquired or
retired by the Company provided that the following shares shall not constitute
Additional Common Shares:
<PAGE>
(a) (i) shares issued upon the exercise of this Warrant or
upon the conversion of the Series B Senior Cumulative Convertible
Preferred Shares and (ii) such number of additional shares as may
become issuable upon the exercise of this Warrant or upon conversion of
the Series B Senior Cumulative Convertible Preferred Shares by reason
of adjustments required pursuant to the anti-dilution provisions
applicable to this Warrant or the Series B Senior Cumulative
Convertible Preferred Shares as in effect on the date hereof, and
(b) (i) shares issued in the acquisition by the Company or a
subsidiary of one hundred percent (100%) of a public company by way of
merger, consolidation or exchange offer, (ii) shares issued pursuant to
a tender or exchange offer for one hundred percent (100%) of a public
company, (iii) shares issued upon the exercise, conversion or
redemption of options, warrants or units existing or outstanding on
January 11, 1999 or the issuance of shares pursuant to contractual
commitments in effect as of January 11, 1999, (iv) shares issued as
awards to trustees or employees of the Company or entities in which the
Company owns, directly or indirectly, at least a 50% economic interest
for recruitment purposes or pursuant to an equity incentive plan,
provided that the number of Common Shares, plus the number of Common
Shares issuable upon the exercise of the options or warrants under the
preceding clause (iii) issued in favor of such employees or trustees,
shall not exceed 5,000,000 Common Shares or (v) shares issued in the
acquisition of property or equity interests in property (e.g.,
partnership interests of a property-owning partnership) by the Company
or a subsidiary of the Company.
"Business Day" shall mean any day other than a Saturday or a
Sunday or a day on which commercial banking institutions in the City of New York
are authorized by law to be closed. Any reference to "days" (unless Business
Days are specified) shall mean calendar days.
"Commission" shall mean the Securities and Exchange Commission
or any successor agency having jurisdiction to enforce the Securities Act.
"Common Shares" shall have the meaning assigned to it in the
introduction to this Warrant, such term to include any shares of beneficial
interest into which such Common Shares shall have been changed or any shares of
beneficial interest resulting from any reclassification of such Common Shares.
"Company" shall have the meaning assigned to it in the
introduction to this Warrant, such term to include any trust, corporation or
other entity which shall succeed to or assume the obligations of the Company
hereunder in compliance with Section 4.
"Convertible Securities" shall mean any evidences of
indebtedness, shares of beneficial interest (other than Common Shares) or other
securities directly or indirectly convertible into, redeemable for or
exchangeable for Additional Common Shares.
<PAGE>
"Current Market Price" shall mean, on any date specified
herein, the average of the daily closing prices for the five consecutive Trading
Days preceding such date specified herein.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended from time to time, and the rules and regulations thereunder, or any
successor statute.
"Expiration Date" shall have the meaning assigned to it in the
introduction to this Warrant.
"Fair Value" shall mean, on any date specified herein (i) in
the case of cash, the dollar amount thereof, (ii) in the case of a security, the
Current Market Price, and (iii) in all other cases, the fair value thereof (as
of a date which is within 20 days of the date as of which the determination is
to be made) determined in good faith jointly by the Company and the Holder;
provided, however, that if such parties are unable to reach agreement within a
reasonable period of time, the Fair Value shall be determined in good faith, by
an independent investment banking firm selected jointly by the Company and the
Holder or, if that selection cannot be made within ten days, by an independent
investment banking firm selected by the American Arbitration Association in
accordance with its rules, and provided further, that the Company and the Holder
shall each pay one-half of all of the fees and expenses of any third parties
incurred in connection with determining the Fair Value.
"Holder" shall have the meaning assigned to it in the
introduction to this Warrant.
"Operating Agreement" shall mean the Operating Agreement dated
as of April 19, 1999, between the Company and Five Arrows Realty Securities III
L.L.C.
"Options" shall mean any rights, options or warrants to
subscribe for, purchase or otherwise acquire either Additional Common Shares or
Convertible Securities.
"Other Securities" shall mean any shares of beneficial
interest (other than Common Shares) and other securities of the Company or any
other Person (corporate or otherwise) which the holders of the Warrants at any
time shall be entitled to receive, or shall have received, upon the exercise of
the Warrants, in lieu of or in addition to Common Shares, or which at any time
shall be issuable or shall have been issued in exchange for or in replacement of
Common Shares or Other Securities pursuant to Section 4 or otherwise.
"Person" shall mean any individual, firm, partnership,
corporation, trust, joint venture, association, joint stock company, limited
liability company, unincorporated organization or any other entity or
organization, including a government or agency or political subdivision thereof,
and shall include any successor (by merger or otherwise) of such entity.
"Purchase Agreement" shall have the meaning assigned to it in
the introduction to this Warrant.
<PAGE>
"Purchase Price" shall mean initially $24.00 per share,
subject to adjustment and readjustment from time to time as provided in Section
3, and, as so adjusted or readjusted, shall remain in effect until a further
adjustment or readjustment thereof is required by Section 3.
"Restricted Securities" shall mean (i) any Warrants bearing
the applicable legend set forth in Section 10.1, (ii) any Common Shares (or
Other Securities) issued or issuable upon the exercise of Warrants which are
(or, upon issuance, will be) evidenced by a certificate or certificates bearing
the applicable legend set forth in such Section, and (iii) any Common Shares (or
Other Securities) issued subsequent to the exercise of any of the Warrants as a
distribution with respect to, or resulting from a subdivision of the outstanding
Common Shares (or other Securities) into a greater number of shares by
reclassification, share splits or otherwise, or in exchange for or in
replacement of the Common Shares (or Other Securities) issued upon such
exercise, which are evidenced by a certificate or certificates bearing the
applicable legend set forth in such Section.
"Rights" shall have the meaning assigned to it in Section 3.9.
"Securities Act" shall mean the Securities Act of 1933, as
amended from time to time, and the rules and regulations thereunder, or any
successor statute.
"Series B Senior Cumulative Convertible Preferred Shares"
shall mean the Company's 8.75% Series B Senior Cumulative Convertible Preferred
Shares, $.01 par value per share.
"Trading Day" shall mean a day on which the Common Shares are
traded on the New York Stock Exchange, or other national exchange or quotation
system used to determine the Current Market Price.
"Warrant" shall mean this Warrant.
2. Exercise of Warrant.
2.1. Manner of Exercise; Payment of the Purchase Price. (a)
This Warrant may be exercised by the Holder hereof, in whole or in part, at any
time or from time to time prior to the Expiration Date, by surrendering to the
Company at its principal office this Warrant, with the form of Election to
Purchase Shares attached hereto as Exhibit A (or a reasonable facsimile thereof)
duly executed by the Holder and accompanied by payment of the Purchase Price for
the number of Common Shares specified in such form.
(b) Payment of the Purchase Price may be made as follows (or
by any combination of the following): (i) in United States currency by cash or
delivery of a certified check or bank draft payable to the order of the Company
or by wire transfer to the Company, (ii) by cancellation of such number of the
Common Shares otherwise issuable to the Holder upon such exercise as shall be
specified in such Election to Purchase Shares, such that the excess of the
aggregate Current Market Price of such specified number of shares on the date of
exercise over the portion of the Purchase Price attributable to such shares
shall equal the Purchase Price attributable to the Common Shares to be issued
upon such exercise, in which case such amount shall be deemed to have been paid
to the Company and the number of shares issuable upon such exercise shall be
<PAGE>
reduced by such specified number, or (iii) by surrender to the Company for
cancellation certificates representing Common Shares of the Company owned by the
Holder (properly endorsed for transfer in blank) having an aggregate Current
Market Price on the date of Warrant exercise equal to the Purchase Price.
2.2. When Exercise Effective. Each exercise of this Warrant
shall be deemed to have been effected immediately prior to the close of business
on the Business Day on which this Warrant shall have been surrendered to, and
the Purchase Price shall have been received by, the Company as provided in
Section 2.1, and at such time the Person or Persons in whose name or names any
certificate or certificates for Common Shares (or Other Securities) shall be
issuable upon such exercise as provided in Section 2.3 shall be deemed to have
become the holder or holders of record thereof for all purposes.
2.3. Delivery of Share Certificates, etc.; Charges, Taxes and
Expenses. (a) As soon as practicable after each exercise of this Warrant, in
whole or in part, and in any event within three Trading Days thereafter, the
Company shall cause to be issued in the name of and delivered to the Holder
hereof or, subject to Section 10, as the Holder may direct,
(i) a certificate or certificates for the number of Common
Shares (or Other Securities) to which the Holder shall be entitled upon
such exercise plus, in lieu of issuance of any fractional share to
which the Holder would otherwise be entitled, if any, a check for the
amount of cash equal to the same fraction multiplied by the Current
Market Price per share on the date of Warrant exercise, and
(ii) in case such exercise is for less than all of the Common
Shares purchasable under this Warrant, a new Warrant or Warrants of
like tenor, for the balance of the Common Shares purchasable hereunder.
(b) An issuance of certificates for Common Shares upon the
exercise of this Warrant shall be made without charge to the Holder
hereof for any issue or transfer tax or other incidental expense, in
respect of the issuance of such certificates, all of which such taxes
and expenses shall be paid by the Company; provided, however, that the
Company 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
Holder hereof, and no such issue or delivery shall be made unless and
until the person requesting such issue or delivery has paid to the
Company the amount of any such tax or established, to the reasonable
satisfaction of the Company, that such tax has been paid.
3. Adjustment of Common Shares Issuable Upon Exercise.
3.1. Adjustment of Number of Shares.
Upon each adjustment of the Purchase Price as a
result of the calculations made in this Section 3, this Warrant shall thereafter
evidence the right to receive, at the adjusted Purchase Price, that number of
Common Shares (calculated to the nearest one-tenth) obtained by dividing (i) the
<PAGE>
product of the aggregate number of shares covered by this Warrant immediately
prior to such adjustment and the Purchase Price in effect immediately prior to
such adjustment of the Purchase Price by (ii) the Purchase Price in effect
immediately after such adjustment of the Purchase Price.
3.2. Adjustment of Purchase Price.
3.2.1. Below Purchase Price. In case the Company, before (but
not after) the twenty-fourth-month anniversary of the date hereof, shall issue
or sell Additional Common Shares (including Additional Common Shares deemed to
be issued pursuant to Section 3.3 but excluding Additional Common Shares
purchasable upon the exercise of Rights referred to in Section 3.9) without
consideration or for a consideration per share (without taking into account
customary underwriters' or placement agents' discounts) less than the Purchase
Price in effect immediately prior to such issue or sale, then the Purchase Price
shall be reduced, concurrently with such issue or sale, to the amount of
consideration for such issuance or sale (or, if for no consideration, to zero).
3.2.2. Extraordinary Distributions. In case the Company at any
time or from time to time after the date hereof shall distribute to all holders
of Common Shares evidence of its indebtedness or assets other than (a) a
distribution payable in Common Shares or (b) a Regular Quarterly Dividend, or
(c) a distribution of Rights referred to in Section 3.9 hereof, then, in each
such case, subject to Section 3.7, the Purchase Price in effect immediately
prior to the close of business on the record date fixed for the determination of
holders of any class of securities entitled to receive such distribution shall
be reduced, effective as of the close of business on such record date, to a
price determined by multiplying such Purchase Price by a fraction
(x) the numerator of which shall be the Current Market Price
in effect on such record date or, if the Common Shares trade on an
ex-distribution basis, on the date prior to the commencement of
ex-distribution trading, less the Fair Value of such distribution
applicable to one Common Share, and
(y) the denominator of which shall be such Current Market
Price,
3.3. Treatment of Options and Convertible Securities. In case
the Company at any time or from time to time after the date hereof shall issue,
sell, grant or assume, or shall fix a record date for the determination of
holders of any class of securities of the Company entitled to receive, any
Options or Convertible Securities (whether or not the rights thereunder are
immediately exercisable), then, and in each such case, the maximum number of
Additional Common Shares (as set forth in the instrument relating thereto,
without regard to any provisions contained therein for a subsequent adjustment
of such number) issuable upon the exercise of such Options or, in the case of
Convertible Securities and Options therefor, the conversion or exchange of such
Convertible Securities, shall be deemed to be Additional Common Shares issued as
of the time of such issue, sale, grant or assumption or, in case such a record
date shall have been fixed, as of the close of business on such record date (or,
if the Common Shares trade on an ex-distribution basis, on the date prior to the
commencement of ex-distribution trading), provided that such Additional Common
Shares shall not be deemed to have been issued (i) unless the consideration per
<PAGE>
share (determined pursuant to Section 3.5) of such shares would be less than the
Current Market Price (or, in the case of an adjustment pursuant to Section
3.2.1, less than the Purchase Price) in effect on the date of and immediately
prior to such issue, sale, grant or assumption or immediately prior to the close
of business on such record date (or, if the Common Shares trade on an
ex-distribution basis, on the date prior to the commencement of ex-distribution
trading), as the case may be, and (ii) such Additional Common Shares are not
purchasable pursuant to Rights referred to in Section 3.9, and provided,
further, that in any such case in which Additional Common Shares are deemed to
be issued,
(a) whether or not the Additional Common Shares underlying
such Options or Convertible Securities are deemed to be issued, no
further adjustment of the Purchase Price shall be made upon the
subsequent issue or sale of Convertible Securities or Common Shares
upon the exercise of such Options or the conversion or exchange of such
Convertible Securities, except in the case of any such Options or
Convertible Securities which contain provisions requiring an
adjustment, subsequent to the date of the issue or sale thereof, of the
number of Additional Common Shares issuable upon the exercise of such
Options or the conversion or exchange of such Convertible Securities by
reason of (x) a change of control of the Company, (y) the acquisition
by any Person or group of Persons of any specified number or percentage
of the voting securities of the Company or (z) any similar event or
occurrence, each such case to be deemed hereunder to involve a separate
issuance of Additional Common Shares, Options or Convertible
Securities, as the case may be;
(b) if such Options or Convertible Securities by their terms
provide, with the passage of time or otherwise, for any increase in the
consideration payable to the Company, or decrease in the number of
Additional Common Shares issuable, upon the exercise, conversion or
exchange thereof (by change of rate or otherwise), the Purchase Price
computed upon the original issue, sale, grant or assumption thereof (or
upon the occurrence of the record date, or date prior to the
commencement of ex-distribution trading, as the case may be, with
respect thereto), and any subsequent adjustments based thereon, shall,
upon any such increase or decrease becoming effective, be recomputed to
reflect such increase or decrease insofar as it affects such Options,
or the rights of conversion or exchange under such Convertible
Securities, which are outstanding at such time;
(c) upon the expiration (or purchase by the Company and
cancellation or retirement) of any such Options which shall not have
been exercised or the expiration of any rights of conversion or
exchange under any such Convertible Securities which (or purchase by
the Company and cancellation or retirement of any such Convertible
Securities the rights of conversion or exchange under which) shall not
have been exercised, the Purchase Price computed upon the original
issue, sale, grant or assumption thereof (or upon the occurrence of the
record date, or date prior to the commencement of ex-distribution
trading, as the case may be, with respect thereto), and any subsequent
adjustments based thereon, shall, upon such expiration (or such
cancellation or retirement, as the case may be), be recomputed as if:
<PAGE>
(i) in the case of Options for Common Shares or
Convertible Securities, the only Additional Common Shares
issued or sold were the Additional Common Shares, if any,
actually issued or sold upon the exercise of such Options or
the conversion or exchange of such Convertible Securities and
the consideration received therefor was the consideration
actually received by the Company for the issue, sale, grant or
assumption of all such Options, whether or not exercised, plus
the consideration actually received by the Company upon such
exercise, or for the issue or sale of all such Convertible
Securities which were actually converted or exchanged, plus
the additional consideration, if any, actually received by the
Company upon such conversion or exchange, and
(ii) in the case of Options for Convertible
Securities, only the Convertible Securities, if any, actually
issued or sold upon the exercise of such Options were issued
at the time of the issue or sale, grant or assumption of such
Options, and the consideration received by the Company for the
Additional Common Shares deemed to have then been issued was
the consideration actually received by the Company for the
issue, sale, grant or assumption of all such Options, whether
or not exercised, plus the consideration deemed to have been
received by the Company (pursuant to Section 3.5) upon the
issue or sale of such Convertible Securities with respect to
which such Options were actually exercised;
(d) no readjustment pursuant to subdivision (b) or (c) above
shall have the effect of increasing the Purchase Price by an amount in
excess of the amount of the adjustment thereof originally made in
respect of the issue, sale, grant or assumption of such Options or
Convertible Securities; and
(e) in the case of any such Options which expire by their
terms not more than 30 days after the date of issue, sale, grant or
assumption thereof, no adjustment of the Purchase Price shall be made
until the expiration or exercise of all such Options, whereupon such
adjustment shall be made in the manner provided in subdivision (c)
above.
3.4. Treatment of Share Distributions, Share Splits, etc. In
case the Company at any time or from time to time after the date hereof shall
declare or pay any distribution on the Common Shares payable in Common Shares,
or shall effect a subdivision of the outstanding Common Shares into a greater
number of Common Shares (by reclassification or otherwise than by payment of a
distribution in Common Shares), then the Purchase Price in effect immediately
prior to such action shall be proportionately reduced and the number of Common
Shares issuable upon exercise of this Warrant shall be proportionately
increased.
3.5. Computation of Consideration. For the purposes of this
Section 3,
(a) the consideration for the issue or sale of any Additional
Common Shares shall, irrespective of the accounting treatment of such
consideration,
<PAGE>
(i) insofar as it consists of cash, be computed at
the amount of cash payable to the Company, without deducting
any expenses paid or incurred by the Company or any
commissions or compensations paid or concessions or discounts
allowed to underwriters, dealers or others performing similar
services in connection with such issue or sale,
(ii) insofar as it consists of property (including
securities) other than cash, be computed at the Fair Value
thereof at the time of such issue or sale, and
(iii) in case Additional Common Shares are issued or
sold together with other shares of beneficial interest or
securities or other assets of the Company for a consideration
which covers both, be the portion of such consideration so
received, computed as provided in clauses (i) and (ii) above,
allocable to such Additional Common Shares, such allocation to
be determined in the same manner that the Fair Value of
property not consisting of cash or securities is to be
determined as provided in the definition of "Fair Value"
herein;
(b) Additional Common Shares deemed to have been issued
pursuant to Section 3.3, relating to Options and Convertible
Securities, shall be deemed to have been issued for a consideration per
share determined by dividing
(i) the total amount, if any, received and receivable
by the Company as consideration for the issue, sale, grant or
assumption of the Options or Convertible Securities in
question, plus the minimum aggregate amount of additional
consideration (as set forth in the instruments relating
thereto, without regard to any provision contained therein for
a subsequent adjustment of such consideration to protect
against dilution) payable to the Company upon the exercise in
full of such Options or the conversion or exchange of such
Convertible Securities or, in the case of Options for
Convertible Securities, the exercise of such Options for
Convertible Securities and the conversion or exchange of such
Convertible Securities, in each case computing such
consideration as provided in the foregoing subdivision (a),
by
(ii) the maximum number of Common Shares (as set
forth in the instruments relating thereto, without regard to
any provision contained therein for a subsequent adjustment of
such number to protect against dilution) issuable upon the
exercise of such Options or the conversion or exchange of such
Convertible Securities; and
(c) Additional Common Shares deemed to have been issued
pursuant to Section 3.4, relating to distributions, share splits, etc.,
shall be deemed to have been issued for no consideration.
<PAGE>
3.6. Adjustments for Combinations, etc. In case the
outstanding Common Shares shall be combined or consolidated, by reclassification
or otherwise, into a lesser number of Common Shares, the Purchase Price in
effect immediately prior to such combination or consolidation shall,
concurrently with the effectiveness of such combination or consolidation, be
proportionately increased and the number of Common Shares issuable upon exercise
of this Warrant shall be proportionately decreased.
3.7. De Minimis Adjustments. No adjustment in the Conversion
Ratio shall be required unless such adjustment would require a cumulative
increase or decrease of at least 1% thereof; provided, however, that any
adjustments that by reason of this Section 3.7 are not required to be made shall
be carried forward and taken into account in any subsequent adjustment until
made. All calculations under this Section 3 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.
3.8. Abandoned Distribution. If the Company shall take a
record of the holders of its Common Shares for the purpose of entitling them to
receive a distribution (which results in an adjustment to the Purchase Price
under the terms of this Warrant) and shall, thereafter, and before such
distribution is paid or delivered to shareholders entitled thereto, abandon its
plan to pay or deliver such distribution, then any adjustment made to the
Purchase Price and number of Common Shares purchasable upon exercise of this
Warrant by reason of the taking of such record shall be reversed, and any
subsequent adjustments, based thereon, shall be recomputed.
3.9. Shareholder Rights Plan. Notwithstanding the foregoing,
in the event that the Company shall distribute "poison pill" rights pursuant to
a "poison pill" shareholder rights plan (the "Rights"), the Company shall, in
lieu of making any adjustment pursuant to Section 3.2.1 or Section 3.2.2 hereof,
make proper provision so that each Holder who exercises a Warrant after the
record date for such distribution and prior to the expiration or redemption of
the Rights shall be entitled to receive upon such exercise, in addition to the
Common Shares issuable upon such exercise, a number of Rights to be determined
as follows: (i) if such exercise occurs on or prior to the date for the
distribution to the holders of Rights of separate certificates evidencing such
Rights (the "Distribution Date"), the same number of Rights to which a holder of
a number of Common Shares equal to the number of Common Shares issuable upon
such exercise at the time of such exercise would be entitled in accordance with
the terms and provisions of and applicable to the Rights; and (ii) if such
exercise occurs after the Distribution Date, the same number of Rights to which
a holder of the number of shares into which the Warrant so exercised was
exercisable immediately prior to the Distribution Date would have been entitled
on the Distribution Date in accordance with the terms and provisions of and
applicable to the Rights.
4. Consolidation, Merger, etc.
4.1. Adjustments upon Certain Transactions. If the Company
shall be a party to any transaction (including, without limitation, a merger,
consolidation, statutory share exchange, self tender offer for all or
substantially all Common Shares, sale of all or substantially all of the
Company's assets or recapitalization of the Common Shares (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,
<PAGE>
securities or other property (including cash or any combination thereof) (other
than a capital reorganization or reclassification resulting in the issue of
Additional Common Shares for which adjustment in the Purchase Price is provided
in Section 3.2.1 or 3.2.2), then, and in the case of each such Transaction,
proper provision shall be made so that, upon the basis and the terms and in the
manner provided in this Warrant, the Holder of this Warrant, upon the exercise
hereof at any time after the consummation of such Transaction, shall be entitled
to receive (at the aggregate Purchase Price in effect at the time of such
consummation for all Common Shares or Other Securities issuable upon such
exercise immediately prior to such consummation), in lieu of the Common Shares
or Other Securities issuable upon such exercise prior to such consummation, the
kind and amount of shares, stock, securities and other property (including cash
or any combination thereof) to which such Holder would actually have been
entitled as a shareholder upon the consummation of such Transaction if such
Holder had exercised this Warrant immediately prior thereto, assuming such
Holder (i) is not a person with which the Company consolidated or into which the
Company merged or which merged into the Company 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 or her appraisal rights
or rights of election, if any, as to the kind or amount of shares, stock,
securities and other property (including cash) receivable in such Transaction.
The Company shall not be a party to any Transaction unless the terms of such
Transaction are consistent with the provisions of this Section 4.1, and it shall
not consent or agree to the occurrence of any Transaction until the Company has
entered into an agreement with the successor or purchasing entity, as the case
may be, for the benefit of the Holder of this Warrant that will contain
provisions enabling such Holder to receive the securities, cash or other
property to which such Holder would actually have been entitled as a shareholder
upon such consummation if such Holder had exercised this Warrant immediately
prior thereto, subject to adjustments (subsequent to such consummation) as
nearly equivalent as possible to the adjustments provided for in Sections 3
through 5.
4.2. Assumption of Obligations. Notwithstanding anything
contained in this Warrant or in the Purchase Agreement to the contrary, the
Company shall not effect any Transaction unless, prior to the consummation
thereof, each Person (other than the Company) which may be required to deliver
any stock, securities, cash or property upon the exercise of this Warrant as
provided herein shall assume, by written instrument delivered to, and reasonably
satisfactory to, the Holder of this Warrant, (a) the obligations of the Company
under this Warrant (and if the Company shall survive the consummation of such
transaction, such assumption shall be in addition to, and shall not release the
Company from, any continuing obligations of the Company under this Warrant), (b)
the obligations of the Company under the Operating Agreement and (c) the
obligation to deliver to the Holder such shares of stock, securities, cash or
property as, in accordance with the foregoing provisions of this Section 4, the
Holder may be entitled to receive. Nothing in this Section 4 shall be deemed to
authorize the Company to enter into any transaction not otherwise permitted by
the Purchase Agreement.
5. [Intentionally omitted.]
6. No Dilution or Impairment. The Company shall not, by
amendment of its Declaration of Trust or through any consolidation, merger,
reorganization, transfer of assets, dissolution, issue or sale of securities or
any other voluntary action, avoid or seek to avoid the observance or performance
<PAGE>
of any of the terms of this Warrant, but will at all times in good faith assist
in the carrying out of all such terms and in the taking of all such action as
may be necessary or appropriate in order to protect the rights of the Holder of
this Warrant against dilution or other impairment. Without limiting the
generality of the foregoing, the Company (a) shall not permit the par value of
any shares of beneficial interest receivable upon the exercise of this Warrant
to exceed the amount payable therefor upon such exercise, (b) shall at all times
reserve and keep available, free from preemptive rights, out of the aggregate of
its authorized but unissued Common Shares solely for the purpose of effecting
the exercise of this Warrant, the full number of Common Shares deliverable upon
the full exercise of this Warrant, (c) shall take all such action as may be
necessary or appropriate in order that the Company may validly and legally issue
fully paid and nonassessable shares of beneficial interest, free from all taxes,
liens, security interests, encumbrances, preemptive rights and charges on the
exercise of this Warrant from time to time outstanding and, (d) shall not take
any action which results in any adjustment of the Purchase Price if the total
number of Common Shares (or Other Securities) issuable after the action upon the
full exercise of this Warrant would exceed the total number of Common Shares (or
Other Securities) then authorized by the Company's Declaration of Trust and
available for the purpose of issue upon such exercise.
7. NOTICE OF Adjustments. In each case of any adjustment or
readjustment in the Common Shares (or Other Securities) issuable upon the
exercise of this Warrant, the Company at its expense shall promptly compute such
adjustment or readjustment in accordance with the terms of this Warrant and
prepare a notice of such adjustment or readjustment setting forth such
adjustment or readjustment and the effective date of such adjustment or
readjustment and shall mail such notice of such adjustment or readjustment to
each holder of a Warrant at such holder's address as it appears in the Warrant
Register (as defined below).
8. Notices of TRUST Action. If:
(a) the Company shall declare a distribution on the Common
Shares (other than the Regular Quarterly Dividend); or
(b) the Company shall authorize the granting to all holders of
Common Shares of rights or warrants to subscribe for or purchase any
shares of any class of beneficial interest; or
(c) there shall be any reclassification of the Common Shares
or any consolidation or merger to which the Company is a party and for
which approval of any shareholders of the Company is required, or a
statutory share exchange, or self tender offer by the Company 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 Company as an
entity; or
(d) there shall occur the involuntary or voluntary
liquidation, dissolution or winding up of the Company;
then the Company shall cause to be mailed to the holders of this Warrant, at the
address as it appears in the Warrant Register, as promptly as possible, but at
least 15 Business Days prior to the applicable date hereinafter specified, a
<PAGE>
notice stating (A) the date on which a record is to be taken for the purpose of
such distribution or rights 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 or warrants are to be determined or (B) the date on which
such reclassification, consolidation, merger, statutory share exchange, sale,
transfer, liquidation, dissolution or winding up is expected to become
effective, and the date as of which it is expected that holders of Common Shares
shall be entitled to exchange their Common Shares for securities or other
property, if any, deliverable upon such reclassification, 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 8.
9. Registration of Common Shares. If any Common Shares
required to be reserved for purposes of exercise of this Warrant require
registration with or approval of any governmental authority under any federal or
state law (other than the Securities Act) before such shares may be issued upon
exercise, the Company shall, at its expense and as expeditiously as possible,
use its reasonable best efforts to cause such shares to be duly registered or
approved, as the case may be. At any such time as Common Shares are listed on
any national securities exchange, the Company shall endeavor to list the Common
Shares required to be delivered upon exercise of this Warrant, prior to such
delivery, upon each such national securities exchange and maintain the listing
of such shares after their issuance; and the Company shall also endeavor to list
on any such national securities exchange and maintain such listing of, any Other
Securities that at any time are issuable upon exercise of this Warrant, if and
at the time that any securities of the same class shall be listed on any such
national securities exchange(s) by the Company. The covenants contained in this
Section 9 shall terminate upon the Expiration Date.
10. Restrictions on Transfer.
10.1. Restrictive Legends.
Except as otherwise permitted by this Section 10, each certificate for Common
Shares (or Other Securities) issued upon the exercise of any Warrant, and each
certificate issued upon the transfer of any such Common Shares (or Other
Securities), shall be stamped or otherwise imprinted with a legend in
substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE
SECURITIES LAW OF ANY STATE, AND MAY NOT BE SOLD, TRANSFERRED OR
OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR
PURSUANT TO AN APPLICABLE EXEMPTION TO THE REGISTRATION REQUIREMENTS OF
SUCH ACT AND SUCH LAWS. SUCH SECURITIES MAY NOT BE SOLD, TRANSFERRED OR
OTHERWISE DISPOSED OF EXCEPT IN COMPLIANCE WITH THE CONDITIONS
SPECIFIED IN THE COMMON SHARE PURCHASE WARRANT ISSUED BY BRANDYWINE
REALTY TRUST (THE "COMPANY") PURSUANT TO THE INVESTMENT AGREEMENT,
DATED APRIL 19, 1999, BETWEEN THE COMPANY AND FIVE ARROWS REALTY
SECURITIES III L.L.C. A COMPLETE AND CORRECT COPY OF THE FORM OF SUCH
WARRANT IS AVAILABLE FOR INSPECTION AT THE PRINCIPAL OFFICE OF THE
COMPANY OR AT THE OFFICE OR AGENCY MAINTAINED BY THE COMPANY AS
PROVIDED IN SUCH WARRANT AND WILL BE FURNISHED TO THE HOLDER OF SUCH
SECURITIES UPON WRITTEN REQUEST AND WITHOUT CHARGE."
<PAGE>
10.2. Transfer to Comply With the Securities Act. Restricted
Securities may not be sold, assigned, pledged, hypothecated, encumbered or in
any manner transferred or disposed of, in whole or in part, except in compliance
with (i) the provisions of the Securities Act and state securities or Blue Sky
laws, (ii) the terms and conditions of the Purchase Agreement and (iii) the
terms and conditions hereof.
10.3. Termination of Restrictions. The restrictions imposed by
this Section 10 on the transferability of Restricted Securities shall cease and
terminate as to any particular Restricted Securities (a) when a registration
statement with respect to the sale of such securities shall have been declared
effective under the Securities Act and such securities shall have been disposed
of in accordance with such registration statement, (b) when such securities are
sold pursuant to Rule 144 (or any similar provision then in force) under the
Securities Act, or (c) when, in the opinion of both counsel for the Holder and
counsel for the Company, such restrictions are no longer required or necessary
in order to protect the Company against a violation of the Securities Act upon
any sale or other disposition of such securities without registration
thereunder. Whenever such restrictions shall cease and terminate as to any
Restricted Securities, the Holder shall be entitled to receive from the Company,
without expense, new securities of like tenor not bearing the applicable legends
required by Section 10.1.
11. Reservation of SHARES, etc. The transfer agent for the
Common Shares, which may be the Company ("Transfer Agent"), and every subsequent
Transfer Agent for any shares of the Company's equity securities issuable upon
the exercise of any of the purchase rights represented by this Warrant, are
hereby irrevocably authorized and directed at all times until the Expiration
Date to reserve such number of authorized and unissued shares as shall be
requisite for such purpose. The Company shall keep copies of this Warrant on
file with the Transfer Agent for the Common Shares and with every subsequent
Transfer Agent for any of the Company's equity securities issuable upon the
exercise of the rights of purchase represented by this Warrant. The Company
shall supply such Transfer Agent with duly executed share certificates for such
purpose. All Warrant Certificates surrendered upon the exercise of the rights
thereby evidenced shall be canceled, and such canceled Warrants shall constitute
sufficient evidence of the number of shares of beneficial interest which have
been issued upon the exercise of such Warrants. Subsequent to the Expiration
Date, no shares of beneficial interest need be reserved in respect of any
unexercised Warrant.
12. Registration and Transfer of Warrants, etc.
<PAGE>
12.1. Warrant Register; Ownership of Warrants. Each Warrant
issued by the Company shall be numbered and shall be registered in a warrant
register (the "Warrant Register") as it is issued and transferred, which Warrant
Register shall be maintained by the Company at its principal office or, at the
Company's election and expense, by a Warrant Agent or the Company's transfer
agent. The Company shall be entitled to treat the registered Holder of any
Warrant on the Warrant Register as the owner in fact thereof for all purposes
and shall not be bound to recognize any equitable or other claim to or interest
in such Warrant on the part of any other Person, and shall not be affected by
any notice to the contrary, except that, if and when any Warrant is properly
assigned in blank, the Company may (but shall not be obligated to) treat the
bearer thereof as the owner of such Warrant for all purposes. Subject to Section
10, a Warrant, if properly assigned, may be exercised by a new holder without a
new Warrant first having been issued.
12.2. Transfer of Warrants. Subject to compliance with Section
10, if applicable, this Warrant and all rights hereunder are transferable in
whole or in part, without charge to the Holder hereof, upon surrender of this
Warrant with a properly executed Form of Assignment attached hereto as Exhibit B
at the principal office of the Company. Upon any partial transfer, the Company
shall at its expense issue and deliver to the Holder a new Warrant of like
tenor, in the name of the Holder, which shall be exercisable for such number of
Common Shares with respect to which rights under this Warrant were not so
transferred. The Holder shall be responsible for payment of any transfer tax
payable in connection with any transfer, in whole or in part of this Warrant.
12.3. Replacement of Warrant. On receipt by the Company of
evidence reasonably satisfactory to the Company of the loss, theft, destruction
or mutilation of this Warrant and, in the case of any such loss, theft or
destruction of this Warrant, on delivery of an indemnity agreement reasonably
satisfactory in form and amount to the Company or, in the case of any such
mutilation, on surrender of such Warrant to the Company at its principal office
and cancellation thereof, the Company at its expense shall execute and deliver,
in lieu thereof, a new Warrant of like tenor.
12.4. Adjustments To Purchase Price and Number of Shares.
Notwithstanding any adjustment in the Purchase Price or in the number or kind of
Common Shares purchasable upon exercise of this Warrant, any Warrant theretofore
or thereafter issued may continue to express the same number and kind of Common
Shares as are stated in this Warrant, as initially issued.
12.5. Fractional Shares. Notwithstanding any adjustment
pursuant to Section 3 in the number of Common Shares covered by this Warrant or
any other provision of this Warrant, the Company shall not be required to issue
fractions of shares upon exercise of this Warrant or to distribute certificates
which evidence fractional shares. In lieu of fractional shares, the Company
shall make payment to the Holder, at the time of exercise of this Warrant as
herein provided, in an amount in cash equal to such fraction multiplied by the
Current Market Price of a Common Share on the date of Warrant exercise.
<PAGE>
13. Remedies; Specific Performance. The Company stipulates
that there would be no adequate remedy at law to the Holder of this Warrant in
the event of any default or threatened default by the Company in the performance
of or compliance with any of the terms of this Warrant and accordingly, the
Company agrees that, in addition to any other remedy to which the Holder may be
entitled at law or in equity, the Holder shall be entitled to seek to compel
specific performance of the obligations of the Company under this Warrant,
without the posting of any bond, in accordance with the terms and conditions of
this Warrant in any court of the United States or any State thereof having
jurisdiction, and if any action should be brought in equity to enforce any of
the provisions of this Warrant, the Company shall not raise the defense that
there is an adequate remedy at law. Except as otherwise provided by law, a delay
or omission by the Holder hereto in exercising any right or remedy accruing upon
any such breach shall not impair the right or remedy or constitute a waiver of
or acquiescence in any such breach. No remedy shall be exclusive of any other
remedy. All available remedies shall be cumulative.
14. No Rights or Liabilities as Shareholder. Nothing contained
in this Warrant shall be construed as conferring upon the Holder hereof any
rights as a shareholder of the Company or as imposing any obligation on the
Holder to purchase any securities or as imposing any liabilities on the Holder
as a shareholder of the Company, whether such obligation or liabilities are
asserted by the Company or by creditors of the Company.
15. Notices. All notices and other communications (and
deliveries) provided for or permitted hereunder shall be made in writing by hand
delivery, telecopier, any courier guaranteeing overnight delivery or first class
registered or certified mail, return receipt requested, postage prepaid,
addressed (a) if to the Company, to the attention of its President at its
principal office located at 14 Campus Boulevard, Suite 100, Newtown Square,
Pennsylvania 19073 or such other address as may hereafter be designated in
writing by the Company to the Holder in accordance with the provisions of this
Section, or (b) if to the Holder, at its address as it appears in the Warrant
Register.
All such notices and communications (and deliveries) shall be
deemed to have been duly given: at the time delivered by hand, if personally
delivered; when receipt is acknowledged, if telecopied; on the next Business
Day, if timely delivered to a courier guaranteeing overnight delivery; and five
days after being deposited in the mail, if sent first class or certified mail,
return receipt requested, postage prepaid; provided, that the exercise of any
Warrant shall be effective in the manner provided in Section 2.
16. Amendments. This Warrant and any term hereof may not be
amended, modified, supplemented or terminated, and waivers or consents to
departures from the provisions hereof may not be given, except by written
instrument duly executed by the party against which enforcement of such
amendment, modification, supplement, termination or consent to departure is
sought.
17. Descriptive Headings, Etc. The headings in this Warrant
are for convenience of reference only and shall not limit or otherwise affect
the meaning of terms contained herein. Unless the context of this Warrant
otherwise requires: (1) words of any gender shall be deemed to include each
other gender; (2) words using the singular or plural number shall also include
the plural or singular number, respectively; (3) the words "hereof", "herein"
<PAGE>
and "hereunder" and words of similar import when used in this Warrant shall
refer to this Warrant as a whole and not to any particular provision of this
Warrant, and Section and paragraph references are to the Sections and paragraphs
of this Warrant unless otherwise specified; (4) the word "including" and words
of similar import when used in this Warrant shall mean "including, without
limitation," unless otherwise specified; (5) "or" is not exclusive; and (6)
provisions apply to successive events and transactions.
18. GOVERNING LAW. This Warrant shall be governed by, and
construed in accordance with, the laws of the State of New York (without giving
effect to the conflict of laws principles thereof).
19. Judicial Proceedings; waiver of jury. Any legal action,
suit or proceeding brought against the Company with respect to this Warrant may
be brought in any federal court of the Southern District of New York or any
state court located in New York County, State of New York, and by execution and
delivery of this Warrant, the Company hereby irrevocably and unconditionally
waives any claim (by way of motion, as a defense or otherwise) of improper
venue, that it is not subject personally to the jurisdiction of such court, that
such courts are an inconvenient forum or that this Warrant or the subject matter
may not be enforced in or by such court. The Company hereby irrevocably and
unconditionally consents to the service of process of any of the aforementioned
courts in any such action, suit or proceeding by the mailing of copies thereof
by registered or certified mail, postage prepaid, at its address set forth or
provided for in Section 15, such service to become effective 10 days after such
mailing. Nothing herein contained shall be deemed to affect the right of any
party to serve process in any manner permitted by law or commence legal
proceedings or otherwise proceed against any other party in any other
jurisdiction to enforce judgments obtained in any action, suit or proceeding
brought pursuant to this Section. The Company irrevocably submits to the
exclusive jurisdiction of the aforementioned courts in such action, suit or
proceeding. THE COMPANY HEREBY IRREVOCABLY WAIVES TRIAL BY JURY IN ANY ACTION,
SUIT OR PROCEEDING, WHETHER AT LAW OR EQUITY, BROUGHT BY IT OR THE HOLDER IN
CONNECTION WITH THIS WARRANT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
20. OPERATING Agreement. The Common Shares (and Other
Securities) issuable upon exercise of this Warrant (or upon conversion of any
Common Shares issued upon such exercise) shall constitute Registrable Securities
(as such term is defined in the Operating Agreement). Each holder of this
Warrant shall be entitled to all of the benefits afforded to a holder of any
such Registrable Securities under the Operating Agreement and such holder, by
its acceptance of this Warrant, agrees to be bound by and to comply with the
terms and conditions of the Operating Agreement applicable to such holder as a
holder of such Registrable Securities.
<PAGE>
21. NON-RECOURSE. No recourse shall be had for any obligation
of the Company hereunder, or for any claim based thereon or otherwise in respect
thereof, against any past, present or future trustee, shareholder, officer or
employee of the Company, whether by virtue of any statute or rule of law, or by
the enforcement of any assessment or penalty or otherwise, all such other
liability being expressly waived and released by each other party hereto.
BRANDYWINE REALTY TRUST
By: /s/ Gerard H. Sweeney
--------------------------------------------
Title: President and Chief Executive Officer
<PAGE>
EXHIBIT A to
Common Shares Purchase Warrant
[FORM OF]
ELECTION TO PURCHASE SHARES
The undersigned hereby irrevocably elects to exercise the
Warrant to purchase ____ Common Shares, par value $0.01 per share ("Common
Shares"), of BRANDYWINE REALTY TRUST and hereby [makes payment of $________
therefor] [or] [makes payment therefor by reduction pursuant to Section
2.1(b)(ii) of the Warrant of the number of Common Shares otherwise issuable to
the Holder upon Warrant exercise by ___ shares] [or] [makes payment therefor by
delivery of the following Common Shares Certificates of the Company (properly
endorsed for transfer in blank) for cancellation by the Company pursuant to
Section 2.1(b)(iii) of the Warrant, certificates of which are attached hereto
for cancellation [list certificates by number and amount]]. The undersigned
hereby requests that certificates for such shares be issued and delivered as
follows:
ISSUE TO:
(NAME)
(ADDRESS, INCLUDING ZIP CODE)
(SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER)
DELIVER TO:
(NAME)
(ADDRESS, INCLUDING ZIP CODE)
If the number of Common Shares purchased (and/or reduced)
hereby is less than the number of Common Shares covered by the Warrant, the
undersigned requests that a new Warrant representing the number of Common Shares
not so purchased (or reduced) be issued and delivered as follows:
ISSUE TO:
FIVE ARROWS REALTY SECURITIES III L.L.C.
(ADDRESS, INCLUDING ZIP CODE)
DELIVER TO:
FIVE ARROWS REALTY SECURITIES III L.L.C.
(ADDRESS, INCLUDING ZIP CODE)
Dated: _____________, ______ FIVE ARROWS REALTY SECURITIES II, L.L.C.
By
Name:
Title:
<PAGE>
EXHIBIT B to
Common Shares Purchase Warrant
[FORM OF] ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and
transfers unto the Assignee named below all of the rights of the undersigned to
purchase Common Shares, par value $0.01 per share ("Common Shares") of
BRANDYWINE REALTY TRUST represented by the Warrant, with respect to the number
of Common Shares set forth below:
Name of Assignee Address No. of Shares
- ---------------- ------- -------------
and does hereby irrevocably constitute and appoint ________ Attorney to make
such transfer on the books of BRANDYWINE REALTY TRUST maintained for that
purpose, with full power of substitution in the premises.
Dated: _______________, ______ FIVE ARROWS REALTY SECURITIES III L.L.C.
By
Name:
Title:
<PAGE>
OPERATING AGREEMENT
OPERATING AGREEMENT, dated as of April 19, 1999, between
Brandywine Realty Trust, a Maryland real estate investment trust (the
"Company"), and Five Arrows Realty Securities III L.L.C., a limited liability
company organized under the laws of the State of Delaware (the "Investor"), for
the benefit of the Investor.
This Agreement is executed pursuant to the Investment
Agreement, dated as of April 19, 1999, between the Company and the Investor (the
"Investment Agreement"). In order to induce the Investor to enter into the
Investment Agreement, the Company has agreed to provide the registration rights
set forth in this Agreement.
The parties hereby agree as follows:"`
1. DEFINITIONS
The following terms shall have the meanings set forth below:
"Affiliate" means, with respect to any Person, (a) any member
of the Immediate Family of such Person or a trust established primarily
for the benefit of such member, (b) any beneficiary of a trust
described in (a), (c) any Entity which, directly or indirectly through
one or more intermediaries, is deemed to be the beneficial owner of 10%
or more of the voting equity of the Person for the purposes of Section
13(d) of the Exchange Act, (d) any officer of the Person or any member
of the Board of Trustees of the Company, or (e) any Entity which,
directly or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, such Person, including
such Person or Persons referred to in the preceding clause (a) or (d);
provided, however, that none of the Investor, Rothschild Realty Inc. or
their respective Affiliates, nor any of their respective officers,
directors, partners or members nor a Preferred Trustee (as such term is
defined in the Articles Supplementary) shall be considered an Affiliate
of the Company or any of its Subsidiaries for the purposes of this
Agreement.
"Articles Supplementary" means the Articles Supplementary
classifying 4,375,000 preferred shares of beneficial interest as 8.75%
Series B Senior Cumulative Convertible Preferred Shares of the Company.
"Business Day" means any Monday, Tuesday, Wednesday, Thursday
or Friday which is not a day on which banking institutions in New York
City are authorized or obligated by law or executive order to close.
"Commission" means the Securities and Exchange Commission.
<PAGE>
"Common Share" means the common shares of beneficial interest,
par value $.01 per share, of the Company.
"Demand Requesting Holders" means any Holder or Holders
holding an aggregate of not less than 30% of the Registrable Securities
then outstanding. For purposes of calculating such percentage,
Preferred Shares constituting Registrable Securities shall be deemed to
equal the number of Common Shares into which such Preferred Shares are
convertible.
"Entity" means any general partnership, limited partnership,
corporation, joint venture, trust, business trust, real estate
investment trust, limited liability company, cooperative or
association.
"equity security" includes common stock, preferred stock,
shares of beneficial interest, units of limited partner interests and
any other security that is treated as an equity security either under
the Exchange Act or under generally accepted accounting principles by
the issuer thereof or any other security convertible into, redeemable
for or exchangeable for any equity security and any other instrument,
such as an equity swap, the value of which is based, at least in part,
on the value of such equity security.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Fully Diluted Basis" means the computation of a percentage
giving effect to: (I) all issued and outstanding Common Shares, (II)
all Common Shares issuable upon the conversion or redemption of or
exchange for any convertible debt or equity securities, and (III) all
shares issuable upon the exercise or redemption of any warrants,
options or any other rights of any nature whatsoever (whether or not
vested) including but not limited to any employee, consultant or
trustee share option plan.
"Governmental Body" means any foreign, federal, state,
municipal or other government, or any department, commission,
investigative body, board, bureau, agency, public authority or
instrumentality thereof or any court, mediator, arbitrator or other
tribunal.
"Holder" means any person that owns Registrable Securities or
Piggyback Registrable Securities, as applicable, constituting more than
3% of the outstanding shares of such class of Registrable Securities or
Piggyback Registrable Securities, as applicable.
"Immediate Family" means, with respect to any Person, such
Person's spouse, parents, parents-in-law, descendants, nephews, nieces,
brothers, sisters, brothers-in-law, sisters-in-law, stepchildren,
sons-in-law and daughters-in-law.
"Majority Holders" means (a) the Investor, so long as (i) the
Investor holds at least 25% of the outstanding Registrable Securities
and (ii) no underwritten Demand Registration or Piggyback Registration
has been consummated by the Company pursuant to Section 3 or Section 4
of this Agreement, or (b) otherwise, the holder or holders at the
<PAGE>
relevant time (excluding the Company or any of its Subsidiaries) of
more than 50% of the Registrable Securities then outstanding. For
purposes of calculating such percentage, Preferred Shares constituting
Registrable Securities shall be deemed to equal the number of Common
Shares into which such Preferred Shares are convertible.
"Person" means any individual or Entity.
"Piggyback Registrable Securities" means Registrable
Securities of the same class and series as the securities the Company
proposes to register under the Securities Act in a transaction giving
rise to Piggyback Registration rights under Section 4 hereof.
"Preferred Shares" means the 8.75% Series B Senior Cumulative
Convertible Preferred Shares of Beneficial Interest issued by the
Company to the Investor, pursuant to the Investment Agreement.
"Prospectus" means the Prospectus included in any Registration
Statement, as amended or supplemented by any prospectus supplement with
respect to the terms of the offering of any portion of the Registrable
Securities covered by such Registration Statement and all other
amendments and supplements to the Prospectus, including post-effective
amendments, and all material incorporated by reference in such
Prospectus.
"Registrable Securities" means (i) all Preferred Shares and
all Common Shares that (x) have been issued, or are issuable on
conversion, in respect of the Preferred Shares pursuant to the
provisions of Section 7 of the Articles Supplementary of the Company,
dated April 19, 1999, (y) have been issued or are issuable upon
exercise, in respect of the Warrant issued pursuant to the Investment
Agreement or (z) otherwise are held, or would be held upon conversion
or exercise of other securities, by the Investor, its Affiliates or
their respective members and partners (provided that if such securities
have been purchased in the open market, they shall be Registrable
Securities only if they are "restricted securities" or the holder
thereof is an "affiliate" of the Trust, as such terms are defined in
the federal securities laws), (ii) any other securities that are
received by the Holders pursuant to Section 7 of the Articles
Supplementary or Section 3 of the Warrant, and (iii) any other
securities into which or for which any of the securities described in
clauses (i) and (ii) above may be or have been converted or exchanged
pursuant to a plan of recapitalization, reorganization, merger, sale of
assets or otherwise, until such time as (a) they have been effectively
registered under the Securities Act for resale and sold thereunder, (b)
they are distributed to the public pursuant to Rule 144 (or any similar
provisions then in force) under the Securities Act, (c) they shall have
been otherwise transferred, new certificates therefor not bearing a
legend restricting further transfer shall have been issued by the
Company (or any successor) and subsequent disposition thereof shall not
require registration under the Securities Act, or (d) they shall have
ceased to be outstanding. The Company shall have the right to exclude
shares eligible to be sold pursuant to Rule 144(k) from its
registration obligations hereunder.
<PAGE>
"Registration Statement" means any registration statement of
the Company which covers any of the Registrable Securities pursuant to
the provisions of this Agreement, including the Prospectus, amendments
and supplements to such Registration Statement, including
post-effective amendments, all exhibits and all material incorporated
by reference in such Registration Statement.
"Securities Act" means the Securities Act of 1933, as amended,
or any successor federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
"Shareholder Approval" means the affirmative vote of holders
of a majority of the Voting Shares of the Company represented in person
or by proxy at a duly held meeting of such shareholders at which a
quorum was present or the written consent of holders of a majority of
all outstanding Voting Shares of the Company; provided, however, that
if the outstanding Voting Shares having varying votes per share, the
foregoing reference in this sentence to holders of a majority of shares
shall be deemed to mean holders of shares entitled to cast a majority
of votes.
"Subsidiary" of any Person or Entity means an Entity in which
such Person or Entity has the ability, whether by the direct or
indirect ownership of shares or other equity interests, by contract or
otherwise, to elect a majority of the directors of a corporation or the
trustees of a real estate investment trust, to select the managing
partner of a partnership, or otherwise to select, or have the power to
remove and then select, a majority of those persons exercising
governing authority over such Entity. A limited partnership shall be
deemed to be a Subsidiary of a Person or Entity if such Person or
Entity or a Subsidiary of such Person or Entity serves as a general
partner thereof. A trust shall be deemed to be a Subsidiary of a Person
or Entity if such Person or Entity or a Subsidiary of such Person or
Entity or the designees thereof serves as a majority of the trustees
thereof or of any Person having the right to select a majority of such
trustees.
"Underwriters Maximum Number" means for any underwritten
registration, that number of shares of securities to which such
registration should, in the written opinion of the managing underwriter
or underwriters of such registration in light of market factors, be
limited. The Underwriters Maximum Number may be zero.
"underwritten registration" or "underwritten offering" means a
registration in which securities of the Company are sold to an
underwriter for reoffering to the public.
"Voting Shares" means equity securities of the Company
entitled to vote generally in the election of trustees of the Company.
2. COVENANTS AND UNDERTAKINGS
2.1 Reservation of Shares. The Company will maintain as
reserved those Common Shares reserved in accordance with Section 4.6 of the
Investment Agreement and shall take all such action as may be required from time
to time in order that it may validly and legally issue fully paid and
nonassessable Common Shares in accordance herewith and therewith.
<PAGE>
2.2 Affiliate Transactions. So long as the Investor or an
Affiliate of the Investor, or one of their respective current members or
partners (and their Affiliates), is the holder of either (A) all of the
outstanding Preferred Shares or (B) an amount of the Company's Voting Shares,
together with Preferred Shares and/or the Warrant, which if converted into or
exercised for Common Shares, would exceed 10% of the outstanding Common Shares
on a Fully Diluted Basis, the Company will not, and will not permit any of their
respective Subsidiaries to, directly or indirectly, consummate any transaction
or series of transactions (including, without limitation, the sale, purchase,
exchange or lease of any assets or properties or the rendering of any services)
with any Affiliate (other than among the Company or its Subsidiaries) (an
"Affiliate Transaction") unless (i) such transaction or series of related
transactions is on terms that are no less favorable to the Company or its
Subsidiaries, as the case may be, than would be available in a comparable
transaction in arm's-length dealings with an unrelated third party, as
reasonably determined by the Company's Board of Trustees and (ii) with respect
to any one transaction or series of related transactions involving aggregate
payments in excess of $500,000, the Company delivers a certificate, certified by
an officer of the Company, to the Investor certifying that such transaction or
series of related transaction complies with clause (i) above and such
transaction or series of related transactions has received the approval of a
majority of the disinterested members of the Board of Trustees of the Company;
provided, however, that this Section 2.2 shall not apply to the compensation of
executives of the Company or to any transaction (a) arising out of any agreement
existing on the date hereof or any transaction in which all holders of any class
or series of outstanding equity securities of the Company have the right to
participate on a pro rata basis, (b) between a joint venture (in which the
Company or one of its Subsidiaries is a partner or member) and an Affiliate of
the joint venture that is not otherwise an Affiliate of the Company, (c) that
has received Shareholder Approval or (d) under any equity incentive plan that
has received Shareholder Approval.
2.3 Inspection Rights. So long as the Investor or an Affiliate
of the Investor, or one of their respective current members or partners (and
their Affiliates), is the holder of either (A) all of the Preferred Shares
outstanding or (B) an amount of the Company's Voting Shares, together with
Preferred Shares and/or the Warrant, which if converted into or exercised for
Common Shares, would exceed 10% of the Common Shares on a Fully Diluted Basis,
the Company shall permit, and cause its Subsidiaries to permit, the Investor or
any agents or representatives thereof to examine and inspect the books and
records of the Company and its Subsidiaries and take copies and extracts
therefrom on reasonable prior notice and at reasonable times and during normal
business hours; provided, however, that the Investor continues to be subject to
Section 10.5 of the Investment Agreement.
2.4 Insurance for Trustees. So long as the Investor or an
Affiliate of the Investor, or one of their respective current members or
partners (and their Affiliates), is represented on the Board of Trustees of the
Company or is entitled to obtain such representation or is the holder of either
(A) all of the Preferred Shares outstanding or (B) an amount of the Company's
Voting Shares, together with Preferred Shares and/or the Warrant, which if
converted into or exercised for Common Shares would exceed 10% of the Common
Shares on a Fully Diluted Basis, the Company shall obtain and maintain trustees'
<PAGE>
and officers' reimbursement and liability insurance in form reasonably
acceptable to the Investor and with such carrier as shall be reasonably
acceptable to the Investor in the name of the Company for the benefit of each
trustee, including each Preferred Trustee (as such term is defined in the
Articles Supplementary), in an amount not less than $5,000,000 (it being agreed
that the policy currently in place is in acceptable form and with an acceptable
carrier); provided, however, that (i) such trustees supply the information
required by the Company's insurance carrier and meet the qualifications
established by such carrier, if any, which shall not be more burdensome than
those of the Company's current policy, and (ii) if such insurance is a
claim-based or equivalent policy, each such Preferred Trustee shall be entitled
to such insurance for an additional six years.
2.5 Accrued and Unpaid Distributions. Notwithstanding anything
in the Articles Supplementary to the contrary, on the date of conversion of any
Preferred Shares pursuant to Section 7 of the Articles Supplementary by the
Investor, Rothschild Realty Inc., an Affiliate of either of them or one of their
respective members or partners, the Company shall pay such holder of such
Preferred Shares all accrued and unpaid distributions in respect of such
Preferred Shares in cash as provided for in Section 2 of the Articles
Supplementary.
2.6 Fees and Expenses. In the event that the Company shall
request that the Investor consent to any action by the Company that is otherwise
prohibited by, or amend any of, the Operative Instruments, the Company shall pay
all reasonable legal fees and expenses reasonably incurred by the Investor in
connection with the Investor's review of such request.
3. DEMAND REGISTRATION
3.1 Right to Demand Registration
(a) Subject to Section 3.6, at any time following the
date hereof, Demand Requesting Holders may make written requests to the Company
for registration with the Commission (a "Demand Registration") under and in
accordance with the provisions of the Securities Act of all or part of their
Registrable Securities; provided, however, that the Company (i) shall be
required to effect no more than two such Demand Registrations pursuant to this
Section 3 (other than the Shelf Registration as defined in Section 3.2), (ii)
shall not be required to cause a Demand Registration to be filed with the
Commission prior to the day that is 270 days after the date hereof, and (iii)
shall not be required to effect a Demand Registration if less than $10 million
in market value of Registrable Securities would be registered or if the
Registrable Securities could be sold pursuant to the Shelf Registration if then
in effect.
(b) A Demand Registration shall be in the form of a
firmly underwritten offering managed by an underwriter or underwriters selected
pursuant to Section 3.5.
(c) Within ten days after receipt of any request by
the Demand Requesting Holders under Section 3.1(a) or the Majority Holders under
Section 3.2, the Company will give written notice (the "Other Holders Notice")
of such registration request to all other Holders, if any, and, subject to
Section 3.4, shall include in such registration all Registrable Securities with
respect to which the Company has received written requests for inclusion therein
<PAGE>
from the Holders thereof within 15 days after such notice by the Company. The
Company shall have no obligation to include in such registration Registrable
Securities with respect to which the Company has not received written requests
within such 15-day period.
(d) The failure to file a Registration Statement
within 60 days of a written request delivered under Section 3.1 shall
constitute, in the absence of an injunction or a Blackout Period having been
imposed, a breach thereof entitling the Holders to remedies hereunder.
3.2 Shelf Registration. Subject to Section 3.6, at any time
following the date hereof, the Majority Holders may make a written request to
the Company that a "shelf" registration statement with respect to all of the
Registrable Shares, on an appropriate Form, pursuant to Rule 415 under the
Securities Act or any similar rule that may be adopted by the Commission (the
"Shelf Registration"), be filed with the Commission, provided that the Company
shall not be required to cause such Shelf Registration to be filed with the
Commission prior to the date that is 270 days after the date hereof, provided
that the Company may, upon prior notice to Holders of Registrable Securities
elect to file a Shelf Registration before such date or request. The Company
shall use reasonable best efforts to keep the Shelf Registration continuously
effective until the earlier of (i) the second anniversary (plus the term of any
Blackout Period, as defined in Section 3.5) of the date the Shelf Registration
is declared effective and (ii) the date on which all shares registered on the
Shelf Registration statement have been sold. The Shelf Registration shall
provide for distributions under all lawful means and shall not qualify as either
of the Demand Registrations to which the Holders are entitled. Any Holder shall
be required to comply with the rules of the New York Stock Exchange or any other
stock exchange on which the Common Shares are then listed.
3.3 Effective Registration and Expenses. A registration will
qualify as a Demand Registration or a Shelf Registration when it has become
effective; provided, however, that (i) if the Demand Requesting Holders with
regard to a Demand Registration, or the Majority Holders with regard to a Shelf
Registration, withdraw their Registrable Securities after the filing with the
Commission of the initial Registration Statement related thereto and prior to
the effective date thereof, the registration will count as a Demand Registration
or a Shelf Registration unless such Demand Requesting Holders or Majority
Holders, as the case may be, agree severally to pay all of the Registration
Expenses of the Company and all other out of pocket expenses of the Company
contemplated by Section 7 hereof, incurred through the date that notice of such
withdrawal is given and (ii) an effective Demand Registration will not count as
a Demand Registration if the Demand Requesting Holders have not been permitted
to register and sell all of the Registrable Securities requested to be included
in such registration by such Demand Requesting Holders.
3.4 Priority on Underwritten Demand Registrations. Subject to
the rights granted pursuant to the agreements set forth on Schedule 11.2, if the
managing underwriter or underwriters of any underwritten Demand Registration
advise the Company and the Holders in writing of an Underwriters Maximum Number,
the Company will be obligated and required to include in such registration (i)
first, the Registrable Securities requested to be included in such Demand
Registration by the Holders, pro rata in proportion to the number of Registrable
<PAGE>
Securities requested to be included in such registration by each of them until
all such Registrable Securities have been so included, (ii) second, the
securities requested to be included in such Demand Registration by the Company
and other Persons having contractual rights thereto, in accordance with the
priorities that exist among them, and (iii) third, any other securities of the
Company to be registered on behalf of any other Person, including the Company.
Neither the Company nor any of its securityholders (other than Holders of
Registrable Securities) shall be entitled to include any securities in any
underwritten Demand Registration unless the Company or such securityholders (as
the case may be) shall have irrevocably agreed in writing to sell such
securities on the same terms and conditions as shall apply to the Registrable
Securities to be included in such underwritten Demand Registration.
3.5 Selection of Underwriters. The managing underwriter and
any additional investment bankers and managers for use in connection with any
underwritten Demand Registration will be selected by the Company with the
consent of the holders of a majority of the Registrable Securities to be
registered on behalf of the Demand Requesting Holders, with such consent not to
be unreasonably withheld.
3.6 Limitations Regarding Registration at the Request of
Holders
(a) The Company shall not be required to effect a
Demand Registration or a Shelf Registration under Section 3 and the Holders of
Registrable Securities will discontinue the disposition of their securities
covered by a Shelf Registration during any Blackout Period (as defined below)
(i) if the Board of Trustees of the Company determines in good faith that
effecting such a registration or continuing such disposition at such time would
have a material adverse effect upon a proposed sale of all (or substantially
all) of the assets of the Company or a merger, reorganization, recapitalization
or similar current transaction materially affecting the capital structure or
equity ownership of the Company, (ii) if the Company is in possession of
material information which the Board of Trustees of the Company determines in
good faith is not in the best interests of the Company to disclose in a
registration statement at such time, (iii) if the Company has delivered a notice
pursuant to Section 4.1 that it is undertaking an underwritten offering in which
the Holders will be entitled to exercise their Piggyback Registration rights, or
(iv) if the Company is otherwise prohibited pursuant to the rules and
regulations of the Commission from effecting such filing; provided, however,
that the Company may (x) only delay a Demand Registration pursuant to this
Section 3.6 by delivery of a Blackout Notice (as defined below) within thirty
(30) days of delivery of the notice requesting a Demand Registration and only
for a period not exceeding three (3) months from the date of delivery of the
Blackout Notice (or until such earlier time as such transaction is consummated
or no longer proposed or the material information has been made public); and (y)
require, by delivery of a Blackout Notice, that the Holders of Registrable
Securities discontinue from time to time, the disposition of their securities
covered by a Shelf Registration for an aggregate period not to exceed six (6)
months (each period as described in (x) and (y) above, a "Blackout Period") in
any 36-month period.
(b) The Company shall promptly notify the Holders in
writing (a "Blackout Notice") of any decision not to effect a Demand
Registration or a Shelf Registration or to discontinue sales of Registrable
Securities pursuant to this Section 3.6, which notice shall set forth the reason
<PAGE>
for such decision (but not disclosing any nonpublic material information unless
expressly requested by Holders, who shall be obligated to maintain the
confidentiality of such information) and shall include an undertaking by the
Company promptly to notify the Holders as soon as a Demand Registration or a
Shelf Registration may be effected or sales may resume.
(c) The Company shall not be required to effect a
Demand Registration or Shelf Registration under this Section 3 during any period
in which the Company is restricted from filing a registration statement or from
making any public sale or distribution of its equity securities pursuant to any
agreement on Schedule 11.2.
4. PIGGYBACK REGISTRATION
4.1 Right to Include Registrable Securities. Subject to
Section 4.3, if the Company or any other issuer of Registrable Securities at any
time or from time to time proposes to register shares of its equity securities
or Registrable Securities under the Securities Act (other than in a registration
on Form S-4 or S-8 or any successor form to such forms or in connection with an
exchange offer or an offering of securities solely to the existing stockholders
or employees of the Company), whether or not for sale for its own account, the
Company shall deliver prompt written notice to all Holders of Registrable
Securities of its intention to undertake such registration and of such Holders'
rights to participate in such registration to the extent of their holdings of
Piggyback Registrable Securities under this Section 4 as hereinafter provided.
The Company shall use its reasonable best efforts to effect the registration
under the Securities Act of all Piggyback Registrable Securities with respect to
which the Company receives a request for registration from the Holders thereof
by written notice to the Company within 15 Business Days after the date of the
Company's notice to such Holders of its intended registration (which notice by
Holders shall specify the amount of such Piggyback Registrable Securities to be
registered, which amount for each Holder must equal or exceed the lesser of (i)
half of all Piggyback Registrable Securities that such Holder either owns or has
the right to acquire or (ii) 10,000 shares), to the extent necessary to permit
their disposition in accordance with the Company's intended methods thereof of
all such Piggyback Registrable Securities by including such Piggyback
Registrable Securities in the registration statement pursuant to which the
Company proposes to register the securities (a "Piggyback Registration");
provided, however, that if such registration involves an underwritten offering,
all Holders requesting inclusion in the registration shall be required to sell
such Piggyback Registrable Securities to the underwriters selected by the
Company at the same price and on the same terms of underwriting applicable to
the Company and any other Persons selling securities. Holders desiring to
participate in a Piggyback Registration shall be bound by the Company's intended
method of disposition of shares thereunder. The Holders requesting inclusion in
a registration pursuant to this Section 4 may, at any time prior to the
effective date of the registration statement relating to such registration,
revoke such request by delivering written notice to the Company revoking such
requested inclusion. All requests for Piggyback Registration under this Section
4 shall be without prejudice to the rights of the Holders to request, and shall
not be counted as, a Demand Registration or Shelf Registration under Section 3
above.
4.2 Priority in Piggyback Registration. If any of the
Piggyback Registrable Securities registered pursuant to any Piggyback
Registration are to be sold in one or more firm commitment underwritten
<PAGE>
offerings, and the managing underwriters provide a written opinion addressed to
the Company and the Holders of such Piggyback Registrable Securities advising of
an Underwriters Maximum Number, or, in the case of a Piggyback Registration not
being underwritten, the Company shall reasonably determine (and notify the
Holders of Piggyback Registrable Securities of such determination), after
consultation with an investment banker of nationally recognized standing, that
the number of shares of securities proposed to be sold in such offering exceeds
the number of shares which can be sold in such offering within a price range
acceptable to the Company, the Company shall include in such registration only
such number of shares (including Piggyback Registrable Securities, if any) which
in the opinion of such underwriter or underwriters or the Company, as the case
may be, can be sold within such price range, selected in the following order of
priority: (i) first, all of the shares that the Company proposes to register
(but solely to the extent that the proceeds thereof shall not be used to
purchase Common Shares or other securities of the Company), and the shares
requested by any other Person having demand registration rights and having made
demand for the subject registration, and (ii) second, subject only to priority
"piggyback" rights, if any, granted pursuant to the agreements set forth on
Schedule 11.2, the Piggyback Registrable Securities requested to be included in
such registration by Holders that have requested their Piggyback Registrable
Securities to be included therein, pro rata in proportion to the number of
Piggyback Registrable Securities requested to be included in such registration
by each of them.
4.3 Limitations Regarding Piggyback Registrations. If the
Company, at any time after giving written notice under Section 4.1 of its
intention to register Common Stock and prior to the effectiveness of the
registration statement filed in connection with such registration, determines
for any reason either not to effect such registration or to delay such
registration, the Company may, at its election, by the delivery of written
notice to each Holder, (i) in the case of a determination not to effect
registration, relieve itself of its obligation to register the Piggyback
Registrable Securities in connection with such registration, or (ii) in the case
of a determination to delay the registration, delay the registration of such
Piggyback Registrable Securities for the same period as the delay in the
registration of such other Common Shares. In addition, Holders of Piggyback
Registrable Securities shall not have the right to include such securities in
any registration statement filed pursuant to a registration rights agreement in
effect on the date hereof and set forth on Schedule 11.2 if, under any such
agreement, the beneficiary thereof would not be required to allow a Holder of
Piggyback Registrable Securities to participate in the registration statement
filed on behalf of such beneficiary.
4.4 Agreement of Holders. As a condition precedent to
permitting any Holder to participate in a Piggyback Registration, the Company
shall have the right to require such Holder to execute an agreement in form and
substance satisfactory to the Company to the effect that such Holder agrees to
be bound by, and to comply with, all of the obligations of a Holder under this
Agreement.
5. HOLDBACK AGREEMENTS
5.1 Restrictions on Public Sale by Holder of Registrable
Securities
<PAGE>
(a) Each Holder of Registrable Securities agrees, if
requested by the managing underwriter or underwriters in an underwritten
offering of any Registrable Securities (or of Company securities from which
Registrable Securities are not included in compliance with this Agreement), not
to effect any public sale or distribution or any other sale pursuant to the
exemption from the registration requirements of the Securities Act available for
private placements, of its remaining equity securities of the Company, including
a sale pursuant to Rule 144 (or any similar provision then in force) under the
Securities Act (except as part of such underwritten registration), during the
14-day period prior to, and during the 90-day period (or such shorter period as
may be agreed to by the parties hereto) beginning on, the effective date of such
Registration Statement, to the extent timely notified in writing by the Company
or the managing underwriter or underwriters, unless the underwriters managing
the registered offering and the Company otherwise agree.
(b) Each Holder of Registrable Securities agrees by
acquisition of such Registrable Securities not to effect any public sale or
distribution or any other sale pursuant to the exemption from the registration
requirements of the Securities Act available for private placements, of its
remaining equity securities of the Company, including a sale pursuant to Rule
144 (or any similar provision then in force) under the Securities Act (except as
part of such underwritten registration), during the period that a holder of
securities registrable under any of the agreements set forth on Schedule 11.2 is
prohibited from making any such sale or distribution as a result of an
underwritten public offering pursuant to such agreement.
5.2 Restriction on Public Sale by the Company and Others. The
Company agrees (i) not to effect any public sale or distribution of any of its
equity securities during the 14-day period prior to, and during the 90-day
period beginning on, the effective date of a Demand Registration Statement filed
pursuant to Section 3 or such longer periods, but in no event more than 180
days, as may be required in the reasonable judgment of the managing underwriter
or underwriters (except as part of such underwritten registration or pursuant to
registrations on Forms S-4 or S-8 or any successor form to such forms or in
connection with an exchange offer or an offering of securities solely to the
existing stockholders or employees of the Company), and (ii) that it will cause
each holder of equity securities of the Company purchased from the Company at
any time after the date of this Agreement (other than in a registered public
offering) who as a result of such purchase, owns more than 5% of the Common
Shares on a Fully Diluted Basis, to agree not to effect any public sale or
distribution or, in the case of officers or Trustees of the Company, any other
sale pursuant to the exemption from the registration requirements of the
Securities Act available for private placements, of any such securities during
such period, including a sale pursuant to Rule 144 under the Securities Act
(except as part of such underwritten registration, if permitted).
6. REGISTRATION PROCEDURES
Upon the Company incurring registration obligations under
Section 3 or Section 4 and subject thereto (including, without limitation, the
Company's unfettered right to terminate or withdraw a registration under Section
4 for any or no reason), the Company will use its reasonable best efforts to
effect such registrations to permit the sale of such Registrable Securities in
accordance with the intended method or methods of distribution thereof, and
pursuant thereto the Company will, at its expense, as expeditiously as
reasonably possible:
<PAGE>
(a) prepare and file with the Commission a
Registration Statement relating to such registration on any appropriate form
under the Securities Act, which form shall be available for the sale of the
Registrable Securities by the Holders thereof in accordance with the intended
method or methods of distribution thereof, and use its reasonable best efforts
to cause such Registration Statement to become effective; provided, however,
that before filing a Registration Statement or Prospectus or any amendments or
supplements thereto, the Company will furnish to the Holders of the Registrable
Securities covered by such Registration Statement, their counsel and the
underwriters, if any, copies of all such documents proposed to be filed
sufficiently in advance of filing to provide them with a reasonable opportunity
to review such documents and comment thereon; provided that nothing in this
Agreement shall require the Company to provide Holders and their counsel with
documents incorporated by reference in advance of the filing of such documents
with the Commission;
(b) prepare and file with the Commission such
amendments and post-effective amendments to a Registration Statement as may be
necessary to keep such Registration Statement effective for a period of not less
than 180 days (or such shorter period which shall terminate when all Registrable
Securities covered by such Registration Statement have been sold or withdrawn,
but not prior to the expiration of the 90-day period referred to in Section 4(3)
of the Securities Act and Rule 174 thereunder, if applicable); cause the related
Prospectus to be supplemented by any required Prospectus supplement, and as so
supplemented to be filed pursuant to Rule 424 under the Securities Act; and
comply with the provisions of the Securities Act applicable to it with respect
to the disposition of all securities covered by such Registration Statement
during the applicable period in accordance with the intended methods of
disposition by the sellers thereof set forth in such Registration Statement or
supplement to such Prospectus;
(c) notify each Holder of Registrable Securities
included in the Registration Statement, their counsel and the managing
underwriters, if any, at any time when a prospectus relating thereto is required
to be delivered under the Securities Act, promptly, and (if requested by any
such Person) confirm such notice in writing, (1) when a Prospectus or any
Prospectus supplement or post-effective amendment has been filed, and, with
respect to a Registration Statement or any post-effective amendment, when the
same has become effective, (2) of any request by the Commission for amendments
or supplements to a Registration Statement or related Prospectus or for
additional information, (3) of the issuance by the Commission of any stop order
suspending the effectiveness of a Registration Statement or the initiation of
any proceedings for that purpose, (4) if at any time the representations and
warranties of the Company contained in agreements contemplated by Section 6(n)
cease to be true and correct, (5) of the receipt by the Company of any
notification with respect to the suspension of the qualification of any of the
Registrable Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose, (6) of the happening of any
event as a result of which the Prospectus included in the Registration Statement
(as then in effect) contains any 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 (in the case of the Prospectus or any preliminary Prospectus,
in light of the circumstances under which they were made) not misleading
(provided that in the case of a shelf registration, the Company shall be
<PAGE>
required to notify Holders only when the Company has received notice from a
Holder that the Holder intends to sell Registrable Securities under the
Registration Statement) and (7) of the Company's reasonable determination that a
post-effective amendment to a Registration Statement would be appropriate or
that there exist circumstances not yet disclosed to the public which make
further sales under such Registration Statement inadvisable pending such
disclosure and post-effective amendment (provided that in the case of a shelf
registration, the Company shall be required to notify Holders only when the
Company has received notice from a Holder that the Holder intends to sell
Registrable Securities under the Registration Statement);
(d) at any time when a prospectus relating thereto is
required to be delivered under the Securities Act, upon the occurrence of any
event contemplated by Section 6(c)(2)-(7), prepare a supplement or
post-effective amendment to the Registration Statement or related Prospectus or
any document incorporated therein by reference or file any other required
document so that, as thereafter delivered to the purchasers of the Registrable
Securities being sold thereunder, such Prospectus will not contain an untrue
statement of a material fact or omit to state any material fact necessary to
make the statements therein not misleading;
(e) use reasonable best efforts to obtain the
withdrawal of any order suspending the effectiveness of the Registration
Statement, or the lifting of any suspension of the qualification of any of the
Registrable Securities for sale in any jurisdiction required pursuant to Section
6(i), as soon as reasonably possible;
(f) if requested by a managing underwriter or any
Holder of Registrable Securities, immediately incorporate in a prospectus
supplement or post-effective amendment such information concerning such Holder
of Registrable Securities, the managing underwriter or underwriters or the
intended method of distribution as the managing underwriter or underwriters or
the Holder of Registrable Securities reasonably requests to be included therein
and as is appropriate in the reasonable judgment of the Company, including,
without limitation, information with respect to the number of shares of the
Registrable Securities being sold to such underwriter or underwriters, the
purchase price being paid therefor by such underwriter or underwriters and with
respect to any other terms of the underwritten (or best efforts underwritten)
offering of the Registrable Securities to be sold in such offering; make all
required filings of such Prospectus supplement or post-effective amendment as
soon as notified of the matters to be incorporated in such Prospectus supplement
or post-effective amendment; and supplement or make amendments to any
Registration Statement if requested by a managing underwriter of such
Registrable Securities;
(g) furnish to each Holder of Registrable Securities
included in such Registration Statement and each managing underwriter, if any,
without charge, one manually-signed copy of the Registration Statement and any
post-effective amendments thereto, including financial statements and schedules,
and, upon request, copies of all documents incorporated therein by reference and
all exhibits (including those incorporated by reference);
(h) deliver to each Holder of Registrable Securities
included in such Registration Statement, their counsel and the underwriters, if
any, without charge, as many copies of the Prospectus or Prospectuses (including
each preliminary Prospectus) and any amendment or supplement thereto as such
<PAGE>
Persons may reasonably request; the Company consents to the use of such
Prospectus or any amendment or supplement thereto by each Holder of Registrable
Securities included in the Registration Statement and the underwriters, if any,
in connection with the offering and sale of the Registrable Securities covered
by such Prospectus or any amendment or supplement thereto;
(i) prior to any public offering of Registrable
Securities use its reasonable best efforts to register or qualify, or cooperate
with the Holders of Registrable Securities included in the Registration
Statement, the underwriters, if any, and their respective counsel in connection
with the registration or qualification of, such Registrable Securities for offer
and sale under the securities or blue sky laws of such jurisdictions as any
Holder or underwriter reasonably requests in writing; use its reasonable best
efforts to keep each such registration or qualification effective, including
through new filings or amendments or renewals, during the period such
Registration Statement is required to be kept effective and do any and all other
acts or things necessary or advisable to enable the disposition in such
jurisdictions of the Registrable Securities covered by the applicable
Registration Statement; provided, however, that the Company will not be required
to qualify to do business or take any action that would subject it to taxation
or general service of process in any jurisdiction where it is not then so
qualified or subject;
(j) cooperate with the Holders of Registrable
Securities included in the Registration Statement and the managing underwriter
or underwriters, if any, to facilitate (x) the timely preparation and delivery
of certificates (not bearing any restrictive legends) representing Registrable
Securities to be sold under the Registration Statement or (y) the timely
transfer of beneficial ownership of such Registrable Securities in machine
book-entry fashion under the auspices of The Depository Trust Company or other
similar organization; and cause such Registrable Securities to be in such
denominations and registered in such names as the managing underwriter or
underwriters, if any, or such Holders may request at least two business days
prior to any sale of Registrable Securities;
(k) use its reasonable best efforts to cause the
Registrable Securities covered by the Registration Statement to be registered
with or approved by such Governmental Bodies consistent with the provisions of
Section 6(i) as may be necessary to enable the seller or sellers thereof or the
managing underwriter or underwriters, if any, to consummate the disposition of
such Registrable Securities;
(l) cause all Registrable Securities included in such
Registration Statement to be (1) listed, by the date of first sale of
Registrable Securities pursuant to such Registration Statement, on each
securities exchange on which shares of the same class and series have previously
been, or are concurrently to be, listed, if any, or (2) if the Registrable
Securities to be included in such Registration Statement are to be distributed
in an underwritten offering, quoted on the National Association of Securities
Dealers Automated Quotation System ("NASDAQ") or the National Market System of
NASDAQ if the Common Shares are then quoted thereon and such Registrable
Securities qualify for inclusion thereon;
<PAGE>
(m) provide a transfer agent and registrar for the
Registrable Securities not later than the effective date of such Registration
Statement;
(n) enter into such agreements and take all such
other reasonable actions in connection therewith in order to expedite or
facilitate the disposition of such Registrable Securities and in such
connection, in the case of an underwritten offering, enter into an underwriting
agreement in form, scope and substance as is customary in underwritten offerings
and use its reasonable best efforts to comply with and satisfy the covenants and
conditions of such underwriting agreement, including, without limitation,
providing opinions of counsel to the Company, indemnifications, and "comfort"
letters from the Company's independent certified public accountants;
(o) make available for inspection by a representative
of the Holders of Registrable Securities included in the Registration Statement,
any underwriter participating in any disposition pursuant to such Registration
Statement and any lawyer, accountant or other advisors retained by such selling
Holders or underwriter, all pertinent financial and other records, pertinent
trust documents and properties of the Company as they may reasonably request,
and cause the Company's officers, trustees and employees to supply all pertinent
information reasonably requested by any such representative, underwriter,
lawyer, accountant or other advisors in connection with such Registration
Statement; provided, however, that any records, information or documents that
are furnished by the Company and that are nonpublic shall be used only in
connection with such registration and shall be kept confidential by such Persons
except to the extent disclosure of such records, information or documents is
required by law; and
(p) otherwise use its reasonable best efforts to
comply with all applicable rules and regulations of the Commission and make
generally available to its security holders earnings statements satisfying the
provisions of Section 11(a) of the Securities Act, no later than 90 days after
the end of any 12-month period commencing at the end of any fiscal quarter in
which Registrable Securities are sold to underwriters in a firmly underwritten
offering.
Each Holder of Registrable Securities as to which any
registration is being effected shall furnish promptly to the Company such
information regarding the distribution of such securities as the Company may
from time to time reasonably request in writing.
Each Holder of Registrable Securities (i) shall sell its
securities covered by any Registration Statement in accordance with the plan of
distribution provided for therein and (ii) upon receipt of any notice from the
Company of the happening of any event of the kind described in Section
6(c)(2)-(7), shall forthwith discontinue disposition of Registrable Securities
covered by such Registration Statement or Prospectus until such Holder's receipt
of the copies of the supplemented or amended Prospectus contemplated by Section
6(d), or until it is advised in writing by the Company that the use of the
applicable Prospectus may be resumed, and has received copies of any additional
or supplemental filings which are incorporated by reference in such Prospectus,
and, if so directed by the Company, such Holder will, or will request the
managing underwriter or underwriters, if any, to, deliver to the Company (at the
Company's expense) all copies, other than permanent file copies then in such
Holder's possession, of the Prospectus covering such securities current at the
time of receipt of such notice. In the event the Company shall give any such
notice, the time period mentioned in Section 6(b) during which a Registration
<PAGE>
Statement is required to be kept effective shall be extended by the number of
days during the time period from and including the date of the giving of such
notice pursuant to Section 6(c) to and including the earlier of (x) the date
when each seller of Registrable Securities covered by such Registration
Statement shall have received the copies of the supplemented or amended
Prospectus contemplated by Section 6(d), or (y) the date when each such seller
is notified by the Company that it may resume use of the Prospectus as then in
effect. The Company shall be obligated to use its reasonable best efforts to
cause such Registration Statement and Prospectus to conform to all legal
requirements and to notify the Holders that the use of the applicable Prospectus
may be resumed. Nothing in this paragraph shall create an exception to the
permitted duration of any Blackout Period imposed pursuant to and subject to
Section 3.6 of this Agreement.
7. REGISTRATION EXPENSES
All expenses incident to the Company's performance of or
compliance with this Agreement, including, without limitation, all registration
and filing fees, fees and expense of compliance with state securities or blue
sky laws, including reasonable fees and disbursements of counsel for the
underwriters in connection with blue sky qualifications of the Registrable
Securities under the laws of such jurisdictions as the managing underwriter or
underwriters may reasonably designate, printing expenses, messenger, telephone
and delivery expenses, and fees and disbursements of counsel for the Company and
of all independent certified public accountants of the Company (including the
expenses of any special audit and "cold comfort" letters required by or incident
to such performance), and of underwriters, any liability insurance and fees and
expenses of other Persons retained by the Company (all such expenses being
herein called "Registration Expenses") will be borne by the Company whether or
not the Registration Statement becomes effective. The Company will also pay its
internal expenses (including, without limitation, all salaries and expenses of
its officers and employees performing legal or accounting duties), the expense
of any annual audit, the fees and expenses incurred in connection with the
listing of the securities to be registered on any securities exchange on which
similar securities issued by the Company are then listed and the fees and
expenses of any Person, including special experts, retained by the Company. None
of the following expenses shall be paid by the Company: transfer taxes,
discounts, commissions or fees of underwriters, selling brokers, dealer managers
or similar securities industry professionals relating to the distribution of the
Registrable Securities and the legal fees and disbursements of counsel to the
Holders.
8. INDEMNIFICATION
8.1 Indemnification by the Company. The Company agrees to
indemnify, defend and hold harmless, to the full extent permitted by law, each
Holder of Registrable Securities registered pursuant to any registration
hereunder and each of its Affiliates or partners, each of their respective
members, officers, directors, employees, agents, representatives, successors and
assigns and each Person who controls such Holder, Affiliate or partner (within
the meaning of the Securities Act) against any and all actions, causes of
action, suits, losses, liabilities, obligations, damages, deficiencies, demands,
claims, judgments, taxes, assessments, settlement costs, court costs and other
costs and expenses, including, without limitation, interest, penalties, fines,
costs of investigation, discovery, case preparation, defense or appeal, expert
<PAGE>
witness fees and expenses and reasonable attorneys' and paralegal fees and
disbursements (collectively, "Losses") incurred by any such Person in any
capacity and caused by any untrue statement of a material fact contained in any
Registration Statement, Prospectus or preliminary Prospectus or any omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein (in the case of a Prospectus or any preliminary
Prospectus, in the light of the circumstances under which they were made) not
misleading, except insofar as the same are caused by or contained in any
information furnished in writing to the Company by such Holder or its
representative expressly for use therein; provided, however, that such
indemnification with respect to any preliminary prospectus shall not be
applicable if a copy of the Prospectus was not sent or given by or on behalf of
such Holder on the initial sale, if such is required by law, at or prior to the
written confirmation of the sale and if the Prospectus (as amended or
supplemented) would have cured the defect giving rise to such Losses.
8.2 Indemnification by Holders. In connection with any
registration hereunder, each Holder participating in such registration will
promptly furnish to the Company in writing such information and affidavits with
respect to such Holder as the Company reasonably requests for use in connection
with any Registration Statement or Prospectus and agrees to indemnify, defend,
and hold harmless, to the full extent permitted by law, the Company, its
trustees, officers, agents and representatives and each Person who controls the
Company (within the meaning of the Securities Act) against any Losses incurred
by any such Person in any capacity and caused by any untrue statement of a
material fact or any omission of a material fact required to be stated in any
Registration Statement or Prospectus or preliminary Prospectus or necessary to
make the statements therein (in the case of a Prospectus, in the light of the
circumstances under which they were made) not misleading, to the extent, but
only to the extent, that such untrue statement or omission is contained in any
information or affidavit with respect to such Holder so furnished in writing by
such Holder or its representatives to the Company specifically for inclusion in
such Registration Statement or Prospectus; provided, however, that such
indemnification with respect to any preliminary prospectus shall not be
applicable if a copy of the Prospectus was not sent or given by or on behalf of
the Company on the initial sale, if such is required by law, at or prior to the
written confirmation of the sale and if the Prospectus (as amended or
supplemented) would have cured the defect giving rise to such Losses. In no
event shall the liability of any selling Holder hereunder be greater in amount
than the net dollar amount of the proceeds received by such Holder upon the sale
of the Registrable Securities giving rise to such indemnification obligation.
The Company shall be entitled to receive indemnities from underwriters to the
same extent as provided above with respect to information so furnished in
writing by such persons or their representatives to the Company specifically for
inclusion in any Prospectus or Registration Statement.
8.3 Conduct of Indemnification Proceedings. Any Person
entitled to indemnification hereunder will (i) give prompt written notice to the
indemnifying party of any claim with respect to which it seeks indemnification
and (ii) permit such indemnifying party to assume the defense of such claim with
counsel reasonably satisfactory to the indemnified party. Notwithstanding the
foregoing, any Person entitled to indemnification hereunder shall have the right
to employ separate counsel and to participate in the defense of such claim, but
the reasonable fees and expenses of such counsel shall be at the expense of such
<PAGE>
Person unless (a) the indemnifying party has agreed in writing to pay such fees
or expenses, (b) the indemnifying party shall have failed to assume the defense
of such claim and employ counsel reasonably satisfactory to such Person or (c) a
conflict of interest may exist between such Person and the indemnifying party
(it being understood that (x) in the case of each of (a), (b) and (c) above, the
reasonable fees and expenses of such separate counsel to such Person shall be
paid by the indemnifying party and (y) in the case of (c) above, if the Person
notifies the indemnifying party in writing that such Person elects to employ
separate counsel at the expense of the indemnifying party, the indemnifying
party shall not have the right to assume the defense of such claim on behalf of
such Person). If such defense is not assumed by the indemnifying party, the
indemnifying party will not be subject to any liability for any settlement made
without its consent (but such consent will not be unreasonably withheld or
delayed). No indemnifying party will be required to consent to entry of any
judgment or enter into any settlement which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to the indemnified party of
a release from all liability in respect to such claim or litigation. An
indemnifying party who is not entitled to, or elects not to, assume the defense
of a claim will not be obligated to pay the reasonable fees and expenses of more
than one counsel for all parties indemnified by such indemnifying party with
respect to such claim, unless in the reasonable judgment of any indemnified
party a conflict of interest may exist between such indemnified party and any
other of such indemnified parties with respect to such claim, in which event the
indemnifying party shall be obligated to pay the fees and expenses of such
additional counsel or counsels. The Company may not enter into any settlement of
any claim relating to the offer and sale of Registrable Securities that does not
provide for the complete and unconditional release of such Person.
8.4 Contribution. If the indemnification provided for in this
Section 8 from the indemnifying party is unavailable to an indemnified party
hereunder in respect of any losses, claims, damages, liabilities or expense
referred to therein, then the indemnifying party in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages, liabilities or
expenses in such proportion as is appropriate to reflect the relative fault of
the indemnifying party and indemnified parties in connection with the actions
which resulted in such losses, claims, damages, liabilities or expenses, as well
as any other relevant equitable considerations. The relative fault of such
indemnifying party and indemnified parties shall be determined by reference to,
among other things, whether any action in question, including any untrue or
alleged untrue statement of a material fact or omission or alleged omission to
state a material fact, has been made by, or relates to information supplied by,
such indemnifying party or indemnified parties, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such action; provided, however, that in no event shall the liability of any
selling Holder hereunder be greater in amount than the difference between the
dollar amount of the proceeds received by such Holder upon the sale of the
Registrable Securities giving rise to such contribution obligation and all
amounts previously contributed by such Holder with respect to such losses,
claims, damages, liabilities and expenses. The amount paid or payable by a party
as a result of the losses, claims, damages, liabilities and expenses referred to
above shall be deemed to include any legal or other fees or expenses reasonably
incurred by such party in connection with any investigation or proceeding.
<PAGE>
The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 8.4 were determined by pro
rata allocation or by any other method of allocation which does not take into
account the equitable considerations referred to in the immediately paragraph.
No person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
9. RULE 144
The Company agrees that it will file the reports required to
be filed by it under the Securities Act and the Exchange Act and the rules and
regulations adopted by the Commission thereunder, to the extent required from
time to time to enable such Holder to sell Registrable Securities without
registration under the Securities Act within the limitation of the exemptions
provided by (a) Rule 144 under the Securities Act, as such Rule may be amended
from time to time, or (b) any similar rule or regulation hereafter adopted by
the Commission. Upon the request of any Holder of Registrable Securities, the
Company will deliver to such Holder a written statement as to whether it has
complied with such information and requirements.
10. EFFECTIVENESS
This Agreement shall be effective upon the execution and
delivery of a counterpart by each of the parties hereto.
11. MISCELLANEOUS
11.1 No Adequate Remedy at Law. In the event of a breach by
the Company of its obligations under this Agreement, each Holder, in addition to
being entitled to exercise all rights granted by law, including recovery of
damages, will be entitled to specific performance of its rights under this
Agreement. The Company agrees that monetary damages would not be adequate
compensation for any loss incurred by reason of a breach by it of any of the
provisions of this Agreement and hereby agrees to waive the defense in any
action for specific performance that a remedy at law would be adequate.
11.2 No Inconsistent Agreement
(a) Except for the registration rights contained in
the agreements set forth on Schedule 11.2 hereto, the Company has not previously
entered into any agreement that remains in effect with respect to its equity
securities granting any registration rights to any Person. The provisions of the
agreements set forth on Schedule 11.2 hereto are not in conflict with the
provisions hereof and do not inhibit the Company's ability to perform this
Agreement. There are no priority "piggyback" rights as referred to in Section
4.2 hereof, except in the agreements indicated by asterisk on Schedule 11.2.
(b) The Company will not on or after the date of this
Agreement enter into any agreement with respect to its securities (i) which
grants registration rights to anyone on a preferred or pari passu position to
the Holders as to "cut-back" priorities in piggyback registrations or (ii) which
conflicts with the provisions hereof.
<PAGE>
11.3 Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, unless the Company has obtained the written consent of the
Majority Holders. Notwithstanding the foregoing, a waiver or consent to depart
from the provisions hereof with respect to a matter which relates exclusively to
the rights of Holders of Registrable Securities whose securities are being sold
pursuant to a Registration Statement and which does not directly or indirectly
affect the rights of other Holders may be given by Holders owning a majority of
the shares of the Registrable Securities being sold by such Holders, provided
that the provisions of this sentence may not be amended, modified, or
supplemented except in accordance with the provisions of the immediately
preceding sentence.
11.4 Notices. Any notice or other communication required or
permitted hereunder shall be deemed to be delivered if in writing (or in the
form of a telecopy) addressed as provided below and if either (a) actually
delivered or telecopied to said address, (b) in the case of overnight delivery
of a notice, the next business day after properly posted with postage prepaid,
or (c) in the case of a letter, three business days shall have elapsed after the
same shall have been deposited in the United States mails, postage prepaid and
registered or certified:
If to the Company, then to Brandywine Realty Trust, 14 Campus
Boulevard, Suite 100, Newtown Square, Pennsylvania 19073, Attention:
President and Chief Executive Officer and General Counsel, or such
other address or addresses of which the Investor shall have been given
notice, with concurrent copies to Pepper Hamilton LLP, 3000 Two Logan
Square, Philadelphia, Pennsylvania 19103, Attention: Michael Friedman,
Esq., or such other address of which the Investor shall have been given
notice.
If to any Holder of Registrable Securities, to it at its
address set forth on the books and records of the Company.
11.5 Non-Recourse. No recourse shall be had for any of the
obligations of the Company hereunder or for any claim based thereon or otherwise
in respect thereof, against any past, present or future trustee, shareholder,
officer or employee of the Company, whether by virtue of any statute or rule of
law, or by the enforcement of any assessment or penalty or otherwise, all of
such liability being expressly waived and released by the Investor on behalf of
itself and its Affiliates and each Holder of Registrable Securities.
11.6 Counterparts. This Agreement and any amendments, waivers,
consents or supplements may be executed in two or more counterparts and by the
parties hereto in separate counterparts, each of which when so executed shall be
deemed to be an original and all of which taken together shall constitute one
and the same instrument. This Agreement shall become effective upon the
execution of a counterpart by each of the parties hereto.
<PAGE>
11.7 Headings. Section and subsection headings in this
Agreement are included herein for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose or be given any
substantive effect.
11.8 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York applicable to
agreements made and to be performed entirely within such State.
11.9 Consent to Jurisdiction; Waiver of Jury Trial
(a) Any action, suit or proceeding arising out of or
relating to this Agreement or the transactions contemplated hereby may be
instituted in any federal court of the Southern District of New York or any
state court located in New York County, State of New York, and each party agrees
not to assert, by way of motion, as a defense or otherwise, in any such action,
suit or proceeding, any claim that it is not subject personally to the
jurisdiction of such court, that the action, suit or proceeding is brought in an
inconvenient forum, that the venue of the action, suit or proceeding is improper
or that this Agreement or the subject matter hereof may not be enforced in or by
such court. The parties irrevocably submit to the exclusive jurisdiction of such
court in any such action, suit or proceeding. Any and all service of process and
any other notice in any such action, suit or proceeding shall be effective
against any party if given personally or by registered or certified mail, return
receipt requested, or by any other means of mail that requires a signed receipt,
postage prepaid, mailed to such party as herein provided. Nothing herein
contained shall be deemed to affect the right of any party to serve process in
any manner permitted by law or to commence legal proceedings or otherwise
proceed against any other party in any other jurisdiction to enforce judgments
obtained in any action, suit or proceeding brought pursuant to this Section
11.9.
(b) Each of the parties hereby irrevocably waives
trial by jury in any action, suit, proceeding or counterclaim, whether at law or
equity, brought by either of them in connection with this Agreement or the
transactions contemplated hereby.
11.10 Severability. The invalidity, illegality or
unenforceability in any jurisdiction of any provision in or obligation under
this Agreement shall not affect or impair the validity, legality and
enforceability of the remaining provisions or obligations under this Agreement
or of such provision or obligation in any other jurisdiction.
11.11 Entire Agreement. This Agreement is intended by the
parties as a final expression of their agreement and intended to be a complete
and exclusive statement of the agreement and understanding of the parties hereto
in respect of the subject matter contained herein, other than the provisions of
any other documents specifically referred to herein. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein, with respect to the registration rights granted by the Company with
respect to the Registrable Securities. This Agreement supersedes all prior
agreements and understandings between the parties with respect to such subject
matter.
11.12 Non-Public Information. The Investor acknowledges that
its ability to disclose material non-public information or to trade any of the
Company's securities based on any material non-public information furnished to
it by the Company may be limited by the securities laws.
<PAGE>
11.13 Attorneys' Fees. In any action or proceeding brought to
enforce any provision of this Agreement, or where any provision hereof is
validly asserted as a defense, the successful party shall be entitled to recover
reasonable attorneys' fees in addition to its reasonable costs and expenses and
any other available remedy.
11.14 Construction. The Company and the Investor acknowledge
that each of them has had the benefit of legal counsel of its own choice and has
been afforded an opportunity to review this Agreement with its legal counsel and
that this Agreement shall be construed as if jointly drafted by the Company and
the Investor.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
BRANDYWINE REALTY TRUST
By: /s/ Gerard H. Sweeney
----------------------------------------------
Name: Gerard H. Sweeney
Title: President and Chief Executive Officer
FIVE ARROWS REALTY SECURITIES III L.L.C.
By: /s/ D. Pike Aloian
----------------------------------------------
Name: D. Pike Aloian
Title: Manager
<PAGE>
AGREEMENT AND WAIVER
--------------------
AGREEMENT AND WAIVER (the "Waiver"), dated as of April 19,
1999, between Brandywine Realty Trust, a Maryland real estate investment trust
(the "Company"), and Five Arrows Realty Securities III L.L.C., a Delaware
limited liability company (the "Investor"). Terms used herein and not otherwise
defined herein shall have the meanings set forth in the Company's Declaration of
Trust, as amended through and on the date hereof (the "Declaration") and the
Articles Supplementary (the "Articles Supplementary") classifying 4,375,000
shares of the Company's 8.75% Series B Senior Cumulative Convertible Preferred
Shares of Beneficial Interest (the "Preferred Shares").
WHEREAS, the Company intends to issue and sell to the
Investor, and the Investor intends to purchase from the Company, the Preferred
Shares and a warrant (the "Warrant") to purchase 500,000 common shares of
beneficial interest of the Company ("Common Shares"), subject to adjustment in
the event of a stock dividend, stock split or similar subdivision of Common
Shares;
WHEREAS, the Declaration and the Articles Supplementary set
forth certain restrictions with respect to the ownership of the Company's shares
of beneficial interest ("Shares");
WHEREAS, the Company desires to waive certain of those
restrictions on the terms and conditions set forth in this Waiver; and
WHEREAS, the Company's Board of Trustees has approved the
provisions of this Waiver.
NOW, THEREFORE, in consideration of the foregoing and for
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties hereto hereby agree as follows:
1. Representations and Warranties of the Company. The Company
hereby represents and warrants to the Investor as follows:
(a) Except as set forth on Schedule 1(a) hereto, no
individual (as determined for purposes of Section 856(h) of
the Code but including "qualified trusts" (as defined in
Section 856(h)(3)(E) of the Code)), Beneficially Owns more
than 9.8% of the number of shares of each class of outstanding
Shares and, to the knowledge of the Company, no such
individual Beneficially Owns more than 5% of each such class.
(b) (i) Attached hereto as Exhibit A is a true and
complete list of the Tenants which have leases which provide
for the payment of annual "rents from real property" to the
Company (as such term is defined in Section 856(d) of the
Code, and giving effect to the provisions of Treasury
Regulation Section 1.856-3(g)) in an amount, determined solely
with reference to the amount required to be included in the
gross income of the Company for purposes of applying Section
<PAGE>
856(c) of the Code, in excess of $500,000 annually (a "Major
Lease") (it being understood that at any time and from time to
time the Company may, subject to Section 3(b) hereof, notify
the Investor that there has been an addition to or a change in
Tenants and supply to the Investor a revised Exhibit A, which
shall become Exhibit A hereto as of and after the date of
receipt by the Investor of such revised Exhibit A), (ii) the
Company does not own, directly or indirectly (after applying
the constructive ownership rules of Section 856(d)(5) of the
Code) any stock or other equity interests in any such Tenant
(as determined for purposes of applying Section 856(d)(2)(B)
of the Code) (the representation in this clause (ii) is
sometimes hereinafter referred to as a "Tenant
Representation") and (iii) for purposes of Section 856(c)(2)
of the Code, at least 98% of the gross income of the Company
for the calendar year ending December 31, 1998 was derived
from the sources specified in Section 856(c)(2) of the Code
("Qualifying Income"). For purposes of this Agreement, the
term "Tenant" refers to any corporation, partnership, limited
liability company, joint venture, unincorporated organization,
estate, trust, or any other entity that pays or is expected to
pay "rents from real property" (as such term is defined in
Section 856(d) of the Code) to the Company or to any entity
all or part of the income of which would be attributed to the
Company for purposes of applying Sections 856(c)(2) and
856(c)(3) of the Code.
(c) Under current law, the only basis upon which the
Investor could cause the Company to fail to qualify as a REIT
solely by reason of the ownership by the Investor of the
Preferred Shares or Common Shares into which the Preferred
Shares have been converted (such Preferred Shares or Common
Shares, hereinafter, the "Subject Shares") or the Common
Shares which may be issued upon the exercise of the Warrant
(such Common Shares hereinafter, the "Additional Shares") (it
being understood that this representation does not apply to
any failure to qualify as a result of any action, inaction or
event, including but not limited to the provision of any
service or the institution of any legal proceeding, by any
person, including but not limited to the Investor, that could
affect the Company's status as a REIT), is by (i) the Investor
owning, actually or Beneficially, Shares to the extent that
such actual or Beneficial Ownership of Shares would result in
the Company being "closely-held" within the meaning of Section
856(h) of the Code or (ii) actual or constructive ownership of
an interest in the Company that, after application of the
constructive ownership rules of Section 856(d)(5) of the Code,
would result in the Company being deemed to own, after
application of such rules, an interest in a Tenant that would
cause the Company to own or be deemed to own, for purposes of
applying Section 856(d)(2)(B) of the Code, 10% or more of the
voting power or number of shares, or interests in assets or
net profits, as applicable, in such Tenant and the income
derived by the Company from such Tenants, when combined with
other income that is both (i) required to be taken into
account by the Company for purposes of applying Section 856(c)
of the Code and (ii) not described in Sections 856(c)(2)(A)
through (H) or Sections 856(c)(3)(A) through (I) of the Code,
<PAGE>
as applicable, would cause the Company to fail to satisfy any
of the gross income requirements of Section 856(c) of the
Code.
2. Representations and Warranties of the Investor. The
Investor hereby represents and warrants to the Company as follows:
(a) Relying upon and assuming the accuracy of the
representations and warranties given by the Company set forth
in Section 1, the ownership by the Investor and The Public
Employees Retirement System of Ohio ("OPERS") of the Subject
Shares and/or the Additional Shares will not result in the
Company being "closely-held" within the meaning of Section
856(h) of the Code and will not result in the Company
otherwise failing to qualify as a REIT.
(b) Attached hereto as Exhibit B is a true and
complete list of the persons owning a capital or profits
interest in the Investor, the interest owned in the Investor
by each such person, the persons owning beneficial interests
in the entities (other than OPERS) owning a capital or profits
interest in the Investor and the interest owned by each such
person.
(c) OPERS is a "qualified trust" as that term is
defined in Section 856(h)(3)(E) of the Code except to the
extent that it not being a "qualified trust" would not result
in the Company being "closely-held" within the meaning of
Section 856(h) of the Code or would not result in the Company
otherwise failing to qualify as a REIT.
(d) The Investor and those persons owning a direct or
indirect interest in the Investor collectively own, directly
or indirectly, no more than 5% of the value of the Company,
not including the Subject Shares.
(e) No person has a beneficial interest in OPERS
(based on such person's actuarial interest in such trust, as
provided for in Section 856(h)(3)(A) of the Code) with a value
of more than 0.2% of the total value of all beneficial
interests in OPERS.
(f) (i) Except as notified to the Company by the
Investor pursuant to Section 4(b), the Investor directly owns
no stock or other equity interest in excess of 9.8% in a
Tenant identified on Exhibit A (as the same may be amended
from time to time), and (ii) except as notified to the Company
by the Investor pursuant to Section 4(b), no Person owns a
stock or other equity interest (as determined for purposes of
applying Section 856(d)(2)(B) of the Code) in a Tenant
identified on Exhibit A (as the same may be amended from time
to time) that would both (A) be attributable to the Investor
by operation of Section 318 of the Code, as modified by
Section 856(d)(5) of the Code and (B) result in the Investor
being deemed to own, pursuant to such section as so modified,
in excess of 9.8% of such stock or other equity interests in
such Tenant.
<PAGE>
(g) For purposes of applying Section 856(h) of the
Code, no individual (as determined for purposes of applying
Section 856(h) but including "qualified trusts" other than
OPERS) is or will be deemed to own more than 0.2% of the value
or number, whichever is greater, of the outstanding Shares by
virtue of the Investor's or OPERS' ownership of the Subject
Shares and any Additional Shares, except for the direct or
indirect individual members of Rothschild Realty Investors II
L.L.C., no one of whom, following such acquisition, will be
deemed to own (for purposes of applying such section), more
than 9.8% of the value or the number, whichever is greater, of
the outstanding Shares.
3. Undertakings of the Company.
(a) Other than the waiver provided pursuant to this
Waiver, the Company will not hereafter grant any waiver of the
Ownership Limit in the Declaration or the Articles
Supplementary if such waiver would cause the Company to be
"closely-held" or a "pension-held REIT," both within the
meaning of Section 856(h) of the Code.
(b) Before the Company, or any entity, all or part of
the income of which would be attributed to the Company for
purposes of applying Sections 856(c)(2) and 856(c)(3) of the
Code, enters into a Major Lease, the Company will provide the
name of the proposed Tenant to the Investor and will represent
to the Investor the Tenant Representation contained in
1(b)(ii) hereof. The Company will not enter (or cause such
entity to enter) into such Major Lease unless the Investor
shall inform (or be treated as informing pursuant to Section
4(b) hereof) the Company that the Investor does not own and is
not deemed to own, for purposes of Section 856(d)(2)(B) of the
Code, more than a 9.8% interest in the proposed tenant.
(c) Except as provided in this Waiver, the Company
will not take any action or fail to take any reasonable action
that it knows (or reasonably should know) would reasonably be
expected to result in (other than (i) any action or failure to
take action required to preserve the Company's status as a
REIT or (ii) any action or failure to take action in reliance
upon the representations and warranties of the Investor in
Section 2 or the undertakings of the Investor in Section 4),
(x) the Investor owning, actually or Beneficially, Shares to
the extent that such actual or Beneficial Ownership of Shares
would result in the Company being "closely-held" within the
meaning of Section 856(h) of the Code or would result in the
Company otherwise failing to qualify as a REIT, in either case
solely by reason of the actual or Beneficial Ownership of the
Subject Shares and any Additional Shares by the Investor and
OPERS, or (y) less than 97% of the gross income of the Company
for any year (for purposes of Section 856(c)(2) of the Code)
being Qualifying Income (it being understood that, absent
actual knowledge to the contrary or the failure of the Company
to comply with Section 1(b) and 3(b) hereof, the Company shall
be entitled to assume for this purpose that the Company does
not own and is not deemed to own any interest in a Tenant
<PAGE>
described in Section 856(d)(2)(B) by reason of the ownership
of the Subject Shares or any Additional Shares by the
Investor, OPERS or any transferee that executes a Successor
Waiver Agreement (as defined in Section 6)).
4. Undertakings of the Investor.
(a) The Investor and those persons identified on
Exhibit B or who, following the date hereof, acquire a direct
or indirect capital or profits interest in the Investor (the
"Investor Group") will not take any action or fail to take any
reasonable action that the Investor or any such Person knows
(or reasonably should know) would reasonably be expected to
cause: (i) the Investor to be an individual for purposes of
Section 542(a)(2) of the Code as modified by Section 856(h) of
the Code, (ii) OPERS to fail to qualify as a "qualified trust"
as that term is defined in Section 856(h)(3)(E) of the Code,
(iii) any individual (as determined for purposes of applying
Section 856(h) but including "qualified trusts" other than
OPERS), except for the direct or indirect individual members
of Rothschild Realty Investors II L.L.C., to be deemed to own
more than 0.2% of the value or number, whichever is greater,
of the outstanding Shares by virtue of the Investor's or
OPERS' ownership of the Subject Shares or any Additional
Shares, (iv) a direct or indirect individual member of
Rothschild Realty Investors II L.L.C. to be deemed to own (for
purposes of applying such section), more than 9.8% of the
value or number of shares, whichever is greater, of the
outstanding Shares, (v) any person to have a beneficial
interest in OPERS (based on such person's actuarial interest
in such trust, as provided in Section 856(h)(3)(A) of the
Code) with a value of more than 0.2% of the total value of all
beneficial interests in OPERS, (vi) except as notified to the
Company by the Investor pursuant to Section 4(b), the Investor
to directly acquire a stock or other equity interest in a
Tenant identified on Exhibit A (as the same may be amended
from time to time) following the date hereof in excess of 9.8%
of such stock or other equity interest in such Tenant, (vii)
except as notified to the Company by the Investor pursuant to
Section 4(b), any Person to acquire a stock or other equity
interest (as determined for purposes of applying Section
856(d)(2)(B) of the Code) in a Tenant identified on Exhibit A,
following the receipt of such Exhibit A (as the same may be
amended from time to time), that would both (A) result in the
Investor and the Company being deemed to own, by operation of
Section 318 of the Code, as modified by Section 856(d)(5) of
the Code, in excess of 9.8% of such stock or other equity
interests in such Tenant, and (B) result in the Company having
gross income for any year which is not Qualifying Income in
excess of 2% of the gross income of the Company (as determined
for purposes of Section 856(c)(2) of the Code) and (viii) the
Investor to own more than 25% of the value of the Company.
(b) The Investor shall inform the Company, (i) within
10 business days of receiving any notice from the Company set
forth in Section 3(b) hereof, if the Investor or any person
having a direct or indirect ownership interest in the Investor
owns or is deemed to own, for purposes of applying Section
856(d)(2)(B) of the Code, more than a 9.8% ownership interest
in such proposed Tenant and the nature of such ownership (any
<PAGE>
such failure to notify the Company within such 10 business day
period will for all purposes be deemed to be an affirmative
statement by the Investor to the Company that neither the
Investor nor any person having a direct or indirect ownership
interest in the Investor owns or is deemed to own, for
purposes of applying such section, more than a 9.8% ownership
interest in such proposed Tenant), (ii) within 10 business
days of the end of each quarter of the Company's fiscal year,
if the Investor or any person having a direct or indirect
ownership interest in the Investor owns or is deemed to own,
for purposes of applying Section 856(d)(2)(B) of the Code,
more than a 9.8% ownership interest in any Tenant on Exhibit A
(as the same may be amended from time to time) and (iii)
within 10 business days of any reasonable request from the
Company, whether the level of ownership in any Tenant on
Exhibit A (as the same may be amended from time to time) by
the Investor or any person having a direct or indirect
ownership interest in the Investor exceeds 9.8% for purposes
of applying Section 856(d)(2)(B).
5. Waiver. On the basis of the accuracy of the representations
and warranties of the Investor contained in Section 2 and the undertakings in
Section 4, the Company, pursuant to subparagraph 6.6(k) of Article VI of the
Declaration, hereby exempts the Investor and its affiliates (as defined under
Rule 144 under the Securities Act of 1933, as amended ("Affiliates")) from the
restrictions on ownership of Shares set forth in the Declaration (the "Ownership
Restrictions"), including subparagraphs 6.6(b)(i) and (ii) of Article VI of the
Declaration; such exemption to be effective only to the extent it does not
result in any individual (as determined for purposes of Section 856(h) of the
Code but excluding OPERS and any qualified trusts as defined in Section
856(h)(3)(E) of the Code) Beneficially Owning more than 9.8% of the value or
number, whichever is greater, of the Company's outstanding Shares.
6. Transfer of Subject Shares. The provisions of this Section
6 apply in the event the Investor seeks to transfer Subject Shares, Additional
Shares and/or the Warrant in a manner that, but for this Section 6, would result
in a violation of the Ownership Restrictions.
(a) Subject to the provisions of this Section 6, the
Company hereby agrees to exempt from the Ownership
Restrictions any Person to whom the Investor seeks to transfer
Subject Shares, Additional Shares or the Warrant to the extent
necessary to enable the Investor to transfer ownership of
Subject Shares, Additional Shares or the Warrant to such other
Person. The agreement described in this paragraph (a) shall
not become effective until the expiration of the period ending
one year after the date hereof; provided, however, that an
exemption with respect to transfers to Affiliates of the
Investor shall be effective immediately.
(b) The agreement to exempt described in paragraph
(a) shall be conditioned on obtaining from the intended
transferee of the Subject Shares, Additional Shares or the
Warrant, as the case may be (the "Intended Transferee"),
representations and undertakings reasonably requested by the
Company in order to ensure that no individual (as determined
for purposes of Section 856(h) of the Code but excluding
"qualified trusts" as defined in Section 856(h)(3)(E) of the
<PAGE>
Code) will Beneficially Own more than 9.8% of the value or
number, whichever is greater, of the outstanding Shares
following the Intended Transferee's acquisition of the Subject
Shares, Additional Shares and/or the Warrant. The parties
agree that the phrase "representations and undertakings
reasonably requested" includes, but is not limited to,
representations and undertakings similar to those set forth in
Section 2 and 4 hereof (but as modified by this Section 6).
Such representations and undertakings shall be included in an
agreement between the Company and the Intended Transferee
consistent with the terms of this Waiver (a "Successor Waiver
Agreement").
7. Violation.
(a) In the event of any breach of a representation or
warranty given by the Investor in Section 2 or a violation of
any of the undertakings set forth in Section 4 (other than as
a result of a breach by the Company of any of the
representations or warranties of the Company set forth in
Section 1 or a violation by the Company of any of the
undertakings of the Company set forth in Section 3), in
addition to all rights provided in this Waiver, in the
Declaration or the Articles Supplementary, or granted by law
(including recovery of damages), the Waiver set forth in
Section 5 hereof shall, to the extent reasonably determined by
the Board to be necessary in order for the Company to qualify
for taxation as a REIT, be void ab initio and shall result in
a conversion of all or a portion (as reasonably determined by
the Board to be necessary) of the Subject Shares and any
Additional Shares into Excess Shares or, if an IRS Ruling
Satisfactory to the Company has not been obtained, shall to
such extent cause the issuance or acquisition of all or a
portion of the Subject Shares and any Additional Shares to be
void ab initio, in either case to the same extent as if the
Waiver in Section 5 hereof had never been granted, and to be
subject to the ownership limits and related provisions set
forth in the Declaration and the Articles Supplementary.
(b) In addition to and not in limitation of the
provisions of paragraph (a), to the extent the Investor or
OPERS attempts to acquire Beneficial Ownership of Shares that
would result in any individual (other than OPERS or any other
"qualified trust") Beneficially Owning in excess of 9.8% of
the value or number, whichever is greater, of outstanding
Shares, such purported acquisition shall be void ab initio and
shall result in a conversion of such excess Shares into Excess
Shares, or if an IRS Ruling Satisfactory to the Company has
not been obtained, shall cause the issuance or acquisition of
such excess Shares to be void ab initio.
(c) In the event the Company breaches any of the
representations and warranties given by the Company in Section
1 or any of the undertakings in Section 3 and such breach
results in Subject Shares or Additional Shares being exchanged
for Excess Shares in accordance with subparagraph 6.6(c)(i) of
Article VI of the Declaration, the Investor shall be entitled
to exercise all rights provided herein or granted by law
(including recovery of damages) or in equity.
<PAGE>
8. Change in Law. In the event that there is a change in law
or in the interpretation of the law of which the Company or the Investor has
knowledge that may cause or has caused any Subject Shares or Additional Shares
held by the Investor to be exchanged for Excess Shares or to be void ab initio,
the Company and the Investor shall communicate such knowledge to the other party
and shall use reasonable efforts (a) to prevent such occurrence or circumstance,
(b) to amend the documents and instruments with respect to the Subject Shares or
Additional Shares held by the Investor to mitigate the effect of such change
(provided, however, that in effecting such amendment, the Company shall in no
event be required to (i) materially disproportionately disadvantage any other
security holder of the Company, (ii) provide the Investor as a holder of the
Subject Shares and Additional Shares with better terms, on a whole, than existed
with respect to such Preferred Shares or Common Shares prior to such amendment
or (iii) repurchase any securities of the Company owned, directly or indirectly,
by the Investor), and (c) unless required by the Declaration or the Articles
Supplementary or in order to preserve the Company's status as a REIT, to not
disproportionately disadvantage the Investor with respect to other security
holders of the Company in determining, if the Company is permitted to make such
a determination, which Shares shall be void ab initio or exchanged for Excess
Shares or repurchased.
9. Assignment. Except to the extent provided herein, no party
hereto may assign (by operation of law or otherwise) either this Waiver or any
if its rights, interests, or obligations hereunder without the prior written
consent of the other party in its sole and absolute discretion.
10. Amendments. The provisions of this Waiver, including the
provisions of this sentence (but excluding Exhibit A, which may be amended in
accordance with Section 1), may not be amended, modified or supplemented, and
waivers or consents to departures from the provisions hereof may not be given,
unless each of the parties hereto consents in writing to such amendment,
modification, supplement or waiver. Each such consent or waiver shall be
effective only in the specific instance and for the specific purpose for which
given.
11. Notice. All notices hereunder shall be in writing and
shall be given: (a) if to the Company, at 14 Campus Boulevard, Suite 100,
Newtown Square, Pennsylvania 19073, Attention: President and Chief Executive
Officer and General Counsel, or such other address or addresses of which the
Investor shall have been given notice, with copies to Pepper Hamilton LLP, 3000
Two Logan Square, Eighteenth and Arch Streets, Philadelphia, Pennsylvania
19103-2799, Attention: Michael Friedman, Esq., or such other address of which
the Investor shall have been given notice; and (b) if to the Investor, at
Rothschild Realty Inc., 1251 Avenue of the Americas, New York, New York 10020,
Attn: D. Pike Aloian, or such other address of which the Company shall have been
given notice, with copies to Schulte Roth & Zabel LLP, 900 Third Avenue, New
York, New York 10022, Attn: Marc Weingarten, Esq., or such other address of
which the Company shall have been given notice. Any notice shall be deemed to
have been given if personally delivered or sent by United States mail or by
commercial courier or delivery service or by telegram or telex and shall be
deemed received, unless earlier received, (i) if sent by certified or registered
mail, return receipt requested, three business days after deposit in the mail,
postage prepaid, (ii) if sent by United States Express Mail or by commercial
courier or delivery service, one Business Day after delivery to a United States
Post Office of delivery service, postage prepaid, (iii) if sent by telegram,
<PAGE>
telex or facsimile transmission, when receipt is acknowledged by answerback, and
(iv) if delivered by hand, on the date of receipt.
12. Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstance, is
held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions contained herein shall not be affected or impaired thereby.
13. Headings. The headings in this Waiver are for convenience
of reference only and shall not limit or otherwise affect the meaning hereof.
14. Governing Law. This Waiver shall be governed by and
construed in accordance with the laws of the State of Maryland as applied
between residents of that State entering into contracts wholly to be performed
in that State.
15. Counterparts. This Waiver may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
* * * * * *
IN WITNESS WHEREOF, the parties hereto have executed and
delivered this Waiver as of the date first written above.
BRANDYWINE REALTY TRUST,
a Maryland Real Estate Investment Trust
By:/s/ Gerard H. Sweeney
--------------------------------------------
Name: Gerard H. Sweeney
Title: President and Chief Executive Officer
FIVE ARROWS REALTY SECURITIES III L.L.C.,
a Delaware limited liability company
By: /s/ D. Pike Aloian
--------------------------------------------
Name: D. Pike Aloian
Title: Manager
