<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________
SCHEDULE 13D
INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT
TO RULE 13d-1(a) AND AMENDMENTS THERETO FILED PURSUANT TO
RULE 13d-2(a)
(Amendment No. )
Brandywine Realty Trust
(Name of Issuer)
Common Shares of Beneficial Interest
(Title of Class of Securities)
105368203
(CUSIP Number)
Mr. D. Pike Aloian
Rothschild Realty Inc.
1251 Avenue of the Americas
New York, New York 10020
(212) 403-3500
(Name, address and telephone number of person
authorized to receive notices and communications)
April 27, 1999
(Date of event which requires filing of this statement)
______________________
If the filing person has previously filed a statement
on Schedule 13G to report the acquisition that is the subject of
this Schedule 13D, and is filing this schedule because of Rule
13d-1(e), 13d-1(f) or 13D-1(g), check the following box [ ].
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Page 2 of 7 pages
13D
CUSIP No. 105368203
-----------
- ------------------------------------------------------------------------
(1) NAME OF REPORTING PERSON Five Arrows Realty Securities III
L.L.C.
I.R.S. IDENTIFICATION NO.
OF ABOVE PERSON (ENTITIES ONLY)
- ------------------------------------------------------------------------
(2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP **
(a) [/X/]
(b) [/ /]
- ------------------------------------------------------------------------
(3) SEC USE ONLY
- ------------------------------------------------------------------------
(4) SOURCE OF FUNDS
WC
- ------------------------------------------------------------------------
(5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS
REQUIRED PURSUANT TO ITEM 2(d) OR 2(e) [ ]
- ------------------------------------------------------------------------
(6) CITIZENSHIP OR PLACE OF ORGANIZATION Delaware
- ------------------------------------------------------------------------
NUMBER OF (7) SOLE VOTING POWER -0-
SHARES ---------------------------------------------------------
BENEFICIALLY (8) SHARED VOTING POWER 4,875,000 (fn1)
OWNED BY ---------------------------------------------------------
EACH (9) SOLE DISPOSITIVE POWER -0-
REPORTING ---------------------------------------------------------
PERSON WITH (10) SHARED DISPOSITIVE POWER 4,875,000 (fn1)
- ------------------------------------------------------------------------
(11) AGGREGATE AMOUNT BENEFICIALLY OWNED
BY EACH REPORTING PERSON 4,875,000 (fn1)
- ------------------------------------------------------------------------
(12) CHECK BOX IF THE AGGREGATE AMOUNT
IN ROW (11) EXCLUDES CERTAIN SHARES ** [ ]
- ------------------------------------------------------------------------
(13) PERCENT OF CLASS REPRESENTED
BY AMOUNT IN ROW (11) 11.4% (fn1)
- ------------------------------------------------------------------------
(14) TYPE OF REPORTING PERSON
OO
- ------------------------------------------------------------------------
** SEE INSTRUCTIONS BEFORE FILLING OUT!
fn1 Consisting of (i) 1,041,667 shares of 8.75% Series B Senior
Cumulative Convertible Preferred Shares ("Preferred Shares") held by
Five Arrows Realty Securities III L.L.C. ("Five Arrows") and up to
3,333,333 additional Preferred Shares which Five Arrows may be obligated
to purchase on or before December 31, 1999, each of which is
convertible, at any time or from time to time at the option of the
reporting person, into one common share of beneficial interest, subject
to adjustment, and (ii) 500,000 common shares of beneficial interest
(the "Warrant Shares") purchasable at any time or from time to time
under a seven-year warrant (the "Warrant").
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Page 3 of 7 pages
13D
CUSIP No. 105368203
-----------
(1) NAME OF REPORTING PERSON Rothschild Realty Investors III
L.L.C.
I.R.S. IDENTIFICATION NO.
OF ABOVE PERSON (ENTITIES ONLY)
- ------------------------------------------------------------------------
(2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP **
(a) /x/
(b) / /
- ------------------------------------------------------------------------
(3) SEC USE ONLY
- ------------------------------------------------------------------------
(4) SOURCE OF FUNDS
WC
- ------------------------------------------------------------------------
(5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS
REQUIRED PURSUANT TO ITEM 2(d) OR 2(e) [ ]
- ------------------------------------------------------------------------
(6) CITIZENSHIP OR PLACE OF ORGANIZATION Delaware
- ------------------------------------------------------------------------
NUMBER OF (7) SOLE VOTING POWER -0-
SHARES ---------------------------------------------------------
BENEFICIALLY (8) SHARED VOTING POWER 4,875,000 (fn1)
OWNED BY ---------------------------------------------------------
EACH (9) SOLE DISPOSITIVE POWER -0-
REPORTING ---------------------------------------------------------
PERSON WITH (10) SHARED DISPOSITIVE POWER 4,875,000 (fn1)
- ------------------------------------------------------------------------
(11) AGGREGATE AMOUNT BENEFICIALLY OWNED
BY EACH REPORTING PERSON 4,875,000 (fn1)
- ------------------------------------------------------------------------
(12) CHECK BOX IF THE AGGREGATE AMOUNT
IN ROW (11) EXCLUDES CERTAIN SHARES** [ ]
- ------------------------------------------------------------------------
(13) PERCENT OF CLASS REPRESENTED
BY AMOUNT IN ROW (11) 11.4% (fn1)
- ------------------------------------------------------------------------
(14) TYPE OF REPORTING PERSON
OO
- ------------------------------------------------------------------------
** SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
Page 4 of 7 pages
Item 1. Security and Issuer
This statement on Schedule 13D ("Schedule 13D") is being
filed with respect to the common shares of beneficial interest, par
value $.01 per share (the "Common Shares"), of Brandywine Realty Trust
a Maryland corporation (the "Company"), whose principal executive
offices are located at 14 Campus Boulevard, Suite 100, Newtown Square,
Pennsylvania 19073.
Item 2. Identity and Background
(a) This Schedule 13D is being filed on behalf of (i) Five
Arrows Realty Securities III L.L.C., a Delaware limited liability
company ("Five Arrows") and (ii) Rothschild Realty Investors III L.L.C.,
a Delaware limited liability company and sole Managing Member of Five
Arrows ("Rothschild").
The reporting entities are making a joint filing pursuant to
Rule 13d-1(k) because, by reason of the relationship as described
herein, they may be deemed to be a "group" within the meaning of Section
13(d)(3) with respect to acquiring, holding and disposing of Common
Shares.
(b) The business address of each of Five Arrows and
Rothschild is 1251 Avenue of the Americas, New York, New York 10020.
(c) Five Arrows is a private investment limited liability
company. The principal occupation of Rothschild is acting as managing
member of Five Arrows. The current Managers of Rothschild are John D.
McGurk, Matthew W. Kaplan, James E. Quigley, 3rd, and D. Pike Aloian.
(d) Neither Five Arrows nor Rothschild has, during the last
five years, been convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors).
(e) Neither Five Arrows nor Rothschild has, during the last
five years, been a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction and as result of such
proceeding was or is subject to a judgment decree or final order
enjoining future violations of, or prohibiting or mandating activities
subject to, federal or state securities laws or a finding of any
violation with respect to such laws.
Item 3. Source and Amount of Funds or Other Consideration
The source of funds for the purchases reported by Five Arrows
herein was, and will be, Five Arrows' capital. The total amount of
funds used by Five Arrows to purchase the shares reported herein will be
up to $110,700,000 allocated as follows: (i) $23,500,007.52 to purchase
the Preferred Shares currently held by Five Arrows, (ii) $75,199,992.48
which Five Arrows may use to purchase up to an additional 3,333,333
Preferred Shares and (iii) up to $12,000,000 to purchase the 500,000
Warrant Shares.
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Page 5 of 7 pages
Item 4. Purpose of Transaction
The purpose of the acquisition of the Preferred Shares and the
Warrant Shares by Five Arrows reported herein is for investment.
Five Arrows intends to review its holdings with respect to the
Company on a continuing basis. Depending on Five Arrows' evaluation of
the Company's business and prospects, and upon future developments
(including, but not limited to, market prices of the Common Shares and
availability and alternative uses of funds; as well as conditions in the
securities markets and general economic and industry conditions), Five
Arrows may acquire additional securities of the Company or sell all or a
portion of its Preferred Shares or other securities of the Company, now
owned or hereafter acquired.
Pursuant to the Articles Supplementary attached as Exhibit
99.2 and incorporated by reference in its entirety in this Item 4, Five
Arrows has the right to designate one member of the Board of Trustees of
the Company (the "Initial Designated Trustee") and another member under
certain circumstances. D. Pike Aloian has been designated as the
Initial Designated Trustee and has been appointed to the Board of
Trustees of the Company by the existing Board of Trustees of the
Company.
Other than as set forth above, Five Arrows has no present
plans or proposals which relate to, or would result in, any of the
matters enumerated in paragraphs (b) through (j), inclusive, of Item 4
of Schedule 13D. Five Arrows may, at any time and from time to time,
review or reconsider its position with respect to the Company, and
formulate plans or proposals with respect to any such matters.
Item 5. Interest in Securities of the Issuer
(a) As of the close of business on April 27, 1999, Five
Arrows may be deemed to beneficially own 4,875,000 Common Shares
(consisting of (i) 1,041,667 Preferred Shares held by Five Arrows and up
to 3,333,333 additional Preferred Shares that Five Arrows may be
obligated to purchase on or before December 31, 1999, each of which is
convertible, at any time or from time to time at the option of the
reporting person, into one Common Share, subject to adjustment, and (ii)
500,000 Common Shares purchasable at any time or from time to time under
the Warrant). Such shares in the aggregate would represent 11.4% of the
outstanding Common Shares of the Company (based on 38,011,655 Common
Shares of the Company outstanding as of March 15, 1999, as reported in
the Form 10-K of the Company for the fiscal year ended December 31,
1998, as filed on April 1, 1999, plus the 4,875,000 Common Shares of the
Company reported herein).
<PAGE>
Page 6 of 7 pages
(b) Five Arrows has the sole power to vote and dispose of the
Preferred Shares and the Common Shares owned, or which may be owned, by
it as reported herein, which power may be exercised by Rothschild.
(c) Five Arrows purchased 1,041,667 Preferred Shares on April
27, 1999, pursuant to the Investment Agreement, dated April 19, 1999,
between the Company and Five Arrows, attached hereto as Exhibit 99.3 and
incorporated by reference in its entirety herein. In consideration for
the 1,041,667 Preferred Shares, Five Arrows paid $22.56 per share for a
total of $23,500,007.52.
(d) Not applicable.
(e) Not applicable.
ITEM 6. Contracts, Arrangements, Understandings or Relationships
With Respect to Securities of the Issuer
Other than as described in the agreements included as exhibits
attached hereto and incorporated by reference into this Item 6 in their
entirety, there are no contracts, understandings or relationships (legal
or otherwise) among the persons named in Item 2 hereof and between such
persons or any person with respect to any securities of the Company,
including but not limited to transfer or voting of any of the Preferred
Shares or the Common Shares, finder's fees, joint ventures, loan or
option arrangements, puts or calls, guarantees of profits, division of
profits or loss, or the giving or withholding of proxies.
ITEM 7. Material To Be Filed As Exhibits
Exhibit Number Description
99.1 Joint Acquisition Statement, as
required by Rule 13d-1(k) of the
Securities Exchange Act of 1934.
99.2 Articles Supplementary Classifying and
Designating 4,375,000 Preferred Shares
as 8.75% Series B Senior Cumulative
Convertible Preferred Shares.
99.3 Investment Agreement, dated as of
April 19, 1999, between the Company
and Five Arrows.
99.4 Common Shares Purchase Warrant, dated
April 19, 1999, to purchase 500,000
Common Shares.
<PAGE>
Page 7 of 7 pages
SIGNATURE
After reasonable inquiry and to the best of their knowledge
and belief, the undersigned certify that the information set forth in
this statement is true, complete and correct.
Dated: May 6, 1999
FIVE ARROWS REALTY SECURITIES III L.L.C.
By: /s/ D. Pike Aloian
D. Pike Aloian
Manager
ROTHSCHILD REALTY INVESTORS III L.L.C.
By: /s/ D. Pike Aloian
D. Pike Aloian
Manager
<PAGE>
EXHIBIT 99.1
EXHIBIT 99.1
JOINT ACQUISITION STATEMENT
PURSUANT TO RULE 13D-1(k)
The undersigned acknowledge and agree that the foregoing statement on
Schedule 13D is filed on behalf of each of the undersigned and that all
amendments to this statement on Schedule 13D shall be filed on behalf of
each of the undersigned without the necessity of filing additional joint
acquisition statements. The undersigned acknowledge that each shall
be responsible for the timely filing of such amendments, and for the
completeness and accuracy of the information concerning him or it
contained therein, but shall not be responsible for the completeness
and accuracy of the information concerning the other, except to the
extent that he or it knows or has reason to believe that such
information is inaccurate.
Dated: May 6, 1999
FIVE ARROWS REALTY SECURITIES III L.L.C.
By: /s/ D. Pike Aloian
D. Pike Aloian
Manager
ROTHSCHILD REALTY INVESTORS III L.L.C.
By: /s/ D. Pike Aloian
D. Pike Aloian
Manager
<PAGE>
EXHIBIT 99.2
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
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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
<PAGE>
thereof; provided, however, that the Trust shall have the right to
declare and pay distributions at any time. Distributions shall 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
<PAGE>
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
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.
<PAGE>
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.
(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
<PAGE>
(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 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
<PAGE>
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 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").
<PAGE>
(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 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
<PAGE>
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 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,
<PAGE>
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 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
<PAGE>
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, 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
<PAGE>
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 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
<PAGE>
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 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
<PAGE>
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
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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.
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(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
<PAGE>
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.
(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
<PAGE>
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.
(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
<PAGE>
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.
(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
<PAGE>
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.
(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
<PAGE>
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 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).
<PAGE>
(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 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
<PAGE>
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 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
<PAGE>
(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 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
<PAGE>
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.
(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
<PAGE>
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.
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
<PAGE>
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 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.
<PAGE>
(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 in the business of acquiring, developing, redeveloping,
<PAGE>
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
<PAGE>
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.
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 ______ day of __________, 1999.
BRANDYWINE REALTY TRUST
By: ____________________________
Name: Gerard H. Sweeney
Title: President and Chief
Executive Officer
ATTEST:
By: ______________________
Name: Brad A. Molotsky
Title: Secretary
[Trust Seal]
<PAGE>
EXHIBIT 99.3
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.
<PAGE>
"Agreement" means this Investment Agreement, as originally
executed and as hereafter from time to time supplemented, amended and
restated.
"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.
2 Investment Agreement
<PAGE>
"Entity" means any general partnership, limited partnership,
corporation, joint venture, trust, business trust, real estate
investment trust, limited liability company, cooperative or association.
"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. Sections
9601 et seq., as amended; the Resource Conservation and Recovery Act
("RCRA"), 42 U.S.C. Sections6901 et seq., as amended; the Clean Air Act
("CAA"), 42 U.S.C. Sections 7401 et seq., as amended; the Clean Water
Act ("CWA"), 33 U.S.C. Sections 1251 et seq., as amended; the
Occupational Safety and Health Act ("OSHA"), 29 U.S.C. Sections 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.
3 Investment Agreement
<PAGE>
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"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.
4 Investment Agreement
<PAGE>
"Permit" means a permit, license, consent, order or approval
by any federal, state or local governmental agency.
"Person" means any individual or Entity.
"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. Section 9601; (iii)
perform pre-remedial studies and investigations and post-remedial
operation and maintenance activities as required by 42 U.S.C. Section
9601; or (iv) any other actions authorized by 42 U.S.C. Section 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.
5 Investment Agreement
<PAGE>
"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 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
6 Investment Agreement
<PAGE>
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
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
7 Investment Agreement
<PAGE>
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 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
8 Investment Agreement
<PAGE>
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").
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.
9 Investment Agreement
<PAGE>
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 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.
10 Investment Agreement
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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.
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
11 Investment Agreement
<PAGE>
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; 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;
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<PAGE>
(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.
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
13 Investment Agreement
<PAGE>
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 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
14 Investment Agreement
<PAGE>
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.
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<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.
16 Investment Agreement
<PAGE>
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.
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.
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<PAGE>
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:
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
18 Investment Agreement
<PAGE>
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.
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.
19 Investment Agreement
<PAGE>
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 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.
20 Investment Agreement
<PAGE>
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.
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
21 Investment Agreement
<PAGE>
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.
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.
22 Investment Agreement
<PAGE>
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 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
23 Investment Agreement
<PAGE>
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 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.
24 Investment Agreement
<PAGE>
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).
(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
25 Investment Agreement
<PAGE>
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 the
acquisition of securities of the Company as provided in Articles 2 and 3
26 Investment Agreement
<PAGE>
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;
27 Investment Agreement
<PAGE>
(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;
(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.
28 Investment Agreement
<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:
--------------------------------------
Name: Gerard H. Sweeney
Title: President and Chief Executive
Officer
FIVE ARROWS REALTY SECURITIES III L.L.C.
By:
--------------------------------------
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:
--------------------------------------
Name: D. Pike Aloian
Title:
29 Investment Agreement
<PAGE>
<PAGE>
EXHIBIT 99.4
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
-2-
<PAGE>
indirectly convertible into, redeemable for or exchangeable for
Additional Common Shares.
"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.
-3-
<PAGE>
"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.
"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.
-------
-4-
<PAGE>
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 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,
-5-
<PAGE>
(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 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
-6-
<PAGE>
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 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
-7-
<PAGE>
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:
-8-
<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.
-9-
<PAGE>
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,
(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
-10-
<PAGE
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.
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)
-11-
<PAGE
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, 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
-12-
<PAGE
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 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
-13-
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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 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.
-14-
<PAGE
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."
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
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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.
-------------------------------------------
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
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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.
-17-
<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,
-18-
<PAGE
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" 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.
-19-
<PAGE
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.
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:---------------------------------------------
Title: President and Chief Executive Officer
-20-
<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 II, L.L.C.
By--------------------------------------
Name:
Title:
<PAGE>
<PAGE>
