-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, A7PcrmnYe4XKmy1ef2ZZ3HK4f3iWtN7VpAXuPgze6tZEnIsulauh/c2lrblC7lrl M4Jhe2Oy3SrOIMmYaawuJQ== 0000893220-96-001977.txt : 19961202 0000893220-96-001977.hdr.sgml : 19961202 ACCESSION NUMBER: 0000893220-96-001977 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 19961114 ITEM INFORMATION: Acquisition or disposition of assets ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19961127 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: BRANDYWINE REALTY TRUST CENTRAL INDEX KEY: 0000790816 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 232413352 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-09106 FILM NUMBER: 96673565 BUSINESS ADDRESS: STREET 1: TWO GREENTREE CENTRE STREET 2: STE 100 CITY: MARLTON STATE: NJ ZIP: 08053 BUSINESS PHONE: 2152519111 MAIL ADDRESS: STREET 1: TWO GREENTREE CENTRE STREET 2: SUITE 100 CITY: MARLTON STATE: NJ ZIP: 08053 FORMER COMPANY: FORMER CONFORMED NAME: LINPRO SPECIFIED PROPERTIES DATE OF NAME CHANGE: 19920703 8-K 1 BRANDYWINE REALTY TRUST 8-K 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K Current Report Filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported) November 14, 1996 BRANDYWINE REALTY TRUST ----------------------- (Exact name of registrant as specified in its charter) MARYLAND 1-9106 23-2413352 (State or Other Jurisdiction (Commission (I.R.S. Employer of Incorporation) file number) Identification Number) 16 CAMPUS BOULEVARD, NEWTOWN SQUARE, PENNSYLVANIA 19073 (Address of principal executive offices) (610) 325-5600 (Registrant's telephone number, including area code) Page 1 of 5 pages 2 ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS. On November 14, 1996, the Company consummated a previously disclosed transaction (the "SERS Transaction") with a voting trust (the "SERS Voting Trust") established for the benefit of the Commonwealth of Pennsylvania State Employes' Retirement System ("SERS") pursuant to which it acquired nine commercial properties (the "SERS Properties") in suburban Philadelphia aggregating approximately 418,000 net rentable square feet and that have an average age of approximately 12 years. As of September 30, 1996, the SERS Properties were approximately 92.4% leased to 62 tenants. The SERS Properties were acquired by the Company for an aggregate purchase price of $30.3 million, payable as follows: (i) by issuing 481,818 preferred shares of beneficial interest, par value $.01 per share ("Preferred Shares") that, subject to certain conditions, are convertible into 4,818,180 common shares of beneficial interest, par value at $.01 per share ("Common Shares") (1,606,060 Common Shares after giving effect to the Company's previously disclosed reverse one for three share split effective November 25, 1996 ("Reverse Share Split")); (ii) by agreeing to make deferred payments aggregating $3.8 million (as described below); and (iii) by issuing two-year warrants to purchase 400,000 Common Shares at an exercise price of $8.50 per share (133,333 Common Shares at an exercise price of $25.50 per share after giving effect to the Company's Reverse Share Split). The purchase price was determined through negotiation in an arm's-length transaction. Each Preferred Share will entitle the holder to: (i) receive distributions equal to the distributions payable in respect of a number of Common Shares equal to the Conversion Number (defined below); (ii) vote, together with holders of Common Shares, as a class, and to cast the number of votes equal to the Conversion Number; and (iii) a liquidation preference equal to the greater of (a) the amount that would have been payable with respect to the Common Shares into which such Preferred Shares would have been convertible immediately prior to the liquidation had the condition to convertibility been satisfied and (b) the product of $5.50 ($16.50 after giving effect to the Company's Reverse Share Split) multiplied by the Conversion Number plus all declared but unpaid dividends. The Company will be required to pay $2.5 million of the deferred purchase price on June 30, 1998 and $1.3 million on December 31, 1999 in cash or, at the Company's option, through the issuance of additional Preferred Shares that will be convertible, subject to certain conditions, into a number of Common Shares equal to the applicable amount of the deferred purchase price divided by the greater of the Market Value Per Share or the Book Value Per Share (as such terms are defined below). The term "Conversion number" means, initially, ten and such number is subject to adjustment for share splits, reverse share splits, share dividends and the like. The term "Book Value Per Share" means, as of any date: (i) the total beneficiaries' equity as shown on the Company's consolidated balance sheet as of the fiscal quarter end immediately prior to the applicable date (with appropriate adjustments for any material events subsequent thereto) prepared in accordance with rules and regulations of the Securities and Exchange Commission and generally accepted accounting principles applied on a consistent basis (as adjusted to reflect the consideration received by the Company upon the Exercise (defined below) of any Convertible Securities (defined below) which are included in -2- 3 the computation in (ii) below), divided by (ii) the sum of the number of Common Shares outstanding on such date plus the number of Common Shares issuable upon the exercise, conversion or exchange (collectively, "Exercise") of outstanding options, warrants, Preferred Shares and other convertible securities or similar rights (collectively, "Convertible Securities") to the extent that the consideration payable upon the exercise of such Convertible Securities is less than the Market Value Per Share of the Common Shares issuable upon such Exercise. The term "Market Value Per Share" means, as of any date (the "Valuation Date"), the average of the closing per share sale price(s) of the Common Shares for the period of 20 consecutive trading days ending on the trading date immediately preceding the Valuation Date as such prices are reported by the principal United States securities exchange on which the Common Shares are then traded or, if the Common Share are not then traded on any such exchange, the closing per share sale price (or the average of the quoted per share closing bid and asked prices if no sale is reported) as reported by the National Association of Securities Dealers, Inc. ("NASD"), Automated Quotation System ("NASDAQ") or any comparable system or, if the Common Shares are not then quoted on NASDAQ or any comparable system, the average of the closing per share bid and asked prices as furnished by any member of the NASD selected by the Board of Trustees. Prior to approval (a "Conversion Approval") of the unlimited conversion of Preferred Shares into Common Shares by a majority of the votes cast by holders of Common Shares at a meeting of shareholders in which holders of Preferred Shares have no right to vote such Preferred Shares, Preferred Shares will be convertible into up to 543,975 Common Shares (181,325 Common Shares after giving effect to the Company's Reverse Share Split). In the event that a Conversion Approval has not occurred by July 1, 1997, holders of Preferred Shares will become entitled to receive distributions equal to 120% of the distributions payable in respect of a number of Common Shares equal to the Conversion Number. In the event that a Conversion Approval has not occurred by July 1, 1998, holders of Preferred Shares will have the right to require the Company to redeem their Preferred Shares at the Redemption Price (defined below). Safeguard Scientifics, Inc., The Nichols Company and Richard M. Osborne have agreed to vote Common Shares beneficially owned by them in favor of the unlimited conversion. The term "Redemption Price" means, in respect of a Preferred Share, the greater of: (i) the product of (a) $5.50 ($16.50 after giving effect to the Company's Reverse Share Split) plus an amount (the "Return Amount") equal to 8.0% of $5.50 ($16.50 after giving effect to the Company's Reverse Share Split) per annum from the date of issuance of such Preferred Share to the redemption date thereof less an amount (not to exceed the Return Amount) equal to distributions actually received by the holder of account of such Share and (b) the Conversion Number and (ii) the product of the market price of a Common Share and the Conversion Number. For information concerning the SERS Properties, reference is made to the information under the heading "Business and Properties" in the Registration Statement on Form S-11 (Registration No. 333-13969), as amended, filed by the Company with the Securities and Exchange Commission and such information is hereby incorporated herein by reference. -3- 4 ITEM 7. FINANCIAL STATEMENT, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS. (a) Financial Statements of Businesses Acquired. [to come] The audited statement of revenues and certain operating expenses of the SERS Properties for the year ended December 31, 1995 is incorporated by reference from pages F-51 and F-52 of the Company's Registration Statement in Form S-11, File No. 333-13969, as amended, declared effective November 25, 1996. The unaudited interim statements of revenues and certain expenses of the SERS Properties included therein include all adjustments consisting only of normal recurring accruals, which the Company considers necessary for a fair presentation of the SERS Properties revenues and certain expenses for the nine months ended September 30, 1995 and 1996, as presented in the unaudited interim financial statements. (b) Pro Forma Financial Information. Pro forma financial information which reflects the Company's acquisitions of the SERS Properties as of September 30, 1996 and for the year ended December 31, 1995 and the 9 months ended September 30, 1996 is incorporated by reference from pages F-3 to F-13 of the Company's Registration Statement on Form S-11, File No. 333-13969, as amended, declared effective November 25, 1996. (c) Exhibits. 10.1 Contribution Agreement among the Company, Greenwood Square Corporation, BCBC Holding Company, 500 North Gulph Road and RAI Real Estate Advisers, Inc. ("RAI"), as voting trustee. 10.2 Securities Purchase Agreement between the Company and RAI, as voting trustee. 10.3 Warrant to purchase Common Shares in favor of RAI, as voting trustee. 10.4 Standstill Agreement between the Company and RAI, as voting trustee. 10.5 Registration Rights Agreement between the Company and RAI, as voting trustee. 10.6 Pledge Agreement between the Company and RAI, as voting trustee. 10.7 Voting Agreement between the Company, RAI as voting trustee, and certain other parties. 10.8 Excerpt from Registration Statement on Form S-11 (No. 333-13969), as amended, consisting of the discussion under the heading "Business and Properties."
-4- 5 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. BRANDYWINE REALTY TRUST Date: November 27, 1996 By: /s/ Gerard H. Sweeney ------------------------ Title: President and Chief Executive Officer -5- EX-10.1 2 CONTRIBUTION AGREEMENT 1 EXHIBIT 10.1 CONTRIBUTION AGREEMENT 2 TABLE OF CONTENTS
PAGE ---- Section 1. Sale and Purchase of Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2- 1.1 Sale and Purchase of Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2- 1.2 Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2- 1.3 Capital Escrow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -3- 1.4 Deposit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -3- 1.5 Included Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -4- 1.6 Assumption of Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -5- Section 2. Additional Investment; Warrant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -5- 2.1 Additional Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -5- 2.2 Warrant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -5- Section 3. Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -5- 3.1 By BRT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -6- 3.2 By Sellers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -12- 3.3 By The Voting Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -17- 3.4 Survival of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . -18- Section 4. Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -18- 4.1 Conditions Precedent to BRT Obligations on the Closing Date . . . . . . . . . . . . . . . . . . . -18- 4.2 Conditions Precedent To Sellers and the Voting Trust Obligations on the Closing Date . . . . . . . -19- 4.3 Mutual Conditions Precedent of the Parties on the Closing Date . . . . . . . . . . . . . . . . . . -20-
-i- 3 Section 5. Operations Prior to Transfer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -21- 5.1 Property Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -21- 5.2 Casualty or Condemnation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -21- Section 6. Closing; Closing Deliveries; Adjustments; Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . -22- 6.1 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -22- 6.2 Closing Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -22- 6.3 Adjustments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -24- 6.4 Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -25- 6.5 Indemnification for Seller's Tax Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . -26- Section 7. Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -26- 7.1 BRT Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -26- 7.2 Mutual Covenant - Best Efforts To Close . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -26- 7.3 Morgan Stanley Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -26- Section 8. Matters to be Completed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -26- 8.1. Matters to be Completed. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -26- Section 9. Sellers' Or Voting Trust's Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -27- 9.1 Sellers' or Voting Trust's Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -26- Section 10. General Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -27- 10.1 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -27- 10.2 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -28- 10.3 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -28- 10.4 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -28-
-ii- 4 10.5 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -28- 10.6 Section Headings, Captions and Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . -28- 10.7 Amendments. Modifications and Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -29- 10.8 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -29- 10.9 Liability of Trustees, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -29- 10.10 Non-Recourse. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -29- 10.11 Exhibits Incorporated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -29-
-iii- 5 CONTRIBUTION AGREEMENT THIS AGREEMENT is made as of the 6th day of November, 1996 by and among BRANDYWINE REALTY TRUST, a Maryland real estate investment trust ("BRT"), GREENWOOD SQUARE CORPORATION, a Delaware corporation ("Greenwood"), BCBC HOLDING COMPANY, a Delaware corporation ("BCBC"), 500 NORTH GULPH ROAD HOLDINGS, INC., a Pennsylvania corporation ("North Gulph") (Greenwood, BCBC and North Gulph are herein sometimes collectively called "Sellers" and individually, a "Seller") and, RAI REAL ESTATE ADVISERS, INC., ("RAI") as the voting trustee of a voting trust dated as of November 6, 1996 executed by the Commonwealth of Pennsylvania State Employes' Retirement System ("SERS") as shareholder and by RAI as voting trustee (the "Voting Trust") RECITALS A. Greenwood is the owner of the fee estate in property known as Greenwood Square, located in Bensalem Township, Bucks County, Pennsylvania, more fully described in EXHIBIT "A" attached hereto (the "Greenwood Property"). B. BCBC is the owner of the fee estate in property known as Bucks County Business Park, located partly in Middletown Township and partly in Falls Township, Bucks County, Pennsylvania, more fully described in "EXHIBIT "B" attached hereto (the "BCBC Property"). C. North Gulph is the owner of the fee estate in property known as 500 North Gulph Road, located in Upper Merion Township, Montgomery County, Pennsylvania, more fully described in EXHIBIT "C" attached hereto (the "North Gulph Property"). The Greenwood Property, the BCBC Property and the North Gulph Property are herein collectively called the "Properties" and individually a "Property." D. SERS is directly or indirectly the beneficial owner of all of the capital stock of Sellers and has the sole economic interest in the Voting Trust. E. BRT is a real estate investment trust and general partner of Brandywine Operating Partnership, L.P., a Delaware limited partnership ("BRT OP"), which owns certain office and other properties. F. The parties wish to enter into this Agreement to provide for the sale by Sellers for the account of the Voting Trust of the Properties, the purchase of the Properties 6 by BRT or its designated affiliate, the investment of funds by Voting Trust in BRT and certain other matters as herein set forth. TERMS AND CONDITIONS NOW THEREFORE, in consideration of the premises and the mutual representations, warranties, covenants and agreements contained herein, the parties hereto, intending to be legally bound, agree as follows: SECTION 1. SALE AND PURCHASE OF PROPERTIES 1.1 Sale and Purchase of Properties. On the Closing Date, each Seller will sell and convey to BRT OP (or any subsidiary of BRT OP) the Property of such Seller and BRT will purchase the Properties from Sellers, for the consideration, on the terms and subject to the conditions of this Agreement. 1.2 Consideration. The purchase price ("Purchase Price") for the Properties shall be THIRTY MILLION THREE HUNDRED THOUSAND DOLLARS ($30,300,000), payable as follows: (a) At Closing, BRT shall pay to Sellers $26,500,000 by issuing to Voting Trust (or to its designee) preferred shares with the terms set forth in the Articles Supplementary attached hereto as EXHIBIT "D-1" ( the "Property Shares") that are convertible into 4,818,182 common shares of beneficial interest (par value $.01) of BRT, as adjusted for any share splits, reverse share splits, share dividends or similar transactions (the "Common Shares"). The Property Shares shall be subject to a Standstill Agreement in the form attached as EXHIBIT "D-2". References in this Agreement to designees of the Voting Trust or Sellers shall be limited to designees that are not prohibited by the Standstill Agreement. (b) On June 30, 1998, BRT will pay to Sellers (or to their designee) $2,500,000. (c) On December 31, 1999, BRT will pay to Sellers (or to their designee) $1,300,000. The sums payable pursuant to this clause (c) and the preceding clause (b) in the total amount of $3,800,000 are herein jointly called the "Deferred Purchase Price." Each installment of the Deferred Purchase Price shall be paid by BRT in cash, or, at the option of BRT, by BRT issuing to the Voting Trust (or to its designee) either Common Shares (if a Secondary Offering as defined in Section 1.2 of the Securities Purchase Agreement (defined below) shall have occurred) or Property Shares that are convertible into -2- 7 a number of Common Shares, equal to the applicable portion of the Deferred Purchase Price divided by the greater of the Market Value or Book Value Per Share. The term "Book Value Per Share" as used herein means, as of any date, (i) the total beneficiaries' equity as shown on BRT's consolidated balance sheets as of the fiscal quarter end immediately prior to the applicable date (with appropriate adjustment for any material events subsequent thereto) prepared in accordance with the published rules and regulations of the Securities and Exchange Commission (the "SEC") and generally accepted accounting principles applied on a consistent basis (as adjusted to reflect the consideration received by BRT upon the Exercise (defined below) of any Convertible Securities (defined below) which are included in the computation in (ii) below), divided by (ii) the sum of the number of Common Shares outstanding on such date plus the number of Common Shares issuable upon the exercise, conversion or exchange (collectively, "Exercise") of outstanding options, warrants, preferred shares and other convertible securities or similar rights (collectively, "Convertible Securities") to the extent that the consideration payable upon the exercise of such Convertible Securities is less than the Market Value of the Common Shares issuable upon such Exercise. The term "Market Value" as used herein means, as of any date, (the "Valuation Date") the average of the closing per share sale price(s) of the Common Shares for the period of twenty consecutive trading days ending on the trading day immediately preceding the Valuation Date as such prices are reported by the principal United States securities exchange on which the Common Shares are then traded or, if the Common Shares are not then traded on any such exchange, the closing per share sale price (or the average of the quoted per share closing bid and asked prices if no sale is reported) as reported by the National Association of Securities Dealers, Inc. ("NASD") Automated Quotation System ("NASDAQ") or any comparable system or, if the Common Shares are not then quoted on NASDAQ or any comparable system, the average of the closing per share bid and asked prices as furnished by any member of the NASD selected by the Board of Trustees of BRT. 1.3 Capital Escrow. At Closing, North Gulph will deposit into escrow the sum of $315,000 (the "North Gulph Capital Escrow"), BCBC will deposit into escrow the sum of $90,000 (the "BCBC Capital Escrow") and Greenwood will deposit into escrow the sum of $950,000 (the "Greenwood Capital Escrow"), each on the terms and conditions of the Capital Escrow Agreement attached hereto as EXHIBIT "E". 1.4 Deposit. Upon the execution of this Agreement, BRT will deposit in escrow with Commonwealth Land Title Insurance Company ("Deposit Escrowee")the sum of $100,000,(such sum and all earnings thereon are herein called the "Deposit"). The Deposit will be held by Deposit Escrowee in an interest bearing account of a bank, savings bank or savings and loan association the accounts of which are insured by an agency of the United States government, pursuant to an Escrow Agreement in the form attached as EXHIBIT "T" (the "Deposit Escrow Agreement"). If BRT shall fail to consummate Closing in accordance with this Agreement or shall fail to observe or perform its covenants or obligations hereunder -3- 8 to be observed or performed at or prior to Closing, the Deposit will be paid to Sellers and Voting Trust on account of the purchase price or as liquidated damages for such failure at the option of Sellers, provided, however, that unless such failure to consummate Closing constitutes a breach of BRT's covenant under subsection 7.2 hereof, Sellers and the Voting Trust will retain the Deposit as Sellers' and the Voting Trust's sole and exclusive remedy hereunder. If Closing occurs, the Deposit will be returned to BRT. If Closing does not occur by reason of the failure of one or more conditions to Closing (which failure does not result from the default of BRT hereunder) or if either party is permitted to and shall terminate this Agreement as provided in Section 8, then the Deposit will be returned to BRT. 1.5 Included Assets. References in this Agreement to a Property shall include: (a) Real Property. Fee simple interest in such Property, and all of the easements, licenses, rights of way, (including, without limitation, easements, licenses and rights of way for signage), privileges, hereditaments, appurtenances, and rights to any land lying in the beds of any street, road or avenue, open or proposed, adjoining there to, and inuring to the benefit of said land (hereinafter collectively referred to as the "Premises"); and (b) Personal Property. All equipment, fixtures, machinery and personalty of every description attached to or used in connection with the Premises, including, without limitation, furniture, fixtures, fittings, supplies, apparatus, equipment, machinery, and all other items of tangible and intangible personal property and replacements thereof, if any, affixed or attached to or located on or about the Premises (including, without limitation, all heating, lighting, plumbing, water, sewer, ventilating, exhaust, electrical, gas, refrigeration, air-conditioning, communication, fire protection, security, disability and life/safety fixtures, equipment and systems; all hot water heaters, furnaces, heating controls, motors and boiler pressure systems and equipment; all incinerating, disposal, cleaning, maintenance, janitorial, snow removal and landscaping equipment; all fuels; all appliances; (limited, in the case of personal property to the right, title and interest of Seller's therein, and excluding property of tenants of the Properties but including all right, title and interest of Sellers in such property of tenants); and all assignable intangible personal property owned by Sellers and used in connection with the ownership, operation and maintenance of the Premises, including without limitation, all contract rights, guaranties and warranties of any nature, architects, engineers, surveyors' or other real estate professionals' plans, specifications, certifications, contracts, reports, data or other technical descriptions, reports or audits, and all marketing materials ("Contract Documents"), all governmental permits, licenses, certificates, and approvals in connection with the ownership of the Premises ("Licenses"), all escrow accounts, deposits, instruments, documents of title, general intangibles, and business records pertaining to the Premises, and all of Seller's rights, claims, and causes of action if any, to the extent they are assignable, under any warranties and/or guarantees of manufacturers, contractors or installers, rights against others relating to the Premises or the operation or maintenance thereof, including to the extent applicable, any warranties from any previous owners of the Premises (hereinafter collectively referred to as "Personal Property"); and -4- 9 (c) Leases. All leases, licenses (to the extent transferable) and other occupancy agreements for any part of the Premises, if any, and all prepaid rent and unapplied security deposits (the "Leases"): (d) Right to Names. Any right, title and interest of Seller in and to the trade names printing styles, trademarks and logos ("Names"). 1.6 Assumption of Liabilities. (a) At the Closing, BRT shall assume and agree to pay, perform and discharge, when due, each of the following obligations and liabilities of Sellers and/or their affiliates relating to the Properties (the "Assumed Liabilities"): (i) the liabilities and obligations of Sellers to be performed or discharged after the Closing pursuant to the Leases; (ii) payment of real estate taxes and utility bills accruing prior to Closing with respect to the Properties as to which BRT receives a credit at Closing, to the extent of such credit. (b) Excluded Liabilities. Except as expressly provided in this Agreement, BRT shall not assume or be responsible for any liabilities or obligations of Sellers or their respective affiliates of any nature whatsoever, whether or not relating to the Properties. Sellers and their respective affiliates, as applicable, shall remain responsible for such excluded liabilities and obligations. SECTION 2. ADDITIONAL INVESTMENT; WARRANT 2.1 Additional Investment. The Voting Trust and BRT are contemporaneously herewith entering into a Securities Purchase Agreement (the "Securities Purchase Agreement") providing for the investment by Voting Trust of $10.5 million in shares of BRT, at the times and on the terms and conditions set forth in the Securities Purchase Agreement. 2.2 Warrant. At Closing as additional consideration for the Properties, BRT will issue to the Voting Trust a warrant for the purchase of 400,000 Common Shares, as adjusted for any share splits, reverse share splits, share dividends or similar transactions (the "Warrant"), on the terms and subject to the conditions of the form of Warrant attached hereto as EXHIBIT "F". The value of the Warrant is $56,000.00. -5- 10 SECTION 3. REPRESENTATIONS AND WARRANTIES 3.1 By BRT. BRT hereby represents and warrants that, except as disclosed in the Disclosure Letter (as defined in the Securities Purchase Agreement) or the Company SEC Reports (defined below) or in any exhibit or schedule hereto: (a) Organization: Authority. BRT is a real estate investment trust duly formed, validly existing and in good standing under the laws of the state of Maryland with all the necessary trust power and authority to own, lease or operate its properties and assets and to carry on its business as now conducted, BRT is duly qualified to do business and is in good standing as a foreign business trust or partnership in each jurisdiction where the character of its properties or assets and the nature of its business requires it to be so qualified. BRT has the requisite trust authority to enter into and perform this Agreement and all other documents and agreements to be executed by it in connection with the transactions contemplated by this Agreement. (b) Due Authorization; Binding Agreement. The execution, delivery and performance of this Agreement and all other documents and agreements to be executed by BRT in connection with the transactions contemplated by this Agreement have been duly and validly authorized by all necessary action of BRT. This Agreement and all other documents and agreements to be executed by BRT in connection with the transactions contemplated by this Agreement have been and will be duly executed and delivered by BRT and constitute the legal, valid and binding obligations of BRT enforceable against BRT in accordance with their respective terms, except as such enforcement may be limited by bankruptcy, insolvency, moratorium, reorganization and other similar laws relating to or affecting the enforcement of creditor's rights generally, and except that the availability of specific performance, injunctive relief or other equitable remedies is subject to the discretion of the court before which any such proceeding may be brought. (c) Consents and Approvals. No consent, waiver, approval, license or authorization of, or filing, registration or qualification with, or notice to, any governmental unit or any other person is required to be made, obtained or given by BRT in connection with the execution, delivery and performance of this Agreement or any other documents and agreements to be executed by BRT in connection with the transactions contemplated by this Agreement that has not been heretofore obtained, other than the filing with and approval of the American Stock Exchange of a listing application with respect to the Common Shares and the filing of the Articles Supplementary with the State Department of Assessments and Taxation of Maryland. (d) No Violation. None of the execution, delivery or performance of this Agreement or any other document or agreement to be executed by BRT in connection with the transactions contemplated by this Agreement does or will, with or without the giving of notice, lapse of time or both, violate, conflict with or constitute a default under any term or provision of the organizational documents of BRT or any other agreement to which BRT is a party or by which it is bound or any term or provision of any judgment, decree, order, statute, injunction, rule or regulation of a governmental unit applicable to BRT, or by which it or its -6- 11 assets or properties are bound or result in the creation of any lien or other encumbrance upon the assets or properties of BRT. (e) Compliance with Laws and Recorded Declarations. To the best of BRT's knowledge, BRT and each of its subsidiaries has complied with all laws (including, without limitation, the Americans with Disabilities Act of 1990) and requirements of insurance bodies applicable to the ownership, leasing, use and operation of its or their real properties (collectively, the "BRT Properties"), including, without limitation, parking and building setback requirements, and has performed all work and secured all required material consents and approvals and obtained and fully paid for all material licenses, permits, certificates, entitlements, grants of right and any other items and documents required by applicable law, by contract, or as a condition of any approval granted by the applicable municipal authority, required of BRT or its subsidiaries for the completion, ownership, leasing, use and occupancy of its or their properties, including but not limited to final certificates of occupancy for each of the current tenancies at such properties (other than where construction of tenant improvements for new tenancies is not yet completed or applications remain pending), except where the failure to so comply or obtain would not have a material adverse effect on BRT and its subsidiaries taken as a whole. Such licenses, permits, certificates, entitlement, grants of right and other items and documents are in full force and effect. Neither BRT or any of its subsidiaries have taken any action that would (or failed to take any action, the omission of which would) result in the revocation or suspension of such licenses, permits, certificates, entitlements, grants of right and other items and documents, and neither BRT nor any of its subsidiaries have received any notice of any violation from any federal, state or municipal entity or notice of an intention by any such governmental entity to revoke any certificate of occupancy or other certificate, license, permit, entitlement or grant of right issued by it in connection with the ownership, use and occupancy of any of its or their properties that in each case has not been cured or otherwise resolved to the satisfaction of such governmental entity. To the best of BRT's knowledge, (i) any and all charges (including condominium fees, to the extent applicable) and other assessments under declarations and like agreements to which any of the BRT Properties are subject have been paid and no special assessments thereunder against any of the BRT Properties are pending, and (ii) all consents and approvals required to be obtained under such declarations and like agreements with respect to the BRT Properties have been obtained. (f) Litigation. The SEC Reports(defined below), the Registration Statements (defined below) and/or the Disclosure Letter (as defined in the Securities Purchase Agreement) list all material pending or, to BRT's knowledge, threatened litigation involving BRT and its subsidiaries. Except as so disclosed, there is no pending or, to the knowledge of BRT, threatened suit, action or litigation, or administrative, arbitration or other proceeding or governmental inquiry or investigation questioning the validity of this Agreement or the transactions contemplated hereby, or affecting in any material adverse respect BRT or any subsidiary or the business, properties, assets, operations, prospects or condition (financial or otherwise) of BRT and its subsidiaries taken as a whole, nor is there, to the knowledge of BRT, any basis for any such suit, action, litigation, proceeding, inquiry or investigation. -7- 12 (g) Brokers. No brokers or finders have been employed or engaged by BRT or any of its subsidiaries with respect to the transactions contemplated by this Agreement or any other document or agreement to be executed in connection with the transactions contemplated by this Agreement. (h) SEC Reports. Since January 1, 1995, BRT and its subsidiaries have timely filed all forms, reports, schedules, statements and other documents required to be filed with the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange Act") or the Securities Act of 1933, as amended (the "1933 Act"), including without limitation (i) all Annual Reports on Form 10-K, (ii) all Quarterly Reports on Form 10-Q, (iii) all reports on Form 8-K and (iv) all proxy statements relating to meetings of stockholders (whether annual or special) and (v) all information incorporated by reference into any of the foregoing (collectively, as amended to date, together with the Registration Statements (defined below) referred to herein as the "Company SEC Reports"). The Company SEC Reports were prepared in all material respects in accordance with and complied in all material respects with the requirements of applicable law, including the Exchange Act and the 1933 Act and the applicable rules and regulations of the SEC thereunder, and the Company SEC Reports did not at the time they were filed and do not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. BRT has not filed any registration statements with the SEC at any time within the last three years other than (i) Registration Statement on Form S-8 dated October 16, 1996 and (ii) Registration Statement on Form S-11 dated October 11, 1996 (collectively the "Registration Statements"). BRT has delivered to Voting Trust prior to the date hereof true and correct copies of all Company SEC Reports and any other reports and documents filed with the SEC since January 1, 1995. (i) Financial Statements. Each of the consolidated financial statements (including, in each case, any related notes thereto) contained in the Company SEC Reports (i) have been prepared in all material respects in accordance with the published rules and regulations of the SEC and generally accepted accounting principles applied on a consistent basis throughout the periods involved (except in the case of the unaudited financial statements, as permitted by Form 10-Q of the SEC), (ii) comply as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto and (iii) fairly present in all material respects the consolidated financial position of BRT and its subsidiaries as of the respective dates thereof and the consolidated results of operations and cash flows for the periods indicated (subject, in the case of unaudited consolidated financial statements for interim periods, to year-end adjustments (consisting only of normal recurring accruals)), except that any pro forma financial statements contained in such consolidated financial statements are not necessarily indicative of the consolidated financial position of BRT and its subsidiaries as of the respective dates thereof and the consolidated results of operations and cash flows for the periods indicated. Since December 31, 1995, the -8- 13 Company has not made any material change in the accounting practices or policies applied in the preparation of its financial statements. (j) Environmental Matters. Neither BRT nor its subsidiaries have (a) caused any substance or waste that is listed or defined as hazardous or toxic under applicable environmental laws or petroleum products (collectively, "Hazardous Materials") to be improperly maintained or disposed of on, under or at any of its or their properties, or any part thereof in a manner which violates, or could give rise to liability under, applicable environmental laws, or (b) failed to remediate, alter, mitigate or abate any condition required to be remediated, altered, mitigated or abated under such environmental laws, to the extent BRT or its subsidiaries have been notified of the existence of a condition required to be remediated, altered, mitigated or abated. Except as set forth in the environmental site assessments provided by BRT to Sellers or disclosed in the Company SEC Reports: (1) to the best of BRT's knowledge, each of its properties, and the properties of its subsidiaries, is in compliance, and has heretofore complied, with all environmental laws in all material respects, (2) to the best of BRT's knowledge, there has been no discharge of Hazardous Materials by any tenant of any property of BRT or its subsidiaries, or by any other person or property in, to or under any property of BRT or its subsidiaries, in either case in quantities requiring response, remediation or removal, and (3) BRT has not received any written notice from any governmental unit or other person that it or its subsidiaries, or any of its or their properties or operations conducted thereon, are not or have not been in compliance with the environmental laws. (k) Absence of Undisclosed Liabilities and Contractual Obligations. Except for (i) liabilities disclosed in the financial statements referred to in subsection 3.1 (i) or in the SEC Reports, (ii) liabilities arising in the ordinary course of business which, if material (individually or in the aggregate), are disclosed in EXHIBIT "G" attached hereto (the "BRT Disclosure Schedule"), (iii) liabilities at the date hereof which are specifically disclosed or otherwise reflected in the Exhibits attached to this Agreement and (iv) current liabilities incurred in the ordinary course of business after the date hereof, no BRT Property is subject to liabilities of any nature, whether matured or unmatured, fixed or contingent, which could reasonably be expected to have, individually or in the aggregate, a material adverse effect upon such property. There are no Significant Agreements relating to the BRT Properties, or their operations other than as set forth in the BRT Disclosure Schedule. No indebtedness secured by a lien upon any of the BRT Properties is cross-defaulted and/or cross-collateralized with any other properties other than among the BRT Properties. For purposes hereof, "Significant Agreement" means and includes any of the following by which any of the BRT Properties may otherwise be subject or bound, in each such case as amended and currently in effect, inclusive of any waivers relating thereto: (A) all agreements, instruments and documents (excluding tenant leases referred to in subsection 3.1(l) of this Agreement and easements and documents providing for the assessment of common charges or related fees that are included in the Permitted Exceptions) evidencing, securing or pertaining to contractual obligations that relate to the ownership or operation of any of the BRT Properties; and -9- 14 (B) all mortgages. (l) Tenant Leases. The rent rolls attached hereto as EXHIBIT "H" (the "BRT Rent Rolls") list each of the leases currently in effect with respect to the BRT Properties as the same have been amended or modified (the "BRT Leases"); there are no leases, licenses or other rights of occupancy affecting any of the BRT Properties except for the BRT Leases. BRT has made available to the Voting Trust complete copies of all of the documents that constitute the BRT Leases. The BRT Leases are in full force and effect and, except as set forth on the applicable BRT Rent Roll, (A) to the best of BRT's knowledge, no uncured Event of Default (as defined in such Leases), has occurred and is continuing under any such Lease, no tenant has asserted a defense to, offset or claim against its rent or the performance of its obligations under its Lease and no tenant has asserted a default on the part of the landlord which would give it the right to terminate its Lease or set off against rent, (B) there are no rights of first refusal on, or options to purchase, any of the BRT Properties, or any right to a participation interest (whether of profits, sale or refinancing proceeds, or calculated based on fair market value) with respect to any such property, in favor of any tenant, (C) no proposed modifications to any BRT Lease that would reduce (i) the space leased to any tenant, (ii) the amount of any tenant's rent or (iii) the term of any lease, (D) no free rent or other rent concession is due any tenant under the BRT Leases for periods after the Closing Date, (E) no landlord under a BRT Lease is required to provide tenant improvements or refurbishments with respect thereto after the Closing Date (other than any tenant improvements that the landlord may be required to construct if an expansion option provided in a BRT Lease is exercised), and (F) no tenant under a BRT Lease has the option to terminate its lease prior to the stated expiration date. Except for (i) security deposits or (ii) the first full month's rent, whether or not the term of a Lease has commenced, no prepayments of rent more than thirty (30) days in advance have been made under the BRT Leases. All decorating, repairs, alterations or other work performed by the landlord under each of the BRT Leases prior to the date hereof, or the cost of any such work performed by the tenant and to be reimbursed by the landlord prior to the date hereof, has been performed or reimbursed, as applicable. No rent or security deposits under the BRT Leases have been assigned or encumbered, except as security for the mortgages noted in the BRT Disclosure Schedule, and there are no agreements or understandings, written or oral, with any of the tenants other than as set forth in the BRT Leases or otherwise set forth on the BRT Rent Rolls. All brokerage commissions and other compensation and fees payable by reason of the BRT Leases have been paid in full, except as set forth in the BRT Disclosure Schedule. (m) Reassessments. Each of the BRT Properties has been fully assessed and is not subject to abatement. To the best of BRT's knowledge, there are no proposed reassessments of any of the BRT Properties by any taxing authority and there are no threatened or pending special assessments or other actions or proceedings (other than county-wide reassessments and/or the usual increases in millage rates that may be under consideration by the taxing authorities in the jurisdictions where the BRT Properties are located) that could reasonably be expected to give rise to an increase in real property taxes or assessments against any of the BRT Properties. -10- 15 (n) Property Improvements. To the best of BRT's knowledge, except as disclosed in any engineering studies or reports obtained by or delivered to Sellers in connection with this transaction prior to the date hereof, the improvements at the BRT Properties are in good condition and repair, ordinary wear and tear excepted, and have not suffered any casualty or other material damage which has not been repaired in all material respects. To the best of BRT's knowledge, there is no material latent or patent structural, mechanical or other significant defect, soil condition or deficiency in the improvements included in the BRT Properties, or any other defects, soil conditions or deficiencies which, in the aggregate, would materially adversely affect the value of such properties taken as a whole. (o) Condemnation or Governmental Proceedings. No eminent domain, condemnation, incorporation, annexation or moratorium or similar proceeding has been commenced or, to the best of BRT's knowledge, threatened by an authority having the power of eminent domain to condemn any part of the BRT Properties. To the best of BRT's knowledge, there are no pending or threatened governmental rules, regulations, plans, studies or efforts, or court orders or decisions, which do or could adversely effect the use or value of the BRT Properties for their present use. (p) Insurance. EXHIBIT "I" attached hereto lists the insurance policies relating to the BRT Properties or any part thereof carried by BRT; all such policies are in full force and effect, and will be continued or renewed with the existing coverages and policy limits until the Closing Date, and all premiums thereunder have been paid to the extent due, and will be paid until the Closing Date; and no notice of cancellation has been received with respect thereto and, to the best knowledge of BRT, no cancellation is threatened. (q) FIRPTA. BRT is neither a "foreign person" within the meaning of Section 1445(f) of the Code nor a "foreign partner" within the meaning of Section 1446 of the Code. (r) Taxes. BRT (i) has filed or has had filed on its behalf all Tax Returns (as defined below) on a timely basis which are required to be filed as of the date hereof, and such Tax Returns are correct and complete, (ii) has paid or has had paid on its behalf on a timely basis all Taxes (as defined below) shown to be due on such Tax Returns and (iii) with respect to any period for which Tax Returns have not yet been filed, or for which Taxes are not yet due or owing, has made due and sufficient current accruals for such Taxes in its books and records in accordance with generally accepted accounting principles. For purposes of this subsection, "Tax" shall mean any Federal, state or local tax of any kind whatsoever, including any interest or penalty, and "Tax Return" shall mean any return, declaration, report, claim for refund, information return, statement or other similar document relating to Taxes. (s) No Defaults. All payments of principal and interest on all mortgage indebtedness respecting the BRT Properties are current as of the date hereof. Neither BRT nor BRT OP is in default of any loan secured by any of the BRT Properties or any other Significant Agreement and, to the best of BRT's knowledge, no event has occurred which with -11- 16 the giving of notice or passage of time would become a default under any such loan or under any such Significant Agreement. (t) Ownership of BRT Properties. The properties constituting the BRT Properties are listed on EXHIBIT "J" attached hereto. BRT and BRT OP each owns the interest in each of the BRT Properties indicated on EXHIBIT "J". 3.2 By Sellers. Sellers hereby represent and warrant that, except as disclosed in any exhibit or schedule to this Agreement: (a) Organization: Authority. Each of the Sellers is duly incorporated, validly existing and in good standing under the laws of its jurisdiction of incorporation and has full corporate power and authority to own, lease and operate its properties and to carry on its business as presently conducted. Each of the Sellers is duly qualified to do business and is in good standing in each jurisdiction where the character of its properties or assets and the nature of its business requires it to be so qualified. Each Seller has the requisite authority to enter into and perform this Agreement. (b) Due Authorization; Binding Agreement. The execution, delivery and performance of this Agreement and all other documents and agreements to be executed by Sellers in connection with the transactions contemplated by this Agreement have been duly and validly authorized by all necessary action of each Seller. This Agreement and all other documents and agreements to be executed by Sellers in connection with the transactions contemplated by this Agreement have been and will be duly executed and delivered by Sellers and constitute the legal, valid and binding obligations of Sellers enforceable against Sellers in accordance with their respective terms, except as such enforcement may be limited by bankruptcy, insolvency, moratorium, reorganization and other similar laws relating to or affecting the enforcement of creditor's rights generally, and except that the availability of specific performance, injunctive relief or other equitable remedies is subject to the discretion of the court before which any such proceeding may be brought. (c) Consents and Approvals. Except for the consent of CoreStates Bank N.A. with respect to the sale of the North Gulph Property (which consent Sellers shall obtain, by a pay down of related debt, if required), no consent, waiver, approval, license or authorization of, or filing, registration or qualification with, or notice to, any governmental unit or any other person is required to be made, obtained or given by any Seller in connection with the execution, delivery and performance of this Agreement or any other documents and agreements to be executed by Sellers in connection with the transactions contemplated by this Agreement that has not been heretofore obtained. (d) No Violation. None of the execution, delivery or performance of this Agreement or any other document or agreement to be executed by any Seller in connection with the transactions contemplated by this Agreement does or will, with or without the giving of notice, lapse of time or both, (i) violate, conflict with or constitute a default under any term or -12- 17 provision of (a) the organizational documents of any Seller or any other agreement to which any Seller is a party or by which it is bound or (b) any term or provision of any judgment, decree, order, statute, injunction, rule or regulation of a governmental unit applicable to any Seller, or by which it or they or its or their assets or properties are bound or (ii) result in the creation of any lien or other encumbrance upon the assets or properties of any Seller, other than in favor of BRT. (e) Ownership of the Properties. The Properties are owned by their respective Seller in fee simple and, to the best of Sellers' knowledge, title thereto is subject only to the Permitted Exceptions (defined below). (f) Compliance with Laws and Recorded Declarations. To the best of Sellers' knowledge, each of the Sellers has complied with all laws (including, without limitation, the Americans with Disabilities Act of 1990) and requirements of insurance bodies applicable to the ownership, leasing, use and operation of the Properties, including, without limitation, parking and building setback requirements, and has performed all work and secured all required consents and approvals and obtained and fully paid for all material licenses, permits certificates, entitlements, grants of right and any other items and documents required by applicable law, by contract, or as a condition of any approval granted by the applicable municipal authority, required of any of the Sellers for the completion, ownership, leasing, use and occupancy of the Properties, including but not limited to final certificates of occupancy for each of the current tenancies at such Properties (other than where construction of tenant improvements for new tenancies is not yet completed or applications remain pending), except where the failure to so comply or obtain would not have a material adverse effect on the applicable Property. Such licenses, permits, certificates, entitlement, grants of right and other items and documents are in full force and effect. The Sellers have not taken any action that would (or failed to take any action, the omission of which would) result in the revocation or suspension of such licenses, permits, certificates, entitlements, grants of right and other items and documents, and none of the Sellers, the Voting Trust or SERS have received any notice of any violation from any federal, state or municipal entity or notice of an intention by any such governmental entity to revoke any certificate of occupancy or other certificate, license, permit, entitlement or grant of right issued by it in connection with the ownership, use and occupancy of any of the Sellers Properties that in each case has not been cured or otherwise resolved to the satisfaction of such governmental entity. To the best of Sellers' knowledge, (i) any and all charges (including condominium fees, to the extent applicable) and other assessments under declarations and like agreements to which any of the Properties are subject have been paid and no special assessments thereunder against any of the Properties are pending, and (ii) all consents and approvals required to be obtained under such declarations and like agreements with respect to the Properties have been obtained. (g) Environmental Matters. None of the Sellers have (a) caused any Hazardous Materials to be improperly maintained or disposed of on, under or at the Properties or any part thereof in a manner which violates, or could give rise to liability under, applicable environmental laws, or (b) failed to remediate, alter, mitigate or abate any condition required to be remediated, altered, mitigated or abated under such environmental laws, to the extent Sellers -13- 18 has been notified of existence of a condition required to be remediated, altered, mitigated or abated. Except as set forth in the environmental site assessments provided by Sellers to BRT pursuant to their due diligence investigation (including, without limitation, those described in EXHIBIT "K-1" attached hereto or as described in EXHIBIT "K-2" attached hereto (the "Sellers' Disclosure Schedule"): (1) to the best of Sellers' knowledge, each Property is in compliance, and has heretofore complied, with all environmental laws in all material respects, (2) to the best of Sellers' knowledge, there has been no discharge of Hazardous Materials by any tenant of the Properties or by any other person in, to or under any of the Properties, in either case in quantities requiring response, remediation or removal, and (3) No Seller has received any written notice from any governmental unit or other person that it or any of the Properties or operations conducted thereon are not or have not been in compliance with the environmental laws. (h) Tenant Leases. The rent rolls attached hereto as EXHIBIT "L" (the "Sellers' Rent Rolls") list each of the leases currently in effect with respect to the Properties as the same have been amended or modified (the "Leases"); there are no leases, licenses or other rights of occupancy affecting any of the Properties except for the Leases. Sellers have made available to BRT complete copies of all of the documents that constitute the Leases. The Leases are in full force and effect and, except as set forth on the applicable Sellers' Rent Roll, (A) to the best of Sellers' knowledge, no material uncured Event of Default (as defined in such Leases), has occurred and is continuing under any such Lease, no tenant has asserted a defense to, offset or claim against its rent or the performance of its obligations under its Lease and no tenant has asserted a default on the part of the landlord which would give it the right to terminate its Lease or set off against rent, (B) there are no rights of first refusal on, or options to purchase, any of the Properties or any right to a participation interest (whether of profits, sale or refinancing proceeds, or calculated based on fair market value) with respect to any such Property, in favor of any tenant, (C) there are no proposed modifications to any Lease that would reduce (i) the space leased to any tenant, (ii) the amount of any tenant's rent or (iii) the term of any lease, (D) no free rent or other rent concession is due any tenant under the Leases for periods after the Closing Date, (E) no landlord under a Lease is required to provide tenant improvements or refurbishments with respect thereto after the Closing Date (other than any tenant improvements that the landlord may be required to construct if an expansion option provided in a Lease is exercised), and (F) no tenant under a Lease has the option to terminate its lease prior to the stated expiration date. Except for (i) security deposits or (ii) the first full month's rent, whether or not the term of a Lease has commenced, no prepayments of rent more than thirty (30) days in advance have been made under the Leases. All decorating, repairs, alterations or other work required to be performed by the landlord under each of the Leases prior to the date hereof, or the cost of any such work performed by the tenant and to be reimbursed by the landlord prior to the date hereof, has been performed or reimbursed, as applicable. No rent or security deposits under the Leases have been assigned or encumbered, and there are no agreements or understandings, written or oral, with any of the tenants other than as set forth in the Leases or otherwise set forth on the Sellers' Rent Roll. All brokerage commissions and other compensation and fees payable by season of the Leases have been paid in full, except as set forth in the Sellers' Disclosure Schedule (and other than any commissions that may be due if a tenant takes expansion space or renews its lease). -14- 19 (i) Litigation. There are no claims, actions, suits, proceedings or investigations pending or, to the best of Sellers' knowledge, threatened before any court, governmental unit or any mediator or arbitrator with respect to the Properties, except for litigation listed on EXHIBIT "M" hereto, which litigation and any projected liability resulting therefrom is covered by insurance. (j) Reassessments. Each of the Properties has been fully assessed and is not subject to abatement. To the best of Sellers' knowledge, there are no proposed reassessments of any of the Properties by any taxing authority and there are no threatened or pending special assessments or other actions or proceedings (other than county-wide reassessments and/or the usual increases in millage rates that may be under consideration by the taxing authorities in the jurisdictions where the Properties are located) that could reasonably be expected to give rise to an increase in real property taxes or assessments against any of the Properties. (k) Sellers' Employees. There are no employees of any Seller. (l) Property Improvements. To the best of Sellers' knowledge, except as disclosed in any engineering studies or reports obtained by or delivered to BRT in connection with this transaction prior to the date hereof (including, without limitation, those described on Exhibit "K-3" attached hereto), the improvements at the Properties are in good condition and repair, ordinary wear and tear excepted, and have not suffered any casualty or other material damage which has not been repaired in all material respects. To the best of Sellers' knowledge, there is no material latent or patent structural, mechanical or other significant defect, soil condition or deficiency in the improvements included in the Properties, or any other defects, soil conditions or deficiencies which, in the aggregate, would materially adversely affect the value of such Properties taken as a whole. (m) Condemnation or Governmental Proceedings. No eminent domain, condemnation, incorporation, annexation or moratorium or similar proceeding has been commenced or, to the best of Sellers' knowledge, threatened by an authority having the power of eminent domain to condemn any part of the Properties. To the best of Sellers' knowledge, there are no pending or threatened governmental rules, regulations, plans, studies or efforts, or court orders or decisions, which do or could adversely affect the use or value of the Properties for their present use. (n) Insurance. EXHIBIT "N" attached hereto lists the insurance policies relating to the Properties or any part thereof carried by Sellers. All such policies are in full force and effect, and will be continued or renewed with the existing coverages and policy limits until the Closing Date, and all premiums thereunder have been paid to the extent due, and will be paid until the Closing Date; and no notice of cancellation has been received with respect thereto and, to the best knowledge of Sellers, no cancellation is threatened. -15- 20 (o) FIRPTA. No Seller is a "foreign person" within the meaning of Section 1445(f) of the Code or a "foreign partner" within the meaning of Section 1446 of the Code. (p) Brokers. No brokers or finders have been employed or engaged by Sellers with respect to the transactions contemplated by this Agreement or any other document or agreement to be executed in connection with the transactions contemplated by this Agreement. (q) Taxes. Each of the Sellers (i) has filed or has had filed on its behalf all Tax Returns (as defined below) on a timely basis which are required to be filed as of the date hereof, and such Tax Returns are correct and complete, (ii) has paid or has had paid on its behalf on a timely basis all Taxes (as defined below) shown to be due on such Tax Returns and (iii) with respect to any period for which Tax Returns have not yet been filed, or for which Taxes are not yet due or owing, has made due and sufficient current accruals for such Taxes in its books and records in accordance with generally accepted accounting principles. For purposes of this subsection, "Tax" shall mean any Federal, state or local tax of any kind whatsoever, including any interest or penalty, and "Tax Return" shall mean any return, declaration, report, claim for refund, information return, statement or other similar document relating to Taxes. (r) Business of Seller. None of the Sellers has engaged in any business other than owning the properties that are being transferred hereunder. (s) Service Contracts. EXHIBIT "S" attached hereto is a complete list of all existing service, equipment, supply and maintenance contracts with respect to or affecting the Properties (the "Service Contracts"), and each of such Service Contracts is terminable at will without penalty or cancellation fee upon no more than thirty (30) days notice. Unless otherwise directed by BRT, none of the Service Contracts shall be terminated by Sellers as of Closing, except such of the Service Contracts as constitute management agreements for a Property or Properties, which shall be terminated by Sellers as of Closing. Except as set forth on EXHIBIT "S", no written notice of default or breach by Sellers in the terms of any of such Service Contracts have been received by Sellers. Sellers have performed, and at Closing shall have performed, all obligations which it or they have under said Service Contracts. (t) No Tax Assessments. There are no public improvements in the nature of off-site improvements, or otherwise, which have been ordered to be made and/or which have not heretofore been assessed, and, to Seller's knowledge, there are no general or special assessments currently affecting or pending against the Properties. (u) Utilities. All utilities required for the operation of the Properties either enter each of the Properties through adjoining public streets, or, if they pass through adjoining private lands, do so in accordance with valid public easements or private easements which will inure to the benefit of BRT as assignee or nominee at no cost to the owner of the Properties. -16- 21 (v) Zoning Classification. The zoning classification of: (i) the Greenwood Property is PCD Planned Commerce Park District; (ii) the BCBL Property is M-1 as to Middletown Township and PIP Planned Industrial Park District as to Falls Township; and (iii) the North Gulph Property is SM Suburban Metropolitan. 3.3 By The Voting Trust. The Voting Trust hereby represents and warrants that, except as disclosed in any exhibit to this Agreement: (a) Organization: Authority. The Voting Trust is duly organized, validly existing and in good standing under the laws of its jurisdiction of formation and has full power and authority to own, lease and operate its properties and to carry on its business as presently conducted. The Voting Trust is duly qualified to do business and is in good standing in each jurisdiction where the character of its properties or assets and the nature of its business requires it to be so qualified. The Voting Trust has the requisite authority to enter into and perform this Agreement. (b) Due Authorization; Binding Agreement. The execution, delivery and performance of this Agreement and all other documents and agreements to be executed by the Voting Trust in connection with the transactions contemplated by this Agreement have been duly and validly authorized by all necessary action of the Voting Trust. This Agreement and all other documents and agreements to be executed by the Voting Trust in connection with the transactions contemplated by this Agreement have been and will be duly executed and delivered by the Voting Trust and constitute the legal, valid and binding obligations of the Voting Trust enforceable against the Voting Trust in accordance with their respective terms, except as such enforcement may be limited by bankruptcy, insolvency, moratorium, reorganization and other similar laws relating to or affecting the enforcement of creditor's rights generally, and except that the availability of specific performance, injunctive relief or other equitable remedies is subject to the discretion of the court before which any such proceeding may be brought. (c) Consents and Approvals. No consent, waiver, approval, license or authorization of, or filing, registration or qualification with, or notice to, any governmental unit or any other person is required to be made, obtained or given by the Voting Trust in connection with the execution, delivery and performance of this Agreement or any other documents and agreements to be executed by the Voting Trust in connection with the transactions contemplated by this Agreement that has not been heretofore obtained. (d) No Violation. None of the execution, delivery or performance of this Agreement or any other document or agreement to be executed by the Voting Trust in connection with the transactions contemplated by this Agreement does or will, with or without the giving of notice, lapse of time or both, (i) violate, conflict with or constitute a default under any term or provision of (a) the organizational documents of the Voting Trust or any other agreement to which the Voting Trust is a party or by which it is bound or (b) any term or provision of any judgment, decree, order, statute, injunction, rule or regulation of a governmental unit applicable to the Voting Trust, or by which it or they or its or their assets or properties are -17- 22 bound or (ii) result in the creation of any lien or other encumbrance upon the assets or properties of the Voting Trust, other than in favor of BRT. (e) Status of SERS. No individual has an actuarial interest of more than 9.8% in SERS. 3.4 Survival of Representations and Warranties. All representations and warranties made by the parties in this Agreement shall survive Closing for a period of two years; provided that no party shall be liable for the breach of any representation or warranty hereunder unless the total amount recoverable from such breaching party with respect to all breaches of representations and warranties hereunder exceeds, an aggregate of $225,000. Any and all liability of Sellers and the Voting Trust hereunder after Closing shall be limited to and enforceable only against the Collateral (as defined in the Pledge Agreement), and by offset against the Deferred Purchase Price, and the Collateral shall be pledged to BRT to secure the payment of any such liability, pursuant to a Pledge Agreement in the form attached hereto as EXHIBIT "V". SECTION 4. CONDITIONS 4.1 Conditions Precedent to BRT Obligations on the Closing Date. The obligations of BRT to effect the transactions contemplated under this Agreement at the Closing are subject to the fulfillment on or prior to the Closing of the following conditions, any one or more of which may be waived in whole or in part by BRT in writing: (a) Title Insurance. Title to the Properties shall be good and marketable and insurable as such by Commonwealth Land Title Insurance Company free and clear of all liens, restrictions, easements, encroachments, exceptions and other encumbrances other than Permitted Exceptions at regular rates under an ALTA 1970 Form B (revised 10/17/70 and 10/17/84) title insurance policy, with such title endorsements as BRT shall reasonably specify. For purposes of this Agreement "Permitted Exceptions" means (i) for each of the Properties, the existing leases with respect thereto as listed on EXHIBIT "L" and the mortgages, liens, restrictions, easements, encroachments, exceptions and other encumbrances listed on EXHIBIT "O" hereto with respect to such Property, and (ii) for each Property, the lien of taxes not yet due and payable and applicable laws and ordinances. (b) No Material Adverse Change. There shall not have occurred any material adverse change to the Properties, taken as a whole. (c) Tenant Estoppels. Estoppel Certificates with respect to the Properties in form and substance satisfactory to BRT shall have been executed by the tenants of the Properties listed on EXHIBIT "P" hereto. -18- 23 (d) Securities Purchase Agreement. The representations and warranties of the Voting Trust under the Securities Purchase Agreement shall be true and correct as of Closing. (e) No SEC Integration Challenge. The SEC shall not have asserted that the issuance of Shares pursuant to (and as defined in) the Securities Purchase Agreement must be integrated with the sale of Common Shares (as defined in the Securities Purchase Agreement) pursuant to the Registration Statements, which assertion, if made, has not been resolved to the reasonable satisfaction of the Company after the Company has used its best efforts to accomplish such resolution. 4.2 Conditions Precedent To Sellers and the Voting Trust Obligations on the Closing Date. The obligations of Sellers and the Voting Trust to effect the transactions contemplated under this Agreement at the Closing are subject to the fulfillment on or prior to the Closing Date of the following conditions, which may be waived by Sellers and the Voting Trust in writing: (a) No Material Adverse Change. There shall not have occurred any material adverse change to BRT or the properties owned by BRT and its subsidiaries, taken as a whole. (b) Exemption From Ownership Requirements. BRT, by action of its Board of Trustees, shall have confirmed the Voting Trust is exempt from the ownership requirements of BRT's Declaration of Trust pursuant to Section 6.6(k) thereof, in the form attached hereto as EXHIBIT "P". (c) Securities Purchase Agreement. The representations and warranties of BRT under the Securities Purchase Agreement shall be true and correct as of Closing. The conditions set forth in Section 4.11 of the Securities Purchase Agreement shall have been satisfied as of Closing. (d) Amendment to Partnership Agreement. The Partnership Agreement of BRT OP shall have been amended in accordance with the form of amendment attached as EXHIBIT "X". (e) Certain Shareholders Approve Conversion. Safeguard Scientifics, Inc. and Richard M. Osborne, Sr., and all entities holding shares of BRT beneficially owned by Richard M. Osborne, Sr. shall have entered into an agreement with the Voting Trust in the form of EXHIBIT "U". (f) Blue Sky Compliance. BRT shall have complied with all applicable requirements of federal and state securities or "blue sky" laws with respect to the issuance of the Property Shares at the Closing. -19- 24 (g) Registration Rights. The Registration Rights Agreement in the form of EXHIBIT "W" attached hereto shall have been executed and delivered by all the parties thereto and shall be in full force and effect. (h) Opinions. Counsel for BRT shall have delivered to the Voting Trust, as appropriate, written opinions, dated the Closing Date, in form and substance satisfactory to the Voting Trust and its counsel, as appropriate, substantially in the form attached hereto as EXHIBIT "Q". 4.3 Mutual Conditions Precedent of the Parties on the Closing Date. The obligations of BRT, Sellers and the Voting Trust to effect the transactions contemplated under this Agreement at the Closing are subject to the fulfillment on or prior to the Closing Date of the following conditions, any one or more of which may be waived in whole or in part by BRT, Sellers and the Voting Trust in writing: (a) Concurrent Closings and Deliveries. All of the closing documents to be delivered at the Closing shall have been executed and be available for concurrent delivery. (b) Representations and Warranties True as of Closing Date. The representations and warranties of each of the parties contained in this Agreement shall be true at and as of the Closing Date in all material respects, with the same effect as though such representations and warranties were made as of such date, provided that the representations and warranties of each of the parties shall be modified at Closing as provided in their respective Closing Certificates to reflect, as necessary, the operation of the Properties from the date hereof through the Closing Date in accordance with Section 5 hereof. (c) Closing Certificates. Each party to this Agreement shall have executed and delivered a certificate dated as of the Closing Date (the "Closing Certificate"), and signed by the President or other authorized officer, as the case may be, certifying that its representations and warranties set forth in this Agreement (and, as to BRT and the Voting Trust in the Securities Purchase Agreement) remain true and correct in all material respects, as may be modified by information relating to events after the date hereof set forth in the Closing Certificate. The ability of the parties to modify their representations and warranties in a Closing Certificate to reflect events occurring after the date hereof shall not affect the other conditions set forth in this Section 4. (d) Confirmations. BRT shall have received confirmation that the transactions contemplated hereby will not require approval of BRT's shareholders under the rules of the American Stock Exchange. (e) American Stock Exchange Listing. On or prior to the Closing Date, the Common Shares into which the Property Shares are convertible and the Common Shares for which the Warrant is exercisable or exchangeable shall have been approved for listing on the American Stock Exchange. -20- 25 SECTION 5. OPERATIONS PRIOR TO TRANSFER 5.1 Property Operations. (a) Except as otherwise expressly provided herein, between the date hereof and the Closing Date, Sellers shall operate their respective Properties in the ordinary course in a manner consistent with past practice, maintaining the Properties in the same state of repair, order and condition as they are on the date hereof, reasonable wear and tear, damage by fire or other casualty excepted. Without limiting the foregoing, the applicable owner shall not defer any required maintenance or repair unless such maintenance or repair would otherwise be deferred in the ordinary course of business. Sellers shall maintain or have maintained, their books and records in accordance with past practice and use diligent efforts to maintain in full force and effect all authorizations and all insurance policies with respect to their respective Properties. (b) Without in each case obtaining the prior written consent of BRT, which shall not be unreasonably withheld, no Seller shall enter into new Leases or modify, cancel, waive any material default under, accept any rental more than thirty (30) days in advance of its accrual date or accept early surrender of any of the Leases; provided that Sellers may enter into Leases for 5,000 square feet of space or less provided that such Leases are on terms and conditions consistent with the leasing pro forma provided by Sellers for the applicable Property. (c) Sellers shall notify BRT of any material change in any of the information set forth in Section 3 hereof or any of the Exhibits attached hereto with respect to their respective Properties, promptly after such party has knowledge of such material change. Sellers shall promptly deliver to BRT copies of all default notices and other material written communications sent or received by them with respect to their respective Properties. 5.2 Casualty or Condemnation. (a) If prior to the Closing Date there shall be any damage or destruction to a Property by fire or other casualty, Sellers shall give prompt notice thereof to BRT. Unless such damage or destruction results in a material adverse change to the Properties taken as a whole, such damage or destruction shall in no way void or impair this Agreement or reduce the number of Property Shares to be issued with respect to such Property. In such event, subject to BRT's right to participate in the adjustment of the loss with the applicable insurance companies involved and approve the manner of repair and restoration, Sellers shall settle with the insurance companies and apply the insurance proceeds to promptly and diligently repair and restore, or commence to repair and restore, the affected Property to its condition and character immediately prior to the damage or destruction. If such repair and restoration is not completed by the Closing Date, then on the Closing Date the owner of the affected Property shall pay over to BRT the amount of the insurance proceeds collected to the extent such proceeds have not yet been applied to the repair and restoration of the affected Property, (and if any such proceeds -21- 26 have not been collected, the owner of the affected Property shall assign to BRT all its right, title and interest in and to the same). (b) If prior to the Closing Date condemnation or eminent domain proceedings are commenced against any Property, the Seller in question shall give prompt notice thereof to BRT. Unless the taking contemplated by such condemnation or eminent domain proceeding would result in a material adverse change to the Properties taken as a whole, no such condemnation or eminent domain proceeding shall void or impair this Agreement, or reduce the number of Property Shares to be issued with respect to such Property, provided that the owner of the affected Property shall be relieved from any obligation hereunder to convey title to the portion of any such Property so taken. BRT shall have the right to participate in the negotiation of the award to be made for such taking, and the owner of the affected Property shall not agree to any proposed award or execute a deed in lieu of foreclosure without BRT's prior written consent. Any condemnation award payable with respect to the taking of a Property shall be assigned to BRT. SECTION 6. CLOSING; CLOSING DELIVERIES; ADJUSTMENTS; EXPENSES 6.1 Closing. The closing for the transfer of all of the Properties (the "Closing"), shall take place at the offices of Wolf, Block, Schorr and Solis-Cohen, 12th Floor Packard Building, 15th & Chestnut Streets, Philadelphia, PA at 10:00 a.m., on November 14, 1996, or on such other date or at such other time or place as may be agreed upon in writing by the parties hereto (the "Closing Date"). 6.2 Closing Documents. In addition to the opinions, certificates and other documents and instruments referred to in Section 4 of this Agreement, at the Closing, the parties shall also execute and deliver, or cause to be executed and delivered, the following documents: (a) Deeds and Assignments. Deeds and Assignment Agreements in respect of each of the Properties in substantially the forms attached hereto as EXHIBITS "R-1" and "R-2". (b) Mechanics' Liens. Sellers will furnish such affidavits, indemnities and collateral as Commonwealth Land Title Insurance Company may require to insure title to the Properties in BRT OP (or its subsidiaries) free and clear of the possibility of mechanic's liens. (c) Bill of Sale. A bill of sale prepared by BRT's counsel in form acceptable to Sellers, assigning, conveying and transferring to Buyer, all of the Personal Property and the Names. (d) Original Leases. All Leases, tenant files, tenant correspondence and repair records. -22- 27 (e) Original Licenses, Service Contracts. All licenses with respect to the Properties, and such of the Service Contracts as BRT shall request. (f) Assignment of Leases. An assignment agreement prepared by BRT's counsel in form acceptable to Sellers (the "Assignment"), duly exercised by Sellers and BRT, assigning, conveying and transferring to BRT the Leases, and BRT shall assume the obligations and liabilities of Seller arising after the Closing Date under them. (g) FIRPTA Certificates. All certificate(s) required under Section 1445 of the Code. (h) Tenant Letter. Letters to each tenant advising of the change in ownership and directing payment of rent to such party as the BRT shall designate, said letter to be in form acceptable to BRT. (i) Corporate Clearance. Such evidence, indemnification and other undertaking as Commonwealth Land Title Insurance Company may require to insure title in BRT OP (or its subsidiary) free and clear of any liability for taxes owing by any Seller to the Commonwealth of Pennsylvania. (j) Title Insurance Certificates. Such reasonable and customary affidavits of title or other certifications as shall be required by Commonwealth Land Title Insurance Company to insure BRT's title to the Properties as set forth in Section 4.1(a), and to provide affirmative endorsements for (a) no violation of existing covenants, conditions and restrictions, and future violation not to result in forfeiture of title, (b) removal of any exceptions for matters which an accurate survey would disclose, (c) "Fairways" endorsements, and such other endorsements as BRT shall reasonably request. (k) Updated Rent Roll. An updated schedule of Leases, containing all information required to be set forth in EXHIBIT "L which schedule is correct and complete as of the date of closing. (l) Organization Certifications. Confirmation of the good standing and existence of each Seller and the due authority of those executing for them, including, without limitation, the following documents issued no earlier than 30 days prior to Closing: (a) good standing certificate in state or organization and in the State in which the Properties are located, (b) articles of incorporation, certified by the secretary of state of the state of incorporation, (c) a certificate from the secretary of the corporation confirming the incumbency of the signatories and the current force and effect of the resolution authorizing their execution of the documents required under this Agreement. (m) Keys. All keys and combinations to all locks to the Properties. -23- 28 (n) Tax Bills. Current tax bills and, if available, tax bills for each of the years of Sellers' ownership of the Properties. (o) Tax Reduction Rights. An instrument assigning to BRT any claims for the reduction of real or personal property taxes assessed against any portion of the Property for the fiscal year in which the Closing takes place; any refund for such year shall be prorated when received. (p) Contract Documents. All Contract Documents in possession of Sellers. 6.3 Adjustments. The following terms shall be prorated on a per diem basis at Closing, as of the close of business of the day immediately preceding Closing except as otherwise set forth below: (a) Rent Under Leases. Delinquent rents under Leases will not be prorated, but after Closing, BRT will pay promptly to the Seller in question (i) the first money collected from any tenant which as of Closing was delinquent only for the month in which Closing occurred, up to the amount of such delinquency and (ii) sums collected within ninety (90) days following Closing in excess of all sums owing after Closing, from any tenant which, as of Closing, was delinquent for more than the month in which Closing occurred, up to the amount of such delinquency. Except as herein expressly provided, BRT shall be under no obligation to collect rents in arrears for the benefit of Sellers. Except for the adjustment of escalation payments as provided below, Sellers shall have no claim to any rent collected more than ninety (90) days following the Closing Date. (b) All security deposits under Leases and all interest required to be paid thereon pursuant to the terms of such Leases shall be paid over to BRT on the Closing Date; and (c) Sellers shall have paid prior to Closing all taxes and assessments and water and sewer charges, including assessments payable in installments, which are to become due and payable and/or a lien against any Property, provided the first installment of such assessment has become due and payable as of Closing. Real estate taxes, assessments and municipal water and sewer charges for the current tax years will be prorated. (d) Sellers will use reasonable efforts to cause all utility meters to be read as of the end of the day preceding Closing, or as close thereto (whether before or after) as practicable, and the parties will adjust utility charges on the basis of such readings and reasonable estimates to approximate the result that Sellers shall bear all utility charges through the day preceding Closing and BRT shall bear utility charges thereafter. Utility deposits, if any, will be assigned to BRT and reimbursed to Sellers. -24- 29 (e) If BRT shall elect to take assignment of any insurance policy or contract, the premiums or sums payable (or receivable) thereunder will be prorated on a per diem basis such that Sellers will bear all expenses through the day preceding the Closing and BRT will bear all expenses thereafter. (f) Amounts paid or payable in respect of any Service Contracts assigned and assumed by BRT in accordance herewith. (g) At least five (5) days prior to Closing, Sellers shall deliver to BRT a reasonably detailed statement setting forth, as of the date of Closing (a) the sums collected from tenants under Leases on account of or in reimbursement of landlord's operating expenses and/or any other payments made by tenant to landlord on account of sums which are attributable to expenses paid or incurred by the landlord ("escalation payments") for the current fiscal year under each such Lease (whether a lease year or calendar or other year); and (b) the amounts paid or incurred by Sellers during the appropriate fiscal year as aforesaid which Sellers expects will be paid or reimbursed by escalation payments made by tenants. If Sellers shall have collected escalation payments for period prior to Closing in excess of the amount to which Sellers are entitled, whether pursuant to estimates which were in excess of the amounts actually required to be paid, or otherwise, there shall be an adjustment and payment to BRT at Closing for such excess. If the charges were not billed or have not been collected as of the date of Closing, then, when the amount of such escalation payments is determined and collected by BRT from tenants, BRT will, upon collection, remit to Sellers the portion thereof to which Sellers is entitled to the date of Closing. BRT shall have the right, in good faith, to settle or adjust any amount of such escalation payments due from any tenant without Sellers' prior consent, provided that such settlement or adjustment applies ratably to all amounts of escalation payments due from such tenant. Escalation payments will ultimately be prorated between the parties on the basis of the proportions in which each party bore the expense in question. (h) The parties shall endeavor to jointly prepare a schedule of prorations for the Properties no less than five (5) days prior to closing. As to any matter to be prorated hereunder which cannot be determined with certainty as of Closing, the parties will estimate such matter as of Closing and will thereafter adjust such estimated proration promptly after such matter can be determined with certainty. The parties shall correct any errors in prorations as soon after the Closing as amounts are finally determined. 6.4 Expenses. Transfer taxes payable with respect to the conveyance of the Properties shall be divided equally between the Sellers and BRT; provided, however, that if Closing shall occur under the Securities Purchase Agreement, and if in connection with such Closing thereunder Common Shares are issued, then at such Closing BRT will pay to the Voting Trust the sum of Two Hundred Ten Thousand Dollars ($210,000) in partial reimbursement of the realty transfer taxes paid by Sellers at Closing hereunder. BRT shall pay the cost of title insurance and recording costs of the deeds. BRT will pay its own due diligence expenses. Other closing expenses will be allocated to the party who would customarily pay such expense under local practice. Each party will pay the fees and expenses of its own counsel, except that if Closing occurs, BRT will reimburse the Voting Trust at Closing for the reasonable costs incurred -25- 30 by Sellers and Voting Trust for the fees and expenses of counsel in connection with the transactions described hereby. Otherwise each party shall be responsible for all expenses incurred by it in connection with this Agreement and the transactions contemplated hereby, including without limitation the fees and expenses of such party's accountants, attorneys and other advisors; provided, however, that if Closing occurs, BRT will reimburse the Voting Trust the sum of $242,500 paid or payable by SERS to consultants. 6.5 Indemnification for Seller's Tax Obligations. Sellers shall indemnify, defend and save and hold harmless BRT from any loss, cost, liability or expense (including, without limitation, reasonable counsel fees and court costs) incurred, paid or suffered by BRT arising out of or by reason of any claim made by the Pennsylvania Department of Revenue or by any other state taxing or employment authorities asserting or indicating any claims or possible claims for unpaid taxes, penalties, interest or court costs related thereto of Sellers, the Voting Trust, SERS or any related party, due the Commonwealth of Pennsylvania or its political subdivisions. The provisions of this Section 6.5 shall specifically survive Closing hereunder. SECTION 7. COVENANTS 7.1 BRT Covenants. BRT hereby makes the following covenant to Sellers and the Voting Trust: during the Due Diligence Period, BRT will diligently endeavor to obtain the confirmation from the American Stock Exchange described in subsection 4.3(e) hereof. 7.2 Mutual Covenant - Best Efforts To Close. Each party to this Agreement hereby covenants to use its best efforts (i) to cause to be fulfilled any condition to Closing which is under the control or influence of such party and (ii) to consummate Closing hereunder so long as the conditions to such party's obligation are fulfilled. 7.3 Morgan Stanley Transactions. RAI specifically acknowledges and agrees that the Voting Trust and RAI as voting trustee of the Voting Trust are aware of and have no right to consent to or otherwise approve the investment transactions with the Morgan Stanley Funds referred to in the Registration Statements. SECTION 8. MATTERS TO BE COMPLETED 8.1. Matters to be Completed. Prior to Closing, BRT will review the documents and materials described on EXHIBIT "Z" hereto and will promptly notify Sellers' if any information contained in any such documents materially adversely affects the value of the Properties (other than any impairment of future development potential). Sellers may, but need not, remedy the matter in question or compensate BRT therefor, and if Sellers shall not so remedy or so compensate BRT in a manner reasonably satisfactory to BRT, then BRT may terminate this Agreement by notice to Sellers and thereupon the Deposit shall be returned to BRT. -26- 31 SECTION 9. SELLERS' OR VOTING TRUST'S DEFAULT 9.1 Sellers' or Voting Trust's Default. If Sellers or the Voting Trust shall fail to consummate Closing in accordance with this Agreement or shall fail to observe or perform any of their covenants or obligations under this Agreement to be observed or performed at or prior to Closing, BRT as its sole and exclusive remedies may (i) seek specific performance of this Agreement, or (ii) enforce any other remedy available at law or in equity, provided, however, that unless such failure to consummate Closing constitutes a breach of Sellers' or the Voting Trust's covenant under subsection 7.2 hereof, the remedies of BRT under this clause (ii) will be limited to the return of the Deposit to BRT and payment to BRT of the additional sum of $100,000 as liquidated damages for such default. SECTION 10. GENERAL PROVISIONS 10.1 Notices. Any notice, request, demand, waiver, consent, approval or other communication which is required or permitted hereunder shall be in writing and shall be deemed given only if delivered personally, sent by reputable next business day delivery service or by telegram or by registered or certified mail, postage prepaid, as follows: If to BRT, to: Brandywine Realty Trust 16 Campus Boulevard Suite 150 Newtown Square, PA 19073 Attn: Gerard H. Sweeney, President and Chief Executive Officer With a required copy to: Pepper, Hamilton & Scheetz 3000 Two Logan Square 18th & Arch Streets Philadelphia, PA 19103-2799 Attn: Michael H. Friedman, Esq. If to the Sellers or Voting Trust, to: RAI Real Estate Advisers, Inc. 259 Radnor-Chester Road Suite 200 Radnor, PA 19087 Attn: Richard K. Layman -27- 32 With a required copy to: Wolf, Block, Schorr, and Solis-Cohen 12th Floor Packard Building S.E. Corner 15th and Chestnut Streets Philadelphia, PA 19102 Attn: Jason M. Shargel, Esq. 10.2 Confidentiality. The parties to this Agreement acknowledge that certain of the information that may be made available to them in connection with their due diligence investigation or otherwise is proprietary and includes confidential information. The parties shall hold all such information in confidence and shall not disclose it to any person before the Closing without the approval of the other parties, as applicable; provided, however, that the foregoing restriction shall not apply to (i) any information that is or becomes publicly known or that is lawfully obtained from a third party, (ii) to any disclosure required by law or in connection with the enforcement of any party's rights under this Agreement or (iii) any information required, in the reasonable judgment of BRT's counsel, to be included in the Registration Statement on Form S-11, as amended or in any Preliminary or Final Prospectus pertaining thereto. Prior to the Closing, none of the parties (or any of their respective affiliates) shall make any public announcement or disclosure relating to the transactions contemplated herein without the prior agreement of each other party hereto, except as required by law, provided that each other party shall use its best efforts to consult with the other in advance of any disclosure required by law. 10.3 Entire Agreement. This Agreement, together with the Exhibits and certificates referred to herein or delivered pursuant hereto, constitute the entire agreement between the parties hereto with respect to its subject matter and supersede all prior and contemporaneous agreements and understandings with respect to the subject matter thereof. 10.4 Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original copy of this Agreement, and all of which, when taken together, shall be deemed to constitute but one and the same Agreement. 10.5 Governing Law. This Agreement is made pursuant to, and shall be construed and enforced in accordance with, the laws of the Commonwealth of Pennsylvania (and United States federal law, to the extent applicable), irrespective of the principal place of business, residence or domicile of the parties hereto, and without giving effect to otherwise applicable principles of conflicts of laws. Nothing contained herein or in any other document contemplated hereunder shall prevent or delay any party from seeking, in any court of competent jurisdiction, specific performance or other equitable remedies in the event of any breach or intended breach by any party of any of their respective obligations hereunder. 10.6 Section Headings, Captions and Defined Terms. The section headings and captions contained herein are for reference purposes only and shall not in any way affect the meaning and interpretation of this Agreement. The terms defined herein and in any agreement executed in connection herewith include the plural as well as the singular and the use of masculine pronouns include the feminine and neuter. Except as otherwise indicated, all -28- 33 agreements defined herein refer to the same as from time to time amended or supplemented or the terms thereof waived or modified in accordance herewith and therewith. 10.7 Amendments. Modifications and Waiver. The parties may amend or modify this Agreement in any respect. No such amendment or modification shall be effective unless in writing and signed by the party against which such amendment or modification is to be enforced. The waiver by any party of any provision of this Agreement shall not constitute or operate as a waiver of any other provision hereof, nor shall any failure to enforce any provision hereof operate as a waiver of such provision or of any other provision. 10.8 Severability. The invalidity or unenforceability of any particular provision, or part of any provision, of this Agreement shall not affect the other provisions or parts hereof, and this Agreement shall be construed in all respects as if such invalid or unenforceable provisions or parts were omitted. 10.9 Liability of Trustees, etc. No recourse shall be had for any obligation of BRT hereunder, or for any claim based thereon or otherwise in respect thereof, against any past, present or future trustee, shareholder, officer or employee of BRT, whether by virtue of any statute or rule of law, or by the enforcement of any assessment or penalty or otherwise, all such liability being expressly waived and released by each other party hereto. 10.10 Non-Recourse. No recourse shall be had for any obligation of the Sellers or the Voting Trust hereunder, or for any claim based thereon or in respect thereof, against RAI, SERS, or any past, present or future trustee, stockholder, officer or employee of either or against any other person or entity, except for the payment by Sellers or the Voting Trust of any amounts due under clause (ii) of Section 9.1 hereof or as provided in the following sentence, 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. After Closing, recourse for any obligation or liability of the Sellers or the Voting Trust hereunder shall be enforceable only against the collateral (as defined in the Pledge Agreement), and by offset against the Deferred Purchase Price. 10.11 Exhibits Incorporated. All exhibits attached hereto are hereby incorporated into and made a part of this Agreement. -29- 34 IN WITNESS WHEREOF, each of the parties hereto has executed this Agreement, all as of the date first written above. BRANDYWINE REALTY TRUST By: /s/ Gerard H. Sweeney ------------------------------ Title: President/CEO --------------------------- GREENWOOD SQUARE CORPORATION By: /s/ Kathleen M. Hands ------------------------------ Title: Vice President --------------------------- BCBC HOLDING COMPANY By: /s/ Kathleen M. Hands ------------------------------ Title: Vice President --------------------------- 500 NORTH GULPH ROAD HOLDINGS, INC. By: /s/ Kathleen M. Hands ------------------------------ Title: Vice President --------------------------- RAI REAL ESTATE ADVISERS, INC. By: /s/ Richard K. Layman ------------------------------ Title: President --------------------------- -30- 35 EXHIBIT LIST Exhibit A: Legal Description - Greenwood Property Exhibit B: Legal Description - BCBC Property Exhibit C: Legal Description - North Gulph Property Exhibit D-1: Articles Supplementary (Property Shares) Exhibit D-2: Standstill Agreement Exhibit E: Form of Capital Escrow Agreement Exhibit F: Form of Warrant Exhibit G: BRT Disclosure Schedule Exhibit H: BRT Rent Rolls Exhibit I: Insurance Policies Relating to BRT Properties Exhibit J: BRT Properties Exhibit K-1: List of Environmental Site Assessments of the Properties Exhibit K-2: Sellers' Disclosure Schedule Exhibit K-3: List of Engineering Studies and Reports of the Properties Exhibit L: Sellers' Rent Rolls Exhibit M: Sellers' Litigation Exhibit N: Insurance Policies Relating to Properties Exhibit O: Permitted Exceptions on Properties Exhibit P: Required Tenant Estoppels Exhibit Q: Form of Opinion Exhibit R-1: Form of Deed Exhibit R-2: Form of Assignment and Assumption Agreement Exhibit S: Sellers' Service Contracts
-31- 36 Exhibit T: Deposit Escrow Agreement Exhibit U: Form of Agreement of Safeguard Scientifics, Inc. and Richard M. Osborne Exhibit V: Form of Pledge Agreement Exhibit W: Form of Registration Rights Agreement Exhibit X: Form of Amendment to Partnership Agreement of BRT OP Exhibit Y: Form of Confirmation of Voting Trust Exemption from Ownership Requirements Exhibit Z: Remaining Due Diligence Items
-32- EX-10.2 3 SECURITIES PURCHASE AGREEMENT 1 EXHIBIT 10.2 BRANDYWINE REALTY TRUST SECURITIES PURCHASE AGREEMENT 2 TABLE OF CONTENTS SECTION 1. SALE AND PURCHASE OF SHARES; CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1- 1.1 Authorization of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1- 1.2 Sale and Purchase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1- 1.3 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2- SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . -2- 2.1 Organization and Good Standing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -2- 2.2 Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -3- 2.3 No Conflict with Law or Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -3- 2.4 Beneficial Interest of Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -3- 2.5 Reservation of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -4- 2.6 Consents and Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -4- 2.7 Private Offering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -4- 2.8 Declaration of Trust and Bylaws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -5- 2.9 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -5- 2.10 SEC Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -5- 2.11 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -5- 2.12 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -6- 2.13 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -6- 2.14 Real Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -7- 2.15 Tenant Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -9- 2.16 Dividends and Other Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -9- 2.17 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -9- 2.18 Agreements Affecting the Company's Securities . . . . . . . . . . . . . . . . . . . . . . . . . -10- 2.19 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -10- 2.20 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -10- 2.21 Contracts and Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -12- 2.22 Absence of Certain Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -12- 2.23 Contracts with Insiders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -13- 2.24 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -13- 2.25 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -13- 2.26 Certain Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -13- 2.27 Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -14- 2.28 Certain Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -14- 2.29 Labor Agreements and Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -14- 2.30 Entire Business; Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -15- 2.31 Registration Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -15- 2.32 Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -15- 2.33 Standstill Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -15- 2.34 Matters Relating to Partnership Agreement and Warrants. . . . . . . . . . . . . . . . . . . . . -16- 2.35 Investment Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -16- 2.36 Commodity Exchange Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -16-
-i- 3 SECTION 3. PURCHASER'S REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . -16- 3.1 Pre-Existing Entity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -16- 3.2 Beneficial Ownership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -16- 3.3 Principal Place of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -17- 3.4 Purchase Without View to Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -17- 3.5 Restrictions on Transfer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -17- 3.6 Access to Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -17- 3.7 Additional Representations of the Purchaser . . . . . . . . . . . . . . . . . . . . . . . . . . -17- 3.8 Legends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -18- 3.9 Due Authorization, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -18- SECTION 4. CONDITIONS PRECEDENT TO THE PURCHASER'S OBLIGATIONS . . . . . . . . . . . . . . . . . . . . . . -18- 4.1 Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -18- 4.2 Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -19- 4.3 Opinion of Counsel to the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -19- 4.4 Proceedings; Certified Copies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -19- 4.5 No Proceeding or Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -19- 4.6 No Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -19- 4.7 ASE Listing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -19- 4.8 Blue Sky Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -19- 4.9 Registration Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -19- 4.10 Contribution Closing; Transaction Documents . . . . . . . . . . . . . . . . . . . . . . . . . . -19- 4.11 Maryland Anti-Takeover Statutes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -19- 4.12 Environmental Representation Letter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -20- 4.13 Tax Opinion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -20- SECTION 5. CONDITIONS PRECEDENT TO THE COMPANY'S OBLIGATIONS . . . . . . . . . . . . . . . . . . . . . . . -20- 5.1 Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -20- 5.2 Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -20- 5.3 No Proceeding or Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -20- 5.4 ASE Listing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -20- 5.5 Contribution Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -20- 5.6 Additional Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -21- 5.7 Proceedings; Certified Copies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -21- 5.8 No SEC Integration Challenge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -21- SECTION 6. COVENANTS OF THE COMPANY AND THE PURCHASER PRIOR TO CLOSING . . . . . . . . . . . . . . . . . . -21- 6.1 Payment of Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -21- 6.2 Operation of Business in Ordinary Course . . . . . . . . . . . . . . . . . . . . . . . . . . . . -21- 6.3 Access to Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -21- 6.4 Notification of Certain Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -22- 6.5 Conditions Precedent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -23-
-ii- 4 SECTION 7. COVENANTS OF THE COMPANY AND THE PURCHASER AFTER CLOSING . . . . . . . . . . . . . . . . . . . . -23- 7.1 Rule 144 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -23- 7.2 Delivery of Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -23- 7.3 Reservation of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -23- 7.4 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -23- 7.5 Waivers, Consents, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -24- 7.6 Press Releases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -24- 7.7 Shareholders' Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -24- 7.8 Purchaser's Covenant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -24- 7.9 REIT Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -25- SECTION 8. COMPLIANCE WITH 1933 ACT; RESTRICTIONS ON TRANSFERABILITY OF SHARES, PROPERTY SHARES WARRANT AND CONVERSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -25- 8.1 Compliance with 1933 Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -25- 8.2 Restrictive Legend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -25- 8.3 Restrictions on Transferability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -25- 8.4 Termination of Restrictions on Transferability . . . . . . . . . . . . . . . . . . . . . . . . . -26- SECTION 9. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS . . . . . . . . . . . . . . . . . . . . . -26- SECTION 10. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -26- 10.1 Owner of Shares, Property Shares, Warrant and Conversion Shares . . . . . . . . . . . . . . . . -26- 10.2 Successors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -26- 10.3 Broker or Finder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -27- 10.4 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -27- 10.5 Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -27- 10.6 Full Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -28- 10.7 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -28- 10.8 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -28- 10.9 Survival of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . -28- 10.10 Settlement of Disputes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -28- 10.11 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -29- 10.12 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -29- 10.13 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -30- 10.14 Non-Recourse . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -30-
-iii- 5 SCHEDULE OF EXHIBITS Exhibit A -- Form of Amendment No. 1 to Registration Statement Exhibit B -- Amendments or Waivers of Warrant Holders Exhibit C -- Form of Opinion of Counsel to the Company Exhibit D -- Form of Opinion of Special Maryland Counsel to the Company -iv- 6 SECURITIES PURCHASE AGREEMENT (this "Agreement") made as of the 6th day of November, 1996 between BRANDYWINE REALTY TRUST, a Maryland real estate investment trust (the "Company"), and RAI REAL ESTATE ADVISERS, INC. ("RAI") as the voting trustee of a voting trust dated as of November 6, 1996 executed by the Commonwealth of Pennsylvania State Employes' Retirement System ("SERS") as shareholder and by RAI as voting trustee (the "Purchaser"). BACKGROUND The Company desires to issue and sell to the Purchaser, and the Purchaser desires to purchase Common Shares (as defined in Section 1.1), or, if so provided in Section 1.2, Series A Preferred Shares (as defined in Section 1.1), for an aggregate purchase price of $10,500,000 (the "Purchase Price") on the terms and conditions set forth herein. Intending to be legally bound hereby, the parties hereto agree as follows: SECTION 1. SALE AND PURCHASE OF SHARES; CLOSING 1.1 AUTHORIZATION OF SECURITIES. The Board of Trustees of the Company has authorized the issuance of a number of its authorized but unissued common shares of beneficial interest (the "Common Shares") as provided in Section 1.2. The term "Shares" as used herein means the number of Common Shares issuable to the Purchaser hereunder or, if shares of the Company's Series A Convertible Preferred Shares (the "Series A Preferred Shares") are to be issued as provided in Section 1.2, the number of Series A Preferred Shares issuable to Purchaser hereunder. The term "Securities" as used herein means the Shares, the Conversion Shares, the Series A Preferred Shares (the "Property Shares") issuable pursuant to the Contribution Agreement of even date herewith among, inter alia, the Company and the Purchaser (the "Contribution Agreement"), and the Warrant to Purchase Common Shares (the "Warrant") issuable pursuant to the Contribution Agreement. The term "Conversion Shares" as used herein means the Common Shares issuable upon conversion of the Series A Preferred Shares and Property Shares and upon exercise or exchange of the Warrant. 1.2 SALE AND PURCHASE. Subject to the terms and conditions herein set forth, on the Closing Date (as defined in Section 1.3), the Company shall sell, issue and deliver Shares to the Purchaser as follows: If the Secondary Offering occurs on or prior to December 27, 1996, the Company shall issue to the Purchaser a number of Common Shares equal to the Purchase Price divided by a number equal to the price to the public in the Secondary Offering. If the Secondary Offering is not consummated on or before December 27, 1996, the Company shall issue to the Purchaser Preferred Shares convertible into a number of Common Shares equal to the Purchase Price divided by $5.50. The term "Secondary Offering" as used herein means an underwritten primary public offering of Common Shares pursuant to a Registration Statement on Form S-11 declared effective by the 7 SEC (as defined in Section 2.10) which results in gross proceeds to the Company (prior to reduction for the underwriters' discount) of at least $50,000,000. All share amounts and prices shall be appropriately adjusted for any share splits, reverse share splits, share dividends or similar transactions. 1.3 CLOSING. (a) The closing of the issuance and sale of the Shares to the Purchaser hereunder shall take place on the earlier of (i) as promptly as practicable after the closing of the Secondary Offering, or (ii) December 30, 1996, subject to the satisfaction or, if permissible, waiver of the conditions set forth in Sections 4 and 5, at 10:00 A.M. at the offices of Wolf, Block, Schorr and Solis-Cohen, Packard Building, 15th and Chestnut Streets, Philadelphia, PA 19102, unless another date, time or place is agreed to in writing by the parties hereto. As used herein "Closing" shall mean the closing of the issuance and sale of the Shares to the Purchaser hereunder and the "Closing Date" shall mean the date on which such Closing takes place. (b) Subject to the terms and conditions herein set forth, at the Closing, the Company shall deliver to the Purchaser certificates for the Shares duly executed by the Company and registered in the Purchaser's name or the name of its nominee and, in exchange for the delivery of the Shares, the Purchaser shall deliver to the Company the Purchase Price by wire transfer of immediately available funds to an account designated by the Company at least two business days prior to the Closing Date. SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY Other than as set forth on the disclosure letter previously provided to the Purchaser by the Company (the "Disclosure Letter") or as described in the Registration Statement (as defined in Section 2.31) or in the SEC Reports (as defined in Section 2.10), the Company represents and warrants to the Purchaser as follows: 2.1 ORGANIZATION AND GOOD STANDING. The Company is a real estate investment trust duly formed and existing under and by virtue of the laws of the State of Maryland and is in good standing with the State Department of Assessments and Taxation of Maryland and has all requisite power and trust authority, and all necessary licenses and permits, to own and lease its properties and assets and to conduct its business as now conducted. Each Subsidiary (as defined in Section 2.9) is an entity duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization and has all requisite power and authority, and all necessary licenses and permits, to own and lease its properties and assets and to conduct its business as now conducted. The Company and its Subsidiaries are each qualified to do business and are in good standing in all states where the conduct of their respective businesses or their ownership or leasing of property requires such qualification. -2- 8 2.2 AUTHORIZATION. The Company has all requisite power and trust authority to execute and deliver this Agreement and each Transaction Document (as defined in Section 4.10) required to be executed and delivered by it prior to or at the Closing and to carry out the transactions contemplated hereby and thereby. The execution, delivery and performance by the Company of this Agreement and each Transaction Document to which it is a party have been duly authorized by all requisite corporate action. This Agreement has been duly executed and delivered by the Company and constitutes (and, when executed and delivered as contemplated herein each such Transaction Document will constitute) the valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except as such enforcement may be limited by bankruptcy, insolvency, moratorium, reorganization and other similar laws relating to or affecting the enforcement of creditors' rights generally, and except that the availability of specific performance, injunctive relief or other equitable remedies is subject to the discretion of the court before which any such proceeding may be brought. 2.3 NO CONFLICT WITH LAW OR DOCUMENTS. The execution, delivery and performance by the Company of this Agreement and each Transaction Document to which it is a party will not violate any provision of law, any rule or regulation of any governmental authority, or any judgment, decree or order of any court binding on the Company, and will not conflict with or result in any breach of any of the terms, conditions or provisions of, or constitute a default under, or result in the creation of any lien, security interest, charge or encumbrance upon any of the properties, assets or outstanding shares of the Company under its the Declaration of Trust of the Company as amended to the date of this Agreement (the "Declaration of Trust") or the Bylaws of the Company as amended to the date of this Agreement (the "Bylaws"), or any indenture, mortgage, lease, agreement or other instrument to which the Company is a party or by which it or any of its properties is bound. 2.4 BENEFICIAL INTEREST OF COMPANY. The authorized beneficial interest of the Company consists of: (a) 75,000,000 Common Shares, 2,733,554 shares of which are presently issued and outstanding, and (b) 5,000,000 undesignated preferred shares, par value $.01 per share, none of which is presently issued and outstanding. All issued and outstanding Common Shares have been duly and validly issued and are fully paid and nonassessable. There are no outstanding subscriptions, warrants, options or other rights or commitments of any character to subscribe for or purchase from the Company, or obligating the Company to issue, any shares of beneficial interest of the Company or any securities convertible into or exchangeable for such shares, and there are no Common Shares reserved for issuance. The number of Common Shares issuable upon the exercise, conversion or exchange of any outstanding securities of the Company is not subject to adjustment by reason of the issuance and sale of the Securities. There are no (i) preemptive, first refusal or similar rights to purchase or otherwise acquire securities of the Company or any Subsidiary pursuant to any provision of law, the Declaration of Trust, the Bylaws, the Partnership Agreement (as defined in Section 2.21), other agreement or otherwise; or (ii) rights to adjust the number, type or pricing of securities issuable upon conversion, exercise or exchange of other securities or rights issued by the Company. -3- 9 2.5 RESERVATION OF SHARES. The requisite number of duly authorized and unissued Common Shares of the Company have been duly authorized and reserved for issuance upon conversion of the Preferred Shares and Property Shares and exercise of the Warrant and no further trust action is required for the valid issuance of Common Shares upon conversion of the Preferred Shares and Property Shares and exercise of the Warrant. The Conversion Shares will, at the time of the Closing and thereafter, not be subject to preemptive or similar rights of any person or entity, and when issued against payment therefor in accordance with the terms of the Preferred Shares, Property Shares and Warrant, as applicable, will be duly and validly issued, fully paid and nonassessable. 2.6 CONSENTS AND APPROVALS. No permit, consent, approval or authorization of, or declaration to or filing with, any federal, state, local or foreign governmental or regulatory authority or other person or entity, not made or obtained, is required in connection with the execution or delivery of this Agreement or any Transaction Document by the Company, the offer, issuance, sale or delivery of the Securities, or the carrying out by the Company of the other transactions contemplated hereby, other than (a) the filing with, and approval of, the American Stock Exchange, Inc. ("ASE") with respect to the listing of the Shares (to the extent they are Common Shares) and the Conversion Shares, (b) any filings required under federal and applicable state securities laws and (c) the filing of Articles Supplementary in the form of Exhibit D-1 to the Contribution Agreement with the State Department of Assessments and Taxation of Maryland. The issuance and sale by the Company of the Securities as contemplated hereby or by the Contribution Agreement will not require compliance with the notification or other requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations promulgated thereunder. Prior to the closing under the Contribution Agreement (the "Contribution Closing"), the Board of Trustees of the Company shall have taken all action necessary so that the transactions contemplated by the Contribution Agreement and this Agreement including, without limitation, the issuance of the Securities, shall be irrevocably exempt from the operation of Section 3-601 et seq. (the "business combination" statute) and Section 3-701 et seq. (the "control share acquisition" statute) of the Maryland General Corporation Law (collectively, the "Maryland Anti-Takeover Statutes") and from any provisions of the Declaration of Trust and Bylaws that may have the effect of limiting the acquisition of securities of the Company, including without limitation Sections 6.6 and 11.5 of the Declaration of Trust. 2.7 PRIVATE OFFERING. Assuming the accuracy of the Purchaser's representations and warranties contained in Section 3, the offer, issuance and delivery to the Purchaser pursuant to the terms of this Agreement and the Contribution Agreement of the Shares, Property Shares and Warrant and, assuming compliance by the Purchaser with the terms of the Series A Preferred Shares, the Warrant and applicable law, the Conversion Shares, are exempt from registration under the Securities Act of 1933, as amended (the "1933 Act"). Based on the representations of the Purchaser contained in Section 3, it is not necessary, under the circumstances contemplated by this Agreement and the Contribution Agreement, to register issuance of the Securities under the 1933 Act or the Pennsylvania Securities Act of 1972. -4- 10 2.8 DECLARATION OF TRUST AND BYLAWS. The Company has filed as exhibits to the SEC Reports the Declaration of Trust and Bylaws, true and correct copies of which have been delivered to the Purchaser. 2.9 SUBSIDIARIES. The SEC Reports or the Disclosure Letter disclose the name of each entity in which the Company owns any equity interest, other than such entities that neither own any assets nor have ever conducted any business (collectively, the "Subsidiaries," which term includes without limitation Brandywine Operating Partnership, L.P., a Delaware limited partnership). The SEC Reports or the Disclosure Letter accurately describe (a) each Subsidiary's jurisdiction of organization and the percentage of its equity interests owned by the Company and (b) the name of each of the Company's corporate or joint venture affiliates (other than Subsidiaries) and the nature of the affiliation. Except as described in the SEC Reports or the Disclosure Letter, the Company has good and marketable title to all of the equity interests it purports to own of each Subsidiary, free and clear in each case of any mortgage, lien, security interest, charge or other encumbrance, and all such interests have been duly issued and are fully paid and nonassessable. There are no outstanding warrants, options or other rights or commitments of any character to subscribe for or purchase from the Company or a Subsidiary, or obligating such Subsidiary to issue, any additional equity interests or any securities convertible into or exchangeable for such equity interests. 2.10 SEC REPORTS. Since January 1, 1995, the Company and its Subsidiaries have timely filed all forms, reports, schedules, statements and other documents required to be filed with the Securities and Exchange Commission (the "SEC") pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or the 1933 Act, including without limitation, (a) all Annual Reports on Form 10-K, (b) all Quarterly Reports on Form 10-Q, (c) all reports on Form 8-K, (d) all proxy statements relating to meetings of stockholders (whether annual or special) and (e) all information incorporated by reference into any of the foregoing. As used herein the term "SEC Reports" means any of the foregoing, as amended to the date of this Agreement, filed on or after January 1, 1995. The SEC Reports were prepared in all material respects in accordance with and complied in all material respects with the requirements of applicable law, including the Exchange Act and the 1933 Act and the applicable rules and regulations of the SEC thereunder, and the SEC Reports did not at the time they were filed and do not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. Except for the Registration Statement and the Registration Statement on Form S-8 filed on October 16, 1996, the Company has not filed any registration statements with the SEC at any time within the last three years. The Company has delivered to the Purchaser prior to the date hereof true and correct copies of all SEC Reports and any other reports and documents filed with the SEC since January 1, 1995. 2.11 LITIGATION. The SEC Reports, the Registration Statement and/or the Disclosure Letter list all material pending or, to the Company's knowledge, threatened -5- 11 litigation involving the Company and its Subsidiaries. Except as so disclosed, there is no pending or, to the knowledge of the Company, threatened suit, action or litigation, or administrative, arbitration or other proceeding or governmental inquiry or investigation questioning the validity of this Agreement or the transactions contemplated hereby, or affecting in any material adverse respect the Company or any Subsidiary or the business, properties, assets, operations, prospects or condition (financial or otherwise) of the Company and its Subsidiaries taken as a whole, nor is there, to the knowledge of the Company, any basis for any such suit, action, litigation, proceeding, inquiry or investigation. 2.12 COMPLIANCE WITH LAWS. The Company and each Subsidiary is in compliance in all material respects with all laws, ordinances, rules and regulations of governmental authorities (including, without limitation, the Americans with Disabilities Act of 1990) and requirements of insurance bodies applicable to ownership, leasing, use and operation of its or their properties and has obtained and fully paid for all material licenses, permits, certificates, entitlements, grants of right and any other items and documents required by applicable law to be obtained by the Company or its Subsidiaries for the completion, ownership, leasing, use and occupancy of its or their properties, except where the failure to so comply or obtain would not have a material adverse effect on the Company and its Subsidiaries taken as a whole. Such licenses, permits, certificates, entitlements, grants of right and other items and documents are in full force and effect. Neither the Company nor any of its Subsidiaries have taken any action that would (or failed to take any action, the omission of which would) result in the revocation or suspension of such licenses, permits, certificates, entitlements, grants of right and other items and documents, and neither the Company nor any of its Subsidiaries have received any notice of any material violation from any federal, state or municipal entity or notice of an intent by any such governmental entity to revoke any material certificate of occupancy or other certificate, license, permit, entitlement or grant of right issued by it in connection with the ownership, use and occupancy of any of its or their properties, that in each case has not been cured or otherwise resolved to the satisfaction of such governmental entity. 2.13 FINANCIAL STATEMENTS. (a) Each of the consolidated financial statements (including, in each case, any related notes thereto) contained in the SEC Reports and the Registration Statement (i) have been prepared in all material respects in accordance with the published rules and regulations of the SEC and generally accepted accounting principles ("GAAP") applied on a consistent basis throughout the periods involved (except in the case of the unaudited financial statements, as permitted by Form 10-Q of the SEC), (ii) comply as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto and (iii) fairly present in all material respects the consolidated financial position of the Company and its Subsidiaries as of the respective dates thereof and the consolidated results of operations and cash flows for the periods indicated (subject, in the case of unaudited consolidated financial statements for interim periods, to year-end adjustments consisting only of normal recurring accruals), except that any pro forma -6- 12 financial statements contained in such consolidated financial statements are not necessarily indicative of the consolidated financial position of the Company and its Subsidiaries as of the respective dates thereof and the consolidated results of operations and cash flows for the periods indicated. Since December 31, 1995, the Company has not made any material change in the accounting practices or policies applied in the preparation of its financial statements. (b) Since June 30, 1996 (the "Balance Sheet Date") there has been no material adverse change in the business, properties, assets, operations or condition (financial or otherwise) of the Company and its Subsidiaries, taken as a whole. (c) The consolidated balance sheet of the Company and its Subsidiaries at the Balance Sheet Date (the "Balance Sheet") reflects all liabilities and obligations of the Company and of each Subsidiary, whether accrued, contingent or otherwise as of the date thereof, that are of a nature required to be set forth as a liability on a consolidated balance sheet under GAAP. Neither the Company nor any of its Subsidiaries have any liabilities or obligations of any nature (whether or not of the nature required to be reflected on the balance sheet prepared in accordance with GAAP) that are not reflected on the Balance Sheet, except for current liabilities (within the meaning of GAAP) which (i) have been incurred in the ordinary course of business consistent in nature and amount with past practice, and (ii) are neither material to the Company and its Subsidiaries taken as a whole nor inconsistent with any of the representations and warranties contained herein. The Balance Sheet reflects reserves or other appropriate provisions at least equal to reasonably anticipated liabilities, losses and expenses of the Company and its Subsidiaries as of the date thereof which are required to be disclosed by GAAP. (d) At the respective times of the issuance and sale of the Shares, Property Shares and Warrant to the Purchaser, neither the Company nor any of its Subsidiaries will have any liabilities or obligations, whether absolute, accrued, contingent, or otherwise, other than (i) current liabilities reflected on the Balance Sheet not paid since the Balance Sheet Date, (ii) current liabilities incurred in the ordinary course of business or in connection with the transactions contemplated hereby or by the Contribution Agreement or the Disclosure Letter and (iii) the other indebtedness and liabilities of the Company or of its Subsidiaries described in the Disclosure Letter, the Registration Statement or SEC Reports. 2.14 REAL PROPERTY. (a) The SEC Reports or the Registration Statement describe all real properties owned by the Company and each Subsidiary. To the Company's knowledge, the Company and each Subsidiary has good, valid and marketable title to all such real and personal properties and assets reflected therein as being owned by the Company or such Subsidiary, except for properties and assets sold or otherwise disposed of in the ordinary course of business since the Balance Sheet Date or that are not material to its business taken as a whole, subject to no liens, mortgages, security interests, pledges, encumbrances, or -7- 13 charges of any kind except: (i) liens for taxes or assessments or other government charges or levies not yet due and payable, (ii) liens imposed by law, such as mechanic's, materialmen's, warehousemen's and carrier's liens, and other similar liens, securing obligations incurred in the ordinary course of business which are not past due for more than 30 days, (iii) liens under workmen's compensation, unemployment insurance, social security or similar legislation securing obligations which are not past due and (iv) the liens securing other indebtedness not past due of the Company or its Subsidiaries described in the SEC Reports, the Registration Statement or the Disclosure Letter (the "Permitted Liens"). (b) No eminent domain, condemnation, incorporation, annexation or moratorium or similar proceeding has been commenced or, to the best of the Company's knowledge, threatened by an authority having the power of eminent domain to condemn any part of the properties owned by the Company and its Subsidiaries. To the best of the Company's knowledge, there are no pending or threatened governmental rules, regulations, plans, studies or efforts, or court orders or decisions, which do or could adversely affect the use or value of such properties for their present use. (c) The improvements at all properties owned by the Company and its Subsidiaries are in good condition and repair, ordinary wear and tear excepted, and have not suffered any casualty or other material damage which has not been repaired in all material respects. To the best of the Company's knowledge, there is no material latent or patent structural, mechanical or other significant defect, soil condition or deficiency in the improvements included in such properties. (d) Each of the properties owned by the Company and its Subsidiaries has been fully assessed and is not subject to abatement. To the best of the Company's knowledge, there are no proposed reassessments of any of such properties by any taxing authority and there are no threatened or pending special assessments or other actions or proceedings (other than county-wide reassessments and/or the usual increases in millage rates that may be under consideration by the taxing authorities in the jurisdictions where such properties are located) that could give rise to an increase in real property taxes or assessments against any of such properties. (e) There are no "Significant Agreements" relating to the properties owned by the Company and its Subsidiaries, or their operations, other than as set forth in the Disclosure Letter, the Registration Statement or the SEC Reports. For purposes hereof, "Significant Agreement" means and includes any of the following by which any of such properties may otherwise be subject or bound, in each such case as amended and currently in effect, inclusive of any waivers relating thereto: (i) all agreements, instruments and documents (excluding tenant leases referred to in Section 2.15 and easements included in the Permitted Liens) evidencing, securing or pertaining to contractual obligations that (A) are not cancelable upon 60 days -8- 14 notice or less and (B) have payments or receipts, as applicable, in excess of $15,000 per year or $25,000 over its life; and (ii) all mortgages and ground leases. 2.15 TENANT LEASES. (a) The Disclosure Letter lists each of the leases currently in effect with respect to the properties owned by the Company and its Subsidiaries as the same have been amended or modified to date (the "Leases"). The Leases are in full force and effect and, except as set forth in the Disclosure Letter, a. no material uncured Event of Default (as defined in any such Lease), has occurred and is continuing under any such Lease, no tenant has asserted a defense to, offset or claim against its rent or the performance of its obligations under its Lease and no tenant has asserted a default on the part of the landlord which would give it the right to terminate its Lease and b. there are no rights of first refusal on, or options to purchase, any of such leased properties in favor of any tenant, and no proposed modifications to any Lease that would reduce (A) the space leased to any tenant, (B) the amount of any tenant's rent or (C) the term of any Lease. (b) Except for (i) security deposits or (ii) the first full month's rent, whether or not the term of a Lease has commenced, no prepayments of rent more than thirty (30) days in advance have been made under the Leases. No rent or security deposits under the Leases have been assigned or encumbered, except as security for the mortgages noted in the Disclosure Letter or the SEC Reports, and there are no agreements or understandings, written or oral, with any of the tenants other than as set forth in the Leases. All brokerage commissions and other compensation and fees payable by reason of the Leases have been paid in full. 2.16 DIVIDENDS AND OTHER DISTRIBUTIONS. Since the Balance Sheet Date, except for the Company's regular quarterly cash dividend (not in excess of $.07 per share per quarter between the Balance Sheet Date and the Closing Date) neither the Company nor any Subsidiary has declared, set aside, or made any payment of a dividend or made any other distribution in respect of the Company's beneficial interest, repurchased or redeemed any of the Company's beneficial interest, or made any other payments to any holder of 5% or more of the Company's outstanding Common Stock other than salary paid to such stockholder for bona fide services to the Company or a Subsidiary as an officer or employee or reimbursement of reasonable expenses incurred in the ordinary course of business. 2.17 TAX MATTERS. Beginning with the first taxable year of the Company, its taxable year ended December 31, 1986, the Company properly elected to be taxed as a real estate investment trust within the meaning of Sections 856-860 of the Internal Revenue Code of 1986, as amended (the "Code"), and has satisfied, and continues to satisfy, all of the requirements set forth in those provisions and the regulations thereunder to be taxed as a real estate investment trust within the meaning of those provisions. Without limiting the -9- 15 generality of the foregoing, the Company, for each taxable year of the Company beginning with the first taxable year for which it made an election to be classified as a real estate investment trust: (i) has timely made all of the distributions required under Section 857(a)(1) of the Code; (ii) has timely demanded the statements from its shareholders required under Section 1.857-8(d) of the Treasury Regulations promulgated under the Code and maintained the records required under Treasury Regulations Section 1.857-8(e); (iii) has not sought to apply the provisions of Section 856(c)(7) of the Code in any taxable year of the Company; and (iv) has not revoked its election to be taxed as a real estate investment trust for federal income tax purposes nor has it received any notice that its classification as a real estate investment trust has been challenged by any taxing authority. The Company and each Subsidiary has filed all U.S. Federal, state, local, foreign and other tax returns which were required to be filed on or before the date hereof and has paid all taxes which have become due and payable. All such reports and returns were materially accurate and complete when filed and reflect all taxes required to be paid by the Company and its Subsidiaries for the periods reported therein. The provision for taxes made in the Balance Sheet at the Balance Sheet Date was sufficient for the payment of all accrued and unpaid taxes of the Company and its Subsidiaries with respect to the periods then ended. No additional material assessments, deficiencies or penalties in respect of taxes have been made or claimed against the Company or any Subsidiary which remain unpaid. No tax returns or reports of the Company or any Subsidiary are or ever have been under audit. 2.18 AGREEMENTS AFFECTING THE COMPANY'S SECURITIES. There are no agreements, written or oral, between the Company and any holder of its securities or, to the knowledge of the Company, among any holders of its securities, relating to the acquisition, disposition or voting of the securities of the Company. Except for the provisions of the Registration Rights Agreement attached as Exhibit W to the Contribution Agreement (the "Registration Rights Agreement"), there are no agreements, either written or oral, which obligate the Company to effect the registration of any of its securities under the 1933 Act. 2.19 INSURANCE. The Disclosure Letter lists all insurance policies carried by the Company or any Subsidiary relating to its or their real property and assets. All such policies are in full force and effect and all premiums thereunder have been paid to the extent due, and no notice of cancellation has been received with respect thereto and, to the best knowledge of Company, no cancellation is threatened. 2.20 EMPLOYEE BENEFIT PLANS. Schedule 2.20 to the Disclosure Letter lists all deferred compensation, pension, profit sharing, stock option, stock purchase, savings, group insurance and retirement plans, and all vacation pay, severance pay, incentive compensation, consulting, bonus and other material employee benefit or fringe benefit plans or arrangements maintained by the Company and its Subsidiaries with respect to which contributions are made by the Company (including health, life insurance and other benefit plans or arrangements maintained for the retirees which are specifically identified as such on Schedule 2.20). Such plans, including but not limited to all plans or programs that constitute "employee benefit plans" as defined in Section 3(3) of the Employee Retirement Income -10- 16 Security Act of 1974, as amended ("ERISA"), are sometimes collectively referred to in this section as "Benefit Plans." Neither the Company nor any ERISA Affiliate (as hereinafter defined) maintains, contributes or sponsors, and have not maintained, contributed to or sponsored any "employee benefit plan" (as defined in section 3(3) of ERISA) that is subject to Title IV of ERISA or Section 412 of the Internal Revenue Code of 1986, as amended ("Code") or any "Multiemployer Plan" (as defined in Section 4001(a)(3) of ERISA). ERISA Affiliate means all persons which are treated as being under common control or as a single employer with the Company or any of its Subsidiaries under Section 414(b), (c), (m) or (o) of the Code. Each Benefit Plan is and has been maintained in compliance in all material respects with applicable law, including but not limited to ERISA, the Code and with any applicable collective bargaining agreements or other contractual obligations. Each Benefit Plan that provides medical benefits has been operated in compliance with all applicable requirements of Sections 601 through 608 of ERISA and either (i) Section 162(i)(2) and (k) of the Code and regulations thereunder (prior to 1989) or (ii) Section 4980B of the Code and regulations thereunder (after 1988), relating to the continuation of coverage under certain circumstances in which coverage would otherwise cease. Company is not required to make any payment to any current or former employee of the Company in the form of wages or other consideration pursuant to any employment agreement or Benefit Plan that will constitute in the aggregate an "excess parachute payment" (within the meaning of Section 280G(b) of the Code as a consequence in whole or in part of the transactions contemplated by this Agreement. There have been no written statements or communications made or materials provided to any employee or former employee of the Company or its Subsidiaries by any person which provide for or could reasonably be construed as a contract or promise by the Company or any subsidiary to provide for any pension, welfare, or other insurance-type benefits to any such employee or former employee, whether before or after retirement, other than benefits specifically identified on Schedule 2.20 or under the form of employment contracts. All of the Benefit Plans which are pension benefit plans are the subject of favorable determination or opinion letters from the IRS such that the employers maintaining such Benefit Plans, are entitled to rely on the compliance of such Benefit Plans as to the form of the Plan with the applicable requirements of Sections 401(a) and 501(a) of the Code; and no determination letter with respect to any Benefit Plan has been revoked nor, to the best knowledge of the Company, has revocation been threatened, nor has any Benefit Plan been amended since the date of its most recent determination letter or application therefore in any request which would adversely affect its qualification or materially increase its cost. Neither the Company nor any ERISA Affiliate maintains or sponsors any nonqualified deferred compensation plan or arrangements. There are no pending or, to the best knowledge of the Company, threatened claims, actions or lawsuits, other than routine claims for benefits in the ordinary course, asserted or instituted against (i) any Benefit Plan or its assets, (ii) any ERISA Affiliate with respect to any Benefit Plan, or (iii) any fiduciary with respect to any Benefit Plan for which the Company, or its Subsidiaries may be directly or indirectly liable, through indemnification obligations or otherwise. Neither the Company, nor any of its Subsidiaries -11- 17 has engaged, directly or indirectly, in a non-exempt prohibited transaction (as defined in Section 4975 of the Code or Section 406 of ERISA) in connection with any Benefit Plan. As of the date of this Agreement, none of the assets of the Company or its Subsidiaries are required to be treated as "plan assets," within the meaning of Title I of ERISA ("Plan Assets"). 2.21 CONTRACTS AND AGREEMENTS. (a) The Company has filed as exhibits to its SEC Reports and the Registration Statement all of the contracts and agreements required to be so filed by the 1933 Act, the Exchange Act and the rules and regulations of the SEC. True and correct copies of all such agreements have been provided to the Purchaser prior to the date hereof. Neither the Company nor any Subsidiary is a party to any contract or agreement which is material to the business, properties, assets, prospects, operations or condition (financial or otherwise) of the Company and its Subsidiaries taken as a whole which have not been filed as an exhibit to, or otherwise described in, the Registration Statement or the SEC Reports. (b) Neither the Company nor any Subsidiary is (i) in default under any agreement, contract or instrument to which it is a party or by which it is bound, which default is reasonably likely to have a material adverse effect on the business, properties, assets, prospects, operations or condition (financial or otherwise) of the Company and its Subsidiaries taken as a whole, (ii) in violation of the Declaration of Trust, Bylaws or the Agreement of Limited Partnership of Brandywine Operating Partnership, L.P. (the "Partnership Agreement") dated August 22, 1996, as amended, by the amendment attached as Exhibit X to the Contribution Agreement (or other organizational documents), or (iii) in default with respect to any order, writ, injunction or decree of any court or governmental agency binding on it, and no event has occurred which with notice or lapse of time, or both, would create any default or violation described in clauses (i) through (iii). 2.22 ABSENCE OF CERTAIN DEVELOPMENTS. Since the Balance Sheet Date, neither the Company nor any Subsidiary has (a) mortgaged, pledged or subjected to lien, charge or any other encumbrance any of its assets, tangible or intangible, except Permitted Liens, (b) sold, assigned or transferred any of its tangible assets or canceled any debts or obligations except in the ordinary course of business, (c) suffered any extraordinary losses, or waived any rights of substantial value (whether or not in the ordinary course of business), (d) made any changes in officer compensation, (e) entered into any material transaction other than in the ordinary course of business, (f) made any change in any of its material contracts, the Declaration of Trust, Bylaws or Partnership Agreement (or other organizational documents), or in any arrangements or agreements of any nature relating to its officers and directors, (g) sold any equity interests or (h) established any record dates for dividends or other distributions on other than customary quarterly record dates in accordance with past practice. -12- 18 2.23 CONTRACTS WITH INSIDERS. Excluding any agreements or transactions that would not be required to be disclosed pursuant to Items 402 or 404 of Regulation S-K, no officer or trustee of the Company, or, to the Company's knowledge, holder of more than 5% of the Company's outstanding Common Shares, is a party to any contract, agreement, or arrangement providing for the Company's or a Subsidiary's employment of, furnishing of services to the Company or a Subsidiary by, the rental of real or personal property by the Company or a Subsidiary from, or otherwise requiring payments by the Company or a Subsidiary to, any such person or entity, or, to the Company's knowledge, any member of such person's family, or any corporation, partnership or other entity in which such person or entity, or, to the Company's knowledge, any member of such person's family, has an interest or of which such person, or, to the Company's knowledge, any member of such person's family, is an officer, director, trustee, or beneficiary. 2.24 USE OF PROCEEDS. The Company shall use the Purchase Price solely to pay fees and expenses relating to the transactions contemplated by the Transaction Documents and to repay mortgage indebtedness to one or more entities that are not affiliated with the Company or with any entity that owns or has the right to obtain more than five percent of the outstanding Common Shares as of the date of this Agreement in substantially the amounts and to the lenders identified in the Disclosure Letter. 2.25 ENVIRONMENTAL MATTERS. Neither the Company nor its Subsidiaries have (a) caused any substance or waste that is listed or defined as hazardous or toxic under applicable environmental laws or petroleum products (collectively "Hazardous Materials") to be improperly maintained or disposed of on, under or at any of its or their properties, or any part thereof, in a manner which violates, or could give rise to liability under, applicable environmental laws, or (b) failed to remediate, alter, mitigate or abate any condition required to be remediated, altered, mitigated or abated under such environmental laws, to the extent the Company and its Subsidiaries have been notified of the existence of a condition required to be remediated, altered, mitigated or abated. Except as set forth in the environmental site assessments provided by the Company to the Purchaser, (i) to the Company's knowledge, each of its properties, and the properties of its Subsidiaries, is in compliance, and has heretofore complied, with all environmental laws in all material respects, (ii) to the Company's knowledge, there has been no discharge of Hazardous Materials by any tenant of any property of the Company or its subsidiaries in quantities requiring response, remediation or removal, and (iii) the Company has not received any written notice from any governmental unit or other person or entity that it or its Subsidiaries, or any of its or their properties or operations conducted thereon, are not or have not been in compliance with all environmental laws. 2.26 CERTAIN AGREEMENTS. The SEC Reports, the Registration Statement or the Disclosure Letter list all employment and severance agreements that the Company and each Subsidiary has entered into with its officers and employees. The issuance and sale of the Shares to the Purchaser hereunder, the issuance of the Property Shares and Warrant pursuant to the Contribution Agreement, the issuance of the Conversion Shares and the -13- 19 completion of the other transactions provided for herein or in the other Transaction Documents will not give any employee the right to terminate his or her employment and receive severance or other payments from the Company or any Subsidiary, or result in the acceleration of vesting of any outstanding option issued by the Company. 2.27 BOOKS AND RECORDS. The books and records of the Company and its Subsidiaries accurately and fairly reflect their respective income, expenses, assets and liabilities, and the Company and its Subsidiaries maintain internal accounting controls which provide reasonable assurance that: (a) transactions are executed in accordance with management's authorization; (b) transactions are recorded as necessary to permit preparation of reliable financial statements and to maintain accountability for earnings and assets; (c) access to assets is permitted only in accordance with management's authorization; (d) the recorded accountability of all assets is compared with existing assets at reasonable intervals; and (e) all intercompany transactions, charges and expenses among or between the Company, any Subsidiary, or any other affiliate of the Company are accurately reflected in all financial statements. 2.28 CERTAIN PAYMENTS. Neither the Company nor any of its Subsidiaries, nor, to the Company's knowledge, any trustee, officer, agent or employee of any such entity, or any other person or entity associated with or acting for or on behalf of the Company or any of its Subsidiaries has directly or indirectly (a) made any unlawful contribution, gift, bribe, rebate, payoff, influence payment, kickback, or other payment to any person or entity, private or public, regardless of form, whether in money, property or services, (i) to obtain favorable treatment in securing business, (ii) to pay for favorable treatment for business secured, or (iii) to obtain special concessions or special concessions already obtained, for or in respect of the Company or any of its Subsidiaries, or (b) established or maintained any fund or asset that has not been recorded in the books and records of the Company and its Subsidiaries, or (c) taken any other action in violation of any provision of the Foreign Corrupt Practices Act of 1977, as amended. 2.29 LABOR AGREEMENTS AND ACTIONS. Neither the Company nor any Subsidiary is bound by or subject to, any written or oral, express or implied, contract, commitment or arrangement with any labor union, and no labor union has requested or, to the knowledge of the Company, has sought to represent any of the employees, representatives or agents of the Company or any Subsidiary. There is no strike or other labor dispute involving the Company or any Subsidiary pending, or to the knowledge of the Company threatened, nor is the Company aware of any labor organization activity involving any of the employees of the Company or any Subsidiary. The Company is not aware that any officer or key employee, or that any group of key employees, intends to terminate his, her or their employment with the Company or any Subsidiary, nor does the Company or any Subsidiary have a present intention to terminate the employment of any of the foregoing. The employment of each employee of the Company or any Subsidiary is terminable at the will of the applicable employer without further liability of such employer to such employee -14- 20 except for the payment of such employee's normal salary accrued but not paid through the date of such termination. 2.30 ENTIRE BUSINESS; ETC. All of the assets (including the Company's and its Subsidiaries' interests under franchises, licenses, leases and permits) necessary for the conduct of the business of the Company and its Subsidiaries as presently conducted are held exclusively by the Company or a Subsidiary. 2.31 REGISTRATION STATEMENT. The Registration Statement on Form S-11 (SEC File No. 333-13969) initially filed by the Company with the SEC on October 11, 1996 (the "Registration Statement"), as it shall be amended from time to time, will comply at all times in all material respects with the provisions of the 1933 Act and the rules and regulations thereunder, as applicable, except that no representation is made by the Company with respect to information supplied in writing by the Purchaser specifically for inclusion in the Registration Statement ("Purchaser Information") and, at the date hereof, at the date of the Contribution Closing, at the Closing Date, at the date that the Registration Statement is declared effective by the SEC and at each date that sales of Common Shares are made pursuant to the Registration Statement, except for Purchaser Information, the Registration Statement, as it shall be amended from time to time, will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. Unless the otherwise specifically provided, references to the Registration Statement are to the Registration Statement as originally filed, as modified by the form of Amendment No. 1 thereto attached hereto as Exhibit A. 2.32 INFORMATION. Neither this Agreement nor any document delivered to the Purchaser pursuant hereto, including the SEC Reports (except to the extent modified by the Disclosure Letter) and the Registration Statement, contains an untrue statement of a material fact or omits to state a material fact necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading. There is no fact, development or threatened development known to the Company which could reasonably be expected to materially adversely effect the business, assets, properties, operations, prospects or condition (financial or otherwise) of the Company and its Subsidiaries taken as a whole which has not been set forth in this Agreement, the Disclosure Letter, the SEC Reports or the Registration Statement. 2.33 STANDSTILL AGREEMENTS. The Agreement, dated March 20, 1996, by and among the Company, the Richard M. Osborne Trust (the "RMO Trust") and Richard M. Osborne, and the Agreement dated August 22, 1996, by and among the Company, Safeguard Scientifics, Inc. and Safeguard Scientifics (Delaware), Inc., copies of which have been delivered to the Purchaser, have been executed and delivered by all the parties thereto and are in full force and effect as of the date hereof. -15- 21 2.34 MATTERS RELATING TO PARTNERSHIP AGREEMENT AND WARRANTS. The Company has caused the Partnership Agreement to be amended in the form of Exhibit X to the Contribution Agreement and the terms of all outstanding options and warrants (the "Outstanding Warrants") to be amended or waived in the form of Exhibit B hereto, to the effect that: (a) All rights of first refusal relating to the securities of the Company have been eliminated. (b) No adjustments in the number of shares to be received upon redemption or exchange of the Units (as defined in the Partnership Agreement) or upon exercise or exchange of the Outstanding Warrants shall be made as a result of any issuance of securities by the Company other than as a result of the transactions described in Section 15.4(a) of the Partnership Agreement. 2.35 INVESTMENT COMPANY. Each of the Company and its Subsidiaries is not, and upon the issuance and sale of the Common Shares as herein contemplated and the application of the net proceeds therefrom, will not be, an "investment company" within the meaning of the Investment Company Act of 1940, as amended. 2.36 COMMODITY EXCHANGE ACT. The Common Shares, upon issuance, will be excluded or exempted under, or beyond the purview of, the Commodity Exchange Act, as amended (the "Commodity Exchange Act"), and the rules and regulations of the Commodity Futures Trading Commission under the Commodity Exchange Act. SECTION 3. PURCHASER'S REPRESENTATIONS AND WARRANTIES The Purchaser understands that the Shares, Property Shares, Warrant and Conversion Shares will not be registered under the 1933 Act, on the grounds that the sales provided for in this Agreement and the Contribution Agreement are exempt pursuant to Section 4(2) of the 1933 Act and/or Regulation D promulgated under Section 4(2) of the 1933 Act, and that the reliance of the Company on such exemptions is predicated in part on the Purchaser's representations, warranties, covenants and acknowledgments set forth in this Section 3. 3.1 PRE-EXISTING ENTITY. The Purchaser represents and warrants to the Company that SERS is the sole owner of the economic interest in the Securities to be issued to the Purchaser pursuant to the Transaction Documents and that SERS was not organized for the specific purpose of purchasing the Securities to be purchased by it hereunder and pursuant to the Contribution Agreement. 3.2 BENEFICIAL OWNERSHIP. The Purchaser represents and warrants to the Company that, as of the date hereof and prior to the purchase of the Shares, Property Shares and Warrant, (a) it is not the "beneficial owner" of any securities of the Company, as such -16- 22 term is defined in Rule 13d-3 promulgated under the Exchange Act, except for ten Common Shares acquired immediately prior to the execution of this Agreement and the Contribution Agreement, and (b) it is not a member of a group which has acquired beneficial ownership of securities of the Company for purposes of Sections 13(d) and 13(g) of the Exchange Act. 3.3 PRINCIPAL PLACE OF BUSINESS. The Purchaser represents and warrants to the Company that the address of its principal place of business or residence is as set forth in Section 10.5 herein. 3.4 PURCHASE WITHOUT VIEW TO DISTRIBUTION. The Purchaser represents and warrants to the Company that the Shares, Property Shares and Warrant to be purchased by it are being, and any Conversion Shares acquired by it will be, acquired by the Purchaser for its own account for investment purposes, not as a nominee or agent, and not with a view to resale or distribution within the meaning of the 1933 Act, and the rules and regulations thereunder, and the Purchaser will not distribute the Shares, Property Shares, Warrant or Conversion Shares in violation of the 1933 Act or in a way that will cause the Company to lose its exemption from the registration requirements under the 1933 Act with respect to the offer and sale of any of the Securities. 3.5 RESTRICTIONS ON TRANSFER. The Purchaser (a) acknowledges that the Securities are not registered under the 1933 Act or under any state securities laws and that the Securities to be acquired by it must be held indefinitely by it unless they are subsequently registered under the 1933 Act and under any applicable state securities laws or an exemption from registration is available, (b) is aware that any routine sales pursuant to Rule 144 promulgated under the 1933 Act of the Securities may be made only in limited amounts and in accordance with the terms and conditions of that Rule and that in such cases where the Rule is not applicable, compliance with some other registration exemption will be required, (c) is aware that Rule 144 is not presently available for use by the Purchaser for resale of the Securities and (d) is aware that, except as provided in the Registration Rights Agreement, the Company is not obligated to register under the 1933 Act any sale, transfer or other disposition of the Securities. 3.6 ACCESS TO INFORMATION. The Purchaser confirms that the Company has made available to it the opportunity to ask questions of and receive answers from the Company's officers and trustees concerning the terms and conditions of this transaction and the business and financial condition of the Company and its Subsidiaries, and to acquire, and the Purchaser has received to its satisfaction, such additional information, in addition to that set forth herein, about the business and financial condition of the Company and its Subsidiaries and the terms and conditions of this transaction as it has requested. 3.7 ADDITIONAL REPRESENTATIONS OF THE PURCHASER. The Purchaser, on behalf of itself and SERS, represents that (a) it is an "accredited investor" as such term is defined in Rule 501 promulgated under the 1933 Act, and an "institutional investor" within the meaning of Section 203(c) of the Pennsylvania Securities Act of 1972 and the regulations -17- 23 promulgated thereunder, (b) its financial situation is such that it can afford to bear the economic risk of holding the Securities for an indefinite period of time and suffer complete loss of its investment in the Securities (c) its knowledge and experience in financial and business matters are such that it is capable of evaluating the merits and risks of its purchase of the Securities as contemplated by this Agreement and (d) the purchase of the Shares, Property Shares and Warrant by it has been duly and properly authorized and this Agreement has been duly executed by it or on its behalf. 3.8 LEGENDS. The Purchaser understands that the certificates evidencing the Securities shall bear the legend set forth in Section 8.2 herein. 3.9 DUE AUTHORIZATION, ETC. The Purchaser represents that it has all requisite power and authority to execute and deliver this Agreement and each Transaction Document required to be excuted and delivered by it prior to or at the Closing and to carry out the transactions contemplated hereby and thereby. The execution, delivery and performance by the Purchaser of this Agreement and each Transaction Document to which is a party have been duly authorized. This Agreement has been duly executed and delivered by the Purchaser and constitutes (and, when executed and delivered as contemplated herein, each Transaction Document will constitute) the valid and binding obligation of the Purchaser, enforceable against it in accordance with its terms, except as such enforcement may be limited by bankruptcy, insolvency, moratorium, reorganization and other similar laws relating to or affecting the enforcement of creditors' rights generally, except that the availability of specific performance, injunctive relief or other equitable relief or other equitable remedies is subject to the discretion of the court before which any such proceeding may be brought. The execution, delivery and performance by the Purchaser of this Agreement and each Transaction Document to which it is a party will not violate any provision of law, or any rule or regulation of any governmental authority, or any judgment, decree or order of any court binding on the Purchaser, and will not conflict with or result in any breach of any of the terms, conditions or provisions of, or constitute a default under, or result in the creation of any lien, security interest, charge or encumbrance upon any of the assets of the Purchaser, any Agreement or other instrument to which it is a party or by which it or any of its assets is bound. SERS is the sole owner of the economic interest in the Purchaser. No individual has an actuarial interest of more than 9.8% in SERS. SECTION 4. CONDITIONS PRECEDENT TO THE PURCHASER'S OBLIGATIONS The Purchaser's obligation to purchase and make payment for the Shares subscribed for hereunder by it on the Closing Date is subject, at its option, to the satisfaction of each of the following conditions: 4.1 REPRESENTATIONS AND WARRANTIES. On the Closing Date, the representations and warranties contained in Section 2 shall be true and correct in all material -18- 24 respects with the same effect as though made on and as of the Closing Date, and the Company shall have so certified to the Purchaser in writing. 4.2 PERFORMANCE. All the covenants, agreements and conditions contained in this Agreement to be performed or complied with by the Company on or prior to the Closing Date shall have been performed or complied with in all material respects, and the Company shall have so certified to the Purchaser in writing. 4.3 OPINION OF COUNSEL TO THE COMPANY. On the Closing Date, the Purchaser shall have received an opinion from counsel for the Company and special Maryland Counsel to the Company, each dated the Closing Date, addressed to the Purchaser in the forms of Exhibits C and D hereto, respectively. 4.4 PROCEEDINGS; CERTIFIED COPIES. All proceedings to be taken in connection with the transactions contemplated by this Agreement to be consummated on or prior to the Closing Date, and all documents incident thereto, shall be satisfactory in form and substance to the Purchaser. The Purchaser shall have received such certified copies or other copies of such documents as it may reasonably request. 4.5 NO PROCEEDING OR LITIGATION. No suit, action, or other proceeding seeking to restrain, prevent or change the transactions contemplated hereby or otherwise questioning the validity or legality of such transactions shall have been instituted and be pending. 4.6 NO MATERIAL ADVERSE CHANGE. There shall have been no material adverse change since the Balance Sheet Date in the business, properties, assets, operations, or condition (financial or otherwise) of the Company and its Subsidiaries taken as a whole. 4.7 ASE LISTING. On or prior to the Closing Date, the Shares (to the extent that they are Common Shares) and the Conversion Shares shall have been approved for listing on the ASE. 4.8 BLUE SKY COMPLIANCE. The Company shall have complied with all applicable requirements of federal and state securities or "blue sky" laws with respect to the issuance of the Shares sold at the Closing. 4.9 REGISTRATION RIGHTS. The Registration Rights Agreement shall have been executed and delivered by all the parties thereto and shall be in full force and effect. 4.10 CONTRIBUTION CLOSING; TRANSACTION DOCUMENTS. The Contribution Closing shall have occurred. This Agreement, the Warrant, Registration Rights Agreement, Standstill Agreement (as defined in Section 5.4), Contribution Agreement, and each document or agreement required to be delivered at the closing hereunder and at the Contribution Closing shall be referred to herein collectively as the "Transaction Documents." -19- 25 4.11 MARYLAND ANTI-TAKEOVER STATUTES, ETC. The Company and its counsel shall have confirmed to the Purchaser's satisfaction that (a) this Agreement, the other Transaction Documents and the transactions contemplated hereby and thereby are exempt from the operation of the Maryland Anti-Takeover Statutes and Section 11.5 of the Declaration of Trust; and (b) the Purchaser is not subject to the restrictions set forth in Section 6.6 of the Declaration of Trust, including without limitation from the Ownership Limit and the Permissible Ownership Threshold. 4.12 ENVIRONMENTAL REPRESENTATION LETTER. The Company shall have delivered to Purchaser a representation letter dated the Closing Date concerning environmental matters in form and substance similar to that which is contained in the underwriting agreement for the Secondary Offering. 4.13 TAX OPINION. On the Closing Date the Company shall have received from Arthur Andersen LLP an opinion with respect to certain tax matters in form and substance reasonably satisfactory to Purchaser. SECTION 5. CONDITIONS PRECEDENT TO THE COMPANY'S OBLIGATIONS The Company's obligation to sell the Shares subscribed for by the Purchaser on the Closing Date is subject, at the Company's option, to the satisfaction of each of the following conditions: 5.1 REPRESENTATIONS AND WARRANTIES. On the Closing Date, the representations and warranties contained in Section 3 shall be true and correct in all material respects with the same effect as though made on and as of the Closing Date and the Purchaser shall have so certified to the Company in writing. 5.2 PERFORMANCE. All the covenants, agreements and conditions contained in this Agreement to be performed or complied with by the Purchaser on or prior to the Closing Date shall have been performed or complied with in all material respects, and the Purchaser shall have so certified to the Company in writing. 5.3 NO PROCEEDING OR LITIGATION. No suit, action, or other proceeding seeking to restrain, prevent or change the transactions contemplated hereby or otherwise questioning the validity or legality of such transactions shall have been instituted and be pending. 5.4 ASE LISTING. On or prior to the Closing Date, the Shares (to the extent that they are Common Shares) and the Conversion Shares shall have been approved for listing on the ASE. 5.5 CONTRIBUTION CLOSING. The Contribution Closing shall have occurred. -20- 26 5.6 ADDITIONAL DOCUMENTS. The Purchaser shall have delivered such other documents necessary to effect the transactions contemplated hereby as the Company may reasonably request. 5.7 PROCEEDINGS; CERTIFIED COPIES. All proceedings to be taken in connection with the transactions contemplated by this Agreement to be consummated on or prior to the Closing Date, and all documents incident thereto, shall be satisfactory in form and substance to the Company. The Company shall have received such certified copies or other copies of such documents as it may reasonably request. 5.8 NO SEC INTEGRATION CHALLENGE. The SEC shall not have commented that the issuance of Shares pursuant to this Agreement should or may be required to be integrated with the sale of Common Shares pursuant to the Registration Statement, which comment, if made, has not been resolved to the reasonable satisfaction of the Company after the Company has used its best efforts to accomplish such resolution. SECTION 6. COVENANTS OF THE COMPANY AND THE PURCHASER PRIOR TO CLOSING 6.1 PAYMENT OF EXPENSES. (a) If the Closing occurs hereunder, each party shall bear its own expenses, except that the Company shall pay all reasonable legal fees and expenses incurred by the Purchaser in connection with this Agreement and the transactions contemplated hereby. (b) If the Closing hereunder does not occur, each party shall bear its own expenses. 6.2 OPERATION OF BUSINESS IN ORDINARY COURSE. Prior to the Closing, the Company and each Subsidiary will operate its business and the business of each of its Subsidiaries only in the usual and normal course, and will not, except as contemplated by the Registration Statement, as amended through the date of this Agreement, including Amendment No. 1, without the consent of the Purchaser, engage in any of the transactions described in paragraphs (a), (b), (d), (e), (f), (except for the amendment in the form of Exhibit C hereto), (g) or (h) of Section 2.22 hereof. 6.3 ACCESS TO INFORMATION. (a) Between the date hereof and the Closing Date, the Company will give the Purchaser and its authorized representatives reasonable access to all officers, employees, agents, properties, offices and other facilities and to all books and records of the Company and its Subsidiaries, and will permit the Purchaser to make such inspections as the Purchaser may reasonably request and will cause the Company's officers and those of its -21- 27 Subsidiaries to furnish the Purchaser promptly (i) a copy of each report, schedule, registration statement and other document filed by it pursuant to the requirements of federal securities laws and (ii) all other financial and operating data and other information with respect to the business and properties of the Company and any of its Subsidiaries as the Purchaser may from time to time reasonably request. (b) The Purchaser will hold and will cause its authorized representatives, consultants and advisors to hold in confidence, unless compelled to disclose by judicial or administrative process or, in the written opinion of its legal counsel, by other requirements of law, all documents and information concerning the Company and its Subsidiaries furnished to the Purchaser in connection with the transactions contemplated by this Agreement (except to the extent that such information can be shown to have been (i) previously known by the Purchaser from sources other than the Company, its trustees, officers, representatives or affiliates, (ii) in the public domain through no fault of the Purchaser or (iii) later lawfully acquired by the Purchaser on a non-confidential basis from other sources who are not known by the Purchaser to be bound by a confidentiality agreement or otherwise prohibited from transmitting the information to the Purchaser by a contractual, legal or fiduciary obligation) and will not release or disclose such information to any other person or entity, except its auditors, attorneys, financial advisors and other consultants, agents and representatives in connection with this Agreement who need to know such information. If the transactions contemplated by this Agreement are not consummated, such confidence shall be maintained and, if requested by or on behalf of the Company, the Purchaser will, and will use all reasonable efforts to cause its auditors, attorneys, financial advisors and other consultants, agents and representatives to, return to the Company or destroy all copies of written information furnished by the Company to the Purchaser or its agents, representatives or advisors. It is understood that the Purchaser shall be deemed to have satisfied its obligation to hold such information confidential if it exercises the same care as it takes to preserve confidentiality for its own similar information. (c) No inquiry or investigation pursuant to Section 3.6 or this Section 6.3 shall affect any representation or warranty in this Agreement or any other Transaction Document made by the Company or its Subsidiaries or any condition to the Purchaser's obligations set forth herein or in any other Transaction Document. 6.4 NOTIFICATION OF CERTAIN MATTERS. The Company shall give prompt notice to the Purchaser, and the Purchaser shall give prompt notice to the Company, of (a) the occurrence or nonoccurrence of any event the occurrence or nonoccurrence of which would be likely to cause (i) any representation or warranty contained in this Agreement to be untrue or inaccurate or (ii) any covenant, condition or agreement contained in this Agreement not to be complied with or satisfied and (b) any failure of the Company or the Purchaser, as the case may be, to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it hereunder; provided, however, that the delivery of any notice pursuant to this Section 6.4 shall not cure such breach or noncompliance or limit or otherwise affect the remedies available hereunder to the party receiving such notice. -22- 28 6.5 CONDITIONS PRECEDENT. The Company and the Purchaser shall use their reasonable best efforts to cause the conditions specified in Sections 4 and 5 to be satisfied by the Closing Date. SECTION 7. COVENANTS OF THE COMPANY AND THE PURCHASER AFTER CLOSING 7.1 RULE 144. (a) The Company covenants that (i) the Company will use its best efforts to comply with the current public information requirements of Rule 144(c)(1) under the 1933 Act; and (ii) at all such times as Rule 144 is available for use by the holders of the Securities, the Company will furnish each such holder upon request with all information within the possession of the Company required for the preparation and filing of Form 144. (b) At all times during which the Company is neither subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, nor exempt from reporting pursuant to Rule 12g3-2(b) under the Exchange Act, it will provide as promptly as practicable (in any event not later than 15 days after initial request) in written form, upon the written request of the Purchaser or any prospective buyer of the Shares or Conversion Shares from the Purchaser, all information required by Rule 144A(d)(4)(i) of the General Regulations promulgated by the Commission under the Securities Act ("Rule 144A Information"). The Company's obligations under this Section 7.1 shall at all times be contingent upon such seller's obtaining from a prospective buyer an agreement to take all reasonable precautions to safeguard any non-public Rule 144A Information from disclosure to anyone other than a person or entity who will assist such buyer in evaluating the purchase of the Conversion Shares. 7.2 DELIVERY OF FINANCIAL STATEMENTS. From and after the Contribution Closing, the Company shall deliver to the Purchaser, until such time as the Purchaser no longer owns any Securities, a copy of each and every report on Form 10-K, Form 8-K, Form 10-Q and all other reports and proxy statements filed by the Company or any Subsidiary with the SEC within 15 days of such filing. 7.3 RESERVATION OF SHARES. From and after the Closing, the Company shall at all times reserve and keep available, free from pre-emptive rights, out of its authorized but unissued shares of beneficial interest, a sufficient number of of Common Shares for issuance upon the exercise of the Warrant and conversion of the Shares (if applicable) and Property Shares. 7.4 COMPLIANCE WITH LAWS. The Company will, and will cause each Subsidiary to, comply in all material respects with all laws and regulations applicable to the conduct of its business, including without limitation ERISA, environmental laws, and -23- 29 employee safety laws. The Company shall use its best efforts to insure that none of the assets of the Company or its Subsidiaries are required to be treated as Plan Assets (as defined in Section 2.20) by any "benefit plan investor" (as defined in Title I of ERISA). The Company shall take such actions as are necessary, on an ongoing basis, to determine whether assets of the Company or its Subsidiaries are required to be treated by a Benefit Plan Investor as including Plan Assets and shall promptly notify the Purchaser in writing if, at any time, it has reason to believe that any Benefit Plan Investor is likely to be required to treat the assets of the Company or its Subsidiaries as Plan Assets. 7.5 WAIVERS, CONSENTS, ETC. Compliance with any of the covenants in this Section 7 may be waived, either generally or in the particular instance, and any consent required thereunder may be given, by the Purchaser in writing. 7.6 PRESS RELEASES. The Purchaser shall have the right reasonably to approve any press release with respect to the transactions contemplated by this Agreement and the Contribution Agreement. In addition, at no time may the Company use or otherwise refer to the name of the Purchaser or any of its affiliates in any press release, publication or other report without the prior consent of the Purchaser not to be unreasonably withheld or delayed. 7.7 SHAREHOLDERS' MEETING. The Company shall duly call and hold an annual meeting of its shareholders as soon as practicable after the end of its curent fiscal year, but in no event later than June 30, 1997, for the purpose of voting upon the approval of the Stockholder Approval Matter; and, if approval of the Stockholder Approval Matter is not obtained at such meeting, the Company shall duly call and hold another meeting of its shareholders by June 30, 1998 for such purpose. In this regard, the Company will (i) subject to the fiduciary duties of the Board of Trustees, include in the proxy statement (the "Proxy Statement") relating to the annual meeting (and, if necessary, such other meeting) the unanimous recommendation of the Board that shareholders of the Company vote in favor of the Stockholder Approval Matter, and (ii) use its best efforts (A) to obtain and furnish the information required to be included by it in the Proxy Statement in compliance with the Exchange Act and, after consultation with the Purchaser, respond promptly to any comments made by the SEC with respect to the Proxy Statement and cause the Proxy Statement to be mailed to its shareholders in a timely fashion and (B) to obtain the necessary approvals by its shareholders of the Stockholder Approval Matter subject to its Board's fiduciary duties. The term "Stockholder Approval Matter" as used herein means any and all matters that must be approved by shareholders in order to permit the unlimited conversion and exchange of all the Conversion Shares by the Purchaser in compliance with all ASE rules, regulations and requirements. 7.8 PURCHASER'S COVENANT. To the extent permitted by applicable law Purchaser hereby (i) waives any right of rescission it might have arising out of the integration of the offer and sale of the Securities made hereby or in the Contribution -24- 30 Agreement with the public offering under the Registration Statement and (ii) covenants that it will not make any rescission claim on that basis. 7.9 REIT STATUS. The Company will continue to elect to be taxed as a real estate investment trust within the meaning of Sections 856-860 of the Code, and will continue to satisfy all of the requirements set forth in those provisions and the regulations thereunder to be taxed as a real estate investment trust within the meaning of those provisions and the regulations thereunder. SECTION 8. COMPLIANCE WITH 1933 ACT; RESTRICTIONS ON TRANSFERABILITY OF SHARES, PROPERTY SHARES WARRANT AND CONVERSION SHARES 8.1 COMPLIANCE WITH 1933 ACT. The Shares, Property Shares, Warrant, Property Shares and Conversion Shares shall not be transferable, except upon the conditions specified in this Section 8, which conditions are intended to insure compliance with the provisions of the 1933 Act and applicable state securities laws in respect of any such transfer. 8.2 RESTRICTIVE LEGEND. The Warrant, and each certificate evidencing the Shares and Conversion Shares and any Common Shares or other securities issued in respect of such Shares and Conversion Shares upon any share split, share dividend, recapitalization, merger, consolidation, similar event, shall (unless otherwise permitted by the provisions of Section 8.4) be stamped or otherwise imprinted with the following legend: "[THIS WARRANT HAS] OR [THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE] NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAW AND THE TRANSFERABILITY [T]HEREOF IS SUBJECT TO THE PROVISIONS OF A SECURITIES PURCHASE AGREEMENT BETWEEN BRANDYWINE REALTY TRUST AND THE ORIGINAL HOLDER OF THE SECURITIES EVIDENCED HEREBY." 8.3 RESTRICTIONS ON TRANSFERABILITY. The Company shall not be required to register the transfer of the Shares, Property Shares or Warrant or any Conversion Shares on the books of the Company unless the Company shall have been provided with an opinion of counsel reasonably satisfactory to it prior to such transfer to the effect that registration under the 1933 Act or any applicable state securities law is not required in connection with the transaction resulting in such transfer; provided, however, that no such opinion of counsel shall be necessary in order to effectuate a transfer in accordance with the provisions of Rule 144(k) or Rule 144A promulgated under the 1933 Act. Each Warrant or certificate for Shares, Property Shares or Conversion Shares issued upon any transfer as above provided shall bear the restrictive legend set forth in Section 8.2 above, except that such restrictive legend shall not be required if the opinion of counsel reasonably satisfactory to the Company referred to above is to the further effect that such legend is not required in order to establish -25- 31 compliance with the provisions of the 1933 Act and any applicable state securities law, or if the transfer is made in accordance with the provisions of Rule 144(k) under the 1933 Act. Nothing herein shall restrict a transfer of any or all of the Securities to a Permitted Transferee (as defined in Section 10.2). 8.4 TERMINATION OF RESTRICTIONS ON TRANSFERABILITY. The conditions precedent imposed by this Section 8 upon the transferability of the Shares, Property Shares, Warrant and Conversion Shares shall cease and terminate as to any of the Shares, Property Shares, Warrant or Conversion Shares when (i) such securities shall have been registered under the 1933 Act and sold or otherwise disposed of in accordance with the intended method of disposition by the seller or sellers thereof set forth in the registration statement covering such securities, (ii) at such time as an opinion of counsel satisfactory to the Company shall have been rendered as required pursuant to the second sentence of Section 8.3 to the effect that the restrictive legend on such securities is no longer required, or (iii) when such securities are transferable in accordance with the provisions of Rule 144(k) promulgated under the 1933 Act. Whenever the conditions imposed by this Section 8 shall terminate as hereinabove provided with respect to any of the Shares, Property Shares, Warrant or Conversion Shares, the holder of any such securities bearing the legend set forth in this Section 8 as to which such conditions shall have terminated shall be entitled to receive from the Company, without expense (except for the payment of any applicable transfer tax) and as expeditiously as possible, a new Warrant or new shares certificates not bearing such legend. SECTION 9. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS All covenants, agreements, representations and warranties made herein and in the certificates delivered pursuant hereto shall survive the execution and delivery of this Agreement and the issuance and sale of the Shares hereunder in accordance with Section 10.9. SECTION 10. MISCELLANEOUS 10.1 OWNER OF SHARES, PROPERTY SHARES, WARRANT AND CONVERSION SHARES. The Company may deem and treat the person or entity in whose name the Shares, Property Shares, Warrant and Conversion Shares, as the case may be, are registered as the absolute owner thereof for all purposes whatsoever, and the Company shall not be affected by any notice to the contrary. 10.2 SUCCESSORS. This Agreement shall be binding upon and except as provided herein, shall inure to the benefit of the respective successors and permitted assigns of each of the parties hereto. The rights and obligations of either party hereunder shall not be assignable without the prior written consent of the other party, except that, subject to -26- 32 compliance with applicable state and federal securities laws, the Purchaser shall be entitled to assign its rights and obligations in whole or in part to one or more entities in which the majority of the economic interests are held by SERS ("Permitted Transferees") to the extent that any of the Securities are transferred to any such entity and any such entity agrees to be bound by the restrictions set forth in this Agreement. 10.3 BROKER OR FINDER. Each party to this Agreement represents and warrants that, to the best of its knowledge, no broker or finder has acted for such party in connection with this Agreement or the transactions contemplated by this Agreement and that no broker or finder is entitled to any broker's or finder's fee or other commission in respect thereof based in any way on agreements, arrangements or understandings made by such party. The Company shall indemnify the Purchaser against, and hold it harmless from, any liability, cost or expense (including reasonable attorneys' fees and expenses) resulting from any agreement, arrangement, or understanding made by the Company, and the Purchaser shall indemnify the Company against, and hold the Company harmless from, any liability, cost or expense (including reasonable attorneys' fees and expenses) resulting from any agreement, arrangement, or understanding made by the Purchaser with any third party, for brokerage or finder's fees or other commissions in connection with this Agreement or any of the transactions contemplated hereby. 10.4 GOVERNING LAW. This Agreement shall be governed by and construed and enforced in accordance with the laws of the Commonwealth of Pennsylvania. 10.5 NOTICE. Any notice or other communication required or permitted hereunder shall be deemed given when delivered personally, or upon receipt by the party entitled to receive the notice when sent by registered or certified mail, postage prepaid, addressed as follows or to such other address or addresses as may hereafter be furnished in writing by notice similarly given by one party to the other: To the Company: Brandywine Realty Trust 16 Campus Boulevard Suite 150 Newtown Square, PA 19073 Attention: Gerard H. Sweeney, President With a copy to: Pepper, Hamilton & Scheetz 3000 Two Logan Square 18th and Arch Streets Philadelphia, Pennsylvania 19103-2799 Attention: Michael H. Friedman, Esq. -27- 33 To the Purchaser: RAI Real Estate Advisers, Inc. 259 Radnor-Chester Road Suite 200 Radnor, Pennsylvania 19087 Attention: Richard K. Layman, President With a copy to: Wolf, Block, Schorr and Solis-Cohen Packard Building, 15th and Chestnut Streets Philadelphia, Pennsylvania 19102 Attention: Jason M. Shargel, Esq. Notice to any holder of Shares, Property Shares, Warrant, or Conversion Shares other than the Purchaser shall be given in a like manner to such holder at the address reflected in the Company's records. 10.6 FULL AGREEMENT. This Agreement, together with all Exhibits attached hereto or delivered herewith, the other Transaction Documents and any other documents delivered herewith, sets forth the entire understanding of the parties with respect to the transactions contemplated hereby. 10.7 HEADINGS. The headings of the sections of this Agreement are inserted for convenience of reference only and shall not be considered a part hereof. 10.8 AMENDMENT. This Agreement may not be amended except by an instrument in writing signed on behalf of each of the parties hereto. 10.9 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and warranties made by the parties in this Agreement shall survive the execution of this Agreement for a period of two years after the Closing Date. 10.10 SETTLEMENT OF DISPUTES. The parties will attempt in good faith to resolve any and all controversies of every kind and nature between the parties to this Agreement and the other Transaction Documents arising out of or in connection with the existence, construction, validity, interpretation or meaning, performance, non- performance, enforcement, operation, breach, continuance or termination of this Agreement or the other Transaction Documents (each, a "Dispute") promptly by negotiations between senior executives of the parties who have authority to settle the Dispute (and who do not have direct responsibility for administration of this Agreement or the other Transaction Documents). The disputing party shall give the other party written notice of the Dispute. Within 20 days after receipt of said notice, the receiving party shall submit to the other a written response. The notice and response shall include (a) a statement of each party's position and a summary of the evidence and arguments supporting its position, and (b) the name and title of the executive who will represent that party. The executives shall meet at a -28- 34 mutually acceptable time and place within 30 days of the date of the disputing party's notice and thereafter as often as they reasonably deem necessary to exchange relevant information and to attempt to resolve the Dispute. If the matter has not been resolved within 60 days of the disputing party's notice, or if the party receiving said notice will not meet within 30 days, either party may initiate mediation of the controversy or claim in accordance with the Center for Public Resources Model Procedure for Mediation of Business Disputes. If the Dispute has not been resolved pursuant to the aforesaid mediation procedure within 60 days of the initiation of such procedure, or if either party will not participate in a mediation, the Dispute shall be submitted to arbitration in accordance with the rules of the American Arbitration Association. The parties further agree that all matters shall be governed by the laws of the Commonwealth of Pennsylvania. The parties further agree that any arbitration conducted pursuant to this Section 10.10 shall be held in Philadelphia, Pennsylvania before a panel of three arbitrators, one selected by the Purchaser and one selected by the Company and the third selected by the arbitrators selected by the parties. All deadlines specified in this Section 10.10 may be extended by mutual agreement. The prevailing party in any Dispute shall be entitled to reimbursement for its costs, including without limitation attorneys' fees and expenses. 10.11 COUNTERPARTS. This Agreement may be executed in two or more counterparts each of which shall be deemed an original, and all of which shall be considered one and the same agreement and shall become effective when two or more counterparts have been signed by each of the parties and delivered to the other parties, it being understood that all parties need not sign the same counterpart. 10.12 TERMINATION. This Agreement may be terminated prior to the Closing: (a) by mutual written consent of the Purchaser and the Company; (b) by either the Purchaser or the Company if the Closing shall not have been consummated before January 31, 1997 (unless the failure to so close by such date shall be due to the action or failure to act of the party seeking to terminate this Agreement); (c) by either the Purchaser or the Company if any court of competent jurisdiction or other governmental entity shall have issued a final permanent order, decree or ruling or taken any other final action restraining, enjoining or otherwise prohibiting the transactions contemplated by this Agreement and such order, decree, ruling or other action is or shall have become nonappealable; (d) by the Purchaser if (i) there shall have been a material breach on the part of the Company or any of its Subsidiaries of any representation or warranty of the Company or its Subsidiaries set forth herein, (ii) there shall have been any -29- 35 failure of the Company or any of its Subsidiaries to perform or comply with its covenants or agreements hereunder and, in either case, the aggregate effect of all such breaches or failures, as the case may be, would be material to the Company and the Subsidiaries taken as a whole, or (iii) any person (as that term is used in Sections 13(d) and 14(d)(2) of the Exchange Act) acquires beneficial ownership of at least 20% of the outstanding Common Shares; or (e) by the Company if (i) there shall have been a material breach of any representation or warranty on the part of the Purchaser or (ii) there shall have been a failure of the Purchaser to perform or comply with its covenants or agreements hereunder which failure has not been cured within ten days after written notice thereof from the Company to the Purchaser and, in either case, the aggregate effect of all such breaches and failures, as the case may be, would be material. 10.13 EFFECT OF TERMINATION. In the event of the termination and abandonment of this Agreement pursuant to Section 10.12, this Agreement shall forthwith become void and have no effect, without any liability on the part of any party hereto or its affiliates, trustees, directors, officers or stockholders; provided, however, that nothing contained in this Section 10.13 shall relieve any party from liability for any breach of this Agreement; provided further that Sections 6.1(b), 6.3(b), 7 (if the Contribution Closing occurs), 8 and 10 shall survive any such termination. 10.14 NON-RECOURSE. No recourse shall be had for any obligation of the Company hereunder, or for any claim based thereon or otherwise in respect thereof, against any past, present or future trustee, stockholder, officer or employee of the Company, whether by virtue of any statute or rule of law, or by the enforcement of any assessment or penalty or otherwise, all such other liability being expressly waived and released by each other party hereto. No recourse shall be had for any obligation of the Purchaser hereunder, or for any claim based thereon or in respect thereof, against RAI Real Estate Advisers, Inc., SERS, or any past, present or future trustee, stockholder, officer or employee of either or against any other person or entity, except as provided in the following sentence, 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. Recourse for any obligation or liability of the Purchaser hereunder shall be limited to the Collateral (as defined in the Pledge Agreement attached as Exhibit V to the Contribution Agreement) on the terms set forth in such Pledge Agreement. [THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK.] -30- 36 IN WITNESS WHEREOF, each of the parties hereto has fully executed this Agreement as of the date first set forth above. BRANDYWINE REALTY TRUST By: /s/ Gerard H. Sweeney --------------------------------- Gerard H. Sweeney, President RAI REAL ESTATE ADVISERS, INC., as voting trustee of a voting trust dated November 6, 1996 By: /s/ Richard K. Layman --------------------------------- Richard K. Layman, President -31- EX-10.3 4 WARRANT AGREEMENT FOR SHARES OF COMMON STOCK 1 THE SECURITIES REPRESENTED HEREBY AND ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER THE SECURITIES LAWS OF ANY STATE. ALL SUCH SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. THE ISSUER OF SUCH SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS. Void after 5:00 p.m. New York Time, on November 14, 1998. BRANDYWINE REALTY TRUST Warrant Agreement for the Purchase of Shares of Common Stock No. 1 400,000 Shares FOR VALUE RECEIVED, BRANDYWINE REALTY TRUST, a Maryland real estate investment trust (the "Company"), with its principal office at 16 Campus Boulevard, Suite 150, Newtown Square, Pennsylvania 19073, hereby certifies that RAI Real Estate Advisers, Inc. as voting trustee of a voting trust dated as of November 6 ,1996 or its assigns (the "Holder") is entitled, subject to the provisions of this Warrant, to purchase from the Company, at any time before 5:00 p.m. (Eastern Time) on November 14, 1998 (the "Expiration Date"), the number of fully paid and nonassessable common shares of beneficial interest of the Company (the "Common Stock") set forth above, subject to adjustment as hereinafter provided. The Holder may purchase such number of shares of Common Stock at a purchase price per share (as appropriately adjusted pursuant to Section 6, Section 8 or Section 9 hereof) of Eight Dollars and 50/100 Cents ($8.50) (the "Exercise Price"). As provided in Section 6(j), the term "Common Stock" shall mean the aforementioned Common Stock of the Company, together with any other equity securities that may be issued by the Company in addition thereto or in substitution therefor as provided herein. The number of shares of Common Stock to be received upon the exercise of this Warrant and the price to be paid for a share of Common Stock are subject to adjustment from time to time as hereinafter set forth. The shares of Common Stock deliverable upon such exercise, as adjusted from time to time, are hereinafter sometimes referred to as "Warrant Shares." -1- 2 Section 1. Exercise of Warrant. (a) This Warrant may be exercised in whole or in part on any business day (the "Exercise Date") occurring from and after the date hereof and on or before the Expiration Date by presentation and surrender hereof to the Company at its principal office at the address set forth in the initial paragraph hereof or at the office of its stock transfer or warrant agent, if any, (or at such other address as the Company may hereafter notify the Holder in writing) with the Purchase Form annexed hereto duly executed and accompanied by proper payment of the Exercise Price in lawful money of the United States of America in the form of a check, subject to collection, for the number of Warrant Shares specified in the Purchase Form. If this Warrant should be exercised in part only, the Company shall, upon surrender of this Warrant, execute and deliver a new Warrant evidencing the rights of the Holder thereof to purchase the balance of the Warrant Shares purchasable hereunder. Upon receipt by the Company of this Warrant and such Purchase Form, together with proper payment of the Exercise Price, at such office, the Holder shall be deemed to be the holder of record of such Warrant Shares, notwithstanding that the stock transfer books of the Company shall then be closed or that certificates representing such Warrant Shares shall not then be actually delivered to the Holder, which certificates shall be delivered to the Holder within two (2) business days following the Company's receipt of the Warrant together with the aforesaid Purchase Form and payment. The Company shall pay any and all documentary stamp or similar issue or transfer taxes payable in respect of the issue or delivery of the Warrant Shares. (b) In addition to and without limiting the rights of the Holder under any other terms set forth herein, the Holder shall have, upon written request by the Holder delivered or transmitted to the Company together with this Warrant, the right (the "Conversion Right") to require the Company to convert this Warrant into shares of Common Stock as follows: upon exercise of the Conversion Right, the Company shall deliver to the Holder (without payment by the Holder of any Exercise Price) that number of shares of Common Stock that is equal to the quotient obtained by dividing (x) the value of this Warrant at the time the Conversion Right is exercised (determined by subtracting the aggregate Exercise Price in effect immediately prior to the exercise of the Conversion Right from the aggregate current market price (determined as provided in Section 11 below) of the shares of Common Stock issuable upon exercise of this Warrant immediately prior to the exercise of the Conversion Right) by (y) the current market price of one share of Common Stock (determined as provided in Section 11 below) immediately prior to the exercise of the Conversion Right. The Conversion Right referred to above may be exercised by the Holder by surrender of this Warrant at the principal office of the Company or at the offices of its stock transfer or warrant agent, if any, together with a written statement specifying that the Holder thereby intends to exercise the Conversion Right. Certificates representing shares of Common Stock issuable upon exercise of the Conversion Right shall be delivered to the Holder within two (2) business days following the Company's receipt of this Warrant together with the aforesaid written statement. Section 2. Reservation of Shares. The Company shall reserve at all times for issuance and delivery upon exercise of this Warrant all shares of its Common Stock or other -2- 3 shares of beneficial interest of the Company from time to time issuable upon exercise of this Warrant. All such shares shall be duly authorized and, when issued upon the exercise of the Warrant in accordance with the terms hereof, shall be validly issued, fully paid and nonassessable, free and clear of all taxes, liens, security interests, charges and other encumbrances or restrictions (other than restrictions pursuant to applicable federal and state securities laws) and free and clear of all preemptive rights. If the Common Stock is listed on any national securities exchange or The Nasdaq Stock Market, the Company shall also list the shares issuable upon exercise of the Warrant on such exchange, subject to notice of issuance, or include the shares issuable upon exercise of this Warrant in the listing of its Common Stock on The Nasdaq Stock Market, as the case may be. Section 3. Fractional Interest. The Company will not issue a fractional share of Common Stock or scrip upon any exercise or conversion of this Warrant. Instead, the Company shall issue the next highest number of whole shares of Common Stock. Section 4. Exchange, Transfer, Assignment or Loss of Warrant. (a) The Holder of this Warrant may not transfer or assign its interest in this Warrant, or any of the Warrant Shares, in whole or in part, unless, prior to any such transfer, the transferee agrees in writing, in form and substance satisfactory to the Company, to be bound by the terms of this Agreement and provides the Company with an opinion of counsel in such form reasonably acceptable to the Company, that such transfer would not be in violation of the Act or any applicable state securities laws. (b) Subject to the provisions of subsection (a) above and Section 10, upon surrender of this Warrant to the Company or its stock transfer agent or warrant agent, accompanied by the Assignment Form annexed hereto duly executed and funds sufficient to pay any transfer tax, the Company shall, without charge, execute and deliver a new Warrant or Warrants in the name of the assignee or assignees named in such instrument of assignment and, if the Holder's entire interest is not being assigned, in the name of the Holder, and this Warrant shall promptly be canceled. (c) This Warrant may be divided by or combined with other Warrants which carry the same rights upon presentation hereof at the principal office of the Company or at the office of its stock transfer or warrant agent, if any, together with a written notice specifying the names and denominations in which new Warrants are to be issued and signed by the Holder hereof. The term "Warrant" as used herein includes any warrants into which this Warrant may be divided or exchanged. (d) Upon receipt of evidence satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant, and (in the case of loss, theft or destruction) of indemnification reasonably satisfactory to the Company, and upon surrender and cancellation of this Warrant, if mutilated, the Company shall execute and deliver a new Warrant of like tenor and date registered in the Holder's name representing the number of shares purchasable under -3- 4 the original Warrant. Any such new Warrant executed and delivered shall constitute an additional contractual obligation of the Company, whether or not the original Warrant shall be at any time enforceable by anyone. Section 5. Rights of the Holder. The Holder shall not, by virtue hereof, be entitled to any rights of a shareholder in the Company, either at law or equity, and the rights of the Holder are limited to those set forth in this Warrant. Section 6. Adjustment of Exercise Price and Number of Shares. The number and kind of securities purchasable upon the exercise of this Warrant and the Exercise Price shall be subject to adjustment from time to time upon the occurrence of certain events, as follows: (a) Adjustment for Change in Beneficial Interest. If at any time after November 6, 1996, the Company: (i) pays a dividend or makes a distribution on its Common Stock in shares of its Common Stock; (ii) subdivides its outstanding shares of Common Stock into a greater number of shares; (iii) combines its outstanding shares of Common Stock into a smaller number of shares; (iv) makes a distribution on its Common Stock in shares of its beneficial interest other than Common Stock; or (v) issues by reclassification of its Common Stock any shares of its beneficial interest; then the Exercise Price in effect (and the number of Warrant Shares and other securities, if any, issuable upon exercise of this Warrant) immediately prior to such action shall be adjusted so that the Holder may receive upon exercise of the Warrant, and payment of the same aggregate consideration, the number of shares of beneficial interest of the Company which the Holder would have owned immediately following such action if the Holder had exercised the Warrants immediately prior to such action. The adjustment shall become effective immediately after the record date in the case of such a dividend or distribution, and immediately after the effective date in the case of a subdivision, combination or reclassification. -4- 5 (b) Adjustment for Other Distributions. If at any time after November 6, 1996, the Company distributes to all holders of its Common Stock any of its assets or debt securities, the Exercise Price following the record date for such distribution shall be adjusted in accordance with the following formula: M-F --- E' = E x M where: E' = the adjusted Exercise Price. E = the then current Exercise Price immediately prior to the adjustment. M = the current market price (determined as provided in Section 11 below) per share of Common Stock on the record date of the distribution. F = the aggregate fair market value (determined in such reasonable manner as may be prescribed in good faith by the Board of Trustees of the Company) on the record date of the distribution of the assets or debt securities divided by the number of outstanding shares of Common Stock. The adjustment shall be made successively whenever any such distribution is made and shall become effective immediately after the record date for the determination of shareholders entitled to receive the distribution or the effective date of such issuance, as applicable. Notwithstanding the formula above, in no event shall the adjusted Exercise Price be less than zero. In the event that such distribution or issuance is not actually made, the Exercise Price shall again be adjusted to the Exercise Price as determined without giving effect to the calculation provided hereby. This subsection does not apply to ordinary quarterly cash dividends or cash distributions paid out of consolidated current or retained earnings as shown on the books of the Company and paid in the ordinary course of business. (c) Deferral of Issuance or Payment. In any case in which an event covered by this Section 6 shall require that an adjustment in the Exercise Price be made effective as of a record date, the Company may elect to defer until the occurrence of such event (i) issuing to the Holder, if this Warrant is exercised after such record date, the shares of Common Stock and other beneficial interest of the Company, if any, issuable upon such exercise over and above the shares of Common Stock or other beneficial interest of the Company, if any, issuable upon such exercise on the basis of the Exercise Price in effect prior to such adjustment, and (ii) paying to the Holder by check any amount in lieu of the issuance of fractional shares pursuant to Section 11. -5- 6 (d) When No Adjustment Required. No adjustment need be made for a change in the par value of the Common Stock. (e) Notice of Certain Actions. In the event that: (i) the Company shall authorize the issuance to all holders of its Common Stock of rights, warrants, options or convertible securities to subscribe for or purchase shares of its Common Stock, or of any other subscription rights, warrants, options or convertible securities; or (ii) the Company shall authorize the distribution to all holders of its Common Stock of evidences of its indebtedness or assets (other than dividends paid in or distributions of the Company's beneficial interest for which the Exercise Price shall have been adjusted pursuant to subsection (a) of this Section 6) or cash dividends or cash distributions payable out of consolidated current or retained earnings as shown on the books of the Company and paid in the ordinary course of business); or (iii) the Company shall authorize any capital reorganization or reclassification of the Common Stock (other than a subdivision or combination of the outstanding Common Stock and other than a change in par value of the Common Stock) or any consolidation or merger to which the Company is a party and for which approval of any shareholders of the Company is required (other than a consolidation or merger in which the Company is the continuing corporation and that does not result in any reclassification or change of the Common Stock outstanding), or the conveyance or transfer of the properties and assets of the Company as an entirety or substantially as an entirety; or (iv) the Company is the subject of a voluntary or involuntary dissolution, liquidation or winding-up procedure; or (v) the Company proposes to take any action (other than actions of the character described in subsection (a) of this Section 6) that would require an adjustment of the Exercise Price pursuant to this Section 6; then the Company shall cause to be mailed by first-class mail to the Holder, at least ten (10) days prior to the applicable record or effective date, a notice stating (x) the date as of which the holders of Common Stock of record to be entitled to receive any such rights, warrants or distributions are to be determined, or (y) the date on which any such consolidation, merger, conveyance, transfer, dissolution, liquidation or winding-up is expected to become effective, and the date as of which it is expected that holders of Common Stock of record shall be entitled to exchange their shares of Common Stock for securities or other property, if any, deliverable upon such reorganization, reclassification, consolidation, merger, conveyance, transfer, dissolution, liquidation or winding-up. -6- 7 (f) No Adjustment Upon Exercise of Warrants. No adjustments shall be made under any Section herein in connection with the issuance of Warrant Shares upon exercise of the Warrants. (g) Common Stock Defined. The term "Common Stock" shall include any equity securities of any class of the Company hereinafter authorized which shall not be limited to a fixed sum or percentage in respect of the right of the holders thereof to participate in dividends, or to participate in distributions of assets upon the voluntary or involuntary liquidation, dissolution or winding up of the Company. However, subject to the provisions of Section 8 hereof, shares issuable upon exercise hereof shall include only shares of the class designated as Common Stock of the Company as of the date hereof or shares of any class or classes resulting from any reclassification or reclassifications thereof or as a result of any corporate reorganization as provided for in Section 8 hereof. (h) Warrants Issued After Adjustments. Irrespective of any adjustments in the Exercise Price or the number or kind of Warrant Shares purchasable upon exercise of this Warrant, Warrants theretofore or thereafter issued may continue to express the same price and number and kind of shares as are stated in the similar warrants initially issuable pursuant to this Agreement. Section 7. Officers' Certificate. Whenever the Exercise Price shall be adjusted as required by the provisions of Section 6, the Company shall forthwith file in the custody of its Secretary or an Assistant Secretary at its principal office an officers' certificate showing the adjusted Exercise Price determined as herein provided, setting forth in reasonable detail the facts requiring such adjustment and the manner of computing such adjustment. Each such officers' certificate shall be signed by the Chairman, President or Chief Financial Officer of the Company and by the Secretary or any Assistant Secretary of the Company. A copy of each such officers' certificate shall be promptly mailed, by certified mail, to each holder of a Warrant and the original shall be made available at all reasonable times for inspection by any other holder of a Warrant executed and delivered pursuant to Section 4 hereof. Section 8. Reclassification, Reorganization, Consolidation or Merger. In the event of any reclassification, capital reorganization or other change of outstanding shares of Common Stock of the Company (other than a subdivision or combination of the outstanding Common Stock and other than a change in the par value of the Common Stock) or in the event of any consolidation or merger of the Company with or into another person or entity (other than a merger in which the Company is the continuing person or entity and that does not result in any reclassification, capital reorganization or other change of outstanding shares of Common Stock of the class issuable upon exercise of this Warrant) or in the event of any sale, lease, transfer or conveyance to another person or entity of the property and assets of the Company as an entirety or substantially as an entirety, the Company shall, as a condition precedent to such transaction, cause effective provisions to be made so that the Holder shall have the right thereafter, by exercising this Warrant, to purchase the kind and amount of shares of beneficial interest and other securities and property (including cash) receivable upon such reclassification, -7- 8 capital reorganization and other change, consolidation, merger, sale or conveyance by a holder of the number of shares of Common Stock that might have been received upon exercise of this Warrant immediately prior to such reclassification, capital reorganization, change, consolidation, merger, sale or conveyance. Any such provision shall include provisions for adjustments in respect of such shares of beneficial interest and other securities and property that shall be as nearly equivalent as may be practicable to the adjustments provided for in this Warrant. The foregoing provisions of this Section 8 shall similarly apply to successive reclassifications, capital reorganizations and changes of shares of Common Stock and to successive consolidations, mergers, sales or conveyances. In the event that in connection with any such capital reorganization, or classification, consolidation, merger, sale or conveyance, additional shares of Common Stock shall be issued in exchange, conversion, substitution or payment, in whole or in part, for, or of, a security of the Company other than Common Stock, any such issue shall be treated as an issue of Common Stock covered by the provisions of Section 6 hereof. Section 9. Duty to Make Fair Adjustments in Certain Cases. If any event occurs as to which, in the reasonable opinion of either the Board of Trustees of the Company or a majority of the holders of the warrants then outstanding under this Warrant, the Warrants issued to the Turkey Vulture Fund XIII, Ltd. on June 21, 1996, the Warrants issued to Safeguard on August 22, 1996 and any warrants issued upon repayment of unsecured debt issued to or held by Osborne (collectively, the "Other Warrants"), the provisions of Section 6 and Section 8 hereof are not strictly applicable or, if strictly applicable, would not fairly protect the purchase rights of the holders of such warrants in accordance with the essential intent and principles of such provisions, then the Board of Trustees of the Company and a majority of the holders of the warrants then outstanding under this Warrant and the Other Warrants shall mutually agree upon an adjustment in the application of such provisions, in accordance with such essential intent and principles, so as to protect such purchase rights as aforesaid. Section 10. Transfer to Comply with the Securities Act of 1933; Registration Rights. (a) No sale, transfer, assignment, hypothecation or other disposition of this Warrant or of the Warrant Shares shall be made if such sale, transfer, assignment, hypothecation or other disposition would result in a violation of the Act, or any state securities laws. Upon exercise of this Warrant, the Holder shall, if requested by the Company, confirm in writing, in a form reasonably satisfactory to the Company, that the shares of Common Stock so purchased are being acquired solely for the Holder's own account, and not as a nominee thereof, for investment, and not with a view toward distribution or resale, except as permitted by the Act, and shall provide such other information to the Company as the Company may reasonably request. Any Warrant and any Warrants issued upon substitution for, or upon assignment or transfer of this Warrant, as the case may be, and all shares of Common Stock issued upon exercise hereof or conversion thereof shall bear a legend (in addition to any legend required by state securities laws) in substantially the form set forth on the first page of this Warrant, unless and until such securities have been transferred pursuant to an effective registration statement -8- 9 under the Act or may be freely sold to the public pursuant to Rule 144 (or any successor rule thereto) or otherwise. (b) The Holder and any transferee of the Warrant or the Warrant Shares issuable hereunder shall have the right to require the Company to register the Warrant Shares with the Securities and Exchange Commission for resale as provided in the Registration Rights Agreement of even date herewith by and between the Holder and the Company. Section 11. Current Market Price. The "current market price" of a share of Common Stock for purposes of this Agreement shall be determined as follows: (a) If the Common Stock is listed on a national securities exchange or admitted to unlisted trading privileges on such exchange or listed for trading on The Nasdaq Stock Market, the current market price shall be the last reported sale price of the Common Stock on such exchange or system on the last business day prior to the date of exercise of this Warrant, or if no such sale is made on such day, the average of the closing bid and asked prices of the Common Stock for such day on such exchange or system; or (b) If the Common Stock is not so listed or admitted to unlisted trading privileges, the current market price shall be the average of the last reported bid and asked prices reported by the National Quotation Bureau, Inc., on the last business day prior to the date of exercise of this Warrant; or (c) If the Common Stock is not so listed or admitted to unlisted trading privileges and bid and asked prices are not so reported, the current market price per share shall be an amount, not less than 90% of the book value per share of the Common Stock as at the end of the most recent fiscal year of the Company ending prior to the date of the exercise of this Warrant, determined in such reasonable manner as may be prescribed in good faith by the Board of Trustees of the Company. Section 12. Modification and Waiver. Neither this Warrant nor any term hereof may be changed, waived, discharged or terminated other than by an instrument in writing signed by the Company and by the Holder. Section 13. Notices. Any notice, request or other document required or permitted to be given or delivered to the Holder or the Company shall be delivered or shall be sent by certified mail, postage prepaid, or by overnight courier to each such holder at its address as shown on the books of the Company or to the Company at the address indicated therefor in the first paragraph of this Warrant. Section 14. Descriptive Headings and Governing Law. The description headings of the several sections and paragraphs of this Warrant are inserted for convenience only and do not constitute a part of this Warrant. This Warrant shall be construed and enforced in -9- 10 accordance with, and the rights of the parties shall be governed by, the laws of the State of Maryland. Section 15. No Impairment. The Company will not knowingly avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by it, but will at all times in good faith assist in the carrying out of all of the provisions of this Warrant. Section 16. Non-Recourse. No recourse shall be had for any obligation of the Company hereunder, or for any claim based thereon or otherwise in respect thereof, against any past, present or future trustee, shareholder, officer or employee of the Company, whether by virtue of any statute or rule of law, or by the enforcement of any assessment or penalty or otherwise, all such other liability being expressly waived and released by each other party hereto. IN WITNESS WHEREOF, the Company has duly caused this Warrant to be signed by its duly authorized officer and to be dated as of November 14, 1996. BRANDYWINE REALTY TRUST By: /s/ John M. Adderly, Jr. ------------------------------------------- John M. Adderly, Jr., Vice President -10- 11 PURCHASE FORM Dated: ------------------------ The undersigned hereby irrevocably elects to exercise the within Warrant to purchase _____________ shares of Common Stock and hereby makes payment of ___________________________ in payment of the exercise price thereof. Signature ----------------------- -11- 12 ASSIGNMENT FORM Dated: ---------------------------------- FOR VALUE RECEIVED,__________________hereby sells, assigns and transfers unto ________________________________ (the "Assignee"), (please type or print in block letters) ________________________________________________________________________________ (insert address) its right to purchase up to __________ shares of Common Stock represented by this Warrant and does hereby irrevocably constitute and appoint _______________________________ Attorney, to transfer the same on the books of the Company, with full power of substitution in the premises. Signature ------------------------------- -12- EX-10.4 5 STANDSTILL AGREEMENT 1 STANDSTILL AGREEMENT THIS AGREEMENT is made as of the 14th day of November, 1996 by and between Brandywine Realty Trust, a Maryland real estate investment trust (the "Trust") and RAI Real Estate Advisers, Inc. ("RAI"), as the voting trustee of a voting trust dated as of November 6, 1996 between the Commonwealth of Pennsylvania State Employes' Retirement System ("SERS") as shareholder and RAI as voting trustee (the "Holder"). WHEREAS, as of the date hereof, pursuant to a Contribution Agreement dated November 6, 1996 among, inter alia, the Trust and the Holder (the "Contribution Agreement"), Holder is acquiring 481,818 Series A Convertible Preferred Shares, par value $.01 per share (the "Convertible Preferred Shares") and a warrant to purchase 400,000 common shares of beneficial interest, par value $.01 per share (the "Common Shares"). The Convertible Preferred Shares and the Common Shares issuable upon conversion thereof are collectively referred to herein as the "Shares;" WHEREAS, pursuant to the Contribution Agreement and a Securities Purchase Agreement dated November 6, 1996 between the Trust and the Holder (the "Securities Purchase Agreement"), the Holder is expected to acquire additional Shares; and WHEREAS, the Trust desires to obtain from the Holder, and the Holder desires to obtain from the Trust, certain agreements, as set forth herein. NOW, THEREFORE, intending to be legally bound hereby, the parties hereto agree as follows: 1. Proxy Solicitations. During the term hereof, without the consent of a majority of the independent members of the Board of Trustees of the Trust (the "Board of Trustees"), Holder agrees that it will not: (i) make or participate in, directly or indirectly, any "solicitation" of "proxies" (as such terms are defined or used in Regulation 14A promulgated pursuant to the Exchange Act) or become a "participant" in any "election contest" (as such terms are used in Regulation 14A) with respect to the Trust, (ii) seek to encourage any third person to vote Common Shares in opposition to the recommendation of a majority of the Board of Trustees, (iii) propose any amendment to the Declaration of Trust of the Trust (the "Declaration of Trust") or (iv) assist any attempt by any other person or entity to do any of the foregoing. 2. Voting of Common Shares; Submission of Matters to Vote of Shareholders; Conversion. During the term hereof, the Holder agrees to vote all Shares beneficially owned by it in accordance with the recommendations of a majority of the Board of Trustees on any matter submitted to a vote of shareholders other than on any of the following matters: (i) a merger, consolidation or liquidation of the Trust or a sale by the Trust of all or substantially all of its assets; (ii) any amendment to the Declaration of Trust or to the Partnership Agreement (as defined in Section 4(a) below); (iii) the nomination of a new member to the Board of Trustees; (iv) the Trust's incurring debt as a result of which the aggregate principal amount of its debt at the time of incurrence would exceed the Trust's Equity Market 2 Capitalization (as defined in Section 8 below); and (v) any Related Party Transaction (as defined in Section 8 below). Without the prior written approval of the Holder during the term hereof (and, as to clause (iv) above, until the Deferred Purchase Price (as defined in the Contribution Agreement) has been paid in full), the Trust shall not effect any of the preceding matters without first obtaining approval thereof by shareholders in accordance with the Declaration of Trust and applicable law. Upon the written request of the Trust delivered to the Holder at least ten (10) days prior to the record date for the applicable meeting, the Holder shall convert into Common Shares prior to such record date the number of Convertible Preferred Shares specified by the Trust in such request as being permissible to be so converted and shall vote such Common Shares in favor of the right of the Holder to convert the Convertible Preferred Shares on an unlimited basis. 3. Restrictions on Dispositions. During the term hereof, the Holder shall not, directly or indirectly, sell, assign, transfer or otherwise dispose of any Shares, except: (i) in transactions under Rule 144 promulgated under the Securities Act of 1933, as amended; (ii) in a private transaction to any person who is not then a business competitor of the Trust and who, immediately following the transaction, would own less than five percent (5%) of the outstanding Common Shares (assuming the conversion of all outstanding Convertible Preferred Shares and the conversion of all of the Class A Units of the Partnership (as defined in Section 4(a) below)); (iii) in response to a bona fide tender or exchange offer by a third party for at least 80% of the outstanding Common Shares and supported by a majority of the Board of Trustees; (iv) in a merger or statutory share exchange pursuant to which ownership of the Trust is acquired by a third party; or (v) pursuant to incidental registration rights of the Holder pursuant to a Registration Rights Agreement of even date herewith between the Trust and the Holder. During the term hereof, the Holder agrees to enter into a customary "lock-up" letter upon the request of the underwriters in connection with any public equity offering by the Trust, provided that (i) the duration thereof does not extend for more than 180 days following the effective date of the applicable registration statement and (ii) all other holders of in excess of ten percent (10%) of the outstanding Common Shares and all Trustees and executive officers of the Trust execute a substantially similar letter. Notwithstanding anything to the contrary herein, the Holder may pledge any and all of its Shares to secure up to $15 million in borrowings. 4. Business Operations. (a) Prior to the consummation by the Trust of a Secondary Offering, without the prior written approval of the Holder, the Trust may not materially deviate from the description of its business plans set forth under the caption "Prospectus Summary" in the draft of Amendment No. 1 ("Amendment No. 1") to the Trust's Registration Statement on Form S-11 attached as Exhibit A to the Securities Purchase Agreement and may not do any of the following: (i) engage in speculative development; (ii) acquire any individual property with a purchase price in excess of $25 million; (iii) acquire or dispose of any portfolio of properties with an aggregate purchase price which exceeds 25% of the amount equal to the Trust's Equity Market Capitalization plus the principal amount of all outstanding debt secured by mortgages on the Trust's properties; (iv) acquire any properties outside the Trust's Primary Market Area (as defined in Section 8 below); (v) acquire any properties other than office, warehouse, flex or industrial properties; (vi) incur additional indebtedness in any one transaction or in any series of -2- 3 related transactions in excess of $25 million; (vii) except as provided in Section 4(b) below, issue any additional shares of beneficial interest (other than issuances of Common Shares to funds managed by Morgan Stanley Asset Management, Inc., as more fully described in Amendment No. 1) the Registration Statement) or permit Brandywine Operating Partnership, L.P., a Delaware limited partnership (the "Partnership"), to issue Partnership Interests (as defined in the Partnership's Agreement of Limited Partnership dated August 22, 1996 (the "Partnership Agreement")); (viii) amend in any material manner the Partnership Agreement; (ix) acquire any property other than through the Partnership, unless acquired by the Trust and contributed to the Partnership; or (x) make any material change to the employment agreements between Brandywine Realty Services Company, Inc. ("Brandywine") and Anthony A. Nichols, Sr. and Gerald H. Sweeney (other than to permit such agreements to be assigned to the Trust). (b) Section 4(a)(vii) shall not apply to (A) Common Shares issued pursuant to options and warrants outstanding on the date of this Agreement, (B) Common Shares issued to officers, trustees, directors or employees of, or consultants to, the Trust and its affiliates upon the exercise of warrants, rights or options which (x) are issued pursuant to employee benefit plans, employment agreements or consulting agreements, in each case approved by the Board of Trustees or an appropriate committee of the Trust's Board of Trustees, and (y) have an exercise price not less than 85% of the current market price of the Common Shares at the time of issuance of such warrant, right or option, (C) Common Shares issued on redemption of Class A units of limited partnership interest in the Partnership issued or issuable to Safeguard Scientifics (Delaware), Inc. ("Safeguard") and The Nichols Company ("TNC") and certain other persons, or their respective affiliates, in connection with the transactions contemplated by the Contribution Agreement dated July 31, 1996, by and among the Trust, Safeguard and TNC, (D) Common Shares issuable to (i) Messrs. Belcher, Gallagher, Nichols and Sweeney upon exercise of warrants issued to them on or as of August 22, 1996 pursuant to their employment agreements with Brandywine and (ii) certain other employees of the Trust or Brandywine upon exercise of warrants issued to them on or as of August 22, 1996 for the purchase of an aggregate of 40,000 Common Shares, (E) up to 236,200 Common Shares reserved for issuance to Richard M. Osborne, Sr. or to an entity controlled by him ("Osborne") upon the repayment of unsecured debt issued to or held by Osborne and up to 236,200 Common Shares issuable to Osborne upon exercise of a warrant previously issued to him or issuable upon repayment of unsecured debt issued to or held by Osborne, (F) Common Shares issued upon conversion of the Convertible Preferred Shares, (G) Common Shares or Convertible Preferred Shares issued to the Holder or to or for the benefit of SERS, (H) Common Shares issued in a Secondary Offering, or (I) Partnership Interests issued (i) to acquire Residual Interests pursuant to Section 4.4 of the Partnership Agreement, (ii) upon the achievement of debt discounts pursuant to Section 4.5 of the Partnership Agreement; or (iii) to the Trust on account of capital contributions to the Partnership in accordance with the terms of the Partnership Agreement. 5. REIT Status. During the term hereof, the Holder agrees not to pursue any action which may disqualify the Trust's status as a real estate investment trust under the Internal Revenue Code of 1986. -3- 4 6. Legend. During the term hereof, the Trust may cause any certificates evidencing Shares beneficially owned by the Holder to bear a legend indicating the existence of this Agreement. 7. Term. (a) Unless terminated earlier pursuant to Section 7(b) below and as otherwise provided with respect to Section 2(iv) above, the term of this Agreement shall be for a period ending on the earlier of the (i) second anniversary of the date of this Agreement or (ii) the date on which the Holder owns less than twenty percent (20%) of the Common Shares assuming the conversion of all outstanding Convertible Preferred Shares. (b) The Holder shall have the right, upon written notice to the Trust, to terminate this Agreement (except as to Section 2(iv) as provided above) at any time after one year from the date of this Agreement if: (i) for two successive calendar quarters commencing with the quarter ending December 31, 1996, the total debt of the Trust as of the end of such quarters exceeds the Trust's Equity Market Capitalization; (ii) for two successive calendar quarters commencing with the quarter ending December 31, 1996, the Holder did not receive a cash distribution at least equal to $.11 per Common Share into which the Convertible Preferred Shares are convertible (subject to appropriate adjustment for share splits, share dividends and similar transactions subsequent to November 6, 1996), which distribution shall not exceed 90% of Funds From Operations (as defined in Section 8 below) for such quarter; (iii) the Equity Market Capitalization of the Trust is less than $100 million at any time on or after one year from the date of this Agreement; or (iv) the Trust acquires any property other than through the Partnership, unless acquired by the Trust and contributed to the Partnership. (c) Upon expiration or termination of the term, all rights and obligations of the parties hereto shall terminate, except as provided with respect to Section 2(iv) above and except for any rights arising out of the breach by a party hereto of its obligations hereunder. 8. Definitions. For purposes of this Agreement, the following terms shall have the meanings specified in this Section 8 and shall be equally applicable to both singular and plural forms. "Current Market Price" of a Common Share shall be determined as follows: (i) If the Common Shares are listed on a national securities exchange or admitted to unlisted trading privileges on such exchange or listed for trading on The Nasdaq Stock Market, the Current Market Price shall be the last reported sale price of the Common Shares on such exchange or system on the last business day prior to the valuation date, or if no such sale is made on such day, the average closing bid and asked prices of the Common Shares for such day on such exchange or system; or -4- 5 (ii) If the Common Shares are not so listed or admitted to unlisted trading privileges, the Current Market Price shall be the mean of the last reported bid and asked prices reported by the National Quotation Bureau, Inc., on the last business day prior to the valuation date; or (iii) If the Common Shares are not so listed or admitted to unlisted trading privileges and bid and asked prices are not so reported, the Current Market Price per Common Share shall be an amount, not less than 90% of the book value per Common Share as at the end of the most recent fiscal year of the Trust ending prior to the valuation date, determined in such reasonable manner as may be prescribed in good faith by the Board of Trustees. "Equity Market Capitalization" means the product of (A) the Current Market Price of a Common Share and (B) the number of outstanding Common Shares assuming the conversion of all outstanding Convertible Preferred Shares and all Class A Units of the Partnership. "Funds From Operations" means net income (loss), excluding extraordinary items, gains and losses from sales of property, plus depreciation and amortization and other non-cash charges and similar adjustments for unconsolidated subsidiaries, all as calculated in accordance with generally accepted accounting principles applied on a consistent basis with past periods. "Primary Market Area" means Bucks, Chester, Delaware and Montgomery counties in Pennsylvania; Burlington, Camden, Gloucester, Mercer and Salem counties in New Jersey; and New Castle county in Delaware. "Related Party Transaction" means any transaction involving the Trust or the Partnership and any of their officers, trustees, partners or holders of more than five percent of beneficial interests or partnership interests, as the case may be, which would be required to be disclosed under Items 402 or 404 of Regulation S-K. "Secondary Offering" means an underwritten primary public offering of Common Shares pursuant to a registration statement on Form S-11 declared effective by the Securities and Exchange Commission which results in gross proceeds to the Trust (prior to reduction for the underwriters' discount) of at least $50 million. 9. Specific Performance and Remedies. The parties to this Agreement acknowledge and agree that irreparable damage would occur to the aggrieved party in the event that any provision of this Agreement is not performed in accordance with its specific terms or is otherwise breached, and acknowledge and agree that termination of this Agreement and monetary damages would not provide adequate remedies. It is accordingly agreed that each of the parties shall be entitled to injunctive relief to prevent breaches of the provisions of this Agreement and to enforce specifically the terms and provisions hereof in any court of the United States in addition to any other remedy to which it may be entitled at law or in equity, including, without limitation, monetary damages. -5- 6 10. Expenses. All fees and expenses incurred by any party hereto shall be borne by the party incurring them; provided that the Trust shall reimburse the Holder for the legal fees and expenses incurred by it in connection with the preparation and negotiation of this Agreement; and provided further that, if any party incurs expenses in an effort to enforce compliance by another party of its obligations hereunder and prevails in such effort, the prevailing party shall be entitled to recover such expenses from such other party. 11. Entire Agreement. This Agreement constitutes the entire agreement, and supersedes all prior agreements and understandings, whether oral or written, among the parties hereto with respect to the subject matter hereof. This Agreement may not be amended orally, but may be amended only by an instrument in writing signed by each of the parties hereto. 12. Counterparts. For the convenience of the parties, any number of counterparts of this Agreement may be executed by the parties hereto. Each such executed counterpart shall be, and shall be deemed, an original instrument, and all such executed counterparts shall be deemed to be one and the same instrument. 13. Notices. All notices given hereunder shall be in writing and delivered personally, or sent by telex, telecopier or registered mail, postage prepaid, or by overnight delivery service, addressed as follows: If to The Trust: Brandywine Realty Trust 16 Campus Boulevard Suite 150 Newtown Square, PA 19073 Attention: Gerard A. Sweeney, President Telecopier No. (610) 325-5622 With a copy to: Pepper, Hamilton & Scheetz 3000 Two Logan Square 18th and Arch Streets Philadelphia, PA 19103 Attention: Michael H. Friedman, Esquire Telecopier No. (215) 981-4750 -6- 7 If to The Holder: RAI Real Estate Advisers, Inc. 259 Radnor-Chester Road Suite 200 Radnor, PA 19087 Attention: Richard K. Layman, President Telecopier No. (610) 964-0830 With a copy to: Wolf, Block, Schorr and Solis-Cohen Twelfth Floor Packard Building S.E. Corner 15th and Chestnut Streets Philadelphia, PA 19102 Attention: Jason M. Shargel, Esquire Telecopier No. (215) 977-2346 or to such other address, or such telex or telecopier number, as any party may, from time to time, designate in a written notice given in like manner. Notice given by overnight delivery service shall be deemed delivered on the day following the date the same is accepted for next day delivery by said service. Notice delivery by telecopier shall be deemed to be delivered when transmitted. Notice delivered personally shall be deemed to be delivered when delivered to the addressee. 14. Choice of Law. This Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of Maryland, without reference to the conflict of laws principles thereof. 15. Headings. The headings in this Agreement are for convenience only and shall not be considered a part of or affect the construction or interpretation of any provision of this Agreement. 16. No Waiver. Any waiver by any party of a breach of any provision of this Agreement shall not operate as or be construed to be a waiver of any other breach of such provision or of any breach of any other provision of this Agreement. The failure of a party to insist upon strict adherence to any term of this Agreement shall not be considered a waiver or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Agreement. 17. Severability. If any clause, provision or section of this Agreement is held illegal or invalid by any court, the illegality or invalidity of such clause, provision or section shall not affect any of the remaining clauses, provisions or sections of this Agreement, and this Agreement shall be construed and enforced as if such illegal or invalid clause, provision or section had not been contained herein. In case any agreement or obligation contained in this Agreement is held to be in violation of law, then such agreement or obligation shall be deemed -7- 8 to be the agreement or obligation of the applicable party hereto only to the full extent permitted by law. 18. Non-Recourse. No recourse shall be had for any obligation of the Trust 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 Trust, whether by virtue of any statute or rule of law, or by the enforcement of any assessment or penalty or otherwise, all such other liability being expressly waived and released by each other party hereto. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. BRANDYWINE REALTY TRUST By: /s/ John M. Adderly, Jr. ---------------------------------------- John M. Adderly, Jr., Vice President RAI REAL ESTATE ADVISERS, INC. as voting trustee of a voting trust dated November 6, 1996 By: /s/ Richard K. Layman ---------------------------------------- Richard K. Layman, President -8- EX-10.5 6 REGISTRATION RIGHTS AGREEMENT 1 REGISTRATION RIGHTS AGREEMENT REGISTRATION RIGHTS AGREEMENT (the "Agreement") made and entered into as of this 14th day of November, 1996 by and among BRANDYWINE REALTY TRUST, a Maryland real estate investment trust (the "Company"), RAI REAL ESTATE ADVISERS, INC. ("RAI"), as the voting trustee of a voting trust executed by the Commonwealth of Pennsylvania State Employes' Retirement System as shareholder and RAI as voting trustee dated as of November 6, 1996 (the "Voting Trust"). BACKGROUND Pursuant to a Contribution Agreement, dated November 6, 1996, by and among, inter alia, the Company and the Voting Trust (the "Contribution Agreement"), the Company has issued to the Voting Trust (a) 481,818 shares of the Company's Series A Convertible Preferred Shares (the "Preferred Shares"), par value $.01 per share, and may issue additional Preferred Shares on June 10, 1998, and December 31, 1999 (such issued and issuable Preferred Shares are collectively referred to as the "Property Shares") and (b) a warrant (the "Warrant") to purchase 400,000 shares of the Company's common shares of beneficial interest par value $.01 per share (the "Common Stock"). Pursuant to a Securities Purchase Agreement dated as of November 6, 1996 by and between the Company and the Voting Trust (the "Securities Purchase Agreement"), the Company is obligated to issue to the Voting Trust additional Common Stock or Preferred Shares (the "Additional Shares"). To induce the Voting Trust to enter into the foregoing transactions, the Company has agreed to provide it with the registration rights set forth in this Agreement. 1. CERTAIN DEFINITIONS. In addition to the other terms defined in this Agreement, the following terms shall be defined as follows: "Additional Holders" means the Persons who have registration rights with respect to certain securities of the Company pursuant to either of the Additional Registration Rights Agreements. "Additional Registration Rights Agreements" means that certain Registration Rights Agreement dated August 22, 1996 to which the Company is a party and the Registration Rights Agreement which the Company will enter into with Morgan Stanley Institutional Fund, Inc. - U.S. Real Estate Portfolio and Morgan Stanley SICAV Subsidiary, SA. 2 "Additional Securities" means those securities of the Company which are or become subject to the registration provisions of either of the Additional Registration Rights Agreements. "Brokers Transactions" has the meaning ascribed to such term pursuant to Rule 144 under the Securities Act. "Business Day" means any day on which the American Stock Exchange is open for trading. "Closing Date" means the date of closing under the Contribution Agreement. "Exchange Act" means the Securities Exchange Act of 1934, as amended, and the rules and regulations of the SEC thereunder, all as the same shall be in effect at the relevant time. "Fair Market Value" means: (a) If the Registrable Security is listed on a national securities exchange or admitted to unlisted trading privileges on such exchange or listed for trading on The NASDAQ Stock Market, the fair market value shall be the last reported sale price of the Registrable Security on such exchange or system on the last business day prior to the date the determination of fair market value is made, or if no such sale is made on such day, the average closing bid and asked prices of the Registrable Security for such day on such exchange or system; or (b) If the Registrable Security is not so listed or admitted to unlisted trading privileges, the fair market value shall be the mean of the last reported bid and asked prices reported by the National Quotation Bureau, Inc., on the last business day prior to the date the determination of fair market value is made; or (c) If the Registrable Security is not so listed or admitted to unlisted trading privileges and bid and asked prices are not so reported, the fair market value per share shall be an amount, not less than 90% of the book value per share of the Registrable Security as at the end of the most recent fiscal year of the Company ending prior to the date the determination of fair market value is made, determined in such reasonable manner as may be prescribed in good faith by the Board of Trustees of the Company. "Holders" means the Voting Trust for so long as (and to the extent that) it owns any Registrable Securities, and its successors, assigns, and direct and indirect transferees who become registered owners of Registrable Securities or securities exercisable, exchangeable or convertible into Registrable Securities. "Outstanding" means with respect to any securities as of any date, all such securities theretofore issued, except any such securities theretofore converted, exercised or -2- 3 canceled or held by the issuer or any successor thereto (whether in its treasury or not) or any affiliate of the issuer or any successor thereto. "Person" means an individual, a partnership (general or limited), corporation, limited liability company, joint venture, business trust, cooperative, association or other form of business organization, whether or not regarded as a legal entity under applicable law, a trust (inter vivos or testamentary), an estate of a deceased, insane or incompetent person, a quasi-governmental entity, a government or any agency, authority, political subdivision or other instrumentality thereof, or any other entity. "Registrable Security(ies)" means (i) all or any portion of the Additional Shares (to the extent they are shares of Common Stock), (ii) all or any portion of any shares of Common Stock that may be issued upon conversion of, or in exchange for, the Property Shares or the Additional Shares (to the extent they are Preferred Shares), (iii) all or any portion of any shares of Common Stock that may be issued upon the exercise of, or in exchange for, the Warrant, (iv) any additional shares of Common Stock or other equity securities of the Company issued or issuable after the Closing Date in respect of any such securities (or other equity securities issued in respect thereof) by way of a stock dividend or stock split, in connection with a combination, exchange, reorganization, recapitalization or reclassification of Company securities, or pursuant to a merger, division, consolidation or other similar business transaction or combination involving the Company, and (v) any other shares of Common Stock obtained in open market transactions or otherwise; provided that in the case of equity securities other than Common Stock such securities are registered under Section 12(b) or Section 12(g) of the Exchange Act; and further provided that: as to any particular Registrable Securities, such securities shall cease to constitute Registrable Securities (i) when a registration statement with respect to the sale of such securities shall have become effective under the Securities Act and such securities shall have been disposed of thereunder; or (ii) when such securities shall have ceased to be issued and outstanding. Any time this Agreement requires the vote or consent of the Holder of a "majority" or other stated percentage of the Registrable Securities, the term Registrable Securities shall, solely for purposes of calculating such vote, be deemed to include the Registrable Securities that could be issued under the Preferred Shares and the Warrant and any other securities exercisable or exchangeable for, or convertible into, Registrable Securities. The term Registrable Securities shall not include the Preferred Shares or the Warrant. "Registration Expenses" means all expenses incident to the Company's performance of or compliance with the registration requirements set forth in this Agreement including, without limitation, the following: (i) the fees, disbursements and expenses of the Company's counsel(s), accountants, and experts in connection with the registration under the Securities Act of Registrable Securities; (ii) all expenses in connection with the preparation, printing and filing of the registration statement, any preliminary prospectus or final prospectus, any other offering document and amendments and supplements thereto, and the mailing and delivering of copies thereof to the underwriters and dealers, if any; (iii) the cost of printing or producing any agreement(s) among underwriters, underwriting agreement(s) and blue sky or legal investment memoranda, any selling agreements, and any other documents in connection -3- 4 with the offering, sale or delivery of Registrable Securities to be disposed of; (iv) any other expenses in connection with the qualification of Registrable Securities for offer and sale under state securities laws, including the fees and disbursements of counsel for the underwriters in connection with such qualification and in connection with any blue sky and legal investment surveys; (v) the filing fees incident to securing any required review by the National Association of Securities Dealers, Inc. of the terms of the sale of Registrable Securities to be disposed of and any blue sky registration or filing fees, and (vi) the fees and expenses incurred in connection with the listing of Registrable Securities on each securities exchange (or The NASDAQ Stock Market) on which Company securities of the same class are then listed; provided, however, that Registration Expenses with respect to any registration pursuant to this Agreement shall not include (x) expenses incurred by any Holder in connection with any offering, including the fees and expenses of counsel, accountants, and experts retained by such Holder (other than the fees and expenses of one counsel for the Holders as and to the extent provided in Article 10), (y) any underwriting discounts or commissions attributable to Registrable Securities, or (z) any transfer taxes applicable to Registrable Securities. "SEC" means the United States Securities and Exchange Commission, or such other federal agency at the time having the principal responsibility for administering the Securities Act. "Securities Act" means the Securities Act of 1933, as amended, and the rules and regulations of the SEC thereunder, all as the same shall be in effect at the relevant time. "Shelf Registration Statement" means a Shelf Registration Statement of the Company pursuant to the provisions of Section 2(b) of this Agreement which covers Common Stock on an appropriate form then permitted by the SEC to be used for such registration and the sales contemplated to be made thereby, under Rule 415 under the Securities Act, or any similar rule that may be adopted by the SEC, and all amendments and supplements to such Registration Statement, including pre- and post-effective amendments thereto, in each case including the prospectus contained therein, all exhibits thereto and all material incorporated by reference therein. "Shelf Registration" means a registration of Common Stock effected pursuant to Section 2(b) hereof. "Trading Day" means a day on which the principal securities exchange or stock market on which the applicable security is traded is open for the transaction of business. 2. DEMAND REGISTRATION; SHELF REGISTRATION. (a) (i) A Holder or Holders may request at any time (by written notice delivered to the Company) that the Company register under the Securities Act all or any portion of the Registrable Securities held by (or then issuable to) such Holder or Holders (the "Requesting Holders"), representing in the aggregate not less than twenty percent of the Registrable -4- 5 Securities, for sale in the manner specified in such notice (including, but not limited to, an underwritten public offering); provided, however, that no such request may be made when the Voting Trust would be prohibited from selling Registrable Securities pursuant to an effective registration statement under the Securities Act by the terms of the Standstill Agreement, dated the Closing Date, between the Company and the Voting Trust; provided further, however, that no such request shall be made prior to one hundred twenty (120) days after the date that the Company's Registration Statement on Form S-11 (File No. 333-13969)(the "1996 Registration Statement") has been declared effective by the SEC. In each such case, such notice shall specify the number of Registrable Securities for which registration is requested, the proposed manner of disposition of such securities, and the minimum price per share at which the Requesting Holders would be willing to sell such securities in an underwritten offering. The Company shall, within five (5) Business Days after its receipt of any Requesting Holders' notice under this Section 2(a)(i), give written notice of such request to all other Holders and all Additional Holders and afford them the opportunity of including in the requested registration statement such of their Registrable Securities or Additional Securities, as the case may be, as they shall specify in a written notice given to the Company within twenty (20) days after their receipt of the Company's notice. Within ten (10) Business Days after the expiration of such twenty (20) day period, the Company shall notify all Holders and all Additional Holders requesting registration of (A) the aggregate number of Registrable Securities or Additional Securities, as the case may be, proposed to be registered by all Holders and all Additional Holders, (B) the proposed filing date of the registration statement, and (C) such other information concerning the offering as any Holder or Additional Holder may have reasonably requested. If the Holders of a majority in aggregate amount of the Registrable Securities to be included in such offering shall have requested that such offering be underwritten, the managing underwriter for such offering shall be chosen by the Holders of a majority in aggregate amount of the Registrable Securities being registered, with the consent of the Company, which consent shall not be unreasonably withheld, not less than thirty (30) days prior to the proposed filing date stated in the Company's notice, and the Company shall thereupon promptly notify such Holders, and any Additional Holders to be included in such offering, as to the identity of the managing underwriter, if any, for the offering. On or before the 30th day prior to such anticipated filing date, any Holder or Additional Holder may give written notice to the Company and the managing underwriter specifying either that (A) Registrable Securities or Additional Securities, as the case may be, of such Holder or Additional Holder are to be included in the underwriting, on the same terms and conditions as the securities otherwise being sold through the underwriters under such registration or (B) such Registrable Securities or Additional Securities, as the case may be, are to be registered pursuant to such registration statement and sold in the open market without any underwriting, on terms and conditions comparable to those normally applicable to offerings in reasonably similar circumstances, regardless of the method of disposition originally specified in Holder's or Additional Holder's request for registration. To the extent that any or all of the Registrable Securities to be included in any registration pursuant to this Section 2(a)(i) or any other provision of this Agreement are to be issued upon conversion, exercise or exchange of other securities, there shall be no obligation for any Holder to effect any such conversion, exercise or exchange until immediately prior to the closing of the sale of such Registrable Securities. -5- 6 (ii) The Company shall use its commercially reasonable best efforts to file with the SEC within eighty (80) days (thirty (30) days if the Company may use a Registration Statement on Form S-3 to register such Registrable Securities) after the Company's receipt of the initial Requesting Holders' written notice pursuant to Section 2(a)(i), a registration statement for the public offering and sale, in accordance with the method of disposition specified by such Holders, of the number of Registrable Securities specified in such notice, and thereafter use its commercially reasonable best efforts to cause such registration statement to become effective within sixty (60) days after its filing. Such registration statement may be on Form S-1 or Form S-11 or another appropriate form (including Form S-3) that the Company is eligible to use and that is reasonably acceptable to the managing underwriter; provided, however, that if any Form other than Form S-1 or Form S-11 is used in an underwritten offering, upon the request of the managing underwriter, or the selling shareholders, the prospectus included in the registration statement shall be amplified to include such additional information as such persons may reasonably request regarding the Company, its business and management (including, without limitation, the information called for by Items 101, 102, 103, 201, 202, 301 and 303 of Regulation S-K under the Securities Act). (iii) The Company shall not have any obligation hereunder (A) to permit or participate in more than two offerings pursuant to this Section 2(a), or (B) to register any Registrable Securities under this Section 2(a) unless it shall have received requests from Holders to register at least 20% of the aggregate Registrable Securities issued at the date hereof. (iv) If the Company is required to use commercially reasonable best efforts to register Registrable Securities and Additional Securities in a registration initiated upon the demand of any Holder pursuant to Section 2(a) of this Agreement and the managing underwriters for such offering advise that the inclusion of all securities sought to be registered by the Holders and Additional Holders may interfere with an orderly sale and distribution of or may materially adversely affect the price of such offering, then, unless all such Holders and Additional Holders otherwise notify the Company in writing, the aggregate number of Registrable Securities and Additional Securities included by the Holders and Additional Holders in such offering shall be reduced to a number which the managing underwriters advise will not likely have such effect and the maximum number of Registrable Securities and Additional Securities able to be included in such offering by each Holder and Additional Holder shall be reduced giving first preference to all Registrable Securities before any Additional Securities are included and thereafter pro rata (in accordance with such Holder's or Additional Holder's, as the case may be, proportionate share of all Registrable Securities and Additional Securities duly requested to be included in such registration). (b) At any time during the 60-day period following the end of any fiscal year of the Company, other than the fiscal year in which a registration statement is to be filed pursuant to Section 2(a) (except that the registration pursuant to a Deemed Additional Share Request shall not be subject to such limitation), any Holder or Holders may request in writing that the Company register under the Securities Act all or any portion of the Registrable Securities held by (or then issuable to) such Requesting Holders for sale pursuant to a Shelf Registration Statement; provided that any distribution or sale pursuant to any such Shelf Registration shall be limited to Brokers' Transactions or other transactions that do not involve -6- 7 an underwritten public offering. By closing under the Securities Purchase Agreement, the Voting Trust shall be deemed to have made (as of the date of such closing) a request under Section 2(b) (the "Deemed Additional Share Request") that the Company register for sale pursuant to a Shelf Registration Statement all Additional Shares (or, if applicable, all shares of Common Stock issuable upon conversion of the Additional Shares). The Company shall, within five (5) Business Days after its receipt of any Requesting Holders' notice under this Section 2(b), give written notice of such request to all other Holders and all Additional Holders and afford them the opportunity of including in the requested Shelf Registration Statement such of their Registrable Securities or Additional Securities, as the case may be, as they shall specify in a written notice given to the Company within twenty (20) days after their receipt of the Company's notice. The Company shall thereupon use its commercially reasonable best efforts to file the Shelf Registration Statement with the SEC within sixty (60) days after its receipt of the initial Requesting Holders' notice and to cause such registration statement to be declared effective within sixty (60) days after its filing (or in the case of the Deemed Additional Share Request, the earlier of 60 days after filing or March 31, 1997); provided, however, that the Company shall not be required (A) to effect more than one registration pursuant to this Section 2(b) in any fiscal year for Holders, or (B) to effect any registration pursuant to this Section 2(b) during the fiscal year during which Registrable Securities are registered pursuant to Section 2(a) of this Agreement, or (C) to register any Registrable Securities under this Section 2(b) (other than pursuant to the Deemed Additional Share Request) unless it shall receive requests from Holders to register at least 10% of the aggregate Registrable Securities issued at the date hereof. The Company shall use its commercially reasonable best efforts to keep such Shelf Registration Statement (or, if required hereunder, a successor Shelf Registration Statement filed pursuant to Section 2(d) below) continuously effective in order to permit the prospectus forming a part thereof to be usable by Holders and Additional Holders until all securities included in such Shelf Registration Statement have ceased to be Registrable Securities or Additional Securities, as the case may be, (the "Lapse Date"). (c) Notwithstanding any other provision of this Agreement, the Company shall have the right to defer the filing or effectiveness of a registration statement relating to any registration requested under Section 2(a) for a reasonable period of time not to exceed 180 days if (x) the Company is, at such time, working on an underwritten, primary public offering of its securities and is advised by its managing underwriter(s) that such offering would in its or their opinion be materially adversely affected by such filing; or (y) a prior registration statement of the Company for an underwritten, primary public offering by the Company of its securities was declared effective by the SEC less than 120 days prior to the anticipated effective date of the requested registration. (d) If the Company is precluded by Rule 415 or any other applicable rule under the Securities Act from including all Registrable Securities and Additional Securities in any Shelf Registration or from keeping any Shelf Registration Statement continuously effective from the filing date thereof through the Lapse Date, the Company shall file such additional or further Shelf Registration Statements, as may be required, so that, subject to the other provisions of this Agreement, all Registrable Securities and Additional Securities requested to be included are included on a continuously effective Shelf Registration Statement for substantially all of the period from the filing date of the first Shelf Registration Statement through the Lapse Date. -7- 8 (e) Neither the Company nor any Person other than a Holder or an Additional Holder shall be entitled to include any securities held by it or him in any underwritten offering pursuant to Section 2(a) of this Agreement. (f) No registration of Registrable Securities under this Article 2 shall relieve the Company of its obligation (if any) to effect registrations of Registrable Securities pursuant to Article 3. 3. INCIDENTAL REGISTRATION. (a) Until all securities subject to this Agreement have ceased to be Registrable Securities, if the Company proposes, other than pursuant to Article 2 hereof and other than pursuant to the 1996 Registration Statement, to register any of its Common Stock or other securities issued by it having terms substantially similar to Registrable Securities or any successor securities (collectively, "Other Securities") for public sale under the Securities Act (whether proposed to be offered for sale by the Company or by any other Person) on a form and in a manner which would permit registration of Registrable Securities for sale to the public under the Securities Act, it will give prompt written notice (which notice shall specify the intended method or methods of disposition) to the Holders and the Additional Holders of its intention to do so, and upon the written request of any Holder or Additional Holder delivered to the Company within fifteen (15) Business Days after the giving of any such notice (which request shall specify the number of Registrable Securities or Additional Securities, as the case may be, intended to be disposed of by such Holder or Additional Holder), the Company will use its commercially reasonable best efforts to effect, in connection with the registration of the Other Securities, the registration under the Securities Act of all Registrable Securities and Additional Securities which the Company has been so requested to register by Holders and Additional Holders; provided, however, that: (i) if, at any time after giving such written notice of its intention to register Other Securities and prior to the effective date of the registration statement filed in connection with such registration, the Company shall determine for any reason not to register such Other Securities, the Company may, at its election, give written notice of such determination to the Holders and Additional Holders requesting registration and thereupon the Company shall be relieved of its obligation to register such Registrable Securities and Additional Securities in connection with the registration of such Other Securities (but not from its obligation to pay Registration Expenses to the extent incurred in connection therewith as provided in Article 11), without prejudice, however, to the rights (if any) of the Holders to request that such registration be effected as a registration under Article 2; and (ii) the Company will not be required to effect any registration of Registrable Securities or Additional Securities pursuant to this Article 3 in connection with a primary offering of securities by it if the Company shall have been advised in writing (with a copy to the Holders requesting registration) by a nationally recognized investment banking firm (which may be the managing underwriter for the offering) selected by the Company that, in such firm's opinion, a registration of Registrable Securities and Additional Securities at that time may interfere with an orderly sale and distribution of the securities being sold by the Company in such offering or materially and adversely affect the price of such securities; provided, however, -8- 9 that if an offering of some but not all of the Registrable Securities and Additional Securities requested to be registered by the Holders and Additional Holders would not adversely affect the distribution or price of the securities to be sold by the Company in the offering in the opinion of such firm or are included in such offering notwithstanding any such opinion, the Company shall only include such lesser amount of Registerable Securities and Additional Securities and the aggregate number of Registerable Securities and Additional Securities to be included in such offering by each Holder and Additional Holder shall be allocated pro rata among the Holders and Additional Holders requesting such registration on the basis of the percentage of the securities held by such Holders and Additional Holders which have requested that such securities be included; provided further, however, that a registration under this Article 3 pursuant to demand registration rights of any Additional Holders shall be treated as a primary offering for purposes of this clause (ii) with the result that the applicable Additional Holders shall be entitled to the same priority with respect to the Holders to which the Company is entitled as provided above; and (iii) The Company shall not be required to give notice of, or effect any registration of Registrable Securities under this Article 3 incidental to, the registration of any of its securities in connection with mergers, consolidations, acquisitions, exchange offers, subscription offers, dividend reinvestment plans or stock options or other employee benefit or compensation plans. (b) No registration of Registrable Securities effected under this Article 3 shall relieve the Company of its obligations (if any) to effect registrations of Registrable Securities pursuant to Article 2. 4. HOLDBACKS AND OTHER RESTRICTIONS. (a) Each Holder hereby covenants and agrees with the Company that: (i) such Holder shall not, if requested by the managing underwriters in an underwritten offering that includes such Holder's Registrable Securities, effect any public sale or distribution of securities of the Company of the same class as the securities included in such registration statement (or convertible into such class), including a sale pursuant to Rule 144(k) under the Securities Act (except as part of such underwritten registration): (A) during the ninety (90)-day period (or such longer period of not more than one hundred eighty (180) days if such longer period is also required by the managing underwriters of the Company and all other Persons having securities included in such registration) beginning on the effective date of such registration statement, to the extent timely notified in writing by the Company or the managing underwriters; and (B) in the event of a primary offering by the Company, to the extent such Holder does not elect to sell such securities in connection with such offering, during the period of distribution of the Company's securities in such offering and during the period in which the underwriting syndicate, if any, participates in the aftermarket. In any such case the Company shall require the underwriters to notify the Company and the Company, in turn, shall notify all Holders of Registrable Securities included in the offering promptly after such participation ceases; -9- 10 (ii) such Holder shall not, during any period in which any of his or its Registrable Securities are included in any effective registration statement: (A) effect any stabilization transactions or engage in any stabilization activity in connection with the Common Stock or other equity securities of the Company in contravention of Rule 10b-7 under the Exchange Act; (B) permit any Affiliated Purchaser (as that term is defined in Rule 10b-6 under the Exchange Act) to bid for or purchase for any account in which such Holder has a beneficial interest, or attempt to induce any other person to purchase, any shares of Common Stock or Registrable Securities in contravention of Rule 10b-6 under the Exchange Act; or (C) offer or agree to pay, directly or indirectly, to anyone any compensation for soliciting another to purchase, or for purchasing (other than for such Holder's own account), any securities of the Company on a national securities exchange in contravention of Rule 10b-2 under the Exchange Act; and (iii) such Holder shall, in the case of a registration including Registrable Securities to be offered by it for sale through Brokers Transactions, furnish each broker through whom such Holder offers Registrable Securities such number of copies of the prospectus as the broker may require and otherwise comply with the prospectus delivery requirements under the Securities Act. (b) The Company covenants and agrees with the Holders not to effect any public or private sale or distribution (other than distributions pursuant to employee benefit plans) of its securities, including a sale pursuant to Regulation D under the Securities Act (or Section 4(2) thereof), during the ten (10) day period prior to, and during the ninety (90) day period beginning with, the effectiveness of a Registration Statement filed under Section 2(a) hereof, to the extent timely requested in writing by the managing underwriters, if any, or, if there be none, by the Holders of a majority in aggregate amount of the Registrable Securities included on such registration statement for such registration, except pursuant to registrations on Form S-4, Form S-8 or any successor form. 5. REGISTRATION PROCEDURES. If and whenever the Company is required by the provisions of this Agreement to use commercially reasonable best efforts to effect or cause a registration as provided in this Agreement, the Company will: (a) Use its commercially reasonable best efforts to prepare and file with the SEC, a registration statement within the time periods specified herein, and use its commercially reasonable best efforts to cause such registration statement to become effective as promptly as practicable and to remain effective under the Securities Act until (i) the Lapse Date with respect to registrations pursuant to Section 2(b) and (ii) until the earlier of such time as all securities covered thereby are no longer Registrable Securities or one hundred and eighty (180) days after such registration statement becomes effective with respect to registrations pursuant to Section 2(a), in every case as any such period may be extended pursuant to Section 5(h) hereto. (b) Prepare and file (and, if applicable, cause to become effective) with the SEC, as promptly as practicable, such amendments, post-effective amendments and supplements to such registration statement and the prospectus used in connection therewith as may be -10- 11 necessary to keep such registration statement effective for such period of time required by Section 5(a) above, as such period may be extended pursuant to Section 5(h) hereto. (c) Comply in all material respects with the provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement during the period during which any such registration statement is required to be effective. (d) Furnish to any Holder and any underwriter of Registrable Securities, (i) such number of copies (including manually executed and conformed copies) of such registration statement and of each amendment thereof and supplement thereto (including all annexes, appendices, schedules and exhibits), (ii) such number of copies of the prospectus used in connection with such registration statement (including each preliminary prospectus, any summary prospectus and the final prospectus), and (iii) such number of copies of other documents, in each case as such Holder or such underwriter may reasonably request. (e) Use its commercially reasonable best efforts to register or qualify all Registrable Securities covered by such registration statement under the securities or "blue sky" laws of states of the United States as any Holder or any underwriter shall reasonably request, and do any and all other acts and things which may be reasonably requested by such Holder or such underwriter to consummate the offering and disposition of Registrable Securities in such jurisdictions; provided, however, that the Company shall not be required to qualify generally to do business as a foreign corporation or as a dealer in securities, subject itself to taxation, or consent to general service of process in any jurisdiction wherein it is not then so qualified or subject. (f) Use, as soon as practicable after the effectiveness of the registration statement, commercially reasonable best efforts to cause the Registrable Securities covered by such registration statement to be registered with, or approved by, such other United States public, governmental or regulatory authorities, if any, as may be required in connection with the disposition of such Registrable Securities. (g) Use its commercially reasonable best efforts to list the Common Stock covered by such registration statement on any securities exchange (or if applicable, The NASDAQ Stock Market) on which any securities of the Company are then listed, if the listing of such Registrable Securities in then permitted under the applicable rules of such exchange (or if applicable, The NASDAQ Stock Market). (h) Notify each Holder as promptly as practicable and, if requested by any Holder, confirm such notification in writing, (i) when a prospectus or any prospectus supplement has been filed with the SEC, and, with respect to a registration statement or any post-effective amendment thereto, when the same has been declared effective by the SEC, (ii) of the issuance by the SEC of any stop order or the coming to the Company's attention of the initiation of any proceedings for such or a similar purpose, (iii) of the receipt by the Company of any notification with respect to the suspension of the qualification of any of the Registrable Securities for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose, (iv) of the occurrence of any event which requires the making of any changes to a registration statement or related prospectus so that such documents will not contain any untrue statement of a material -11- 12 fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading (and the Company shall promptly prepare and furnish to each Holder a reasonable number of copies of a supplemented or amended prospectus such that, as thereafter delivered to the purchasers of such Registrable Securities, such prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they are made, not misleading), and (v) of the Company's determination that the filing of a post-effective amendment to the Registration Statement shall be necessary or appropriate. Upon the receipt of any notice from the Company of the occurrence of any event of the kind described in clause (iv) or (v) of this Section 5(h), the Holders shall forthwith discontinue any offer and disposition of Registrable Securities pursuant to the registration statement covering such Registrable Securities until all Holders shall have received copies of a supplemented or amended prospectus which is no longer defective and, if so directed by the Company, shall deliver to the Company, at the Company's expense, all copies (other than permanent file copies) of the defective prospectus covering such Registrable Securities which are then in the Holders' possession. If the Company shall provide any notice of the type referred to in the preceding sentence, the period during which the registration statements are required to be effective as set forth under Section 5(a) shall be extended by the number of days from and including the date such notice is provided, to and including the date when Holders shall have received copies of the corrected prospectus. (i) Enter into such agreements and take such other appropriate actions as are customary and reasonably necessary to expedite or facilitate the disposition of such Registrable Securities, and in that regard, deliver to the Holders such documents and certificates as may be reasonably requested by any Holder of the Registrable Securities being sold or, as applicable, the managing underwriters, to evidence the Company's compliance with this Agreement including, without limitation, using commercially reasonable best efforts to cause its independent accountants to deliver to the Company's Board of Trustees (and to the Holders of Registrable Securities being sold in any registration) an accountants' comfort letter substantially similar to that in scope delivered in an underwritten public offering and covering audited and interim financial statements included in the registration statement or, if such letter cannot be obtained through the exercise of commercially reasonable best efforts, cause its independent accountants to deliver to the Company's Board of Trustees (and to the Holders of Registrable Securities being sold in any registration) a comfort letter based on negotiated procedures providing comfort with respect to the Company's financial statements included or incorporated by reference in the registration statement at the highest level permitted to be given by such accountants under the then applicable standards of the Association of Independent Certified Accountants with respect to such registration statement. In addition, the Company shall furnish to the Holders of Registrable Securities being included in any registration hereunder an opinion of counsel substantially identical in substance and scope to that customarily delivered to underwriters in public offerings. -12- 13 6. UNDERWRITING. (a) If requested by the underwriters for any underwritten offering of Registrable Securities pursuant to a registration hereunder, the Company will enter into and perform its obligations under an underwriting agreement with the underwriters for such offering, such agreement to contain such representations and warranties by the Company and such other terms and provisions as are customarily contained in underwriting agreements with respect to secondary distributions, including, without limitation, customary provisions relating to indemnities and contribution and the provision of opinions of counsel and accountants' letters. (b) If any registration pursuant to Article 3 hereof shall involve, in whole or in part, an underwritten offering, the Company may require Registrable Securities requested to be registered pursuant to Article 3 to be included in such underwriting on the same terms and conditions as shall be applicable to the securities being sold through underwriters under such registration. In such case, each Holder requesting registration shall be a party to any such underwriting agreement. Such agreement shall contain such representations and warranties by the Holders requesting registration and such other terms and provisions as are customarily contained in underwriting agreements with respect to secondary distributions, including, without limitation, provisions relating to indemnities and contribution. (c) In any offering of Registrable Securities pursuant to a registration hereunder, each Holder requesting registration shall also enter into such additional or other agreements as may be customary in such transactions, which agreements may contain, among other provisions, such representations and warranties as the Company or the underwriters of such offering may reasonably request (including, without limitation, those concerning such Holder, its Registrable Securities, such Holder's intended plan of distribution and any other information supplied by it to the Company for use in such registration statement), and customary provisions relating to indemnities and contribution. 7. RULE 144. The Company shall use commercially reasonable best efforts to take all actions necessary to comply with the filing requirements described in Rule 144(c)(1) or any successor thereto so as to enable the Holders to sell Registrable Securities without registration under the Securities Act. Upon the written request of any Holder, the Company will deliver to such Holder a written statement as to whether it has complied with the filing requirements under Rule 144(c)(1) or any successor thereto. 8. PREPARATION; REASONABLE INVESTIGATION; INFORMATION. In connection with the preparation and filing of each registration statement registering Registrable Securities under the Securities Act, (a) the Company will give the Holders and the underwriters, if any, and their respective counsel and accountants, drafts of such registration statement for their review and comment prior to filing and (during normal business hours and subject to such reasonable limitations as the Company may impose to prevent disruption of its business) such reasonable and customary access to its books and records and such opportunities to discuss the business of the Company with its officers and the independent -13- 14 public accountants who have certified its financial statements as shall be necessary, in the reasonable opinion of the Holders of a majority in aggregate amount of the Registrable Securities being registered and such underwriters or their respective counsel, to conduct a reasonable investigation within the meaning of the Securities Act and (b) as a condition precedent to including any Registrable Securities of any Holder in any such registration, the Company may require such Holder to furnish the Company such information regarding such Holder and the distribution of such securities as the Company may from time to time reasonably request in writing or as shall be required by law or the SEC in connection with any registration; provided, however, that, upon the reasonable request of the supplier of any such information, the recipient thereof shall enter into a confidentiality agreement respecting such information in customary form for an underwritten public offering. 9. INDEMNIFICATION AND CONTRIBUTION. (a) In the case of each offering of Registrable Securities made pursuant to this Agreement, the Company shall indemnify and hold harmless each Holder, its officers, directors and trustees, each underwriter of Registrable Securities so offered and each Person, if any, who controls any of the foregoing Persons within the meaning of the Securities Act ("Holder Indemnitees"), from and against any and all claims, liabilities, losses, damages, expenses and judgments, joint or several, to which they or any of them may become subject, under the Securities Act or otherwise, including any amount paid in settlement of any litigation commenced or threatened, and shall promptly reimburse them, as and when incurred, for any legal or other expenses incurred by them in connection with investigating any claims and defending any actions, insofar as such losses, claims, damages, liabilities or actions shall arise out of, or shall be based upon, any violation or alleged violation by the Company of the Securities Act, or relating to action taken or action or inaction required of the Company in connection with such offering, or shall arise out of, or shall be based upon, any untrue statement or alleged untrue statement of a material fact contained in the registration statement (or in any preliminary or final prospectus included therein) relating to the offering and sale of such Registrable Securities, or any amendment thereof or supplement thereto, or in any document incorporated by reference therein, or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading; provided, that the Company shall not be liable to any Holder Indemnitee in any such case to the extent that any such loss, claim, damage, liability or action arises out of, or is based upon, any untrue statement or alleged untrue statement, or any omission, if such statement or omission shall have been made in reliance upon and in conformity with information furnished to the Company in writing by or on behalf of such Holder specifically for use in the preparation of the registration statement (or in any preliminary or final prospectus included therein), or any amendment thereof or supplement thereto. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of any Holder and shall survive the transfer of such securities. The foregoing indemnity agreement is in addition to any liability which the Company may otherwise have to any Holder Indemnitee. (b) In the case of each offering of Registrable Securities made pursuant to this Agreement, each Holder, severally and not jointly, shall indemnify and hold harmless the Company, its officers and trustees, and each Person, if any, who controls any of the foregoing within the meaning of the Securities Act and (if requested by the underwriters) each underwriter -14- 15 who participates in the offering and each Person, if any, who controls any such underwriter within the meaning of the Securities Act (the "Company Indemnitees"), from and against any and all claims, liabilities, losses, damages, expenses and judgments, joint or several, to which they or any of them may become subject, under the Securities Act or otherwise, including any amount paid in settlement of any litigation commenced or threatened, and shall promptly reimburse them, as and when incurred, for any legal or other expenses incurred by them in connection with investigating any claims and defending any actions, insofar as any such losses, claims, damages, liabilities or actions shall arise out of, or shall be based upon, any violation or alleged violation by such Holder of the Securities Act, any blue sky laws, securities laws or other applicable laws of any state or country in which the Registrable Securities are offered and relating to action taken or action or inaction required of such Holder in connection with such offering, or shall arise out of, or shall be based upon, any untrue statement or alleged untrue statement of a material fact contained in the registration statement (or in any preliminary or final prospectus included therein) relating to the offering and sale of such Registrable Securities or any amendment thereof or supplement thereto, or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, but in each case only to the extent that such untrue statement is contained in, or such fact is omitted from, information furnished in writing to the Company by or on behalf of such Holder specifically for use in the preparation of such registration statement (or in any preliminary or final prospectus included therein). The liability of each Holder under such indemnity provision (and under Section 9(d) below) shall be limited to an amount equal to the total net proceeds received by such Holder from such offering. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of the Company and shall survive the transfer of such securities. The foregoing indemnity is in addition to any liability which Holder may otherwise have to any Company Indemnitee. (c) In case any proceeding (including any governmental investigation) shall be instituted involving any Person in respect of which indemnity may be sought pursuant to this Article 9, such Person (the "indemnified party") shall promptly notify the Person against whom such indemnity may be sought (the "indemnifying party") in writing. No indemnification provided for in Section 9(a) or (b) shall be available to any person who shall fail to give notice as provided in this Section 9(c) if the indemnifying party to whom notice was not given was unaware of the proceeding to which such notice would have related and was prejudiced by the failure to give such notice, but the failure to give such notice shall not relieve the indemnifying party or parties from any liability which it or they may have to the indemnified party for contribution or otherwise than on account of the provisions of Section 9(a) or (b). In case any such proceeding shall be brought against any indemnified party and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it shall wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel reasonably satisfactory to such indemnified party and shall pay as incurred the fees and disbursements of such counsel related to such proceeding. In any such proceeding, any indemnified party shall have the right to retain its own counsel at its own expense. Notwithstanding the foregoing, the indemnifying party shall pay as incurred the fees and expenses of the counsel retained by the indemnified party in the event (i) the indemnifying party and the indemnified party shall have mutually agreed to the retention of such counsel or (ii) the named parties to any such proceeding (including any impleaded parties) include both the indemnifying party and the indemnified party and -15- 16 representation of both parties by the same counsel, in the written opinion of such counsel, would be inappropriate due to actual or potential differing interests between them. It is understood that the indemnifying party shall not, in connection with any proceeding or related proceedings in the same jurisdiction, be liable for the reasonable fees and expenses of more than one separate firm for all such indemnified parties. Such firm shall be designated in writing by the Holders of a majority in aggregate Fair Market Value of the then Outstanding Registrable Securities in the case of parties indemnified pursuant to Section 9(a) and by the Company in the case of parties indemnified pursuant to Section 9(b). The indemnifying party shall not be liable for any settlement of any proceeding effected without its written consent but if settled with such consent or if there be a final judgement for the plaintiff, the indemnifying party agrees to indemnify the indemnified party from and against any loss or liability by reason of such settlement or judgment. (d) If the indemnification provided for in this Article 9 is unavailable to or insufficient to hold harmless an indemnified party under Section 9(a) or (b) above in respect of any losses, claims, damages or liabilities (or actions or proceedings in respect thereof) referred to therein, or if the indemnified party failed to give the notice required under Section 9(c) above, then each indemnifying party shall contribute to the amount paid or payable by the indemnified party as a result of such losses, claims, damages or liabilities (or actions or proceedings in respect thereof) in proportion as is appropriate to reflect not only both the relative benefits received by such party (as compared to the benefits received by all other parties) from the offering in respect of which indemnity is sought, but also the relative fault of all parties in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities (or actions or proceedings in respect thereof), as well as any other relevant equitable considerations. The relative benefits received by a party shall be deemed to be in the same proportion as the total net proceeds from the offering (before deducting expenses) received by it bear to the total amounts (including, in the case of any underwriter, underwriting commission and discounts) received by each other party. Relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the party and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The parties agree that it would not be just and equitable if contributions pursuant to this Section 9(d) were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to above in this Section 9(d). The amount paid or payable by an indemnified party as a result of the losses, claims, damages or liabilities (or actions or proceedings in respect thereof) referred to above shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this subsection (d), no person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. -16- 17 10. EXPENSES. In connection with any registration under this Agreement, the Company shall pay all Registration Expenses. In addition, in connection with each registration, the Company shall pay the reasonable fees and expenses of one counsel to represent the interests of the Holders selling Registrable Securities in such registration. Notwithstanding the foregoing, in the event that any Holder or Holders require the Company to conduct an underwritten public offering of Registrable Securities pursuant to Section 2(a) prior to 12 months after the date hereof, each such Holder or Holders shall pay its pro rata share of all Registration Expenses. 11. NOTICES. Except as otherwise provided below, whenever it is provided in this Agreement that any notice, demand, request, consent, approval, declaration or other communication shall or may be given to or served upon any of the parties hereto, or whenever any of the parties hereto, desires to provide to or serve upon the other party any other communication with respect to this Agreement, each such notice, demand, request, consent, approval, declaration or other communication shall be in writing and shall be delivered in person, mailed by registered or certified mail (return receipt requested) or sent by overnight courier service or via facsimile transmission (which is confirmed), as follows: (a) if to a Holder, at the most current address given by such Holder to the Company by means of a notice given in accordance with the provisions of this Article 11, which address initially is, with respect to the Voting Trust, the address set forth in the Securities Purchase Agreement; and (b) if to the Company, initially at the address set forth in the Securities Purchase Agreement and thereafter at such other address, notice of which is given in accordance with the provisions of this Article 11. The furnishing of any notice required hereunder may be waived in writing by the party entitled to receive such notice. Every notice, demand, request, consent, approval, declaration or other communication hereunder shall be deemed to have been duly furnished or served on the party to which it is addressed, in the case of delivery in person or by facsimile, on the date when sent (with receipt personally acknowledged in the case of telecopied notice), in the case of overnight mail, on the day after it is sent and in all other cases, five business days after it is sent. Failure or delay in delivering copies of any notice, demand, request, consent, approval, declaration or other communication to the persons designated above to receive copies shall in no way adversely affect the effectiveness of such notice, demand, request, consent, approval, declaration or other communication. 12. ENTIRE AGREEMENT. This Agreement represents the entire agreement and understanding among the parties hereto with respect to the subject matter hereof and supersedes any and all prior oral and written agreements, arrangements and understandings among the parties hereto with respect to such subject matter; and this Agreement can be amended, supplemented or changed, and any provision hereof can be waived or a departure from any provision hereof can be consented to, only by a written instrument making specific reference to this Agreement signed by the Company and the Holders of at least 80% of the Registrable Securities then outstanding; provided that any amendment that adversely affects the rights of any Holder must be signed by the adversely -17- 18 affected Holder; provided further that any waiver must be signed by the party entitled to the benefit of the term or matter being waived. 13. ARTICLE HEADINGS. The article headings contained in this Agreement are for general reference purposes only and shall not affect in any manner the meaning, interpretation or construction of the terms or other provisions of this Agreement. 14. APPLICABLE LAW. This Agreement shall be governed by, construed and enforced in accordance with the laws of the Commonwealth of Pennsylvania applicable to contracts to be made, executed, delivered and performed wholly within such state and, in any case, without regard to the conflicts of law principles of such state. 15. SEVERABILITY. If at any time subsequent to the date hereof, any provision of this Agreement shall be held by any court of competent jurisdiction to be illegal, void or unenforceable, such provision shall be of no force and effect, but the illegality or unenforceability of such provision shall have no effect upon and shall not impair the enforceability of any other provision of this Agreement. 16. EQUITABLE REMEDIES. The parties hereto agree that irreparable harm would occur in the event that any of the agreements and provisions of this Agreement were not performed fully by the parties hereto in accordance with their specific terms or conditions or were otherwise breached, and that money damages are an inadequate remedy for breach of this Agreement because of the difficulty of ascertaining and quantifying the amount of damage that will be suffered by the parties hereto in the event that this Agreement is not performed in accordance with its terms or conditions or is otherwise breached. It is accordingly hereby agreed that the parties hereto shall be entitled to an injunction or injunctions to restrain, enjoin and prevent breaches of this Agreement by the other parties and to enforce specifically the terms and provisions hereof in any court of the United States or any state having jurisdiction, such remedy being in addition to and not in lieu of, any other rights and remedies to which the other parties are entitled to at law or in equity. 17. NO WAIVER. The failure of any party at any time or times to require performance of any provision hereof shall not affect the right at a later time to enforce the same. No waiver by any party of any condition, and no breach of any provision, term, covenant, representation or warranty contained in this Agreement, whether by conduct or otherwise, in any one or more instances, shall be deemed to be construed as a further or continuing waiver of any such condition or of the breach of any other provision, term, covenant, representation or warranty of this Agreement. -18- 19 18. COUNTERPARTS. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute but one and the same original instrument. 19. THIRD PARTY BENEFICIARIES; SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit of and be binding upon the successors, assigns and transferees of each of the parties hereto; and; provided that nothing herein shall be deemed to permit any assignment, transfer or other disposition of Registrable Securities in violation of the terms of the Securities Purchase Agreement, the Warrant, the Standstill Agreement of even date herewith between the Company and the Voting Trust, the Contribution Agreement or applicable law. If any transferee of any Holder shall acquire Registrable Securities, in any manner, whether by operation of law or otherwise, such Registerable Securities shall be held subject to all of the terms of this Agreement, and by taking and holding such Registrable Securities such person shall be conclusively deemed to have agreed to be bound by and to perform all of the terms and provisions of this Agreement. 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. 22. OTHER REGISTRATION RIGHTS AGREEMENTS. The Company represents and warrants to the Holder that it (i) has not granted any registration rights to any Person other than to the Additional Holders pursuant to the Additional Registration Rights Agreements, and (ii) has caused to be amended all agreements relating to registration rights to which it is a party so that such agreements do not conflict with this Agreement, including without limitation Sections 2(a)(iv) and 3(a)(ii) hereof. The Company covenants and agrees that it will not grant any Person any registration rights that are in conflict with this Agreement. IN WITNESS WHEREOF, this Agreement has been executed and delivered as of the date first above written. BRANDYWINE REALTY TRUST By: /s/ John M. Adderly, Jr. ------------------------------------- John M. Adderly, Jr., Vice President -19- 20 RAI REAL ESTATE ADVISERS, INC., as voting trustee of a voting trust dated November 6, 1996. By: /s/ Richard K. Layman ------------------------------------------ Richard K. Layman, President -20- EX-10.6 7 PLEDGE AGREEMENT 1 PLEDGE AGREEMENT PLEDGE AGREEMENT (the "Agreement") made as of this 14th day of November, 1996 by and among RAI Real Estate Advisers, Inc. ("RAI"), as the voting trustee of a voting trust dated as of November 6, 1996 between the Commonwealth of Pennsylvania State Employes' Retirement System as shareholder and RAI as voting trustee ("Pledgor"), Brandywine Realty Trust, a Maryland real estate investment trust ("Pledgee") and Commonwealth Land Title Insurance Company ("Escrow Agent"). WITNESSETH: WHEREAS, as of the date hereof, pursuant to a Contribution Agreement dated November 6, 1996 by and among, inter alia, the Pledgor and Pledgee (the "Contribution Agreement"), the Pledgee has issued to the Pledgor shares of the Pledgee's Series A Convertible Preferred Shares (the "Preferred Shares"), par value $.01 per share; WHEREAS, pursuant to Sections 3.3 and 10.10 of the Contribution Agreement, any and all liability of Sellers (as defined in the Contribution Agreement) and the Pledgor under the Contribution Agreement, after the closing under the Contribution Agreement, is limited to and enforceable only against the Collateral (as defined below) on the terms set forth in this Agreement; and WHEREAS, pursuant to Section 10.14 of the Securities Purchase Agreement dated as of November 6, 1996 by and between the Pledgor and the Pledgee (the "Securities Purchase Agreement"), recourse for any liability or obligation of Pledgor thereunder is limited to the Collateral on the terms set forth in this Agreement. NOW, THEREFORE, intending to be legally bound hereby, the parties hereto agrees as follows: 1. Defined Terms. For purposes of this Agreement, the following terms shall have the meanings specified below and shall be equally applicable to both singular and plural forms. "Collateral" means, subject to Section 12 below, the Pledged Shares and, in the event the Pledged Shares are sold, transferred, assigned, exchanged or otherwise disposed of pursuant to Section 8 below, all proceeds from the sale, transfer, assignment, exchange or other disposition of the Pledged Shares or other replacement collateral which is reasonably satisfactory to Pledgee. "Event of Default" means either (i) a court of competent jurisdiction having entered a final judgment or (ii) a final resolution being reached by mediation or 2 arbitration pursuant to the dispute resolution provision in the Securities Purchase Agreement, against Pledgor in favor of Pledgee for an obligation or liability arising under the Contribution Agreement or the Securities Purchase Agreement. "Pledged Shares" means the 90,909 Preferred Shares being delivered to the Escrow Agent pursuant to Section 4 below and the shares of the Pledgee's common shares of beneficial interest, par value $.01 per share, issued upon any conversion of such Preferred Shares. "Uniform Commercial Code" means the Uniform Commercial Code from time to time in effect in the Commonwealth of Pennsylvania and the Uniform Commercial Code of any other state which shall be applicable to the pledge of shares hereunder. 2. Pledge; Grant of Security Interest. The Pledgor hereby grants and confirms to Pledgee a first pledge and security interest in the Collateral, as collateral security for any and all liability of Sellers or Pledgor to Pledgee arising out of the Contribution Agreement or the Securities Purchase Agreement. 3. Appointment of Escrow Agent. Pledgor and Pledgee hereby appoint Escrow Agent as the escrow agent under this Agreement and Escrow Agent accepts such appointment in accordance with the provisions of this Agreement. 4. Share Transfer Powers. Pledgor hereby delivers to Escrow Agent, and Escrow Agent acknowledges receipt of, all certificates representing the Pledged Shares, with undated share transfer powers covering such certificates, duly executed in blank by the Pledgor. Such certificates, share transfer powers and any other Collateral subsequently delivered to Escrow Agent pursuant to this Agreement shall be held in escrow by Escrow Agent pursuant to the terms hereof. 5. Representations and Warranties. Pledgor represents and warrants that; (a) Pledgor has the power and authority and the legal right to grant the lien on the Collateral pursuant to this Agreement; (b) Pledgor is the record owner of, and has good and marketable title to, the Pledged Shares, free of any and all liens or options in favor of any other person, except the lien granted by this Agreement; (c) the lien granted and confirmed pursuant to this Agreement constitutes a valid, perfected priority lien on the Collateral, enforceable as such against all creditors of the Pledgor and any persons purporting to purchase any Collateral from the Pledgor; and (d) this Agreement constitutes the valid and binding obligations of Pledgor, enforceable against Pledgor in accordance with its terms, and the execution, delivery and performance of this Agreement does not violate any agreement or understanding to which Pledgor is a party or by which Pledgor is bound, or any applicable law, rule or regulation. 6. Covenants. Pledgor covenants and agrees with Pledgee that from and after the date of this Agreement and until the second anniversary of the date of the Securities Purchase Agreement (or, if on such second anniversary, a claim has been made by Pledgee -2- 3 pursuant to Section 16 (f) below, which, if resolved in Pledgee's favor, would result in an Event of Default, until such later date that such claim has been resolved) (the "Termination Date"): (a) If Pledgor shall, as a result of its ownership of the Pledged Shares, become entitled to receive or shall receive any share certificate as a result of a share dividend, share split or similar distribution on, or as a conversion of or in exchange for any of the Pledged Shares then constituting all or a portion of the Collateral, Pledgor shall immediately deliver the same to Escrow Agent in the exact form received, duly endorsed by the Pledgor to Pledgee, if required, together with an undated share transfer power covering such certificate duly executed in blank by the Pledgor to be held as part of the Collateral. (b) Without the prior written consent of Pledgee, the Pledgor will not create, incur or permit to exist any lien or option in favor of, or any claim of any person with respect to, the Collateral, or any interest therein, except for the lien provided for by this Agreement. The Pledgor will defend the right, title and interest of Pledgee in and to the Collateral against the claim and demands of all persons whom so ever. (c) At any time and from time to time upon the written request of, and at the expense of, Pledgee, the Pledgor will promptly and duly execute and delivery such further documents and take such further actions as Pledgee may reasonably request for the purposes of obtaining or preserving the full benefits of this Agreement and of the rights and powers herein granted. If any amount payable under or in connection with any of the Collateral shall be or become evidenced by any promissory note, other instrument or chattel paper, such note, instrument or chattel paper shall be immediately delivered to Pledgee, duly endorsed in a manner satisfactory to Pledgee, to be held as Collateral pursuant to this Agreement. (d) Pledgor agrees to pay, and to save Pledgee and Escrow Agent harmless from, any and all liability with respect to or resulting from any delay in paying, any and all stamp, exercise, sales or other taxes which may be payable or determined to be payable with respect to any of the Collateral or in connection with any of the transactions contemplated by this Agreement. 7. Cash Dividends; Other Distributions; Voting Rights. Unless an Event of Default shall have occurred and Pledgee shall have given notice to Pledgor of Pledgee's intent to exercise one or more of its rights pursuant to Sections 9 and 10 below, Pledgor shall be permitted to receive all cash dividends and other distributions, if any, paid in respect of the Pledged Shares (except as provided in Section 6(a) above) and to exercise all voting and other rights with respect to the Pledged Shares. 8. Sale of Pledged Shares. Unless an Event of Default shall have occurred and Pledgee shall have given notice to Pledgor of Pledgee's intent to exercise one or more of its rights pursuant to Sections 9 and 10 below, Pledgor shall have the right to sell, transfer, assign, exchange or otherwise dispose of, or grant an option with respect to, any or all of the Pledged Shares provided Pledgee receives a security interest in the proceeds of the Pledged Shares or -3- 4 such other collateral as is satisfactory to Pledgee in its reasonable discretion. Pledgor, Pledgee and Escrow Agent shall cooperate with each other in order to accomplish any such transaction. 9. Rights of Pledgee. If an Event of Default shall occur: (i) Pledgee shall have the right to receive any and all cash dividends paid in respect of the Pledged Shares, and (ii) at Pledgee's option, all the Collateral shall be transferred into the name of Pledgee or its nominee, and Pledgee or its nominee may, at its option, thereafter exercise (A) all voting and other rights pertaining to the Collateral and (B) any and all rights of conversion, exchange, subscription and any other rights, privileges or options pertaining to the Collateral as if it were the absolute owner thereof, all without liability except to account for property actually received by it, but Pledgee shall have no duty to the Pledgor to exercise any such right, privilege or option and shall not be responsible for any failure to do so or delay in so doing. 10. Remedies. If an Event of Default shall have occurred which is then continuing, the Pledgee shall thereafter have all of the rights and remedies set forth in this Agreement and in the Contribution Agreement and of a Pledgee after default under the Uniform Commercial Code or other applicable law with respect to the Collateral and shall have the right, at any time or times thereafter to sell, resell, assign and deliver all or any part of the Collateral in one or more parcels at public or private sale. The Pledgee shall give Pledgee at least ten (10) days' prior written notice of the time and place of any public sale of any Collateral or of the time after which any private sale or any other intended disposition thereof is to be made. Any such notice shall be deemed to meet all requirements hereof and of any applicable law (including the Uniform Commercial Code) that reasonable notification be given of the time and place of such sale or other disposition. All such sales shall be at such commercially reasonable price or prices as the Pledgee shall deem best and either for cash or on credit or for future delivery (without the Pledgee assuming any responsibility for credit risk). At any such sale or sales the Pledgee may purchase any or all of the Collateral to be sold thereat upon such terms as the Pledgee may deem best. The Pledgor shall not remain liable for any deficiency if the proceeds of any sale or other disposition of Collateral are insufficient to pay the judgment causing the Event of Default and the reasonable fees and disbursements of any attorneys employed by Pledgee to collect such judgment. 11. Private Sales. The Pledgor recognizes that Pledgee may be unable to effect a public sale of any or all the Pledged Shares, by reason of certain prohibitions contained in the Securities Act of 1933 (the "Securities Act") and applicable state securities laws or otherwise, and may be compelled to resort to one or more private sales thereof to a restricted group of purchasers which will be obliged to agree, among other things, to acquire such securities for their own account for investment and not with a view to the distribution or resale thereof. The Pledgor acknowledges and agrees that any such private sale may result in prices and other terms less favorable than if such sale were a public sale and, notwithstanding such circumstances, agrees that any such private sale shall be deemed to have been made in a commercially reasonable manner. Pledgee shall be under no obligation to delay a sale of any of the Pledged Shares for the period of time necessary to permit the Pledged Shares to be registered for public sale under the Securities Act, or under applicable state securities laws. -4- 5 12. Return of Collateral. On the Termination Date (as defined in Section 6 above), the Escrow Agent shall return to Pledgor any remaining Collateral and this Agreement shall terminate. 13. Further Assurances. Pledgor agrees to cooperate with Pledgee and to execute and deliver, or cause to be executed and delivered, all such other instruments and to take all such actions as Pledgee may reasonably request from time to time which shall be appropriate or necessary in Pledgee's judgment in order to carry out the provisions and purposes of this Agreement. 14. Escrow Agent (a) Designation. Escrow Agent is designated by Pledgee to hold the Collateral and holds the Collateral on behalf of Pledgee for purposes of Articles 8 and 9 of the Uniform Commercial Code. (b) Limitation on Duties and Liability. Escrow Agent's sole duty with respect to the custody, safekeeping and physical preservation of the Collateral in its possession, under Section 9207 of the Uniform Commercial Code or otherwise, shall be to take reasonable steps to carry out the terms of this Agreement and to assure safekeeping of the Collateral while in Escrow Agent's possession. In no event, however, shall Escrow Agent have any duty to preserve rights in the Collateral against other parties and Escrow Agent shall not be liable for failure to demand, collect or realize upon any of the Collateral or for any delay in doing so. Escrow Agent shall not be liable for any actions undertaken in good faith or in reliance upon documents which it believes to be genuine. (c) Indemnification. Pledgor and Pledgee each agrees to indemnify and hold Escrow Agent harmless against any loss or liability (including reasonable attorneys' fees) incurred by Escrow Agent as a result of any dispute regarding the Collateral or in any way arising from the performance of its obligations under this Agreement, except for any loss or liability resulting from Escrow Agent's negligence or willful misconduct. (d) Resignation; Successor. Escrow Agent may resign from its obligations hereunder by written notice to Pledgor and Pledgee, such resignation to become effective upon the appointment of a successor escrow holder and the delivery to such successor escrow holder of the Collateral. Within 10 days following notice of Escrow Agent's intent to resign, the Pledgor and Pledgee shall jointly designate in writing a successor escrow holder. In the absence of such a designation by Pledgor and Pledgee, Escrow Agent may designate a successor escrow holder. The resigning Escrow Agent shall have no responsibility for the performance of failure of performance of any successor escrow holder hereunder, whether designated by Pledgor and Pledgee or by the resigning Escrow Agent. When the resignation of a resigning Escrow Agent shall become affective hereunder, such Escrow Agent shall be -5- 6 absolutely released and relieved from any and all liability arising thereafter under this Agreement. 15. Powers Coupled with an Interest. All authorizations and agencies herein contained with respect to the Collateral are irrevocable and powers coupled with an interest. 16. Miscellaneous. (a) Indulgences, Etc. Neither the failure nor any delay on the part of any party hereto to exercise any right, remedy, power or privilege under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any right, remedy, power or privilege preclude any other or further exercise of the same or of any other right, remedy, power or privilege, nor shall any waiver of any right, remedy, power or privilege with respect to any occurrence be construed as a waiver of such right, remedy, power or privilege with respect to any other occurrence. No waiver shall be effective unless it is in writing and signed by the party asserted to have granted such waiver. (b) Controlling Law. This Agreement and all questions relating to its validity, interpretation, performance and enforcement (including, without limitation, provisions concerning limitations of actions), shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania, notwithstanding any conflict-of-laws doctrines of such state or other jurisdiction to the contrary, and without the aid of any canon, custom or rule of law requiring construction against the draftsman. (c) Notices. All notices required or permitted hereunder shall be deemed given when delivered (personally or by recognized courier service such as Federal Express), or upon receipt by the party entitled to receive the notice two days after sent by registered or certified mail, postage prepaid, addressed as follows or to such other address or addresses as may hereafter be furnished in writing by notice similarly given by one party to the other: (i) If to Pledgor: RAI Real Estate Advisers, Inc. 259 Radnor-Chester Road Suite 200 Radnor, PA 19087 Attention: President -6- 7 With a copy to: Wolf, Block, Schorr and Solis-Cohen Twelfth Floor Packard Building S.E. Corner 15th and Chestnut Streets Philadelphia, PA 19102-2678 Attention: Jason M. Shargel, Esquire (ii) If to Pledgee: Brandywine Realty Trust 16 Campus Boulevard Suite 150 Newtown Square, PA 19073 Attention: President With a copy to: Pepper Hamilton & Scheetz 3000 Two Logan Square 18th and Arch Streets Philadelphia, PA 19103 Attention: Michael H. Friedman, Esquire (iii) If to Escrow Agent: Commonwealth Land Title Insurance Company Two Logan Square Suite 500 Philadelphia, PA 19103 Attention: Edward J. Rose (d) Binding Nature of Agreement; No Assignment. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, except that neither Pledgor nor Pledgee may assign or transfer any of their obligations under this Agreement without the consent of the other. (e) Execution in Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original as against any party whose signature appears thereon, and all of which shall together constitute one and the same instrument. This Agreement shall become binding when one or more counterparts hereof, individually or taken together, shall bear the signatures of all of the parties reflected hereon as the signatories. -7- 8 (f) Settlement of Disputes. Any and all controversies of every kind and nature between the parties hereto shall be resolved in accordance with the provisions set forth in Section 10.10 of the Securities Purchase Agreement. (g) Fees and Expenses of Escrow Agent. Pledgee shall pay all fees and expenses of the Escrow Agent hereunder. (h) Provisions Separable. The provisions of this Agreement are independent of and separable from each other, and no provision shall be affected or rendered invalid or unenforceable by virtue of the fact that for any reason any other or others of them may be invalid or unenforceable in whole or in part. (I) Entire Agreement. This Agreement contains the entire understanding among the parties hereto with respect to the subject matter hereof, and supersedes all prior and contemporaneous agreements and understandings, inducements or conditions, express or implied, oral or written, except as herein contained. The express terms hereof control and supersede any course or performance and/or usage of the trade inconsistent with any of the terms hereof. This Agreement may not be modified or amended other than by agreement in writing. (j) Section Headings. The section headings in this Agreement are for convenience only; they form no part of this Agreement and shall not affect its interpretation. IN WITNESS WHEREOF, the undersigned have caused this Agreement to be duly executed and delivered as of the date first above written. BRANDYWINE REALTY TRUST By: /s/ John M. Adderly, Jr. --------------------------------------- John M. Adderly, Jr., Vice President RAI REAL ESTATE ADVISERS, INC., as voting trustee of a voting trust dated November 6, 1996. By: /s/ Richard K. Layman --------------------------------------- Richard K. Layman, President COMMONWEALTH LAND TITLE INSURANCE COMPANY By: /s/ Gary Sternick --------------------------------------- Gary Sternick Title Officer -8- EX-10.7 8 VOTING AGREEMENT 1 VOTING AGREEMENT VOTING AGREEMENT (the "Agreement") made as of this 14th day of November, 1996 by and among RAI Real Estate Advisers, Inc. ("RAI") as the voting trustee of a voting trust dated as of November 6, 1996 executed by the Commonwealth of Pennsylvania State Employes' Retirement System as shareholder and by RAI as voting trustee (the "Purchaser"), Safeguard Scientifics, Inc., a Pennsylvania corporation ("Safeguard"), Safeguard Scientifics (Delaware), Inc., a Delaware corporation ("SSD"), The Nichols Company, a Pennsylvania corporation ("TNC"), Anthony A. Nichols, Sr. ("Nichols"), The Richard M. Osborne Trust (the "RMO Trust") and Turkey Vulture Fund XIII, Ltd. (the "RMO Fund"). Safeguard, SSD, TNC, Nichols, the RMO Trust and the RMO Fund are sometimes referred to herein individually as a "Holder" and collectively as the "Holders." WHEREAS, the Holders own common shares of beneficial interest, par value $.01 per share (the "Shares") of the Brandywine Realty Trust, a Maryland real estate investment trust (the "Trust") and warrants (the "Warrants") exercisable for Shares; WHEREAS, the Trust has entered into (i) a Contribution Agreement (the "Contribution Agreement") dated November 6, 1996 by and among inter alia, the Trust and the Purchaser, and (ii) a Securities Purchase Agreement (the "Securities Purchase Agreement") dated November 6, 1996 between the Trust and the Purchaser. The Contribution Agreement and the Securities Purchase Agreement are together referred to herein as the "Transaction Agreements;" and WHEREAS, the Holders desire to enter into an agreement to be specifically enforceable against each of them, as an inducement to the Purchaser to consummate the transactions contemplated by the Transaction Agreements, pursuant to which the Holders, subject to the terms hereof, agree to vote the Shares in accordance with the terms of the Transaction Agreements; NOW, THEREFORE, intending to be legally bound hereby, the parties hereto agree as follows: 1. Voting of Shares. Each of the Holders shall vote all of the Shares now or hereafter registered in such Holder's name, including, but not limited to Shares acquired upon exercise of Warrants, in all matters submitted to the shareholders of the Trust for approval in accordance with Section 7.7 of the Securities Purchase Agreement. 2. Representations of Holders. Each of the Holders hereby represents and warrants to each of the other Holders and to the Purchaser that such Holder: (a) owns and has the right to vote the number of Shares set forth on Schedule A attached hereto, (b) has full power to enter into this Agreement and has not, prior to the date of this Agreement, executed or delivered any proxy or entered into any other voting agreement or similar arrangement which has not 2 expired prior to the date hereof, and (c) will not take any action inconsistent with the purposes and provisions of this Agreement. 3. Binding Agreement; Changes in Shares. Each Holder expressly agrees that this Agreement shall be specifically enforceable in any court of competent jurisdiction in accordance with its terms against each of the parties hereto. In the event that at any time after the date hereof, any Shares or other shares of beneficial interest of the Trust are issued on, or in exchange of any of the Shares by reason of any dividend, split, reclassification or consolidation, such Shares or other beneficial interests shall be subject to the terms of this Agreement. 4. Voting by the Purchaser. Purchaser shall vote all securities of the Trust held by it at any duly called meeting of the Trust's shareholders in favor of restoring voting rights of the RMO Trust and the RMO Fund. 5. Miscellaneous. (a) Indulgences, Etc. Neither the failure nor any delay on the part of any party hereto to exercise any right, remedy, power or privilege under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any right, remedy, power or privilege preclude any other or further exercise of the same or of any other right, remedy, power or privilege, nor shall any waiver of any right, remedy, power or privilege with respect to any occurrence be construed as a waiver of such right, remedy, power or privilege with respect to any other occurrence. No waiver shall be effective unless it is in writing and signed by the party asserted to have granted such waiver. (b) Controlling Law. This Agreement and all questions relating to its validity, interpretation, performance and enforcement (including, without limitation, provisions concerning limitations of actions), shall be governed by and construed in accordance with the laws of the state of Maryland, notwithstanding any conflict-of-laws doctrines of such state or other jurisdiction to the contrary, and without the aid of any canon, custom or rule of law requiring construction against the draftsman. (c) Schedules. All schedules attached hereto are hereby incorporated by reference into, and made a part of, this Agreement. (d) Binding Nature of Agreement; No Assignment. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, except that no party may assign or transfer any of their obligations under this Agreement without the consent of the other parties. (e) Execution in Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original as against any party whose signature appears thereon, and all of which shall together constitute one and the same instrument. This Agreement shall become binding when one or more counterparts hereof, -2- 3 individually or taken together, shall bear the signatures of all of the parties reflected hereon as the signatories. (f) Settlement of Disputes. Any and all controversies of every kind and nature among the parties hereto shall be resolved in accordance with the provisions set forth in Section 10.10 of the Securities Purchase Agreement. (g) Provisions Separable. The provisions of this Agreement are independent of and separable from each other, and no provision shall be affected or rendered invalid or unenforceable by virtue of the fact that for any reason any other or others of them may be invalid or unenforceable in whole or in part. (h) Entire Agreement. This Agreement contains the entire understanding among the parties hereto with respect to the subject matter hereof, and supersedes all prior and contemporaneous agreements and understandings, inducements or conditions, express or implied, oral or written, except as herein contained. The express terms hereof control and supersede any course or performance and/or usage of the trade inconsistent with any of the terms hereof. This Agreement may not be modified or amended other than by agreement in writing. (i) Section Headings. The section headings in this Agreement are for convenience only; they form no part of this Agreement and shall not affect its interpretation. IN WITNESS WHEREOF, the parties hereto have executed and delivered this Agreement on the date first above written. RAI REAL ESTATE ADVISERS, INC., as voting trustee of a voting trust dated November 6, 1996 By: /s/ Kathleen M. Hands --------------------------------- SAFEGUARD SCIENTIFICS, INC. By: /s/ Gerald Wilk --------------------------------- SAFEGUARD SCIENTIFICS (DELAWARE), INC. By: /s/ Gerald Wilk --------------------------------- -3- 4 THE NICHOLS COMPANY By: /s/ John P. Gallagher ------------------------------------ Vice President Finance /s/ Anthony A. Nichols, Sr. --------------------------------------- ANTHONY A. NICHOLS, SR. THE RICHARD M. OSBORNE TRUST By: /s/ Richard M. Osborne ------------------------------------ Senior Vice President TURKEY VULTURE FUND XIII, LTD. By: /s/ Richard M. Osborne ------------------------------------ Vice President -4- EX-10.8 9 EXCERPT FROM FORM S-11 "BUSINESS & PROPERTIES" 1 BUSINESS AND PROPERTIES GENERAL The Initial Properties include 23 suburban office buildings (22 of which are Class A properties) totalling approximately 12 million net rentable square feet and one Class A industrial facility (1510 Gehman Road) totalling approximately 152,000 net rentable square feet. The Company developed 19 of the Initial Properties and currently manages 23 of the Initial Properties, in addition to managing approximately 575,000 net rentable square feet on behalf of third parties and approximately 159,000 net rentable square feet at the four Option Properties. In addition to owning the Initial Properties, the Company, on November 14, 1996, acquired the SERS Properties, which consist of seven office buildings and two industrial facilities, and has entered into agreements to purchase the four other Acquisition Properties. The Properties are located in the Market, with the exception of: (i) the Twin Forks Office Park located in Raleigh, North Carolina, which was acquired by the Company in 1986 in connection with the Company's formation; (ii) 168 Franklin Corner Road located in Lawrenceville, New Jersey; and (iii) Delaware Corporate Center (an Acquisition Property) located in New Castle County, Delaware. The Properties are easily accessible from major thoroughfares and are in close proximity to numerous amenities, including restaurants, retail shopping malls, hotels and banks. The Properties contain an aggregate of approximately 2.0 million net rentable square feet and, as of September 30, 1996, were approximately 94.3% leased to 222 tenants. The Company's tenants include many service sector employers, as well as a large number of professional firms and local, national and foreign businesses. The Company believes, based in part on recent engineering reports, that all of its Properties are well maintained and do not require significant capital improvements. The Properties consist primarily of suburban and industrial buildings (36 of which are Class A properties). The Company considers Class A suburban office and industrial properties to be those that have desirable locations, are well maintained and professionally managed and have the potential of achieving rental and occupancy rates that are typically at or above those prevailing in their respective markets. The average age of the Properties is approximately 10.8 years. The Company's 10 largest tenants (based on pro forma annualized base rent at September 30, 1996) aggregate approximately 29.8% of the Company's total base rent and approximately 27.5% of the Company's net rentable square feet and have a weighted average remaining lease term of approximately 7.8 years. As of September 30, 1996, no single tenant accounted for more than approximately 8.7% of the Company's pro forma aggregate annualized base rent and only 30 tenants individually represented more than 1.0% of such aggregate annualized base rent. Leases representing approximately 58.5% of the net rentable square footage at the Properties were signed during the period January 1, 1993 through December 31, 1995, a time when management believes market rental rates were at or below current market rental rates. This belief is supported by the fact that for the nine months ended September 30, 1996: (i) renewal leases at the Initial Properties were signed covering approximately 154,000 net rentable square feet of office space at a weighted average rental rate of $13.25 per square foot, compared to leases that expired for that space during such period with a weighted average rental rate of $12.66 per square foot (representing a 4.7% increase); and (ii) new leases at the Initial Properties were signed covering approximately 264,000 net rentable square feet of office space at a weighted average rental rate of $15.96 per square foot, compared to leases that expired for that space during such period with a weighted average rental rate of $14.52 per square foot (representing a 9.9% increase). In all cases, weighted average rental rates include expense recoveries, free rent and scheduled rent increases that would be taken into account under generally accepted accounting principles. The Company believes that the strength of its leasing department and tenant retention capabilities should enable it to continue to capitalize on rental rate differentials as the Company's leases expire. The Company's leases are typically structured for terms of three, five, seven or ten years. Due to conditions within the Market, the Company utilizes two primary lease structures: (i) triple net leases (which represented approximately 75.0% of the aggregate net rentable leased square footage at the Initial Properties as of September 30, 1996 and under which tenants are required to pay all real property taxes, insurance and expenses of maintaining the leased space); and (ii) full service gross leases (which represented approximately 25.0% of the aggregate leased net rentable square footage as of September 30, 1996 and under which the tenants typically pay for all real estate taxes and operating expenses above those for an established base year). 63 2 Under the Company's leases at the Initial Properties, the landlord is generally responsible for structural repairs. Most leases do not permit early termination; however, approximately 12 leases at the Initial Properties (covering an aggregate of approximately 184,000 net rentable square feet and having a weighted average base rental rate of approximately $11.53) permit the tenant to terminate the lease prior to its initial term (excluding rights pursuant to casualty, condemnation, eminent domain and changes in zoning classifications) (generally upon six to twelve months' notice and generally after the end of the third year of a five year lease or the fifth year of a 10 year lease, subject to the tenant's obligation to pay a fixed termination penalty, typically consisting of unamortized tenant improvements, leasing commissions plus an additional negotiated payment). Approximately eight leases at the Acquisition Properties (covering an aggregate of approximately 94,000 net rentable square feet and having a weighted average base rental rate of approximately $14.10) similarly permit the tenant to terminate the lease prior to its initial term. The Company's asset management strategy is designed to efficiently balance the sound business and reporting fundamentals necessary for a public company with the operating efficiency of a responsive market-oriented real estate organization. The Properties will be financially and operationally managed under active central control. All financial reporting, administration (including the formation and implementation of policies and procedures), marketing, leasing, capital expenditure and construction decisions are administered at the Company's corporate office. The Company employs asset managers to oversee and direct the ongoing property operations, as well as the on-site personnel which may include a property manager, leasing agent and other necessary staff. The asset managers actively participate with the executive officers in the formation of the Company's policies and procedures. In addition, the Company's financial and property management reporting systems are designed to ensure operational compliance with the Company's policies and procedures. On-site staffing for each Property is determined by the Property's size, tenant profile and location relative to other Properties. The Company has an active tenant relations program and a maintenance staff to ensure that all of the Properties are maintained in accordance with the Company's standard of excellence. The Company also contracts with third parties for cleaning services, day porters, landscaping, engineering and other service personnel necessary to operate each Property. 64 3 PROPERTIES The following table sets forth certain information with respect to the Properties:
AVERAGE TOTAL BASE TOTAL BASE RENT RENT PLUS EXPENSE FOR THE RECOVERIES PER NET PERCENTAGE TWELVE MONTHS NET RENTABLE SQUARE RENTABLE LEASED AS OF ENDED FOOT LEASED INITIAL PROPERTIES: YEAR SQUARE SEPTEMBER 30, SEPTEMBER 30, 1996(2) SEPTEMBER 30, SUBMARKET/PROPERTY BUILT FEET 1996(1) (000'S) 1996(3) - --------------------------------------------- ----- --------- ------------- --------------------- ------------------- HORSHAM/WILLOW GROVE/JENKINTOWN, PA 650 Dresher Road............................ 1984 30,138 100.0% $ 329 $ 15.67 1155 Business Center Drive.................. 1990 51,388 99.4% 591 16.31 500 Enterprise Road......................... 1990 67,800 98.5% 674 13.74 One Progress Avenue......................... 1986 79,204 100.0% 563 9.54 SOUTHERN ROUTE 202 CORRIDOR, PA 456 Creamery Way............................ 1987 47,604 100.0% 336 7.15 486 Thomas Jones Way........................ 1990 51,500 50.9% 416 23.26 468 Creamery Way............................ 1990 28,934 100.0% 293 14.54 110 Summit Drive............................ 1985 43,660 67.6% 262 13.51 BLUE BELL/PLYMOUTH MEETING/FORT WASHINGTON, PA 2240/50 Butler Pike......................... 1984 52,183 99.4% 560 15.82 120 West Germantown Pike.................... 1984 30,546 100.0% 421 19.16 140 West Germantown Pike.................... 1984 25,953 98.7% 297 16.56 2260 Butler Pike............................ 1984 31,892 100.0% 377 16.84 MAIN LINE, PA 16 Campus Boulevard......................... 1990 65,463 100.0% 430 9.94 18 Campus Boulevard......................... 1990 37,700 100.0% 410 15.01 LEHIGH VALLEY, PA 7310 Tilghman Street........................ 1985 40,000 99.0% 329 11.44 7248 Tilghman Street........................ 1987 42,863 93.8% 399 15.06 6575 Snowdrift Road......................... 1988 46,250 100.0% 300 9.06 LANSDALE, PA 1510 Gehman Road............................ 1990 152,625 100.0% 773 7.70 BURLINGTON COUNTY, NJ One Greentree Centre........................ 1982 55,838 100.0% 869 16.97 Two Greentree Centre........................ 1983 56,075 100.0% 816 14.53 Three Greentree Centre...................... 1984 69,101 96.2% 1,049 16.51 CAMDEN COUNTY, NJ 457 Haddonfield Road (LibertyView).......... 1990 121,737 82.8% 1,160 16.34 OTHER MARKETS 168 Franklin Corner Road.................... 1976 32,000 54.5% 186 13.43 Lawrenceville, NJ Twin Forks Office Park Raleigh, NC 5910-6090 Six Forks......................... 1982 73,339 100.0% 1,008 13.83 --------- ----- ------- ------ CONSOLIDATED TOTAL/WEIGHTED AVERAGE FOR THE INITIAL PROPERTIES.......................... 1,333,793 93.8% 12,848 14.04(10) ========= ===== ======= ====== AVERAGE C&W RENTAL RATE TENANTS LEASING 10% OR ANNUALIZED WEIGHTED INCREASE MORE OF RENTABLE RENTAL AVERAGE POTENTIAL SQUARE FOOTAGE PER RATE AS OF CLASS A UNTIL MARKET PROPERTY AS OF INITIAL PROPERTIES: SEPTEMBER 30, RENTAL RATE IS SEPTEMBER 30, 1996 SUBMARKET/PROPERTY 1996(4) RATES(5) ACHIEVED(6) AND LEASE EXPIRATION DATE - --------------------------------------------- ------------------ -------- ------------ ------------------------- < HORSHAM/WILLOW GROVE/JENKINTOWN, PA 650 Dresher Road............................ $16.50 $18.02 9.2% GMAC (100%) - 5/03 1155 Business Center Drive.................. 17.22 18.02 4.6% IMS (79%) - 3/06; Motorola (14%) - 2/99 500 Enterprise Road......................... 15.03 14.50 (3.5)% Conti Mortgage (80%) - 4/01; Pioneer (19%) - 10/00 One Progress Avenue......................... 11.75 18.02 53.4% Reed Technologies (100%) - 6/11 SOUTHERN ROUTE 202 CORRIDOR, PA 456 Creamery Way............................ 7.25(7) 7.89(8) 8.8% Neutronics (100%) - 1/03 486 Thomas Jones Way........................ 15.46 15.55 0.5% First American Real Estate (20%) - 4/00 468 Creamery Way............................ 13.88 13.61 (1.9)% Franciscan Health (82%) - 6/99; American Day Treatment (18%) - 6/00 110 Summit Drive............................ 7.20(8) 7.89(8) 9.6% Maris Equipment (49%) - 4/99 BLUE BELL/PLYMOUTH MEETING/FORT WASHINGTON, PA 2240/50 Butler Pike......................... 17.55 18.70 6.6% CoreStates (59%) - 4/06; TWA Marketing (33%) - 10/99 120 West Germantown Pike.................... 17.52 18.70 6.7% Clair O'Dell (82%) - 7/01; Kleinerts (13%) - 10/98 140 West Germantown Pike.................... 17.38 18.70 7.6% Healthcare, Inc. (46%) - 9/99; Henkel (29%) - 6/98; National Health Equity (20%) - 5/99 2260 Butler Pike............................ 17.82 18.70 4.9% Information Resources (66%) - 12/00; Med Resorts (26%) - 1/01 MAIN LINE, PA 16 Campus Boulevard......................... 13.58 20.27 49.3% New England Mutual (52%) - 5/06; Atlantic Employees C.U. (35%) - 1/06 18 Campus Boulevard......................... 18.62 20.27 8.9% Prudential (25%) - 6/01; Devco Mutual (35%) - 1/01; Scott Paper (17%) - 11/97; Marshall Dennehey (18%) - 10/01 LEHIGH VALLEY, PA 7310 Tilghman Street........................ 8.89(8) 10.50(8) 18.1% AT&T (83%) - 12/96-8/98 7248 Tilghman Street........................ 14.76 15.34 3.9% IDS Financial (29%) - 7/01; Ohio Casualty (46%) - 7/01; Meridian Mortgage (12%) - 6/99 6575 Snowdrift Road......................... 7.15(8) 10.50(8) 46.9% Corning Packaging (100%) - 2/99 LANSDALE, PA 1510 Gehman Road............................ 4.72(8) 5.95(8) 26.1% Ford Electronics (35%) - 6/98; Nibco (65%) - 8/99 BURLINGTON COUNTY, NJ One Greentree Centre........................ 16.07 19.30 20.0% American Executive Centers (30%) - 1/06; West Jersey (15%) - 4/01; Temple Sports Med. (18%) - 12/97 Two Greentree Centre........................ 16.02 19.30 20.5% Merrill Lynch (23%) - 11/05; ReMax Suburban (12%) - 11/05 Three Greentree Centre...................... 16.41 19.30 17.6% Parker, McCay & Criscuolo (39%) - 5/01; Marshall Dennehey (20%) - 5/97; Olde Discounts (12%) - 3/00; Surety Title (13%) - 11/03 CAMDEN COUNTY, NJ 457 Haddonfield Road (LibertyView).......... 18.63 21.81 17.1% HIP Health Plan (31%) - 12/07 OTHER MARKETS 168 Franklin Corner Road.................... 15.55 18.00(9) 15.8% Dr. Belden (12%) - 5/01; Lawrenceville, NJ Crawford & Co. (14%) - 11/99 Twin Forks Office Park Raleigh, NC 5910-6090 Six Forks......................... 14.25 15.50(9) 8.8% N/A ----- ----- ----- CONSOLIDATED TOTAL/WEIGHTED AVERAGE FOR THE INITIAL PROPERTIES.......................... $14.63(10) $16.83(10)(11) 15.0% ===== ===== =====
65 4
AVERAGE TOTAL BASE TOTAL BASE RENT RENT PLUS EXPENSE FOR THE RECOVERIES PER NET PERCENTAGE TWELVE MONTHS NET RENTABLE SQUARE RENTABLE LEASED AS OF ENDED FOOT LEASED ACQUISITION PROPERTIES: YEAR SQUARE SEPTEMBER 30, SEPTEMBER 30, 1996(2) SEPTEMBER 30, SUBMARKET/PROPERTY BUILT FEET 1996(1) (000'S) 1996(3) - ----------------------------------------------- ----- --------- ------------- --------------------- ------------------- HORSHAM/WILLOW GROVE/JENKINTOWN, PA 700 Business Center Drive(12)................. 1986 82,009 100.0% $ 793 $11.59 800 Business Center Drive(12)................. 1986 KING OF PRUSSIA, PA 500 North Gulph Road.......................... 1979 92,851 86.1% 1,387 15.02 BUCKS COUNTY, PA 2200 Cabot Boulevard.......................... 1979 55,081 100.0% 259 5.75 2250 Cabot Boulevard.......................... 1982 40,000 100.0% 170 5.22 2260 Cabot Boulevard(12)...................... 1984 29,638 100.0% 246 10.17 2270 Cabot Boulevard(12)...................... 1984 3000 Cabot Boulevard.......................... 1986 34,640 83.9% 364 12.85 3329 Street Road -- Greenwood Sq.(12)......... 1985 3331 Street Road -- Greenwood Sq.(12)......... 1986 165,929 92.1% 2,234 14.56 3333 Street Road -- Greenwood Sq.(12)......... 1988 BURLINGTON COUNTY, NJ 8000 Lincoln Drive............................ 1983 54,923 100.0% 445 8.25 NORTHERN SUBURBAN WILMINGTON One Righter Parkway........................... 1989 104,828 100.0% 2,044 19.50 --------- ----- ------- ------ CONSOLIDATED TOTAL/WEIGHTED AVERAGE FOR THE ACQUISITION PROPERTIES........................ 659,899 95.2% $ 7,942 $ 12.93 ========= ===== ======= ====== CONSOLIDATED TOTAL/WEIGHTED AVERAGE FOR ALL PROPERTIES.................................... 1,993,692 94.3% $20,790 $ 13.67 ========= ===== ======= ====== AVERAGE C&W RENTAL RATE TENANTS LEASING 10% OR ANNUALIZED WEIGHTED INCREASE MORE OF RENTABLE RENTAL AVERAGE POTENTIAL SQUARE FOOTAGE PER RATE AS OF CLASS A UNTIL MARKET PROPERTY AS OF ACQUISITION PROPERTIES: SEPTEMBER 30, RENTAL RATE IS SEPTEMBER 30, 1996 SUBMARKET/PROPERTY 1996(4) RATES(5) ACHIEVED(6) AND LEASE EXPIRATION DATE - ----------------------------------------------- --------------- -------- ------------ ------------------------- HORSHAM/WILLOW GROVE/JENKINTOWN, PA 700 Business Center Drive(12)................. Metpath (35%) - 1/12; Sprint (19%) - 3/01; Macro (19%) - 4/01%; 800 Business Center Drive(12)................. Advanta (10%) - 6/99 KING OF PRUSSIA, PA 500 North Gulph Road.......................... 16.51 21.39 29.6% Transition Software (16%) - 8/00, Strohl Syst (12%) - 10/99 BUCKS COUNTY, PA 2200 Cabot Boulevard.......................... 4.40 4.50 2.3% Hussman Corp (38%), Nobel Printing (38%) - 6/97; McCaffrey Mgt (24%) - 8/00 2250 Cabot Boulevard.......................... 3.50 4.50 28.6% Bucks County Nut (100%) - 7/99 2260 Cabot Boulevard(12)...................... Sager Electrical (14%) - 8.78 9.00 2.5% 10/98; Terminix Intrntnl 2270 Cabot Boulevard(12)...................... (13%) - 11/96 3000 Cabot Boulevard.......................... 17.03 18.95 11.3% Geraghty & Miller (31%) - 11/97; Prudential Insur. (21%) - 7/98; Luigi Bormioli Co. (11%) - 6/98 3329 Street Road -- Greenwood Sq.(12)......... 3331 Street Road -- Greenwood Sq.(12)......... 16.54 18.95 14.6% Waste Management (27%) - 3333 Street Road -- Greenwood Sq.(12)......... 3/97 BURLINGTON COUNTY, NJ 8000 Lincoln Drive............................ 17.13 19.30 $ 12.7% CSC (67%) - 11/01; Blue Cross (33%) - 2/07 NORTHERN SUBURBAN WILMINGTON One Righter Parkway........................... $ 19.30 20.50 6.2% Kimberly Clark (89%) - 12/05 ----- ----- ----- CONSOLIDATED TOTAL/WEIGHTED AVERAGE FOR THE ACQUISITION PROPERTIES........................ $ 16.23(13) $19.01(11)(13) 17.2% ===== ===== ===== CONSOLIDATED TOTAL/WEIGHTED AVERAGE FOR ALL PROPERTIES.................................... $ 15.15(14) $17.54(11)(14) 15.8% ===== ===== =====
- --------------- (1) Calculated by dividing net rentable square feet included in leases dated on or before September 30, 1996 by the aggregate net rentable square feet included in the Property. (2) "Total Base Rent" for the twelve months ended September 30, 1996 represents base rents received during such period, excluding tenant reimbursements, calculated in accordance with generally accepted accounting principles determined on a straight-line basis. Tenant reimbursements generally include payment of real estate taxes, operating expenses, and escalations and common area maintenance and utility charges. (3) Represents the Total Base Rent for the twelve months ended September 30, 1996, plus tenant reimbursements for the twelve months ended September 30, 1996, divided by the net rentable square feet leased. (4) "Average Annualized Rental Rate" is calculated as follows: (i) for office leases written on a triple net basis, the sum of the annualized contracted base rental rates payable for all space leased as of September 30, 1996 (without giving effect to free rent or scheduled rent increases that would be taken into account under generally accepted accounting principles) plus the 1996 budgeted operating expenses excluding tenant electricity; and (ii) for office leases written on a full service basis, the annualized contracted base rate payable for all space leased as of September 30, 1996. In both cases, the annualized rental rate is divided by the total square footage leased as of September 30, 1996 without giving effect to free rent or scheduled rent increases that would be taken into account under generally accepted accounting principles. (5) Represents the weighted average asking rates, as of June 30, 1996, of directly competitive properties in the relevant submarket within the Market, as identified by C&W. (6) Represents the percentage by which the June 30, 1996 C&W weighted average asking rate exceeds the September 30, 1996 average annualized rental rate of the applicable Property. (7) Property occupied by a single tenant under a triple net lease agreement, pursuant to which the tenant subcontracts directly with third party contractors for all building services. (8) These rates represent triple net lease rates (leases under which tenants are required to pay all real property taxes, insurance and expenses of maintaining the leased space). (9) Rental rates represent management's estimate of asking rental rates in these markets for comparable properties. (10) Excludes 1510 Gehman Road, which is an industrial Property. (11) Represents the Class A weighted average rental rate for the submarkets in which the Properties are located (weighted by Property net rentable square footage) as compared to the Class A office weighted average asking rate of $18.94 per square foot for the Market (weighted by Market net rentable square footage)as identified in the C&W Mid-Year Report. (12) The data reflected for these properties are presented on a consolidated basis. (13) Excludes 2200 Cabot Boulevard and 2250 Cabot Boulevard, which are industrial properties. (14) Excludes 1510 Gehman Road, 2200 Cabot Boulevard and 2250 Cabot Boulevard, which are industrial properties. 66 5 TENANTS Initial Properties. The Initial Properties are leased to approximately 146 tenants that are engaged in a variety of businesses. The following table sets forth information regarding the Company's leases with its 20 largest tenants based upon annualized base rent for the Initial Properties as of September 30, 1996:
PERCENTAGE OF REMAINING AGGREGATE NET PERCENTAGE OF ANNUALIZED AGGREGATE NUMBER OF LEASE TERM RENTABLE SQUARE AGGREGATE LEASED BASE RENT ANNUALIZED TENANT NAME LEASES IN MONTHS FEET LEASED SQUARE FEET (000'S) BASE RENT - ---------------------- --------- ------------- --------------- ----------------- --------------- --------------- Reed Technology....... 1 178 79,204 5.9% $ 733 5.1% Conti Mortgage........ 1 56 53,906 4.0% 596 4.2% IMS................... 1 115 40,774 3.1% 494 3.5% HIP Health Plan of NJ.................. 1 136 37,515 2.8% 463 3.2% Clair O'Dell Agency... 1 59 25,177 1.9% 441 3.1% CoreStates............ 1 116 30,359 2.2% 410 2.9% Nibco, Inc............ 1 36 98,725 7.4% 395 2.8% Parker, McKay & Criscuolo........... 1 57 25,905 1.9% 388 2.7% GMAC.................. 1 81 30,138 2.3% 354 2.5% Neutronics............ 1 77 47,604 3.6% 346 2.4% Corning Packaging..... 1 30 46,250 3.5% 331 2.3% Ford Motor Co......... 1 22 53,900 4.0% 327 2.3% Marshall, Dennehey.... 2 (a) 19,633 1.5% 321 2.2% New England Mutual.... 1 117 31,907 2.4% 320 2.2% AT&T Communications... 3 (b) 32,774 2.5% 288 2.0% Information Resources........... 1 52 21,008 1.6% 284 2.0% American Executive Centers............. 1 114 16,853 1.3% 279 2.0% Devco Mutual.......... 1 54 13,332 1.0% 230 1.6% Ohio Casualty......... 1 59 19,877 1.5% 229 1.6% Franciscan Health Systems............. 1 34 23,588 1.8% 225 1.6% -- ---- ------- ---- ----- ---- Consolidated Total/ Weighted Average..... 23 75 748,429 56.1% $ 7,454 52.3% == ==== ======= ==== ===== ====
- --------------- (a) Consists of two leases: a lease representing 12,971 square feet that expires in May 1997 and a lease representing 6,662 square feet that expires in October 2001. (b) Consists of three leases: a lease representing 11,000 square feet that expires in August 1998; a lease representing 13,107 square feet that expires in December 1996 and a lease representing 8,667 square feet that expires in November 1997. 67 6 Acquisition Properties. The Acquisition Properties are leased to approximately 76 tenants that are engaged in a variety of businesses. The following table sets forth information regarding leases with the 20 largest tenants at the Acquisition Properties based upon annualized base rent for the Acquisition Properties as of September 30, 1996:
PERCENTAGE OF REMAINING AGGREGATE NET PERCENTAGE OF ANNUALIZED AGGREGATE NUMBER OF LEASE TERM RENTABLE SQUARE AGGREGATE LEASED BASE RENT ANNUALIZED TENANT NAME LEASES IN MONTHS FEET LEASED SQUARE FEET (000'S) BASE RENT - ---------------------- --------- ------------- --------------- ----------------- --------------- --------------- Kimberly Clark........ 1 112 93,014 14.1% $ 1,814 20.1% Waste Management...... 1 6 45,764 6.9% 715 8.0% CSC................... 1 63 36,830 5.6% 626 6.9% Blue Cross............ 1 126 18,093 2.7% 315 3.5% FPA Corporation....... 1 6 16,453 2.5% 280 3.1% Prudential............ 2 (a) 13,945 2.1% 271 3.0% Sprint................ 1 55 15,348 2.3% 253 2.8% Metpath............... 1 185 28,475 4.3% 249 2.8% Macro................. 1 56 15,425 2.3% 231 2.6% Transition Software... 1 48 15,101 2.3% 227 2.5% KWS&P................. 1 31 22,706 3.4% 212 2.4% Nason Cullen Inc...... 1 59 12,566 1.9% 201 2.2% Strohl Systems........ 1 38 11,277 1.7% 186 2.1% Nextel Communication....... 1 56 11,004 1.7% 182 2.0% Geraghty & Miller..... 1 15 10,840 1.6% 173 1.9% Outdoor World Corp.... 1 20 9,579 1.5% 153 1.7% Bucks County Nut...... 1 35 40,000 6.1% 140 1.6% Advanta............... 1 34 8,339 1.3% 129 1.4% Orbital Engineer...... 1 53 7,468 1.1% 117 1.3% First American........ 1 39 6,258 0.9% 114 1.3% -- ---- ------- ---- ----- ---- Consolidated Total/Weighted Average..... 21 65 438,435 65.5% $ 6,588 72.2% == ==== ======= ==== ===== ====
- --------------- (a) Consists of two leases: a lease representing 7,445 square feet that expires in July 1998, and a lease representing 6,500 square feet that expires in November 1996. 68 7 Properties. On a combined basis, the Properties are leased to 222 tenants that are engaged in a variety of businesses. The following table sets forth information, on a combined basis, regarding leases at the Properties with the 20 largest tenants based upon annualized base rent from the Properties as of September 30, 1996:
PERCENTAGE OF REMAINING AGGREGATE NET PERCENTAGE OF ANNUALIZED AGGREGATE NUMBER OF LEASE TERM RENTABLE SQUARE AGGREGATE LEASED BASE RENT ANNUALIZED TENANT NAME LEASES IN MONTHS FEET LEASED SQUARE FEET $ (000'S) BASE RENT - ---------------------- --------- ------------- --------------- ----------------- --------------- --------------- Kimberly Clark........ 2 (a) 99,238 5.0% $ 2,013 8.7% Waste Management...... 1 6 45,764 2.3% 752 3.2% Reed Technology....... 1 178 79,204 4.0% 733 3.1% CSC................... 1 63 36,830 1.9% 626 2.7% Conti Mortgage........ 1 56 53,906 2.7% 596 2.6% IMS................... 1 115 40,774 2.0% 495 2.1% HIP Health Plan NJ.... 1 136 37,515 1.9% 463 2.0% Clair O'Dell Agency... 1 59 25,177 1.3% 441 1.9% CoreStates............ 1 116 30,359 1.5% 410 1.8% Nibco, Inc............ 1 36 98,725 5.0% 395 1.7% Parker, McKay & Criscuolo........... 1 57 25,905 1.3% 389 1.7% GMAC.................. 1 81 30,138 1.5% 355 1.5% Neutronics............ 1 77 47,604 2.4% 346 1.5% Corning Packaging..... 1 30 46,250 2.3% 331 1.4% Ford Electronics...... 1 22 53,900 2.7% 327 1.4% Marshall, Dennehey.... 2 (b) 19,633 1.0% 321 1.4% New England Mutual.... 1 117 31,907 1.6% 320 1.4% Blue Cross............ 1 126 18,093 0.9% 315 1.4% AT&T Communications...... 3 (c) 32,774 1.6% 288 1.2% Information Resources........... 1 52 21,008 1.1% 284 1.2% -- ---- ------- ---- ---------- ---- Consolidated Total Weighted Average..... 24 76 874,704 43.9% $10,200 43.8% == ======= ==== ========== ====
- --------------- (a) Consists of two leases: a lease representing 93,014 square feet that expires in December 2005, and a lease representing 6,224 square feet that expires in November 1997. (b) Consists of two leases: a lease representing 12,971 square feet that expires in May 1997 and a lease representing 6,662 square feet that expires in October 2001. (c) Consists of three leases: a lease representing 11,000 square feet that expires in August 1998; a lease representing 13,107 square feet that expires in December 1996 and a lease representing 8,667 square feet that expires in November 1997. 69 8 LEASE EXPIRATIONS Initial Properties. The following table sets forth detailed lease expiration information for the Initial Properties for leases in place as of September 30, 1996, assuming that none of the tenants exercise renewal options or termination rights, if any, at or prior to the scheduled expirations:
PERCENTAGE OF TOTAL RENTABLE FINAL NUMBER OF SQUARE FINAL ANNUALIZED ANNUALIZED LEASES FOOTAGE FINAL BASE RENT PER BASE EXPIRING SUBJECT TO ANNUALIZED SQUARE FOOT RENT UNDER YEAR OF LEASE EXPIRATION WITHIN THE EXPIRING BASE RENT UNDER UNDER EXPIRING CUMULATIVE DECEMBER 31 YEAR(1) LEASES EXPIRING LEASES EXPIRING LEASES(1) LEASES TOTAL - ----------------------------------- ---------- ---------- --------------- ------------------ ---------- ---------- 1996(2)............................ 15 54,004 $ 676,134 $12.52 4.4% 4.4% 1997............................... 42 115,886 1,701,924 14.69 11.1% 15.5% 1998............................... 20 100,621(3) 977,905(3) 9.72 6.4% 21.9% 1999............................... 28 296,212(3) 2,495,062(3) 8.42 16.3% 38.2% 2000............................... 10 62,670 874,483 13.95 5.7% 45.5% 2001............................... 20 212,726 2,970,875 13.97 19.4% 63.3% 2002............................... 1 8,912 169,328 19.00 1.1% 64.4% 2003............................... 7 109,336 1,361,239 12.45 8.9% 73.3% 2004............................... 1 9,262 185,240 20.00 1.2% 74.5% 2005............................... 2 19,387 365,564 18.86 2.4% 76.9% 2006............................... 6 145,449 1,942,732 13.36 12.7% 89.6% 2007 and thereafter................ 2 116,719 1,580,118 13.54 10.4% 100.0% --- --------- ----------- ------ ------ ---- Consolidated Total/Weighted Average.......................... 154 1,251,184 $15,300,604 $12.23 100.0% 100.0% === ========= =========== ====== ====== ====
- --------------- (1) "Final Annualized Base Rent" for each lease scheduled to expire represents the cash rental rate of base rents, excluding tenant reimbursements, in the final month prior to expiration multiplied by 12. Tenant reimbursements generally include payments on account of real estate taxes, operating expense escalations and common area utility charges. (2) Represents lease expirations from September 30, 1996 through December 31, 1996. (3) Includes 152,625 net rentable square feet and $780,711 of final annualized base rent ($5.12 per net rentable square foot) associated with 1998 and 1999 lease expirations on the Company's sole industrial property included in the Initial Properties. 70 9 Acquisition Properties. The following table sets forth detailed lease expiration information for the Acquisition Properties for leases in place as of September 30, 1996, assuming none of the tenants exercise renewal options or termination rights, if any, at or prior to the scheduled expirations:
PERCENTAGE OF TOTAL RENTABLE FINAL NUMBER OF SQUARE FINAL ANNUALIZED ANNUALIZED LEASES FOOTAGE FINAL BASE RENT PER BASE EXPIRING SUBJECT TO ANNUALIZED SQUARE FOOT RENT UNDER YEAR OF LEASE EXPIRATION WITHIN THE EXPIRING BASE RENT UNDER UNDER EXPIRING CUMULATIVE DECEMBER 31 YEAR(1) LEASES EXPIRING LEASES EXPIRING LEASES(1) LEASES TOTAL - ----------------------------------- ---------- ---------- --------------- ------------------ ---------- ---------- 1996(2)............................ 7 23,245 $ 334,950 $14.41 3.4% 3.4% 1997............................... 18 130,449 1,866,640 14.31 19.0% 22.4% 1998............................... 14 42,303 659,835 15.60 6.7% 29.1% 1999............................... 20 143,085 1,605,792 11.22 16.3% 45.4% 2000............................... 4 35,008 445,238 12.72 4.5% 49.9% 2001............................... 10 108,623 1,849,219 17.02 18.8% 68.7% 2002............................... 1 4,433 82,764 18.67 0.8% 69.5% 2003............................... -- -- -- -- -- 69.5% 2004............................... -- -- -- -- -- 69.5% 2005............................... 1 93,014 2,252,799 24.22 22.9% 92.4% 2006............................... -- -- -- -- -- 92.4% 2007 and thereafter................ 3 48.069 742,447 15.45 7.6% 100.0% --- -------- - ----------- ------ ------ Consolidated Total/Weighted Average.......................... 78 628,229 $ 9,839,684 $15.66 100.0% 100.0% === ========= =========== ====== ======
- --------------- (1) "Final Annualized Base Rent" for each lease scheduled to expire represents the cash rental rate of base rents, excluding tenant reimbursements, in the final month prior to expiration multiplied by 12. Tenant reimbursements generally include payments on account of real estate taxes, operating expense escalations and common area utility charges. (2) Represents lease expirations from September 30, 1996 through December 31, 1996. 71 10 Properties. The following table sets forth detailed lease expiration information for the Properties on a combined basis for leases in place as of September 30, 1996, assuming that none of the tenants exercise renewal options or termination rights, if any, at or prior to the scheduled expirations:
PERCENTAGE OF TOTAL RENTABLE FINAL NUMBER OF SQUARE FINAL ANNUALIZED ANNUALIZED LEASES FOOTAGE FINAL BASE RENT PER BASE EXPIRING SUBJECT TO ANNUALIZED SQUARE FOOT RENT UNDER YEAR OF LEASE EXPIRATION WITHIN THE EXPIRING BASE RENT UNDER UNDER EXPIRING CUMULATIVE DECEMBER 31 YEAR(1) LEASES EXPIRING LEASES EXPIRING LEASES(1) LEASES TOTAL - ----------------------------------- ---------- ---------- --------------- ------------------ ---------- ---------- 1996(2)............................ 22 77,249 $ 1,011,084 $13.09 4.0% 4.0% 1997............................... 60 246,335 3,568,563 14.49 14.2% 18.2% 1998............................... 34 142,924(3) 1,637,739(3) 11.46 6.5% 24.7% 1999............................... 48 439,297(3) 4,100,854(3) 9.34 16.3% 41.0% 2000............................... 14 97,678 1,319,720 13.51 5.3% 46.3% 2001............................... 30 321,349 4,820,094 15.00 19.2% 65.5% 2002............................... 2 13,345 252,092 18.89 1.0% 66.5% 2003............................... 7 109,336 1,361,239 12.45 5.4% 71.9% 2004............................... 1 9,262 185,240 20.00 0.7% 72.6% 2005............................... 3 112,401 2,618,363 23.29 10.4% 83.0% 2006............................... 6 145,449 1,942,732 13.36 7.7% 90.7% 2007 and thereafter................ 5 164,788 2,322,565 9.24 9.3% 100.0% --- --------- ----------- ------ ------ Consolidated Total/ Weighted Average................. 232 1,879,413 $25,140,285 $13.38 100.0% 100.0% === ========= =========== ====== ======
- --------------- (1) "Final Annualized Base Rent" for each lease scheduled to expire represents the cash rental rate of base rents, excluding tenant reimbursements, in the final month prior to expiration multiplied by 12. Tenant reimbursements generally include payments on account of real estate taxes, operating expense escalations and common area utility charges. (2) Represents lease expirations from September 30, 1996 through December 31, 1996. (3) Includes 152,625 net rentable square feet and $780,711 of final annualized base rent ($5.12 per net rentable square foot) associated with 1998 and 1999 lease expirations on the Company's sole industrial property included in the Initial Properties. 72 11 LEASING EXPIRATIONS -- PROPERTY BY PROPERTY The following table sets forth detailed lease expiration information for each of the Properties for leases in place as of September 30, 1996, assuming that none of the tenants exercise renewal options or termination rights, if any, at or prior to the scheduled expirations.
YEAR OF LEASE EXPIRATION 1996(1) 1997 1998 1999 2000 2001 2002 - -------------------------------------- -------- ---------- -------- ---------- ---------- ---------- -------- INITIAL PROPERTIES: HORSHAM/WILLOW GROVE/ JENKINTOWN, PA 650 Dresher Road Square Footage of Expiring Leases..... -- -- -- -- -- -- -- Percentage of Total Leased Square Feet................................. -- -- -- -- -- -- -- Final Annual Base Rent Under Expiring Leases(2)................... -- -- -- -- -- -- -- Final Annual Base Rent per Square Foot Under Expiring Leases(3)............. -- -- -- -- -- -- -- Percentage of Total Final Annual Base Rent Represented by Expiring Leases............................... -- -- -- -- -- -- -- Number of Leases Expiring............. -- -- -- -- -- -- -- 1155 Business Center Drive Square Footage of Expiring Leases..... -- -- 1,023 6,988 2,298 -- -- Percentage of Total Leased Square Feet................................. -- -- 2.0% 13.7% 4.5% -- -- Final Annual Base Rent Under Expiring Leases(2)................... -- -- $11,253 $97,622 $29,070 -- -- Final Annual Base Rent per Square Foot Under Expiring Leases(3)............. -- -- $11.00 $13.97 -- -- -- Percentage of Total Final Annual Base Rent Represented by Expiring Leases............................... -- -- 1.7% 14.4% 4.3% -- -- Number of Leases Expiring............. -- -- 1 1 1 -- -- 500 Enterprise Road Square Footage of Expiring Leases..... -- -- -- -- 12,845 53,906 -- Percentage of Total Leased Square Feet................................. -- -- -- -- 19.2% 80.8% -- Final Annual Base Rent Under Expiring Leases(2)................... -- -- -- -- $122,028 $595,661 -- Final Annual Base Rent per Square Foot Under Expiring Leases(3)............. -- -- -- -- $9.50 $11.05 -- Percentage of Total Final Annual Base Rent Represented by Expiring Leases............................... -- -- -- -- 17.0% 83.0% -- Number of Leases Expiring............. -- -- -- -- 1 1 -- One Progress Avenue Square Footage of Expiring Leases..... -- -- -- -- -- -- -- Percentage of Total Leased Square Feet................................. -- -- -- -- -- -- -- Final Annual Base Rent Under Expiring Leases(2)................... -- -- -- -- -- -- -- Final Annual Base Rent per Square Foot Under Expiring Leases(3)............. -- -- -- -- -- -- -- Percentage of Total Final Annual Base Rent Represented by Expiring Leases............................... -- -- -- -- -- -- -- Number of Leases Expiring............. -- -- -- -- -- -- -- 2007 AND YEAR OF LEASE EXPIRATION 2003 2004 2005 2006 THEREAFTER TOTAL - -------------------------------------- ---------- -------- -------- ---------- ---------- ----------- INITIAL PROPERTIES: HORSHAM/WILLOW GROVE/ JENKINTOWN, PA 650 Dresher Road Square Footage of Expiring Leases..... 30,138 -- -- -- -- 30,138 Percentage of Total Leased Square Feet................................. 100.0% -- -- -- -- 100.0% Final Annual Base Rent Under Expiring Leases(2)................... $403,849 -- -- -- -- $403,849 Final Annual Base Rent per Square Foot Under Expiring Leases(3)............. $13.40 -- -- -- -- $13.40 Percentage of Total Final Annual Base Rent Represented by Expiring Leases............................... 100.0% -- -- -- -- 100.0% Number of Leases Expiring............. 1 -- -- -- -- 1 1155 Business Center Drive Square Footage of Expiring Leases..... -- -- -- 40,774 -- 51,083 Percentage of Total Leased Square Feet................................. -- -- -- 79.8% -- 100.0% Final Annual Base Rent Under Expiring Leases(2)................... -- -- -- $538,217 -- $676,162 Final Annual Base Rent per Square Foot Under Expiring Leases(3)............. -- -- -- $13.20 -- $13.24 Percentage of Total Final Annual Base Rent Represented by Expiring Leases............................... -- -- -- 79.6% -- 100.0% Number of Leases Expiring............. -- -- -- 1 -- 4 500 Enterprise Road Square Footage of Expiring Leases..... -- -- -- -- -- 66,751 Percentage of Total Leased Square Feet................................. -- -- -- -- -- 100.0% Final Annual Base Rent Under Expiring Leases(2)................... -- -- -- -- -- $717,689 Final Annual Base Rent per Square Foot Under Expiring Leases(3)............. -- -- -- -- -- $10.75 Percentage of Total Final Annual Base Rent Represented by Expiring Leases............................... -- -- -- -- -- 100.0% Number of Leases Expiring............. -- -- -- -- -- 2 One Progress Avenue Square Footage of Expiring Leases..... -- -- -- -- 79,204 79,204 Percentage of Total Leased Square Feet................................. -- -- -- -- 100.0 % 100.0% Final Annual Base Rent Under Expiring Leases(2)................... -- -- -- -- $967,873 $967,873 Final Annual Base Rent per Square Foot Under Expiring Leases(3)............. -- -- -- -- $12.22 $12.22 Percentage of Total Final Annual Base Rent Represented by Expiring Leases............................... -- -- -- -- 100.0 % 100.0% Number of Leases Expiring............. -- -- -- -- 1 1
- --------------- Footnotes appear on page 81. 73 12
YEAR OF LEASE EXPIRATION 1996(1) 1997 1998 1999 2000 2001 2002 - -------------------------------------- -------- ---------- -------- ---------- ---------- ---------- -------- INITIAL PROPERTIES (CONTINUED): SOUTHERN ROUTE 202 CORRIDOR, PA 456 Creamery Way Square Footage of Expiring Leases..... -- -- -- -- -- -- -- Percentage of Total Leased Square Feet................................. -- -- -- -- -- -- -- Final Annual Base Rent Under Expiring Leases(2)................... -- -- -- -- -- -- -- Final Annual Base Rent per Square Foot Under Expiring Leases(3)............. -- -- -- -- -- -- -- Percentage of Total Final Annual Base Rent Represented by Expiring Leases............................... -- -- -- -- -- -- -- Number of Leases Expiring............. -- -- -- -- -- -- -- 486 Thomas Jones Way Square Footage of Expiring Leases..... 2,676 3,895 8,612 10,086 961 -- -- Percentage of Total Leased Square Feet................................. 10.2 % 14.9% 32.8% 38.5% 3.7% Final Annual Base Rent Under Expiring Leases(2)................... $30,774 $46,935 $99,944 $113,468 $11,532 -- -- Final Annual Base Rent per Square Foot Under Expiring Leases(3)............. $11.50 $12.05 $11.61 $11.25 $12.00 -- -- Percentage of Total Final Annual Base Rent Represented by Expiring Leases............................... 0 0 33.0% 37.5% 3.8% Number of Leases Expiring............. 1 1 3 1 1 -- -- 468 Creamery Way Square Footage of Expiring Leases..... -- -- -- 23,588 5,346 -- -- Percentage of Total Leased Square Feet................................. -- -- -- 81.5% 18.5% -- -- Final Annual Base Rent Under Expiring Leases(2)................... -- -- -- $224,086 $67,627 -- -- Final Annual Base Rent per Square Foot Under Expiring Leases(3)............. -- -- -- $9.50 $12.65 -- -- Percentage of Total Final Annual Base Rent Represented by Expiring Leases............................... -- -- -- 76.8% 23.2% -- -- Number of Leases Expiring............. -- -- -- 1 1 -- -- 110 Summit Drive Square Footage of Expiring Leases..... 2,600 -- -- 26,920 -- -- -- Percentage of Total Leased Square Feet................................. 8.8 % 91.2% Final Annual Base Rent Under Expiring Leases(2)................... $22,646 -- -- $191,110 -- -- -- Final Annual Base Rent per Square Foot Under Expiring Leases(3)............. $8.71 -- -- $7.10 -- -- -- Percentage of Total Final Annual Base Rent Represented by Expiring Leases............................... 10.6 % 89.4% Number of Leases Expiring............. 1 -- -- 2 -- -- -- 2007 AND YEAR OF LEASE EXPIRATION 2003 2004 2005 2006 THEREAFTER TOTAL - -------------------------------------- ---------- -------- -------- ---------- ---------- ----------- INITIAL PROPERTIES (CONTINUED): SOUTHERN ROUTE 202 CORRIDOR, PA 456 Creamery Way Square Footage of Expiring Leases..... 47,604 -- -- -- -- 47,604 Percentage of Total Leased Square Feet................................. 100.0% -- -- -- -- 100.0% Final Annual Base Rent Under Expiring Leases(2)................... $357,030 -- -- -- -- $357,030 Final Annual Base Rent per Square Foot Under Expiring Leases(3)............. $7.50 -- -- -- -- $7.50 Percentage of Total Final Annual Base Rent Represented by Expiring Leases............................... 100.0% -- -- -- -- 100.0% Number of Leases Expiring............. 1 -- -- -- -- 1 486 Thomas Jones Way Square Footage of Expiring Leases..... -- -- -- -- -- 26,230 Percentage of Total Leased Square Feet................................. 100.00% Final Annual Base Rent Under Expiring Leases(2)................... -- -- -- -- -- $302,653 Final Annual Base Rent per Square Foot Under Expiring Leases(3)............. -- -- -- -- -- $11.54 Percentage of Total Final Annual Base Rent Represented by Expiring Leases............................... 100.00% Number of Leases Expiring............. -- -- -- -- -- 7 468 Creamery Way Square Footage of Expiring Leases..... -- -- -- -- -- 28,934 Percentage of Total Leased Square Feet................................. -- -- -- -- -- 100.0% Final Annual Base Rent Under Expiring Leases(2)................... -- -- -- -- -- $291,713 Final Annual Base Rent per Square Foot Under Expiring Leases(3)............. -- -- -- -- -- $10.08 Percentage of Total Final Annual Base Rent Represented by Expiring Leases............................... -- -- -- -- -- 100.0% Number of Leases Expiring............. -- -- -- -- -- 2 110 Summit Drive Square Footage of Expiring Leases..... -- -- -- -- -- 29,520 Percentage of Total Leased Square Feet................................. 100.00% Final Annual Base Rent Under Expiring Leases(2)................... -- -- -- -- -- $213,756 Final Annual Base Rent per Square Foot Under Expiring Leases(3)............. -- -- -- -- -- $7.24 Percentage of Total Final Annual Base Rent Represented by Expiring Leases............................... 100.00% Number of Leases Expiring............. -- -- -- -- -- 3
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YEAR OF LEASE EXPIRATION 1996(1) 1997 1998 1999 2000 2001 2002 - -------------------------------------- -------- ---------- -------- ---------- ---------- ---------- -------- INITIAL PROPERTIES (CONTINUED): BLUE BELL/PLYMOUTH MEETING/ FORT WASHINGTON, PA 2240/50 Butler Pike Square Footage of Expiring Leases..... -- -- 4,430 17,080 -- -- -- Percentage of Total Leased Square Feet................................. -- -- 8.5% 33.0% -- -- -- Final Annual Base Rent Under Expiring Leases(2)................... -- -- $56,483 $187,880 -- -- -- Final Annual Base Rent per Square Foot Under Expiring Leases(3)............. -- -- $12.75 $11.00 -- -- -- Percentage of Total Final Annual Base Rent Represented by Expiring Leases............................... -- -- 8.1% 27.0% -- -- -- Number of Leases Expiring............. -- -- 1 1 -- -- -- 120 West Germantown Pike Square Footage of Expiring Leases..... -- -- 1,450 -- -- 29,096 -- Percentage of Total Leased Square Feet................................. 4.8% 95.2% Final Annual Base Rent Under Expiring Leases(2)................... -- -- $17,400 -- -- $510,427 -- Final Annual Base Rent per Square Foot Under Expiring Leases(3)............. -- -- $12.00 -- -- $17.54 -- Percentage of Total Final Annual Base Rent Represented by Expiring Leases............................... -- 3.3% 96.7% Number of Leases Expiring............. -- -- 1 -- -- 2 -- 140 West Germantown Pike Square Footage of Expiring Leases..... -- -- 7,460 16,900 1,264 -- -- Percentage of Total Leased Square Feet................................. -- -- 29.1% 66.0% 4.9% -- -- Final Annual Base Rent Under Expiring Leases(2)................... -- -- $125,701 $215,059 $16,432 -- -- Final Annual Base Rent per Square Foot Under Expiring Leases(3)............. -- -- $16.85 $12.73 $13.00 -- -- Percentage of Total Final Annual Base Rent Represented by Expiring Leases............................... -- -- 35.2% 60.2% 4.6% -- -- Number of Leases Expiring............. -- -- 1 2 1 -- -- 2260 Butler Pike Square Footage of Expiring Leases..... -- -- -- 3,041 21,008 7,843 -- Percentage of Total Leased Square Feet................................. 9.5% 65.9% 24.6% Final Annual Base Rent Under Expiring Leases(2)................... -- -- -- $41,662 $283,608 $98,038 -- Final Annual Base Rent per Square Foot Under Expiring Leases(3)............. -- -- -- $13.70 $13.50 $12.50 -- Percentage of Total Final Annual Base Rent Represented by Expiring Leases............................... -- -- -- 9.8% 67.0% 23.2% -- Number of Leases Expiring............. -- -- -- 1 1 1 -- 2007 AND YEAR OF LEASE EXPIRATION 2003 2004 2005 2006 THEREAFTER TOTAL - -------------------------------------- ---------- -------- -------- ---------- ---------- ----------- INITIAL PROPERTIES (CONTINUED): BLUE BELL/PLYMOUTH MEETING/ FORT WASHI 2240/50 Butler Pike Square Footage of Expiring Leases..... -- -- -- 30,359 -- 51,869 Percentage of Total Leased Square Feet................................. -- -- -- 58.5% -- 100.0% Final Annual Base Rent Under Expiring Leases(2)................... -- -- -- $450,831 -- $695,194 Final Annual Base Rent per Square Foot Under Expiring Leases(3)............. -- -- -- $14.85 -- $13.40 Percentage of Total Final Annual Base Rent Represented by Expiring Leases............................... -- -- -- 64.9% -- 100.0% Number of Leases Expiring............. -- -- -- 1 -- 3 120 West Germantown Pike Square Footage of Expiring Leases..... -- -- -- -- -- 30,546 Percentage of Total Leased Square Feet................................. 100.0% Final Annual Base Rent Under Expiring Leases(2)................... -- -- -- -- -- $527,827 Final Annual Base Rent per Square Foot Under Expiring Leases(3)............. -- -- -- -- -- $17.28 Percentage of Total Final Annual Base Rent Represented by Expiring Leases............................... 100.0% Number of Leases Expiring............. -- -- -- -- -- 3 140 West Germantown Pike Square Footage of Expiring Leases..... -- -- -- -- -- 25,624 Percentage of Total Leased Square Feet................................. -- -- -- -- -- 100.0% Final Annual Base Rent Under Expiring Leases(2)................... -- -- -- -- -- $357,192 Final Annual Base Rent per Square Foot Under Expiring Leases(3)............. -- -- -- -- -- $13.94 Percentage of Total Final Annual Base Rent Represented by Expiring Leases............................... -- -- -- -- -- 100.0% Number of Leases Expiring............. -- -- -- -- -- 4 2260 Butler Pike Square Footage of Expiring Leases..... -- -- -- -- -- 31,892 Percentage of Total Leased Square Feet................................. 100.0% Final Annual Base Rent Under Expiring Leases(2)................... -- -- -- -- -- $423,308 Final Annual Base Rent per Square Foot Under Expiring Leases(3)............. -- -- -- -- -- $13.27 Percentage of Total Final Annual Base Rent Represented by Expiring Leases............................... -- -- -- -- -- 100.0% Number of Leases Expiring............. -- -- -- -- -- 3
- --------------- Footnotes appear on page 81. 75 14
YEAR OF LEASE EXPIRATION 1996(1) 1997 1998 1999 2000 2001 2002 - -------------------------------------- -------- ---------- -------- ---------- ---------- ---------- -------- INITIAL PROPERTIES (CONTINUED): MAIN LINE, PA 16 Campus Boulevard Square Footage of Expiring Leases..... -- -- -- -- -- 8,000 -- Percentage of Total Leased Square Feet................................. -- -- -- -- -- 12.2% -- Final Annual Base Rent Under Expiring Leases(2)................... -- -- -- -- -- $96,000 -- Final Annual Base Rent per Square Foot Under Expiring Leases(3)............. -- -- -- -- -- $12.00 -- Percentage of Total Final Annual Base Rent Represented by Expiring Leases............................... -- -- -- -- -- 13.4% -- Number of Leases Expiring............. -- -- -- -- -- 1 -- 18 Campus Boulevard Square Footage of Expiring Leases..... -- 6,224 -- 2,042 -- 29,434 -- Percentage of Total Leased Square Feet................................. -- 16.5% -- 5.4% -- 78.1% -- Final Annual Base Rent Under Expiring Leases(2)................... -- $78,360 -- $26,546 -- $447,354 -- Final Annual Base Rent per Square Foot Under Expiring Leases(3)............. -- $12.59 -- $13.00 -- $15.20 -- Percentage of Total Final Annual Base Rent Represented by Expiring Leases............................... -- 14.2% -- 4.8% -- 81.0% -- Number of Leases Expiring............. -- 1 -- 1 -- 3 -- LEHIGH VALLEY, PA 7310 Tilghman Street Square Footage of Expiring Leases..... 13,107 8,667 11,000 3,829 -- 2,980 -- Percentage of Total Leased Square Feet................................. 33.1 % 21.9% 27.8% 9.7% -- 7.5% -- Final Annual Base Rent Under Expiring Leases(2)................... $108,788 $86,670 $92,950 $34,461 -- $29,055 -- Final Annual Base Rent per Square Foot Under Expiring Leases(3)............. $8.30 $10.00 $8.45 $9.00 -- $9.75 -- Percentage of Total Final Annual Base Rent Represented by Expiring Leases............................... 30.9 % 24.6% 26.4% 9.8% -- 8.3% -- Number of Leases Expiring............. 1 1 1 1 -- 1 -- 7248 Tilghman Street Square Footage of Expiring Leases..... -- 5,327 -- 2,695 -- 32,180 -- Percentage of Total Leased Square Feet................................. -- 13.2% -- 6.7% -- 80.1% -- Final Annual Base Rent Under Expiring Leases(2)................... -- $59,929 -- $30,993 -- $348,540 -- Final Annual Base Rent per Square Foot Under Expiring Leases(3)............. -- $11.25 -- $11.50 -- $10.83 -- Percentage of Total Final Annual Base Rent Represented by Expiring Leases............................... -- 13.6% -- 7.1% -- 79.3% -- Number of Leases Expiring............. -- 1 -- 1 -- 2 -- 2007 AND YEAR OF LEASE EXPIRATION 2003 2004 2005 2006 THEREAFTER TOTAL - -------------------------------------- ---------- -------- -------- ---------- ---------- ----------- INITIAL PROPERTIES (CONTINUED): MAIN LINE, PA 16 Campus Boulevard Square Footage of Expiring Leases..... -- -- -- 57,463 -- 65,463 Percentage of Total Leased Square Feet................................. -- -- -- 87.8% -- 100.0% Final Annual Base Rent Under Expiring Leases(2)................... -- -- -- $620,837 -- $716,837 Final Annual Base Rent per Square Foot Under Expiring Leases(3)............. -- -- -- $10.80 -- $10.95 Percentage of Total Final Annual Base Rent Represented by Expiring Leases............................... -- -- -- 86.6% -- 100.0% Number of Leases Expiring............. -- -- -- 3 -- 4 18 Campus Boulevard Square Footage of Expiring Leases..... -- -- -- -- -- 37,700 Percentage of Total Leased Square Feet................................. -- -- -- -- -- 100.0% Final Annual Base Rent Under Expiring Leases(2)................... -- -- -- -- -- $552,260 Final Annual Base Rent per Square Foot Under Expiring Leases(3)............. -- -- -- -- -- $14.65 Percentage of Total Final Annual Base Rent Represented by Expiring Leases............................... -- -- -- -- -- 100.0% Number of Leases Expiring............. -- -- -- -- -- 5 LEHIGH VALLEY, PA 7310 Tilghman Street Square Footage of Expiring Leases..... -- -- -- -- -- 39,583 Percentage of Total Leased Square Feet................................. -- -- -- -- -- 100.0% Final Annual Base Rent Under Expiring Leases(2)................... -- -- -- -- -- $351,924 Final Annual Base Rent per Square Foot Under Expiring Leases(3)............. -- -- -- -- -- $8.89 Percentage of Total Final Annual Base Rent Represented by Expiring Leases............................... -- -- -- -- -- 100.0% Number of Leases Expiring............. -- -- -- -- -- 5 7248 Tilghman Street Square Footage of Expiring Leases..... -- -- -- -- -- 40,202 Percentage of Total Leased Square Feet................................. -- -- -- -- -- 100.0% Final Annual Base Rent Under Expiring Leases(2)................... -- -- -- -- -- $439,462 Final Annual Base Rent per Square Foot Under Expiring Leases(3)............. -- -- -- -- -- $10.93 Percentage of Total Final Annual Base Rent Represented by Expiring Leases............................... -- -- -- -- -- 100.0% Number of Leases Expiring............. -- -- -- -- -- 4
- --------------- Footnotes appear on page 81. 76 15
YEAR OF LEASE EXPIRATION 1996(1) 1997 1998 1999 2000 2001 2002 - -------------------------------------- -------- ---------- -------- ---------- ---------- ---------- -------- INITIAL PROPERTIES (CONTINUED): 6575 Snowdrift Road Square Footage of Expiring Leases..... -- -- -- 46,250 -- -- -- Percentage of Total Leased Square Feet................................. -- -- -- 100.0% -- -- -- Final Annual Base Rent Under Expiring Leases(2)................... -- -- -- $330,688 -- -- -- Final Annual Base Rent per Square Foot Under Expiring Leases(3)............. -- -- -- $7.15 -- -- -- Percentage of Total Final Annual Base Rent Represented by Expiring Leases............................... -- -- -- 100.0% -- -- -- Number of Leases Expiring............. -- -- -- 1 -- -- -- LANSDALE, PA 1510 Gehman Road Square Footage of Expiring Leases..... -- -- 53,900 98,725 -- -- -- Percentage of Total Leased Square Feet................................. -- -- 35.3% 64.7% -- -- -- Final Annual Base Rent Under Expiring Leases(2)................... -- -- $361,130 $419,581 -- -- -- Final Annual Base Rent per Square Foot Under Expiring Leases(3)............. -- -- $6.70 $4.25 -- -- -- Percentage of Total Final Annual Base Rent Represented by Expiring Leases............................... -- -- 46.3% 53.7% -- -- -- Number of Leases Expiring............. -- -- 1 1 -- -- -- BURLINGTON COUNTY, NJ One Greentree Centre Square Footage of Expiring Leases..... 3,701 15,394 5,172 4,415 -- 10,303 -- Percentage of Total Leased Square Feet................................. 6.6% 27.6% 9.3% 7.9% -- 18.5% -- Final Annual Base Rent Under Expiring Leases(2)................... $60,813 $247,192 $84,954 $78,366 -- $182,038 -- Final Annual Base Rent per Square Foot Under Expiring Leases(3)............. $16.43 $16.06 $16.43 $17.75 -- $17.67 -- Percentage of Total Final Annual Base Rent Represented by Expiring Leases............................... 6.2% 25.1% 8.6% 8.0% -- 18.5% -- Number of Leases Expiring............. 2 6 3 1 -- 2 -- Two Greentree Centre Square Footage of Expiring Leases..... 5,680 18,838 3,732 3,183 -- -- -- Percentage of Total Leased Square Feet................................. 10.1% 33.6% 6.7% 5.7% -- -- -- Final Annual Base Rent Under Expiring Leases(2)................... $99,400 $283,350 $69,917 $50,928 -- -- -- Final Annual Base Rent per Square Foot Under Expiring Leases(3)............. $17.50 $15.04 $11.75 $16.00 -- -- -- Percentage of Total Final Annual Base Rent Represented by Expiring Leases............................... 10.3% 29.2% 7.2% 5.3% -- -- -- Number of Leases Expiring............. 1 5 2 1 1 -- -- 2007 AND YEAR OF LEASE EXPIRATION 2003 2004 2005 2006 THEREAFTER TOTAL - -------------------------------------- ---------- -------- -------- ---------- ---------- ----------- INITIAL PROPERTIES (CONTINUED): 6575 Snowdrift Road Square Footage of Expiring Leases..... -- -- -- -- -- 46,250 Percentage of Total Leased Square Feet................................. -- -- -- -- -- 100.0% Final Annual Base Rent Under Expiring Leases(2)................... -- -- -- -- -- $330,688 Final Annual Base Rent per Square Foot Under Expiring Leases(3)............. -- -- -- -- -- $7.15 Percentage of Total Final Annual Base Rent Represented by Expiring Leases............................... -- -- -- -- -- 100.0% Number of Leases Expiring............. -- -- -- -- -- 1 LANSDALE, PA 1510 Gehman Road Square Footage of Expiring Leases..... -- -- -- -- -- 152,625 Percentage of Total Leased Square Feet................................. -- -- -- -- -- 100.0% Final Annual Base Rent Under Expiring Leases(2)................... -- -- -- -- -- $780,711 Final Annual Base Rent per Square Foot Under Expiring Leases(3)............. -- -- -- -- -- $5.12 Percentage of Total Final Annual Base Rent Represented by Expiring Leases............................... -- -- -- -- -- 100.0% Number of Leases Expiring............. -- -- -- -- -- 2 BURLINGTON COUNTY, NJ One Greentree Centre Square Footage of Expiring Leases..... -- -- -- 16,853 -- 55,838 Percentage of Total Leased Square Feet................................. -- -- -- 30.2% -- 100.0% Final Annual Base Rent Under Expiring Leases(2)................... -- -- -- $332,847 -- $986,210 Final Annual Base Rent per Square Foot Under Expiring Leases(3)............. -- -- -- $19.75 -- $17.66 Percentage of Total Final Annual Base Rent Represented by Expiring Leases............................... -- -- -- 33.8% -- 100.0% Number of Leases Expiring............. -- -- -- 1 -- 15 Two Greentree Centre Square Footage of Expiring Leases..... 5,255 -- 19,387 -- -- 56,075 Percentage of Total Leased Square Feet................................. 9.4% -- 34.5% -- -- 100.0% Final Annual Base Rent Under Expiring Leases(2)................... $99,845 -- $365,564 -- -- $969,004 Final Annual Base Rent per Square Foot Under Expiring Leases(3)............. $19.00 -- $18.86 -- -- $16.82 Percentage of Total Final Annual Base Rent Represented by Expiring Leases............................... 10.3% -- 37.7% -- -- 100.0% Number of Leases Expiring............. 1 -- 2 -- -- 12
- --------------- Footnotes appear on page 81. 77 16
YEAR OF LEASE EXPIRATION 1996(1) 1997 1998 1999 2000 2001 2002 - -------------------------------------- -------- ---------- -------- ---------- ---------- ---------- -------- INITIAL PROPERTIES (CONTINUED): Three Greentree Centre Square Footage of Expiring Leases..... -- 17,676 -- -- 13,150 26,430 -- Percentage of Total Leased Square Feet................................. -- 26.6% -- -- 19.8% 39.8% -- Final Annual Base Rent Under Expiring Leases(2)................... -- $317,173 -- -- $242,155 $450,885 -- Final Annual Base Rent per Square Foot Under Expiring Leases(3)............. -- $17.94 -- -- $18.41 $17.06 -- Percentage of Total Final Annual Base Rent Represented by Expiring Leases............................... -- 26.9% -- -- 20.5% 38.2% -- Number of Leases Expiring............. -- 3 -- -- 2 2 -- CAMDEN COUNTY, NJ 457 Haddonfield Road Square Footage of Expiring Leases..... 11,521 -- 7,233 5,798 6,978 8,912 Percentage of Total Leased Square Feet................................. 11.4% -- 7.2% 5.6% 6.9% 8.8% Final Annual Base Rent Under Expiring Leases(2)................... $184,682 -- $105,819 $102,032 $144,134 $169,328 Final Annual Base Rent per Square Foot Under Expiring Leases(3)............. $16.03 -- $14.63 $17.60 $20.66 $19.00 Percentage of Total Final Annual Base Rent Represented by Expiring Leases............................... 10.4% -- 6.0% 5.8% 8.1% 9.6% Number of Leases Expiring............. 1 -- 1 2 3 1 OTHER MARKETS 168 Franklin Corner Road, Lawrenceville, NJ Square Footage of Expiring Leases..... 8,467 550 -- 4,504 -- 3,902 -- Percentage of Total Leased Square Feet................................. 48.6% 3.2% -- 25.8% -- 22.4% -- Final Annual Base Rent Under Expiring Leases(2)................... $106,041 $7,150 -- $62,200 -- $39,020 -- Final Annual Base Rent per Square Foot Under Expiring Leases(3)............. $12.52 $13.00 -- $13.81 -- $10.00 -- Percentage of Total Final Annual Base Rent Represented by Expiring Leases............................... 49.5% 3.3% -- 29.0% -- 18.2% -- Number of Leases Expiring............. 3 1 -- 1 -- 1 -- 5910-6090 Six Forks, Raleigh, NC Square Footage of Expiring Leases..... 17,773 27,794 3,842 18,733 -- 1,674 -- Percentage of Total Leased Square Feet................................. 24.2% 37.9% 5.2% 25.6% -- 2.3% -- Final Annual Base Rent Under Expiring Leases(2)................... $247,672 $390,483 $58,175 $286,723 -- $26,784 -- Final Annual Base Rent per Square Foot Under Expiring Leases(3)............. 13.94 14.05 15.14 15.31 -- 16.00 -- Percentage of Total Final Annual Base Rent Represented by Expiring Leases............................... 23.2% 36.5% 5.4% 26.8% -- 2.5% -- Number of Leases Expiring............. 6 22 5 10 -- 1 -- 2007 AND YEAR OF LEASE EXPIRATION 2003 2004 2005 2006 THEREAFTER TOTAL - -------------------------------------- ---------- -------- -------- ---------- ---------- ----------- INITIAL PROPERTIES (CONTINUED): Three Greentree Centre Square Footage of Expiring Leases..... 9,226 -- -- -- -- 66,482 Percentage of Total Leased Square Feet................................. 13.9% -- -- -- -- 100.0% Final Annual Base Rent Under Expiring Leases(2)................... $170,681 -- -- -- -- $1,180,894 Final Annual Base Rent per Square Foot Under Expiring Leases(3)............. $18.50 -- -- -- -- $17.76 Percentage of Total Final Annual Base Rent Represented by Expiring Leases............................... 14.5% -- -- -- -- 100.0% Number of Leases Expiring............. 1 -- -- -- -- 8 CAMDEN COUNTY, NJ 457 Haddonfield Road Square Footage of Expiring Leases..... 13,589 9,262 -- -- 37,515 100,808 Percentage of Total Leased Square Feet................................. 13.5% 9.2% -- -- 37.2% 100.0% Final Annual Base Rent Under Expiring Leases(2)................... $269,926 $185,240 -- -- $612,245 $1,773,406 Final Annual Base Rent per Square Foot Under Expiring Leases(3)............. $19.86 20.00 -- -- $16.32 $17.59 Percentage of Total Final Annual Base Rent Represented by Expiring Leases............................... 15.2% 10.5% -- -- 34.5% 100.0% Number of Leases Expiring............. 2 1 -- -- 1 12 OTHER MARKETS 168 Franklin Corner Road, Lawrenceville, NJ Square Footage of Expiring Leases..... -- -- -- -- -- 17,423 Percentage of Total Leased Square Feet................................. -- -- -- -- -- 100.0% Final Annual Base Rent Under Expiring Leases(2)................... -- -- -- -- -- $214,411 Final Annual Base Rent per Square Foot Under Expiring Leases(3)............. -- -- -- -- -- $12.31 Percentage of Total Final Annual Base Rent Represented by Expiring Leases............................... -- -- -- -- -- 100.0% Number of Leases Expiring............. -- -- -- -- -- 6 5910-6090 Six Forks, Raleigh, NC Square Footage of Expiring Leases..... 3,524 -- -- -- -- 73,340 Percentage of Total Leased Square Feet................................. 4.8% -- -- -- -- 100.0% Final Annual Base Rent Under Expiring Leases(2)................... $59,908 -- -- -- -- $1,069,745 Final Annual Base Rent per Square Foot Under Expiring Leases(3)............. 17.00 -- -- -- -- 14.59 Percentage of Total Final Annual Base Rent Represented by Expiring Leases............................... 5.6% -- -- -- -- 100.0% Number of Leases Expiring............. 1 -- -- -- -- 45
- --------------- Footnotes appear on page 81. 78 17
YEAR OF LEASE EXPIRATION 1996(1) 1997 1998 1999 2000 2001 2002 - -------------------------------------- -------- ---------- -------- ---------- ---------- ---------- -------- CONSOLIDATED TOTALS FOR INITIAL PROPERTIES Square Footage of Expiring Leases.... 54,004 115,886 100,621 296,212 62,670 212,726 8,912 Percentage of Total Leased Square Feet............................... 4.6 % 9.2% 8.0% 23.6% 5.0% 17.0% .7% Total Annual Base Rent Under Expiring Leases(2).......................... $676,134 $1,701,924 $977,905 $2,495,062 $874,483 $2,970,875 $169,328 Total Annual Base Rent per Square Feet Under Expiring Leases(3)...... $12.86 $14.69 $9.72 $8.42 $13.95 $13.97 $19.00 Percentage of Total Final Annual Base Rate Represented by Expiring Leases............................. 4.8 % 11.0% 6.4% 16.2% 5.7% 19.3% 1.1% Number of Leases Expiring............ 15 42 20 28 10 20 1 CONSOLIDATED TOTALS FOR INITIAL PROPERTIES Square Footage of Expiring Leases.... 109,336 9,262 19,387 145,449 116,719 1,251,184 Percentage of Total Leased Square Feet............................... 8.7% 0.8% 1.5% 11.6% 9.3 % 100.0% Total Annual Base Rent Under Expiring Leases(2).......................... $1,361,239 $185,240 $365,564 $1,942,732 $1,580,118 $15,300,604 Total Annual Base Rent per Square Feet Under Expiring Leases(3)...... $12.45 $20.00 $18.86 $13.36 $13.54 $12.23 Percentage of Total Final Annual Base Rate Represented by Expiring Leases............................. 8.9% 1.2% 2.4% 12.7% 10.3 % 100.0% Number of Leases Expiring............ 7 1 2 6 2 154
YEAR OF LEASE EXPIRATION 1996(1) 1997 1998 1999 2000 2001 2002 - -------------------------------------- -------- ---------- -------- ---------- ---------- ---------- -------- ACQUISITION PROPERTIES: HORSHAM/WILLOW GROVE/JENKINTOWN PA 700/800 Business Center Drive Square Footage of Expiring Leases..... -- -- -- 22,761 -- 30,773 -- Percentage of Total Leased Square Feet................................. -- -- -- 27.8% -- 37.5% -- Final Annual Base Rent Under Expiring Leases(2)............................ -- -- -- $348,223 -- $499,965 -- Final Annual Base Rent per Square Foot under Expiring Leases(3)............. -- -- -- $15.30 -- $16.25 -- Percentage of Total Final Annual Base Rent Represented by Expiring Leases............................... -- -- -- 27.5% -- 39.5% -- Number of Leases Expiring............. -- -- -- 3 -- 2 -- KING OF PRUSSIA, PA 500 North Gulph Road Square Footage of Expiring Leases..... 2,362 8,214 6,617 35,085 15,101 12,566 -- Percentage of Total Leased Square Feet................................. 3.0 % 10.3% 8.3% 43.9% 18.9% 15.7% -- Final Annual Base Rent Under Expiring Leases(2)............................ $43,697 $133,067 $123,521 $608,010 $286,919 $226,188 -- Final Annual Base Rent per Square Foot under Expiring Leases(3)............. $18.50 $16.20 $18.67 $17.33 $19.00 $18.00 -- Percentage of Total Final Annual Base Rent Represented by Expiring Leases............................... 3.1 % 9.4% 8.7% 42.8% 20.2% 15.9% -- Number of Leases Expiring............. 1 1 3 5 1 1 -- Bucks County, PA 2200 Cabot Boulevard Square Footage of Expiring Leases..... -- 20,700 -- 21,000 13,381 -- -- Percentage of Total Leased Square Feet................................. -- 37.6% -- 38.1% 24.3% -- -- Final Annual Base Rent Under Expiring Leases(2)............................ -- $108,054 -- $80,850 $53,524 -- -- Final Annual Base Rent per Square Foot under Expiring Leases(3)............. -- $5.22 -- $3.85 $4.00 -- -- Percentage of Total Final Annual Base Rent Represented by Expiring Leases............................... -- 44.6% -- 33.3% 22.1% -- -- Number of Leases Expiring............. -- 1 -- 1 1 -- -- 2250 Cabot Boulevard Square Footage of Expiring Leases..... -- -- -- 40,000 -- -- -- Percentage of Total Leased Square Feet................................. -- -- -- 100.0% -- -- -- Final Annual Base Rent Under Expiring Leases(2)............................ -- -- -- $140,000 -- -- -- Final Annual Base Rent per Square Foot under Expiring Leases(3)............. -- -- -- $3.50 -- -- -- Percentage of Total Final Annual Base Rent Represented by Expiring Leases............................... -- -- -- 100.0% -- -- -- Number of Leases Expiring............. -- -- -- 1 -- -- -- 2007 AND YEAR OF LEASE EXPIRATION 2003 2004 2005 2006 THEREAFTER TOTAL - -------------------------------------- ---------- -------- -------- ---------- ---------- ----------- ACQUISITION PROPERTIES: HORSHAM/WILLOW GROVE/JENKINTOWN PA 700/800 Business Center Drive Square Footage of Expiring Leases..... -- -- -- -- 28,475 82,009 Percentage of Total Leased Square Feet................................. -- -- -- -- 34.7 % 100.0% Final Annual Base Rent Under Expiring Leases(2)............................ -- -- -- -- $418,583 $1,266,771 Final Annual Base Rent per Square Foot under Expiring Leases(3)............. -- -- -- -- $14.70 $15.45 Percentage of Total Final Annual Base Rent Represented by Expiring Leases............................... -- -- -- -- 33.0 % 100.0% Number of Leases Expiring............. -- -- -- -- 1 6 KING OF PRUSSIA, PA 500 North Gulph Road Square Footage of Expiring Leases..... -- -- -- -- -- 79.945 Percentage of Total Leased Square Feet................................. -- -- -- -- -- 100.0% Final Annual Base Rent Under Expiring Leases(2)............................ -- -- -- -- -- $1,421,402 Final Annual Base Rent per Square Foot under Expiring Leases(3)............. -- -- -- -- -- $17.78 Percentage of Total Final Annual Base Rent Represented by Expiring Leases............................... -- -- -- -- -- 100.0% Number of Leases Expiring............. -- -- -- -- -- 12 Bucks County, PA 2200 Cabot Boulevard Square Footage of Expiring Leases..... -- -- -- -- -- 55,081 Percentage of Total Leased Square Feet................................. -- -- -- -- -- 100.0% Final Annual Base Rent Under Expiring Leases(2)............................ -- -- -- -- -- $242,428 Final Annual Base Rent per Square Foot under Expiring Leases(3)............. -- -- -- -- -- $4.40 Percentage of Total Final Annual Base Rent Represented by Expiring Leases............................... -- -- -- -- -- 100.0% Number of Leases Expiring............. -- -- -- -- -- 3 2250 Cabot Boulevard Square Footage of Expiring Leases..... -- -- -- -- -- 40,000 Percentage of Total Leased Square Feet................................. -- -- -- -- -- 100.0% Final Annual Base Rent Under Expiring Leases(2)............................ -- -- -- -- -- $140,000 Final Annual Base Rent per Square Foot under Expiring Leases(3)............. -- -- -- -- -- $3.50 Percentage of Total Final Annual Base Rent Represented by Expiring Leases............................... -- -- -- -- -- 100.0% Number of Leases Expiring............. -- -- -- -- -- 1
- --------------- Footnotes appear on page 81. 79 18
YEAR OF LEASE EXPIRATION 1996(1) 1997 1998 1999 2000 2001 2002 - -------------------------------------- -------- ---------- -------- ---------- ---------- ---------- -------- ACQUISITION PROPERTIES (CONTINUED): 2260/2270 Cabot Boulevard Square Footage of Expiring Leases..... 11,283 7,356 8,203 -- 2,796 -- -- Percentage of Total Leased Square Feet................................. 38.1 % 24.8% 27.7% -- 9.4% -- -- Final Annual Base Rent Under Expiring Leases(2)............................ $94,613 $72,021 $70,782 -- $34,111 -- -- Final Annual Base Rent per Square Foot under Expiring Leases(3)............. $8.39 $9.79 $8.63 -- $12.20 -- -- Percentage of Total Final Annual Base Rent Represented by Expiring Leases............................... 34.9 % 26.5% 26.1% -- 12.6% -- -- Number of Leases Expiring............. 3 4 3 -- 1 -- -- 3000 Cabot Boulevard Square Footage of Expiring Leases..... 1,900 10,840 11,378 4,933 -- -- -- Percentage of Total Leased Square Feet................................. 6.5 % 37.3% 39.2% 17.0% -- -- -- Final Annual Base Rent Under Expiring Leases(2)............................ $34,200 $173,440 $203,048 $84,101 -- -- -- Final Annual Base Rent per Square Foot under Expiring Leases(3)............. $18.00 $16.00 $17.85 $17.05 -- -- -- Percentage of Total Final Annual Base Rent Represented by Expiring Leases............................... 6.9 % 35.1% 41.1% 17.0% -- -- -- Number of Leases Expiring............. 1 1 2 2 -- -- -- GREENWOOD SQUARE Square Footage of Expiring Leases..... 6,500 80,658 16,105 11,373 3,730 28,454 4,433 Percentage of Total Leased Square Feet................................. 4.3 % 52.8% 10.6% 7.5% 2.4% 18.6% 2.9% Final Annual Based Rent Under Expiring Leases(2)............................ $141,440 $1,334,481 $262,484 $193,957 $70,684 $460,126 $82,764 Final Annual Base Rent per Square Foot under Expiring Leases(3)............. $21.76 $16.54 $16.30 $17.05 $18.95 $16.17 $18.67 Percentage of Total Final Annual Base Rent Represented by Expiring Leases............................... 5.6 % 52.4% 10.3% 7.6% 2.8% 18.1% 3.2% Number of Leases Expiring............. 1 10 6 5 1 6 1 Burlington County, NJ 8000 Lincoln Drive Square Footage of Expiring Leases..... -- -- -- -- -- 36,830 -- Percentage of Total Leased Square Feet................................. -- -- -- -- -- 67.1% -- Final Annual Base Rent Under Expiring Leases(2)............................ -- -- -- -- -- $662,940 -- Final Annual Base Rent per Square Foot under Expiring Leases(3)............. -- -- -- -- -- $18.00 -- Percentage of Total Final Annual Base Rent Represented by Expiring Leases............................... -- -- -- -- -- 67.2% -- Number of Leases Expiring............. -- -- -- -- -- 1 -- ACQUISITION PROPERTIES (CONTINUED): 2007 AND YEAR OF LEASE EXPIRATION 2003 2004 2005 2006 THEREAFTER TOTAL - -------------------------------------- ---------- -------- -------- ---------- ---------- ----------- 2260/2270 Cabot Boulevard Square Footage of Expiring Leases..... -- -- -- -- -- 29,638 Percentage of Total Leased Square Feet................................. -- -- -- -- -- 100.0% Final Annual Base Rent Under Expiring Leases(2)............................ -- -- -- -- -- $271,527 Final Annual Base Rent per Square Foot under Expiring Leases(3)............. -- -- -- -- -- $9.16 Percentage of Total Final Annual Base Rent Represented by Expiring Leases............................... -- -- -- -- -- 100.0% Number of Leases Expiring............. -- -- -- -- -- 11 3000 Cabot Boulevard Square Footage of Expiring Leases..... -- -- -- -- -- 29,051 Percentage of Total Leased Square Feet................................. -- -- -- -- -- 100.0% Final Annual Base Rent Under Expiring Leases(2)............................ -- -- -- -- -- $494,789 Final Annual Base Rent per Square Foot under Expiring Leases(3)............. -- -- -- -- -- $17.03 Percentage of Total Final Annual Base Rent Represented by Expiring Leases............................... -- -- -- -- -- 100.0% Number of Leases Expiring............. -- -- -- -- -- 6 GREENWOOD SQUARE Square Footage of Expiring Leases..... -- -- -- -- 1,501 152,754 Percentage of Total Leased Square Feet................................. -- -- -- -- 1.0 % 100.0% Final Annual Based Rent Under Expiring Leases(2)............................ -- -- -- -- -- $2,545,336 Final Annual Base Rent per Square Foot under Expiring Leases(3)............. -- -- -- -- -- $16.67 Percentage of Total Final Annual Base Rent Represented by Expiring Leases............................... -- -- -- -- -- 100.0% Number of Leases Expiring............. -- -- -- -- 1 31 Burlington County, NJ 8000 Lincoln Drive Square Footage of Expiring Leases..... -- -- -- -- 18,093 54,923 Percentage of Total Leased Square Feet................................. -- -- -- -- 32.9 % 100.0% Final Annual Base Rent Under Expiring Leases(2)............................ -- -- -- -- $323,865 $986,805 Final Annual Base Rent per Square Foot under Expiring Leases(3)............. -- -- -- -- $17.90 $17.97 Percentage of Total Final Annual Base Rent Represented by Expiring Leases............................... -- -- -- -- 32.8 % 100.0% Number of Leases Expiring............. -- -- -- -- 1 2
- --------------- Footnotes appear on page 81. 80 19
YEAR OF LEASE EXPIRATION 1996(1) 1997 1998 1999 2000 2001 2002 - -------------------------------- ---------- ---------- ---------- ---------- ---------- ---------- -------- Northern Suburban Wilmington One Righter Parkway Square Footage of Expiring Leases......................... 1,200 2,681 -- 7,933 -- -- -- Percentage of Total Leased Square Feet.................... 1.1% 2.6% -- 7.6% -- -- -- Final Annual Base Rent Under Expiring Leases(2)............. $21,000 $45,577 -- $150,651 -- -- -- Final Annual Base Rent per Square Foot under Expiring Leases(3)...................... $17.50 $17.00 -- $18.99 -- -- -- Percentage of Total Final Annual Base Rent Represented by Expiring Leases................ 0.9% 1.9% -- 6.1% -- -- -- Number of Leases Expiring....... 1 1 -- 3 -- -- -- 2007 AND YEAR OF LEASE EXPIRATION 2003 2004 2005 2006 THEREAFTER TOTAL - -------------------------------- ---------- ---------- ---------- ---------- ---------- ----------- Northern Suburban Wilmington One Righter Parkway Square Footage of Expiring Leases......................... -- -- 93,014 -- -- 104,828 Percentage of Total Leased Square Feet.................... -- -- 88.7% -- -- 100.0% Final Annual Base Rent Under Expiring Leases(2)............. -- -- $2,252,799 -- -- $2,470,027 Final Annual Base Rent per Square Foot under Expiring Leases(3)...................... -- -- $24.22 -- -- $23.56 Percentage of Total Final Annual Base Rent Represented by Expiring Leases................ -- -- 91.2% -- -- 100.0% Number of Leases Expiring....... -- -- 1 -- -- 6
- --------------- (1) Represents lease expirations from September 30, 1996 to December 31, 1996. (2) Represents annual base rent for the final annual period in accordance with lease terms. (3) Calculated by dividing the annual base rent for the final annual period by the net rentable square feet subject to such leases. CONSOLIDATED TOTALS FOR ACQUISITION PROPERTIES
YEAR OF LEASE EXPIRATION 1996(1) 1997 1998 1999 2000 2001 2002 - -------------------------------- ---------- ---------- ---------- ---------- ---------- ---------- -------- Square Footage of Expiring Leases......................... 23,245 130,449 42,303 143,085 35,008 108,623 4,433 Percentage of Total Leased Square Feet.................... 3.7% 20.8% 6.7% 22.8% 5.6% 17.2% 0.7% Final Annual Base Rent Under Expiring Leases(2)............. $334,950 $1,866,640 $659,835 $1,605,792 $445,238 $1,849,219 $82,764 Final Annual Base Rent per Square Foot under Expiring Leases(3)...................... $14.41 $14.31 $15.60 $11.22 $12.72 $17.02 $18.67 Percentage of Total Final Annual Base Rent Represented by Expiring Leases................ 3.4% 19.0% 6.7% 16.3% 4.5% 8.8% 0.8% Number of Leases Expiring....... 7 18 14 20 4 10 1 2007 AND YEAR OF LEASE EXPIRATION 2003 2004 2005 2006 THEREAFTER TOTAL - -------------------------------- ---------- ---------- ---------- ---------- ---------- ----------- Square Footage of Expiring Leases......................... -- -- 93,014 -- 48,069 628,229 Percentage of Total Leased Square Feet.................... -- -- 14.8% -- 7.7 % 100.0% Final Annual Base Rent Under Expiring Leases(2)............. -- -- $2,252,799 -- $742,447 $9,839,684 Final Annual Base Rent per Square Foot under Expiring Leases(3)...................... -- -- $24.22 -- $15.45 $15.66 Percentage of Total Final Annual Base Rent Represented by Expiring Leases................ -- -- 22.9% -- 7.6 % 100.0% Number of Leases Expiring....... -- -- 1 -- 3 78
- --------------- (1) Represents lease expirations from September 30, 1996 to December 31, 1996. (2) Represents annual base rent for the final annual period in accordance with lease terms. (3) Calculated by dividing the annual base rent for the final annual period by the net rentable square feet subject to such leases. CONSOLIDATED TOTALS FOR ALL PROPERTIES
YEAR OF LEASE EXPIRATION 1996(1) 1997 1998 1999 2000 2001 2002 - -------------------------------- ---------- ---------- ---------- ---------- ---------- ---------- -------- Square Footage of Expiring Leases......................... 77,249 246,335 142,924 439,297 97,678 321,349 13,345 Percentage of Total Leased Square Feet.................... 4.1% 13.1% 7.6% 22.8% 5.2% 17.1% 0.7% Final Annual Base Rent Under Expiring Leases(2)............. $1,011,084 $3,568,563 $1,637,739 $4,100,854 $1,319,720 $4,820,094 $252,092 Final Annual Base Rent per Square Foot under Expiring Leases(3)...................... $13.09 $14.49 $11.46 $9.34 $13.51 $15.00 $18.89 Percentage of Total Final Annual Base Rent Represented by Expiring Leases................ 4.0% 14.2% 6.5% 16.3% 5.3% 19.2% 1.0% Number of Leases Expiring....... 22 60 34 48 14 30 2 2007 AND YEAR OF LEASE EXPIRATION 2003 2004 2005 2006 THEREAFTER TOTAL - -------------------------------- ---------- ---------- ---------- ---------- ---------- ----------- Square Footage of Expiring Leases......................... 109,336 9,262 112,401 145,449 164,788 1,879,413 Percentage of Total Leased Square Feet.................... 5.8% 0.5% 6.0% 7.7% 8.8 % 100.0% Final Annual Base Rent Under Expiring Leases(2)............. $1,361,239 $185,240 $2,618,363 $1,942,732 $2,322,565 $25,140,285 Final Annual Base Rent per Square Foot under Expiring Leases(3)...................... $12.45 $20.00 $23.29 $13.36 $9.24 $13.38 Percentage of Total Final Annual Base Rent Represented by Expiring Leases................ 5.4% 0.7% 10.4% 7.7% 9.3 % 100.0% Number of Leases Expiring....... 7 1 3 6 5 232
- --------------- (1) Represents lease expirations from September 30, 1996 to December 31, 1996. (2) Represents annual base rent for the final annual period in accordance with lease terms. (3) Calculated by dividing the annual base rent for the final annual period by the net rentable square feet subject to such leases. 81 20 HISTORICAL TENANT IMPROVEMENTS AND LEASING COMMISSIONS The following table sets forth certain historical information regarding tenant improvements ("TI") and leasing commission ("LC") costs attributable to leases that commenced (i.e., the date the renewal or replacement tenant began to pay rent) for the Initial Properties during each of the periods presented. TI and LC costs for commenced leases during a particular period do not equal the cash paid during such period due to the timing of payments. The following results for the nine-month period ended September 30, 1996 are not necessarily indicative of the results that may be expected for the full fiscal year. Historical TI and LC data relating to the Acquisition Properties was not made available to the Company.
JANUARY 1 TO TOTAL/WEIGHTED 1993 1994 1995 SEPTEMBER 30, 1996 AVERAGE -------- -------- -------- ------------------ -------------- NEW TENANTS(1)(2) Number of Leases........... 21 8 31 17 77 Square feet of re-tenanted space.................... 91,590 52,312(2) 168,618 160,863 473,383 TI per square foot......... $ 7.01 $ 22.72(2) $ 4.26 $ 3.88 $ 6.70 LC per square foot......... $ 2.87 $ 2.67 $ 2.19 $ 1.42 $ 2.11 -------- -------- -------- -------- ---------- Total TI and LC per square foot........... $ 9.88 $ 25.39(2) $ 6.45 $ 5.30 $ 8.81 ======== ======== ======== ======== ========== RENEWAL/EXPANSION LEASES(1) Number of Leases........... 24 29 32 20 105 Square feet of Renewals/Expansions...... 72,961 122,178 308,331 148,309 651,779 TI per square foot......... $ 4.21 $ 4.31 $ 4.88 $ 3.46 $ 4.38 LC per square foot......... $ .64 $ 2.13 $ 0.79 $ 1.14 $ 1.10 -------- -------- -------- -------- ---------- Total TI and LC per square foot........... $ 4.85 $ 6.44 $ 5.67 $ 4.60 $ 5.48 ======== ======== ======== ======== ========== TOTAL NEW TENANTS AND RENEWAL/EXPANSION LEASES(1)(2) Number of Leases........... 45 37 63 37 182 Square feet................ 164,551 174,490 476,949 309,172 1,125,162 TI per square foot......... $ 5.77 $ 9.83 $ 4.66 $ 3.68 $ 5.36 LC per square foot......... $ 1.88 $ 2.29 $ 1.28 $ 1.29 $ 1.52 -------- -------- -------- -------- ---------- Total TI and LC per square foot........... $ 7.65 $ 12.12 $ 5.94 $ 4.97 $ 6.88 ======== ======== ======== ======== ==========
- --------------- (1) Includes TI and LC costs relating to the 23 Initial Properties that are office buildings and excludes the one industrial property. (2) Represents costs associated with conversion of approximately 44,000 net rentable square feet of warehouse/laboratory space to office space. 82 21 HISTORICAL CAPITAL EXPENDITURES The following table sets forth information relating to the combined historical capital expenditures (excluding those expenditures which are recoverable from tenants) of the 23 Initial Properties that are office buildings. Historical capital expenditure data relating to the Acquisition Properties was not made available to the Company.
JANUARY 1 TO SEPTEMBER 30, 1993 1994 1995 1996 ---------- ---------- ---------- ------------- Number of Net Rentable Square Feet(1).... 1,027,431 1,027,431 1,032,764 1,082,257 Capital Expenditures Incurred............ $ -- $ 46,060 $ 78,601 $ 126,738 Capital Expenditures per net rentable square foot............................ $ -- $ 0.04 $ 0.08 $ 0.12 Annual Weighted Average per square foot (January 1, 1993 to September 30, 1996)............................................ $ 0.06
- --------------- (1) Net rentable square feet are weighted to reflect the acquisitions of 168 Franklin Corner Road in November 1995 and the LibertyView Building (457 Haddonfield Road) in July 1996. In all instances the one industrial property (1510 Gehman Road) included in the Initial Properties and the Acquisition Properties are excluded from the calculations. POTENTIAL REVENUE INCREASE AT REPLACEMENT COST RENTS The Company believes that the SSI/TNC Properties, the Acquisition Properties and LibertyView have been purchased at substantial discounts to replacement cost and have the potential for significant internal revenue growth as rental rates for office properties in their respective submarkets recover to levels that would provide a reasonable return on investment to a developer of a new Class A multi-tenant office building ("Replacement Cost Rents"). ESTIMATED REPLACEMENT COST RENT ANALYSIS MULTI-TENANT OFFICE BUILDINGS (PER NET RENTABLE SQUARE FOOT)
SUBURBAN MARKET(1) ------------------- LOW HIGH ------- ------- Total Construction (Replacement) Costs(1)................ $135.00 $145.00 Estimated Replacement Cost Rents(1)...................... $ 22.00 $ 24.00 Weighted Average Class A Rental Rates(2)................. $ 18.94 $ 18.94 ------- ------- Increase in Class A Rental Rates Necessary to Reach Replacement Cost Rents................................. $ 3.06 $ 5.06 Percentage Increase in Class A Rental Rates Necessary to Reach Replacement Cost Rents........................... 16.2 % 26.7 %
- --------------- (1) Replacement cost data obtained from C&W Market Analyses. C&W consulted the Marshall Valuation Service, a nationally recognized construction cost manual, which indicated that the total cost of development ranges from approximately $135 to $145 per square foot. This cost includes land, both direct and indirect costs of construction, a contingency for initial leasing expenses and an allowance for overhead. This Replacement Cost Rents data excludes any provision for developers' profit. (2) Market estimate, provided by C&W. The Company believes that large corporate users of Class A office space are beginning to face a shortage of large contiguous blocks of Class A space. This is illustrated by the fact that, according to C&W, there has been extremely limited office development for the period from January 1, 1995 to June 30, 1996 (approxi- 83 22 mately 255,000 net rentable square feet of new office development out of a total inventory of approximately 43.7 million square feet of office space in the submarkets where the Properties are located). HISTORICAL SQUARE FEET UNDER CONSTRUCTION PHILADELPHIA MSA
1991 1992 1993 1994 1995 JUNE 30, 1996 ---- ---- ---- ---- ---- ------------- 1,359,500 332,000 157,290 52,390 227,390 26,600
HISTORICAL OCCUPANCY The table below sets forth the average occupancy rates, based on square feet leased, of the Initial Properties at the indicated dates. Historical occupancy data relating to the Acquisition Properties was not made available to the Company.
AGGREGATE RENTABLE PERCENTAGE LEASED DATE SQUARE FEET(1) AT PERIOD END(2) -------------------------------------------- ------------------ ----------------- September 30, 1996.......................... 1,333,794 93.8% December 31, 1995........................... 1,212,056 89.7% December 31, 1994........................... 1,180,056 94.0% December 31, 1993........................... 1,180,056 92.1% December 31, 1992........................... 1,180,056 91.4% December 31, 1991........................... 1,180,056 83.8%
- --------------- (1) The Properties at 168 Franklin Corner Road and 457 Haddonfield Road (LibertyView) are excluded from the data for these years because the Company acquired such Properties subsequent to the applicable period. 168 Franklin Corner Road was acquired in November 1995 and, at that time, was 54% leased. 457 Haddonfield Road was acquired in July 1996, and at that time was 67% leased. (2) Percentage leased for four of the Initial Properties (One, Two and Three Greentree Centre and Twin Forks Office Park) is as of January 31. The Company does not believe that percentages at December 31 for such Properties are materially different than the percentages at January 31. 84 23 OCCUPANCY AND RENTAL RATES -- PROPERTY BY PROPERTY The following table sets forth the occupancy rates, average annual effective rental rate per leased square foot and total annual rental revenue for each of the Initial Properties during the periods specified. Historical occupancy data and average annual effective rental rates relating to the Acquisition Properties were not made available to the Company.
AS OF AND FOR THE PERIOD YEAR ENDED DECEMBER 31, ENDED ---------------------------------------------------------------------- SEPTEMBER 30, 1991 1992 1993 1994 1995 1996 ---------- ---------- ---------- ---------- ---------- ------------- HORSHAM/WILLOW GROVE/ JENKINTOWN, PA 650 DRESHER ROAD Percentage Leased at Period End.......................... 100% 100% 100% 100% 100% 100% Average Annual Effective Rental Rate Per Leased Square Foot (1).......................... $ 17.39 $ 17.39 $ 17.09 $ 16.89 $ 15.23 $ 16.50 Total Annual Rental Revenue (2).......................... $ 524,000 $ 524,000 $ 515,000 $ 509,000 $ 306,000 -- 1155 BUSINESS CENTER DRIVE Percentage Leased at Period End.......................... 99% 100% 96% 97% 100% 99% Average Annual Effective Rental Rate Per Leased Square Foot (1).......................... $ 16.43 $ 16.68 $ 17.14 $ 16.51 $ 16.50 $ 17.22 Total Annual Rental Revenue (2).......................... $ 751,000 $ 854,000 $ 863,000 $ 813,000 $ 827,000 -- 500 ENTERPRISE ROAD Percentage Leased at Period End.......................... 74% 74% 74% 93% 84% 98% Average Annual Effective Rental Rate Per Leased Square Foot (1).......................... $ 11.92 $ 12.80 $ 13.70 $ 11.55 $ 13.13 $ 15.03 Total Annual Rental Revenue (2).......................... $ 471,000 $ 638,000 $ 683,000 $ 626,000 $ 813,000 -- ONE PROGRESS AVENUE Percentage Leased at Period End.......................... 100% 100% 100% 100% 100% 100% Average Annual Effective Rental Rate Per Leased Square Foot (1).......................... $ 12.64 $ 12.06 $ 11.88 $ 12.56 $ 11.45 $ 11.75 Total Annual Rental Revenue (2).......................... $1,001,000 $ 955,000 $ 941,000 $ 995,000 $ 907,000 -- SOUTHERN ROUTE 202 CORRIDOR, PA 456 CREAMERY WAY Percentage Leased at Period End.......................... 100% 100% 100% 100% 100% 100% Average Annual Effective Rental Rate Per Leased Square Foot (1).......................... $ 8.82 $ 5.13 $ 7.71 $ 7.18 $ 7.12 $ 7.25 Total Annual Rental Revenue (2).......................... $ 420,000 $ 244,000 $ 367,000 $ 342,000 $ 339,000 -- 486 THOMAS JONES WAY Percentage Leased at Period End.......................... 66% 66% 88% 88% 86% 50.9% Average Annual Effective Rental Rate Per Leased Square Foot (1).......................... $ 14.91 $ 15.18 $ 14.75 $ 14.74 $ 14.58 $ 15.46 Total Annual Rental Revenue (2).......................... $ 416,000 $ 517,000 $ 646,000 $ 669,000 $ 649,000 --
85 24
AS OF AND FOR THE PERIOD YEAR ENDED DECEMBER 31, ENDED ---------------------------------------------------------------------- SEPTEMBER 30, 1991 1992 1993 1994 1995 1996 ---------- ---------- ---------- ---------- ---------- ------------- 468 CREAMERY WAY Percentage Leased at Period End.......................... 100% 100% 100% 100% 100% 100% Average Annual Effective Rental Rate Per Leased Square Foot (1).......................... $ 12.44 $ 12.96 $ 13.00 $ 13.31 $ 12.89 $ 13.88 Total Annual Rental Revenue (2).......................... $ 360,000 $ 375,000 $ 376,000 $ 385,000 $ 373,000 -- 110 SUMMIT DRIVE Percentage Leased at Period End.......................... 79% 90% 100% 100% 87% 68% Average Annual Effective Rental Rate Per Leased Square Foot (1).......................... $ 8.30 $ 10.13 $ 9.42 $ 9.60 $ 8.46 $ 7.20 Total Annual Rental Revenue (2).......................... $ 314,000 $ 356,000 $ 377,000 $ 419,000 $ 360,000 -- BLUE BELL/PLYMOUTH MEETING/FORT WASHINGTON, PA 2240/50 BUTLER PIKE Percentage Leased at Period End.......................... 79% 100% 100% 100% 100% 99% Average Annual Effective Rental Rate Per Leased Square Foot (1).......................... $ 17.66 $ 17.66 $ 16.69 $ 16.50 $ 16.27 $ 17.55 Total Annual Rental Revenue (2).......................... $ 819,000 $ 842,000 $ 871,000 $ 861,000 $ 849,000 -- 120 WEST GERMANTOWN PIKE Percentage Leased at Period End.......................... 100% 100% 100% 100% 100% 100% Average Annual Effective Rental Rate Per Leased Square Foot (1).......................... $ 19.28 $ 20.26 $ 20.66 $ 20.43 $ 18.73 $ 17.52 Total Annual Rental Revenue (2).......................... $ 589,000 $ 619,000 $ 631,000 $ 624,000 $ 563,000 -- 140 WEST GERMANTOWN PIKE Percentage Leased at Period End.......................... 100% 72% 96% 100% 100% 99% Average Annual Effective Rental Rate Per Leased Square Foot (1).......................... $ 16.65 $ 16.86 $ 16.19 $ 15.34 $ 15.61 $ 17.38 Total Annual Rental Revenue (2).......................... $ 432,000 $ 367,000 $ 365,000 $ 394,000 $ 405,000 -- 2260 BUTLER PIKE Percentage Leased at Period End.......................... 100% 100% 75% 75% 100% 100% Average Annual Effective Rental Rate Per Leased Square Foot (1).......................... $ 16.23 $ 16.62 $ 18.42 $ 17.30 $ 16.76 $ 17.82 Total Annual Rental Revenue (2).......................... $ 497,000 $ 530,000 $ 455,000 $ 416,000 $ 436,000 -- MAIN LINE, PA 16 CAMPUS BOULEVARD Percentage Leased at Period End.......................... 100% 100% 100% 100% 0% 100% Average Annual Effective Rental Rate Per Leased Square Foot (1).......................... $ 16.57 $ 17.53 $ 18.68 $ 18.15 $ 17.22 $ 13.58 Total Annual Rental Revenue (2).......................... $1,122,000 $1,187,000 $1,265,000 $1,229,000 $1,069,000 -- 18 CAMPUS BOULEVARD Percentage Leased at Period End.......................... 35% 77% 77% 82% 82% 100% Average Annual Effective Rental Rate Per Leased Square Foot (1).......................... $ 18.33 $ 16.94 $ 17.69 $ 17.56 $ 17.14 $ 18.62 Total Annual Rental Revenue (2).......................... $ 224,000 $ 350,000 $ 513,000 $ 524,000 $ 532,000 --
86 25
AS OF AND FOR THE PERIOD YEAR ENDED DECEMBER 31, ENDED ---------------------------------------------------------------------- SEPTEMBER 30, 1991 1992 1993 1994 1995 1996 ---------- ---------- ---------- ---------- ---------- ------------- LEHIGH VALLEY, PA 7310 TILGHMAN STREET Percentage Leased at Period End.......................... 78% 90% 82% 82% 93% 99% Average Annual Effective Rental Rate Per Leased Square Foot (1).......................... $ 10.26 $ 10.91 $ 11.85 $ 11.99 $ 11.23 $ 8.89 Total Annual Rental Revenue (2).......................... $ 366,000 $ 350,000 $ 402,000 $ 395,000 $ 393,000 -- 7248 TILGHMAN STREET Percentage Leased at Period End.......................... 96% 96% 83% 92% 92% 94% Average Annual Effective Rental Rate Per Leased Square Foot (1).......................... $ 12.68 $ 12.66 $ 13.82 $ 14.22 $ 13.81 $ 14.76 Total Annual Rental Revenue (2).......................... $ 439,000 $ 522,000 $ 537,000 $ 549,000 $ 557,000 -- 6575 SNOWDRIFT ROAD Percentage Leased at Period End.......................... 100% 100% 100% 100% 100% 100% Average Annual Effective Rental Rate Per Leased Square Foot (1).......................... $ 7.82 $ 7.98 $ 8.09 $ 8.52 $ 7.35 $ 7.15 Total Annual Rental Revenue (2).......................... $ 315,000 $ 369,000 $ 374,000 $ 394,000 $ 340,000 -- 1510 GEHMAN ROAD Percentage Leased at Period End.......................... 50% 85% 85% 100% 100% 100% Average Annual Effective Rental Rate Per Leased Square Foot (1).......................... $ 5.53 $ 5.82 $ 7.47 $ 7.27 $ 7.21 $ 4.72 Total Annual Rental Revenue (2).......................... $ 419,000 $ 676,000 $ 969,000 $1,082,000 $1,101,000 -- BURLINGTON COUNTY, NJ ONE GREENTREE CENTRE Percentage Leased at Period End (3).......................... 81% 97% 100% 93% 91% 100% Average Annual Effective Rental Rate Per Leased Square Foot (1).......................... $ 16.82 $ 14.96 $ 15.53 $ 15.80 $ 18.42 $ 16.07 Total Annual Rental Revenue (2).......................... $ 815,000 $ 744,000 $ 855,000 $ 854,000 $ 949,000 -- TWO GREENTREE CENTRE Percentage Leased at Period End (3).......................... 83% 84% 79% 75% 100% 100% Average Annual Effective Rental Rate Per Leased Square Foot (1).......................... $ 16.74 $ 17.78 $ 18.49 $ 16.18 $ 13.60 $ 16.02 Total Annual Rental Revenue (2).......................... $ 794,000 $ 832,000 $ 845,000 $ 698,000 $ 666,000 -- THREE GREENTREE CENTRE Percentage Leased at Period End (3).......................... 100% 95% 100% 74% 99% 96% Average Annual Effective Rental Rate Per Leased Square Foot (1).......................... $ 17.77 $ 17.77 $ 18.35 $ 15.94 $ 15.78 $ 16.41 Total Annual Rental Revenue (2).......................... $1,226,000 $1,194,000 $1,234,000 $ 957,000 $ 942,000 --
87 26
AS OF AND FOR THE PERIOD YEAR ENDED DECEMBER 31, ENDED ---------------------------------------------------------------------- SEPTEMBER 30, 1991 1992 1993 1994 1995 1996 ---------- ---------- ---------- ---------- ---------- ------------- CAMDEN COUNTY, NJ 457 HADDONFIELD ROAD (LIBERTYVIEW) Percentage Leased at Period End (4).......................... -- -- -- -- 63% 83% Average Annual Effective Rental Rate Per Leased Square Foot (4).......................... -- -- -- -- -- $ 18.63 Total Annual Rental Revenue (4).......................... -- -- -- -- -- -- OTHER MARKETS 168 FRANKLIN CORNER ROAD, LAWRENCEVILLE, NJ Percentage Leased at Period End (5).......................... -- -- -- -- 55% 55% Average Annual Effective Rental Rate Per Leased Square Foot (5).......................... -- -- -- -- $ 15.95 $ 15.55 Total Annual Rental Revenue (5).......................... -- -- -- -- $ 23,000 -- 5910-6090 SIX FORKS, RALEIGH, NC Percentage Leased at Period End (3).......................... 92% 93% 97% 100% 97% 100% Average Annual Effective Rental Rate Per Leased Square Foot (1).......................... $ 11.16 $ 12.37 $ 11.22 $ 13.13 $ 14.27 $ 14.25 Total Annual Rental Revenue (2).......................... $ 630,000 $ 833,000 $ 779,000 $ 944,000 $1,026,000 --
- --------------- (1) For the years ended December 31, 1991 through 1995, represents annual rental revenue divided by the average occupancy level. For the nine-month period ended September 30, 1996, represents: (i) for office leases written on a triple net lease basis, the sum of the annualized contracted base rental rates payable for all space leased as of September 30, 1996 without giving effect to free rent or scheduled rent increases that would be taken into account under generally accepted accounting principles plus the 1996 budgeted operating expense excluding tenant electricity; and (ii) for office leases written on a full service basis, the annualized contracted base rental rate payable for all space leased as of September 30, 1996 without giving effect to free rent or scheduled rent increases that would be taken into account under generally accepted accounting principles. In both cases, the annualized rental is divided by the total square footage leased as of September 30, 1996. (2) Represents rental revenue including tenant reimbursements, determined on a straight-line basis in accordance with generally accepted accounting principles. Tenant reimbursements generally include payment of real estate taxes, operating expenses and escalations and common area maintenance and utility charges. (3) Percentage leased for four of the Properties (One, Two and Three Greentree Centre and Twin Forks Office Park) is as of January 31. The Company does not believe that percentages at December 31 for such Properties are materially different than the percentages at January 31. (4) Property acquired in July 1996. (5) Property acquired in November 1995. 88 27 SUBMARKETS AND PROPERTY INFORMATION The Properties owned and operated by the Company contain an aggregate of approximately 2.0 million net rentable square feet. Thirty-five of the Properties are located in the Market. The C&W Mid-Year Report divides the six Pennsylvania counties included within the Market into nine submarkets. While the Company considers all nine of these Pennsylvania submarkets and the two southern New Jersey counties within the Market as its primary market, its currently owned Properties are concentrated in several key submarket areas. These submarkets are discussed below. Unless otherwise indicated, the market data contained in the following discussion have been derived from the C&W Mid-Year Report and from nine additional market analyses prepared by C&W at the request of the Company (the "C&W Market Analyses"). HORSHAM/WILLOW GROVE/JENKINTOWN The Company owns four Initial Properties and will acquire two Properties in the Horsham/Willow Grove/Jenkintown submarket. This submarket contains, as of June 30, 1996, approximately 3.3 million net rentable square feet of commercial office space. As of June 30, 1996, total vacancy was approximately 12.1%, down from 15.6% as of June 30, 1995. Demand for office space in this submarket has historically come from the movement of users outward from Philadelphia and from the formation of new high-tech/service oriented businesses. HORSHAM BUSINESS CENTER Horsham Business Center is a business park developed by the Company and consists of 16 Class A suburban office buildings aggregating approximately 600,000 net rentable square feet. Horsham Business Center is located on the northwestern side of the Philadelphia metropolitan area in Montgomery County, Pennsylvania. As of June 30, 1996, the direct competition to the Company's Properties within this submarket consisted of approximately 1.1 million net rentable square feet of existing Class A office space (in 22 buildings), with an overall vacancy rate of 8.9%, as compared to 17.2% as of June 30, 1995. The weighted average asking rental rate in directly competitive properties is $18.02 per square foot compared to the average existing rental rates of $16.50 and $17.22 in the Company's two buildings as of September 30, 1996. 650 Dresher Road 650 Dresher Road is a one story office building completed in 1984. This Property contains 30,138 net rentable square feet and is situated on 4.2 acres. This Property is constructed of structural steel framing with a brick exterior. As of September 30, 1996, this Property was 100% leased to GMAC Mortgage Corporation at an average annualized existing base rent of $11.75 per leased square foot. After factoring in 1996 projected operating expense recoveries, the annualized existing rental rate at the building as of August 31, 1996 excluding tenant utilities was $16.50 per leased square foot. The lease is scheduled to expire in May 2003 and is structured on a triple net basis which allows for a complete pass through of all property operating expenses. 1155 Business Center Drive 1155 Business Center Drive is a two story office building completed in 1990. This Property contains 51,388 net rentable square feet and is situated on 5 acres. This Property is constructed of structural steel framing with a brick exterior. As of September 30, 1996, this Property was 99.4% leased to four tenants with an average annualized existing base rent of $12.37 per leased square foot. After factoring in 1996 projected operating expense recoveries, the average annualized existing rental rate at the building as of September 30, 1996 excluding tenant utilities was $17.22 per leased square foot. The largest tenant in this property is IMS (International Mill Service) occupying 40,774 square feet or 79.4% of the total net rentable square feet, with a lease scheduled to expire in March 2006. There are no existing leases at this property that are scheduled to expire in 1996 or 1997. 89 28 700/800 Horsham Business Center Drive (Acquisition Properties) 700/800 Business Center Drive is a two building, one and two story office complex completed in 1986. These buildings aggregate 82,009 net rentable square feet and are situated on 13.2 acres. The buildings are constructed of structural steel framing with a brick exterior. As of September 30, 1996, the buildings were 100% leased to five tenants. After factoring in 1996 projected operating expense recoveries, the average annualized existing rental rate at the buildings as of September 30, 1996 excluding tenant utilities was $14.60 per leased square foot. The primary tenant, is Metpath, which occupies 28,475 net rentable square feet, expanding to 51,236 net rentable square feet in July 1999, under a lease scheduled to expire in January 2012. KEITH VALLEY BUSINESS CENTER Keith Valley Business Center contains two office buildings, and is located in Horsham, Montgomery County, Pennsylvania. Keith Valley Business Center is located several miles from, and is within the same submarket as, Horsham Business Center. 500 Enterprise Road 500 Enterprise Road is a one story office/flex building completed in 1990. This Property contains 67,800 net rentable square feet and is situated on 7.4 acres. This Property is constructed of structural steel framing with a brick exterior. As of September 30, 1996, this Property was 98.5% leased to two tenants, with an average annualized existing base rent per leased square foot of $10.75. After factoring in 1996 projected operating expense recoveries, the average annualized existing rental rate at this Property as of September 30, 1996 excluding tenant utilities was $15.03 per leased square foot. Conti Trade Services Corporation, a wholly owned subsidiary of Continental Grain, leases 53,906 square feet (representing 79.6% of the net rentable square feet) under a lease scheduled to expire in April 2001, provided that Conti Trade Services Corporation may terminate the lease in April 2000 with a penalty payment. The other lessee (constituting 12,845 net rentable square feet) at this Property is Pioneer Technologies, under a lease scheduled to expire in October 2000. This property competes for tenants in the same office submarket as the Properties in the Horsham Business Center. One Progress Drive One Progress Drive is a two story office building completed in 1986. This Property contains 79,204 net rentable square feet and is constructed of structural steel framing with a brick exterior. As of September 30, 1996, this Property was 100% leased to Reed Technology at an average existing base rent per leased square foot of $9.25. After factoring in 1996 projected operating expense recoveries, the annualized existing rental rate at the building as of September 30, 1996, excluding tenant utilities, is $11.75 per leased square foot. Reed Technology is a wholly-owned subsidiary of Reed Elsevier, and the lease is scheduled to expire in June 2011. In connection with this tenancy, the interior of the building was substantially renovated at the tenant's expense. The lease contains the following two early termination provisions: in July 2001 the tenant may terminate the lease upon one year's prior written notice to the Company and by making a termination payment of $3.2 million; in July 2006 the tenant may terminate the lease upon one year's written notice and by making a termination payment of $840,000. According to C&W, One Progress Drive competes for tenants in the same office submarket as the Horsham Business Center properties. The tenant has a right of first offer to purchase this Property during the term of its lease. SOUTHERN ROUTE 202 CORRIDOR The Company owns four Properties in the Southern Route 202 Corridor submarket. This submarket contains, as of June 30, 1996, approximately 3.5 million net rentable square feet of commercial office space and an additional approximately 2.6 million net rentable square feet of flex space. As of June 30, 1996, total vacancy for commercial office space in this submarket was approximately 13.9%, down from 22.9% as of 90 29 June 30, 1995. Over the 18-month period ended June 30, 1996, net absorption of office space in this submarket averaged 39,800 square feet per quarter or approximately 160,000 square feet per annum. Leasing activity during this period averaged approximately 100,000 square feet per quarter or 400,000 square feet per annum. As of June 30, 1996, total vacancy for flex space in this submarket was approximately 2.8%, down from 8.5% at the end of the first quarter of 1995. The Company's Properties in this submarket are located in two separate business complexes: Whitelands Business Park and Oaklands Corporate Center, in which the Company developed a total of seven buildings. Of these seven buildings, four were build-to-suit and were sold to the occupant. The buildings were constructed between 1987 and 1990, contain an aggregate of 171,698 net rentable square feet and are situated on 17.6 acres. OAKLANDS BUSINESS CENTER 456 Creamery Way 456 Creamery Way is a single story office/flex building completed in 1987. This Property contains 47,604 net rentable square feet and is situated on 5.2 acres and is currently 100% leased to Neutronics, Inc. under a lease scheduled to expire in January 2003 at an existing rental rate of $7.25 per square foot. This lease is written on a triple net basis and, pursuant to its terms, the tenant contracts directly with third parties that provide building services, including landscaping, janitorial service and snow removal. 486 Thomas Jones Way 486 Thomas Jones Way is a two story office building completed in 1990. This Property contains 51,500 net rentable square feet and is situated on 4.6 acres. This Property is constructed of steel framing with a brick exterior. As of September 30, 1996, this Property was 50.93% leased to seven tenants at an average annualized existing rental rate of $11.54 per square foot. After factoring in 1996 projected operating expense recoveries, the average annualized existing rental rate at this Property as of September 30, 1996 excluding tenant utilities was $15.46 per leased square foot. The primary tenant at this Property is First American Real Estate, which occupies 10,086 square feet under a lease scheduled to expire in December 1999. 468 Creamery Way 468 Creamery Way is a single story office building completed in 1990. This Property contains 28,934 net rentable square feet and is situated on 2.6 acres. As of September 30, 1996, this Property was 100% leased to two tenants at an average annualized existing rental rate of $10.08 per square foot. After factoring in 1996 projected operating expense recoveries, the average annualized existing rental rate at this Property as of September 30, 1996 excluding tenant utilities was $13.88 per leased square foot. The primary tenant at this Property is Franciscan Health System, which occupies 23,588 square feet under a lease scheduled to expire in June 1999. WHITELANDS BUSINESS CENTER 110 Summit Drive 110 Summit Drive is a single story office building completed in 1985. This Property contains 43,660 net rentable square feet and is situated on 5.2 acres. As of September 30, 1996, this Property was 67.6% leased to three tenants at an average existing base rent of $7.20 per square foot. The primary tenant is Maris Equipment, which occupies 21,580 square feet under a lease scheduled to expire in April 1999. 91 30 BLUE BELL/PLYMOUTH MEETING/FORT WASHINGTON The Company owns four Properties in the Blue Bell/Plymouth Meeting/Fort Washington submarket. As of June 30, 1996, this submarket contains approximately 4.9 million square feet of commercial office space. As of June 30, 1996, total vacancy for commercial office space was approximately 6.9%, down from 11.8% as of June 30, 1995. As of September 30, 1996, there were no projects under construction. Absorption of office space in this submarket has averaged 55,000 square feet per quarter or 218,000 square feet annually during the 18-month period ended June 30, 1996. Leasing activity has averaged approximately 95,000 square feet per quarter or 380,000 square feet per annum during the 18-month period ended June 30, 1996. MEETINGHOUSE BUSINESS CENTER Meetinghouse Business Center was developed by the Company and consists of five office buildings aggregating approximately 140,000 net rentable square feet. This complex is located on the northeastern side of the Philadelphia metropolitan area in Montgomery County, Pennsylvania. The buildings were completed in 1984 and are situated on 20.5 acres. The buildings are one and two story, with structural steel framing and stone and stucco exteriors. This complex was developed consistent with the requirements of the Meetinghouse historical district. The complex is at the interchange of the Pennsylvania Turnpike (both East-West and Northeast Extension) and Interstate 476, which is the largest interchange on the Pennsylvania Turnpike. Meetinghouse Business Center competes for tenants in the Blue Bell/Plymouth Meeting/Fort Washington submarket which consists of approximately 4.9 million square feet. As of June 30, 1996, total vacancy in this marketplace was 6.9%, which represents a significant decline from 11.8% as of June 30, 1995. C&W identified five other buildings which directly compete with Meetinghouse Business Center. These buildings aggregate 443,000 net rentable square feet, and as of June 30, 1996 were less than 1.9% vacant. Average annual asking rental rates for this direct competition range from $18.00 to $19.00 per square foot while existing tenants at this Property were paying $15.45 to $18.60 per square foot as of September 30, 1996. 2240/50 Butler Pike 2240/50 Butler Pike is a one story office building completed in 1984. This Property contains 52,183 net rentable square feet and is situated on 7.5 acres. As of September 30, 1996, this Property was 99.4% leased to three tenants. The primary tenant is CoreStates Bank, which occupies 30,359 net rentable square feet (representing 58% of the aggregate net rentable square feet at the Property) at an existing annualized rental rate of $13.50 per square foot under a lease scheduled to expire in April 2006. The other major tenant in this Property is Worldwide Marketing, which occupies 17,080 net rentable square feet (representing 33% of the net rentable square feet at the Property) at an existing annualized rental rate of $11.00 per square foot under a lease scheduled to expire in October 1999. After factoring in 1996 projected operating expense recoveries, the annual average existing rental rate for this Property as of September 30, 1996 (excluding tenant utilities) was $17.55 per leased square foot. 120 W. Germantown Pike 120 W. Germantown Pike is a two story office building completed in 1984. This Property contains 30,546 net rentable square feet and is situated on 3.2 acres. As of September 30, 1996, this Property was 100% leased to three tenants. The primary tenant is Clair O'Dell, a regional insurance agency, which occupies 25,177 net rentable square feet (representing 82% of the net rentable square feet at the Property) under a lease scheduled to expire in July 2001 at an existing annualized rental rate of $17.50 per square foot. After factoring in 1996 projected operating expense recoveries, the average annual existing rental rate for this Property as of September 30, 1996 excluding tenant utilities was $17.52 per leased square foot. 140 W. Germantown Pike 140 W. Germantown Pike is a two story office building completed in 1984. This Property contains 25,953 net rentable square feet and is situated on 3.6 acres. As of September 30, 1996, this Property was 92 31 98.7% leased to four tenants. The primary tenant is Healthcare, Inc., which occupies 11,822 net rentable square feet (representing 46% of the net rentable square feet at the Property) under a lease scheduled to expire in September 1999 at an average annualized existing rental rate of $12.50 square foot. After factoring in 1996 projected operating expense recoveries, the annual existing rental rate for all tenants at this Property as of September 30, 1996 (excluding tenant utilities) was $17.38 per leased square foot. 2260 Butler Pike 2260 Butler Pike is a one story office building completed in 1984. This Property contains 31,892 net rentable square feet and is situated on 6.2 acres. As of September 30, 1996, this Property was 100% leased to three tenants. The primary tenant is Information Resources, which occupies 21,008 net rentable square feet (representing 66% of the net rentable square feet at the Property) under a lease scheduled to expire in December 2000 at an existing annualized rental rate of $13.50 per square foot. After factoring in 1996 projected operating expense recoveries, the annual existing rental rate for all tenants at this Property as of September 30, 1996 (excluding tenant utilities) was $17.82 per leased square foot. MAIN LINE The Company owns two Properties in the Main Line submarket. This submarket contains, as of June 30, 1996, approximately 2.5 million square feet of commercial office space. As of June 30, 1996, the total vacancy rate was approximately 8.5%, down from 14.5% at June 30, 1995. Over the 18-month period ended June 30, 1996, net absorption of office space in this submarket totalled approximately 150,000 square feet, while leasing activity exceeded 315,000 square feet. The Company's Properties in this submarket are located in the Newtown Square Corporate Campus. NEWTOWN SQUARE CORPORATE CAMPUS According to C&W, as of June 30, 1996, there were 21 buildings aggregating approximately 2.3 million net rentable square feet that are in direct competition to the Company's Newtown Square Properties. The vacancy rate in these directly competitive properties was 7.2% as of June 30, 1996. As a result, vacancy rates in these directly competitive properties compare favorably to the 8.5% vacancy rate in the overall Main Line office submarket area as of June 30, 1996. Rental rates in the directly comparable properties range from $18.00 per square foot full service (which includes a pro rata share of all costs of operating the property) to $24.00 per square foot plus tenant electricity. On a gross rental rate basis, excluding tenant utilities, existing tenants in 16 and 18 Campus Boulevard were paying from $11.49 to $17.60 and from $16.50 to $17.95, respectively, per leased square foot plus electricity as of September 30, 1996. 16 Campus Boulevard 16 Campus Boulevard is a three story office building completed in 1990. This Property contains 65,463 net rentable square feet and is situated on 14.6 acres. This Property is constructed of structural steel framing with a brick exterior. As of September 30, 1996, this Property was 100% leased to four tenants at an average annualized base rent per leased per square foot of $9.43. The largest tenant at this Property, New England Mutual Life, occupies 31,907 net rentable square feet under a lease scheduled to expire in 2006. 16 Campus Boulevard also is the headquarters building of the Company. After factoring in 1996 projected operating expense recoveries, the average annual existing rental rate for the building as of September 30, 1996 (excluding tenant utilities) was $13.58 per square foot. A tenant at this Property has a right of first offer to purchase this Property during the term of its lease, which is scheduled to expire in June 2006. 18 Campus Boulevard 18 Campus Boulevard is a two story office building completed in 1990. This Property contains 37,700 net rentable square feet and is situated on 6.4 acres. This Property is constructed of structural steel framing with a brick exterior. This Property is currently 100% leased to tenants at an average existing annualized base rent per square foot of $14.62. The major tenant at the Property, Devco Mutual, occupies 13,332 net rentable square feet under a lease expiring in January 2001, provided, that, Devco may terminate the lease at January 1998 with a penalty payment. There are no existing leases that are scheduled to expire in 1996. The aggregate net rentable square footage of leases expiring in 1997 93 32 represent 14.2% of this Property's total net rentable square feet. After factoring in 1996 projected operating expense recoveries, the annual existing rental rate for this Property as of September 30, 1996 (excluding tenant utilities) was $18.62 per leased square foot. LEHIGH VALLEY The Company owns three Properties in the Lehigh Valley submarket. This submarket contains approximately 4.4 million square feet of commercial office space. As of June 30, 1996, total vacancy in this submarket was approximately 11.6% down from 15.4% at June 30, 1995. Over the 18-month period ended June 30, 1996, absorption of office space in this submarket was approximately 37,000 square feet per quarter or 148,000 square feet per year. In addition to competing in the office market within this submarket, certain of the Properties compete in the industrial/flex market sector. According to C&W, as of June 30, 1996 there was an estimated 19.1 million net rentable square feet of industrial space located in 12 business parks throughout this market sector. As of June 30, 1996, the vacancy rate in this market sector was 9.9%. Included in this market sector was an estimated 1.7 million square feet of flex space as of June 30, 1996. As of that date, the vacancy rate for flex space was only 14.2%. C&W identified seven flex complexes aggregating 629,000 net rentable square feet that are in direct competition with the Properties located within this submarket. Such competing properties had an overall vacancy rate of 5.2% as of June 30, 1996, compared to 36.7% as of June 30, 1995. Average asking rents in these competing properties ranged from $3.75 to $10.50 per square foot. IRON RUN CORPORATE CENTER The Company owns three Properties in the Iron Run Corporate Center, a 725 acre business park located in Allentown, Pennsylvania. The park contains 37 buildings containing over 3 million net rentable square feet. The Company developed five buildings in the park totalling over 326,000 net rentable square feet. Two buildings, aggregating 200,000 net rentable square feet, were build-to-suit for an end user and a life insurance company. The Company's three Iron Run Corporate Center buildings aggregate 129,113 net rentable square feet and are both office and office/flex buildings. 7310 Tilghman Street 7310 Tilghman Street is a one story office building completed in 1985. This Property contains 40,000 net rentable square feet and is situated on 5.2 acres. The structural steel framed building has a brick exterior and an interior ceiling height capability of 18 feet. As of September 30, 1996, this Property was 99% leased to three tenants at an average annualized existing base rent of $8.89 per square foot. The primary tenant is AT&T, which occupies 32,774 net rentable square feet under three leases scheduled to expire as follows: December 1996 (13,107 net rentable square feet); November 1997 (8,667 net rentable square feet); and August 1998 (11,000 net rentable square feet). 7248 Tilghman Street 7248 Tilghman Street is a one story office/flex building completed in 1987. This Property contains 42,863 net rentable square feet and is situated on 4.2 acres. As of September 30, 1996, this Property was 94% leased to four tenants. The primary tenant is Ohio Casualty, which occupies 19,877 net rentable square feet under a lease scheduled to expire in July 2001. After factoring in 1996 projected operating expense recoveries, the annual existing rental rate for this Property as of September 30, 1996 excluding tenant utilities was 14.76 per leased square foot. According to C&W, these properties compete for office tenants in the Lehigh Valley area which contains of 4.3 million net rentable square feet and, as of June 30, 1996, had a total vacancy of 11.6%, down from 15.4% at June 30, 1995. The average asking rental rate for properties directly competing with the Properties in this submarket ranges between $8.75 to $13.50 per square foot on a triple net basis. 94 33 6575 Snowdrift Road 6575 Snowdrift Road is a one story office/flex building completed in 1989. This Property contains 46,250 net rentable square feet and is situated on 6.3 acres. As of September 30, 1996, this Property was 100% leased to Corning Packaging under a lease scheduled to expire in February 1999 at an average annual rental rate of $7.15 per leased square foot. LANSDALE The Company has a warehouse/distribution facility located in Lansdale, Pennsylvania, which is located along the Northeast Extension of the Pennsylvania Turnpike between Plymouth Meeting and Allentown, Pennsylvania. C&W indicated that, in the four suburban Pennsylvania counties that are adjacent to the City of Philadelphia, there were an estimated 67.5 million net rentable square feet of warehouse/distribution space with a vacancy rate of 13.5% as of June 30, 1996. C&W has indicated that the Company's Property in this submarket competes within the Western Montgomery County area submarket. Within this submarket, there are approximately 4.5 million net rentable square feet of warehouse/distribution space with a vacancy rate as of June 30, 1996 of 15.0%. During the 18-month period ended June 30, 1996, the vacancy rate for warehouse space in the Western Montgomery County market area was highly variable, with a rate as low as 11.4% and as high as 16.3%. During such period, leasing activity amounted to over 700,000 square feet which equated to 120,000 square feet per quarter. 1510 Gehman Road 1510 Gehman Road is a warehouse/flex building located in northern Montgomery County completed in 1990 and situated in a park that contains three buildings that were developed by the Company. Two of the buildings were build-to-suit for a user and the other facility was sold to an institutional investor in 1992. This Property contains 152,625 net rentable square feet and is situated on 14.8 acres. This Property is constructed of structural steel framing, insulated metal panels and exterior masonry units with an interior ceiling height of 24 feet. This Property consists of 65% warehouse space and 35% finished space. As of September 30, 1996, this Property was 100% leased to two tenants with an average annualized existing base rent per leased square foot of $4.72. Nibco, Inc. occupies 98,725 net rentable square feet as warehouse space under a lease scheduled to expire in August 1999 at an existing rate of $4.00 per net rentable square foot. Ford Electronics occupies 53,900 net rentable square feet utilized as design space under a lease scheduled to expire in June 1998 at an existing rental rate of $6.05 per net rentable square foot. Ford has contractual right to acquire the 1510 Gehman Road property provided Ford occupies greater than 50% of the building. As of November 7, 1996, Ford occupied 35% of the building and the balance was occupied by Nibco, Inc. BUCKS COUNTY OFFICE AND INDUSTRIAL MARKET Eight of the Acquisition Properties are located in the Bucks County Office and Industrial market. This submarket contains, as of June 30, 1996 approximately 37 million net rentable square feet of industrial space and 2.6 million net rentable square feet of office space. As of June 30, 1996, the vacancy rate in this submarket was approximately 16.8% for industrial properties and 12.8% for office properties, down from 18.4% at January 1, 1996. As of June 30, 1996, the average rental rate for Class A office space was $18.95 (full service), per net rentable square foot. Office leasing activity during the past few years has averaged approximately 150,000 to 200,000 net rentable square feet per year while net absorption of office space has averaged approximately 75,000 to 200,000 net rentable square feet per year. The average rental rate for industrial space in this submarket was $3.37 per square foot for the six-month period ended June 30, 1996, but varies between $3.00 to $5.00 per net rentable square foot depending on tenant size, percentage of office and special finishes. The average rental rate for office/flex space was $6.45 per net rentable square foot for the six month period ended June 30, 1996 but was between $6.00 and $10.00 per net rentable square foot depending on tenant size, percentage of office and special finishes. Leasing activity 95 34 in this submarket during the six month period ended June 30, 1996 was approximately 353,000 net rentable square feet. 2200 Cabot Boulevard (an Acquisition Property) 2200 Cabot Boulevard is a one story industrial building completed in 1979. This Property contains 55,081 net rentable square feet and is situated on 3.98 acres. This Property is constructed of structural steel framing with a brick and glass exterior. As of September 30, 1996, this Property was 100% leased to three tenants with an average annualized existing base rent of $4.40 per square foot. The largest tenants in this Property are Hussman and Noble Printing, occupying 21,000 and 20,700 square feet, respectively, with leases scheduled to expire in March 1999 and May 1997, respectively, provided, that, Hussman may terminate the lease at September 1997 with a penalty payment. 2250 Cabot Boulevard (an Acquisition Property) 2250 Cabot Boulevard is a one story industrial building completed in 1982. This Property contains 40,000 net rentable square feet and is situated on 3.3 acres. This Property is constructed of structural steel framing with a brick and glass exterior. As of September 30, 1996, this Property was 100% leased to one tenant with an average annualized existing base rent of $3.50 per square foot. This tenant, Bucks County Nut, occupies 40,000 square feet under a lease scheduled to expire in July 1999. 2260/2270 Cabot Boulevard (Acquisition Properties) 2260/2270 Cabot Boulevard consists of two one story office/flex buildings completed in 1984. This Property contains an aggregate of 29,638 net rentable square feet and is situated on 2.1 acres. This Property is constructed of structural steel framing with a brick and glass exterior. As of September 30, 1996, this Property was 100% leased to 12 tenants with an average annualized existing base rent of $8.54 per square foot. The largest tenant in this Property, Sager Electrical, occupies 4,238 square feet under a lease scheduled to expire in October 1998. 3000 Cabot Boulevard (an Acquisition Property) 3000 Cabot Boulevard is a one story office building completed in 1986. This Property contains 34,640 net rentable square feet and is situated on 4.9 acres. This Property is constructed of structural steel framing with a brick and glass exterior. As of September 30, 1996, this Property was 83.8% leased to six tenants with an average annualized existing base rent of $17.03 per square foot. The largest tenant in this Property, Geraghty Miller, occupies 10,840 square feet under a lease scheduled to expire in November 1997. 3333, 3331, 3329 Street Road -- Greenwood Square (Acquisition Properties) The Greenwood Square Property consists of three multi-story office buildings completed from 1985 through 1988. 3333 Street Road is a three story office building, containing 60,408 net rentable square feet situated on 3.4 acres; 3331 Street Road is a four story office building, containing 80,521 net rentable square feet situated on 4.5 acres; and 3329 Street Road is a two story office building, containing 25,000 net rentable square feet situated on 1.5 acres. All three buildings are constructed of structural steel with brick and glass exteriors. As of September 30, 1996 this Property was 92.1% leased to 30 tenants with an average annualized existing gross rent of $16.54 per square foot. The largest tenant in this Property, Waste Management, occupies 45,764 net rentable square feet under a lease scheduled to expire in March 1997. KING OF PRUSSIA/VALLEY FORGE MARKET The Company is acquiring one building in the King of Prussia/Valley Forge market. As of June 30, 1996, this submarket contained approximately 9.3 million square feet of office space. As of June 30, 1996, vacancy in this submarket was approximately 10.8%, down from 17.6% at June 30, 1995. Leasing activity in this 96 35 submarket for the six months ended June 30, 1996 was 586,438 net rentable square feet. Absorption in this submarket for the six months ended June 30, 1996 was 939,237 net rentable square feet compared to 167,504 net rentable square feet for the comparable period during 1995. 500 North Gulph Road (an Acquisition Property) 500 North Gulph Road is a five story office building completed in 1979. This Property contains 92,851 net rentable square feet and is situated on 5.3 acres. This Property is constructed of structural steel framing with a pre-cast concrete exterior. As of September 30, 1996, this Property was 86.1% leased to 13 tenants with an average annualized existing gross rent of $16.51 per square foot. The largest tenants in this Property are Strohl Systems and Transition Software, which are related companies and occupy 26,378 net rentable square feet under two separate leases scheduled to expire in October 1999 and September 2000. SOUTHERN NEW JERSEY The Southern New Jersey market is divided into two principal submarket areas: Burlington County and Camden County. BURLINGTON COUNTY SUBMARKET The Company owns three Initial Properties and will acquire one Property in Burlington County. This submarket contains approximately 4.6 million net rentable square feet of commercial office space. As of June 30, 1996, total office vacancy was 19.3% down from 21.2% as of June 30, 1995 in this submarket. However, the vacancy rate of Class A space as of June 30, 1996 was 12.6% compared to the market average of 19.3%. Leasing activity within the Burlington County market was approximately 93,000 square feet per quarter or 371,000 square feet per annum during the 18-month period ended June 30, 1996. One Greentree Centre One Greentree Centre is a three story midrise office building completed in 1982. This Property contains 55,838 net rentable square feet and is situated on 4.2 acres. This Property is constructed of structural steel framing with a brick exterior. The lobby in this Property was renovated in 1996. As of September 30, 1996, this Property was 100% leased to fourteen tenants at an average annualized base rent per leased square foot of $16.07 full service. The largest tenant in this Property is American Executive Centers, which occupies 16,853 square feet under a lease scheduled to expire in January, 2006. Aggregate square footage of leases scheduled to expire in 1996, 1997 and 1998 represent 7%, 28% and 9% of this Property's total net rentable square footage. Two Greentree Centre Two Greentree Centre is a three story midrise office building completed in 1983. This Property contains 56,075 net rentable square feet and is situated on 4.2 acres. This Property is a sister building to One Greentree Center and is constructed of structural steel framing with a brick exterior. The lobby was renovated in 1996. As of September 30, 1996, this Property was 100% leased to eleven tenants at an average annualized base rent per lease square foot of $16.02 full service. The largest tenant in this Property is Merrill, Lynch, Pierce, Fenner and Smith, which occupies 12,672 net rentable square feet under a lease scheduled to expire in November 2005. Aggregate square footage of leases scheduled to expire in 1996, 1997 and 1998 represent 0%, 30%, and 5%, respectively, of this Property's total net rentable square feet. Three Greentree Centre Three Greentree Centre is a four story midrise office building completed in 1984. This Property contains 69,101 net rentable square feet and is situated on 5.4 acres. This Property is constructed of structural steel framing with a brick and dryvit exterior. The two story lobby was renovated in 1996. As of 97 36 September 30, 1996, this Property was 96% leased to eight tenants at an average annualized base rent per lease square foot of $16.41 full service. The largest tenant at the Property is Parker, McKay, Criscuolo & Associates, a regional law firm, which occupies 25,905 net rentable square feet under a lease scheduled to expire in May 2001. Aggregate square footage of leases scheduled to expire in 1996, 1997 and 1998 represent 0%, 25% and 0%, respectively, of this Property's total net rentable square feet. 8000 Lincoln Drive (an Acquisition Property) 8000 Lincoln Drive is a five story office building completed in 1983. This Property contains 54,923 net rentable square feet and is situated on 7.5 acres. This Property is constructed of structural steel framing with a pre-cast concrete exterior. As of September 30, 1996, this Property was 100% leased for occupancy by January 1997 to two tenants with an average annualized existing base rent of $17.13 per square foot. The largest tenant in this Property will be Computer Science Corp. occupying 36,830 net rentable square feet under a lease scheduled to expire in November 2001, provided that, Computer Science may terminate the lease at November 1999 with a penalty payment. C&W identified 15 office buildings aggregating approximately 1.3 million net rentable square feet that, as of June 30, 1996, compete directly with the Greentree Centre Properties. As of June 30, 1996, these competing properties were approximately 22% vacant, with rental rates ranging from $19.50 to $22.00, per square foot for leases with full operating expenses included. CAMDEN COUNTY SUBMARKET The Company owns one Property in Camden County. This submarket contains approximately 4.8 million net rentable square feet of commercial office space. At June 30, 1996, the vacancy rate was approximately 20%. This high vacancy rate is primarily attributable to vacancy rates of 18.4% and 21% on Class B and Class C space, respectively. At June 30, 1996, the vacancy rate for Class A office space was 9.0%. While there has been negative absorption in this submarket in the 18-month period ended June 30, 1996, C&W has reported that during the three-month period ended June 30, 1996, absorption has been a positive 112,572 square feet. In addition, during the 18-month period ended June 30, 1996, leasing activity in this submarket has approximated 70,000 square feet per quarter or 280,000 square feet annually. 457 Haddonfield Road 457 Haddonfield Road (known as the LibertyView Building) is a seven story midrise office building completed in 1990. This Property contains 121,737 net rentable square feet and is situated on approximately 7 acres. This Property features a structural steel framing, reinforced concrete footings with an exterior of precast panels with reflective glass. Key features in this Property include a two story marble lobby, working balconies on the upper floors, permanent neon lighting and dramatic views of Center City Philadelphia. As of September 30, 1996, this Property was 83% leased to twelve tenants at an average annualized existing rental rate of $18.63 per square foot. The largest tenant of this Property is HIP Health of N.J., which occupies 37,515 net rentable square feet under a lease scheduled to expire in December 2007. NORTHERN SUBURBAN WILMINGTON New Castle County Delaware The Company is acquiring one building in the Northern Suburban Wilmington submarket. As of June 30, 1996 the subtotal market contained approximately 3.0 net rentable million square feet of commercial office space, with a vacancy rate of 12.6% which is down from 15.7% at June 30, 1995. C&W has identified eleven Class A Buildings aggregating approximately 1.2 million net rentable square feet which are directly competitive with the Company's Property in this submarket. As of June 30, 1996, vacancy in the competitive submarket product was approximately 3.7%. The average rental rate for comparable properties in the submarket for Class A space is $20.50 per net rentable square foot. Leasing 98 37 activity in the submarket during the eighteen months period ended June 30, 1996 has averaged 544,000 net rentable square feet on an annualized basis, while annual net absorption of office space has averaged approximately 350,000 net rentable square feet. One Righter Parkway -- Delaware Corporate Center I (an Acquisition Property) Delaware Corporate Center I is a three story office building completed in 1989. This Property contains 104,828 net rentable square feet and is situated on 3 acres. This Property is constructed of structural steel framing and precast concrete exterior. As of September 30, 1996, this Property was 100% leased to six tenants with an average annualized existing base rent of $19.30 per square foot. The largest tenant in this Property, Kimberly Clark, occupies 93,014 net rentable square feet under a lease scheduled to expire in December 2005. Delaware Corporate Center I is a ground leased property. See "-- Ground Lease." Fee ownership is held by Woodlawn Trustees, Incorporated, and the ground lessee's interest will be acquired by the Operating Partnership from the seller. Fifty-one years remain on the original term of the ground lease and the ground lessee has the option to extend the term for two consecutive ten-year terms. The ground lessee holds a right of first refusal to acquire the fee interest in the property. The property is ground leased on a triple-net basis, with the ground lessee assuming all carrying charges respecting the property, in addition to payment of base rent. OTHER MARKETS 168 Franklin Corner Road 168 Franklin Corner Road is located in Lawrenceville, Mercer County, New Jersey and was completed in 1976. This Property contains 32,000 net rentable square feet. As of September 30, 1996, this Property was 55% leased to six tenants at an average annualized existing rental rate of $12.31 per leased square foot. Twin Forks Office Park Twin Forks Office Park is located in Raleigh, North Carolina. This Property was completed in 1982 and contains 73,339 net rentable square feet. As of September 30, 1996 this Property was 100% leased to 46 tenants at an average annualized existing rental rate of $14.25 per leased square foot. The primary tenant in this Property is GE Mortgage, occupying 19,373 square feet (26% of the total net rentable square feet at the Property) under a lease that expired in October 1996. GE Mortgage has announced its intention to vacate and to relocate its Raleigh operations to Cherry Hill, NJ. Since this announcement the Company has actively been marketing this space and, as of September 30, 1996, has re-leased 8,801 of the total 19,373 square feet to three tenants at an annualized existing rental rate of $15.25 per square foot. COMPETITION The Company competes with other owners and developers that have greater resources and more experience than the Company. Within the Suburban Philadelphia Office and Industrial Market, the Company's office and industrial Properties compete generally with properties owned by other real estate developers and institutions principally on the basis of price, property quality and location, especially proximity to major area highways, suburban residential areas, and access to the central Philadelphia business district and the northeast corridor business communities of New York, Baltimore and Washington. The Company's industrial Properties compete principally with buildings owned by other local developers largely on the basis of services provided and access to transportation, both highway and rail, and access to Northeast corridor and national markets. ENVIRONMENTAL MATTERS Under various Federal, state and local laws, ordinances and regulations, a current or previous owner or operator of real property may be liable for the costs of removal or remediation of certain hazardous or toxic 99 38 substances on, in or under such property. Such laws often impose such liability without regard to whether the owner or operator knew of, or was responsible for, the presence of such hazardous or toxic substances. The costs of remediation or removal of such substances may be substantial, and the presence of such substances, or the failure to promptly remediate such substances, may adversely affect the owner's or operator's ability to sell or rent such property or to borrow using such property as collateral. Persons who arrange for the disposal or treatment of hazardous or toxic wastes may be liable for the costs of removal or remediation of such wastes at the disposal or treatment facility, regardless of whether such facility is owned or operated by such person. Certain other federal, state and local laws, ordinances and regulations may impose liability on an owner of real property where on-site contamination discharges into waters of the state, including groundwater, or otherwise affects the beneficial use of such waters. Other federal, state and local laws, ordinances and regulations require abatement or removal of certain asbestos-containing materials in the event of demolition or certain renovations or remodeling and also govern emissions of asbestos fibers in the air. The operation and subsequent removal of certain underground storage tanks are also regulated by federal, state and local laws, ordinances and regulations. In connection with its ownership and operation of the Properties, the Company could be held liable for the costs of remedial action with respect to contamination, asbestos-containing materials or tanks or related claims. All of the Properties have been subjected to either Phase I environmental site assessments, or updates of earlier assessments, performed by independent third parties. Phase I environmental site assessments are intended to evaluate the environmental condition of, and potential environmental liabilities associated with, the Property and include a site visit and review of public and historical records, but involve no soil or groundwater sampling or subsurface investigation. Such assessments generally consist of an investigation of environmental conditions of the Properties, including a preliminary investigation of the Properties and identification of publicly known conditions concerning properties in the vicinity of the Properties, an investigation as to the presence of polychlorinated biphenyls and aboveground and underground storage tanks at the Properties and the preparation and issuance of written reports. The primary focus of the recent Phase I environmental site assessments and updates of earlier assessments conducted on the Properties was to identify any "recognized environmental conditions." These are conditions arising from the presence or likely presence of hazardous substances or petroleum products that would present a risk of harm to the public health or environment or that would be the subject of an enforcement action if brought to the attention of appropriate governmental agencies, or of third party actions. Except as discussed below with respect to the Whitelands Property, the environmental site assessments have not revealed any significant environmental liability, nor is the Company aware of any environmental liability with respect to the Properties that the Company's management believes would have a material adverse effect on the Company. An environmental assessment has identified environmental contamination of potential concern with respect to the Whitelands Property (110 Summit Drive). Petroleum products, solvents and heavy metals were detected in the groundwater. These contaminants are believed to be associated with debris deposited by others in a quarry formerly located on the Whitelands Property. The quarry previously appeared on the Comprehensive Environmental Response Compensation and Liability Information System List, a list maintained by the United States Environmental Protection Agency (the "EPA") of abandoned, inactive or uncontrolled hazardous waste sites which may require cleanup. The EPA conducted a preliminary assessment in 1984 with the result that no further action was taken. Subsequently, the quarry was removed from the list. While the Company believes it is unlikely that the Operating Partnership will be required to undertake remedial action with respect to such contamination, there can be no assurance in this regard. If the Operating Partnership were required to undertake remedial action on the Whitelands Property, it has been indemnified against the cost of such remediation by the seller, SSI, subject to a maximum of $2,018,000. The term of SSI's indemnity agreement expires on August 22, 2001. If SSI is unable to fulfill its obligations under its indemnity agreement or if the Operating Partnership is required to undertake remedial action after the expiration of the five-year term of the agreement, the costs of such remediation could be substantial. Because the Company does not believe that any remediation at the Whitelands Property is probable, no amounts have been accrued for any such potential liability. 100 39 No assurance can be given that existing environmental studies with respect to the Properties reveal all environmental liabilities or that any prior owner of any such property did not create any material environmental condition not know to the Company. Moreover, no assurance can be given that: (i) future laws, ordinances or regulations will not impose any material environmental liability or (ii) the current environmental condition of the Properties will not be affected by tenants and occupants of the Properties, by the condition of properties in the vicinity of the Properties (such as the presence of underground storage tanks) or by third parties unrelated to the Company. GROUND LEASE Delaware Corporate Center I (an Acquisition Property) is a ground leased property. Fee ownership is held by Woodlawn Trustees, Incorporated, and the ground lessee's interest will be acquired by the Operating Partnership from the seller. Fifty-one years remain on the original term of the ground lease and the ground lessee has the option to extend the term for two consecutive ten-year terms. The ground lessee holds a right of first refusal to acquire the fee interest in the property. The property is ground leased on a triple-net basis, with the ground lessee assuming all carrying charges respecting the property, in addition to payment of base rent which is approximately $109,000 per annum, subject to certain periodic adjustments. INSURANCE The Operating Partnership carries comprehensive liability, fire, extended coverage and rental loss insurance covering all of the Properties, with policy specifications and insured limits which the Company believes are adequate and appropriate under the circumstances. There are, however, certain types of losses that are not generally insured because they are either uninsurable or not economically feasible to insure. Should an uninsured loss or a loss in excess of insured limits occur, the Company could lose its capital invested in the Property, as well as the anticipated future revenues from the Property and, in the case of debt which is with recourse to the Company, would remain obligated for any mortgage debt or other financial obligations related to the Property. Any such loss would adversely affect the Company. Moreover, the Company will generally be liable for any unsatisfied obligations other than non-recourse obligations. Company management believes that the Properties are adequately insured. No assurance can be given that material losses in excess of insurance proceeds will not occur in the future. CERTAIN PROPERTY TAX INFORMATION The aggregate real estate property tax obligations paid by the Company (with or without tenant reimbursement) for calendar 1995 were approximately $391,000. The aggregate real estate property tax obligations paid by SSI and TNC (with or without tenant reimbursement) for calendar 1995 with respect to the SSI/TNC Properties were approximately $968,000. These amounts do not include real estate property taxes paid directly by tenants. On a pro forma basis, more than 95.3% of the aggregate annualized base rent at the Properties as of September 30, 1996 is generated by leases which contain provisions requiring tenants to pay as additional rent their proportionate share of any real estate taxes or increases in real estate taxes over base amounts. EMPLOYEES As of September 30, 1996, the Company employed 26 persons, including four executive officers. LEGAL PROCEEDINGS The Company is not currently involved in any material litigation nor, to the Company's knowledge, is any material litigation currently threatened against the Company, other than routine litigation arising in the ordinary course of business, substantially all of which is expected to be covered by liability insurance. MORTGAGE DEBT AND CREDIT FACILITY Mortgage Indebtedness The following table sets forth the Company's mortgage indebtedness that will remain outstanding after the closing of the Offering and the Concurrent Investments and the application of the use of proceeds therefrom. In addition to mortgage indebtedness listed below, the Credit Facility is expected to be secured by 101 40 cross-collateralized mortgages and assignments and rents on all Properties, except for those set forth in the table below.
PROPERTIES -- INDEBTEDNESS (DOLLARS IN THOUSANDS) PRINCIPAL BALANCE INTEREST AS OF RATE AT ANNUAL DEBT MATURITY PREPAYMENT PROPERTY/LOCATION SEPTEMBER 30, 1996 SEPTEMBER 30, 1996 SERVICE(1) DATE PREMIUMS - --------------------------- ------------------ ------------------ ----------- --------- ---------- Horsham Business Center Horsham, PA 650 Dresher Road(2)...... $ 2,500 8.00% $ 237 8/1998 None After 2/1/97 Oaklands Corporate Center Exton, PA 486 Thomas Jones Way(3).. 468 Creamery Way(3)...... 6,427 8.00% 638 2/1998 None Whitelands Business Park Exton, PA 110 Summit Drive(4)...... 1,583 9.25% 220 4/1997 None Iron Run Industrial Park Allentown, PA 7310 Tilghman Street..... 2,533 9.25% 274 3/2000 (9) 6575 Snowdrift Road...... 2,348 8.00% 230 2/1998 None Greentree Centre Marlton, New Jersey One Greentree Centre(5)(6) Two Greentree Centre(5)(6) Three Greentree Centre(5)(6) 6,147 9.00% 628 4/2001 (10) LibertyView Cherry Hill, NJ 457 Haddonfield Road(7)(8)............ 8,461 8.00% 339 1/1999 (11) 910 8.00% 0 12/1997 None Twin Forks Office Park Raleigh, NC 5910-6090 Six Forks(6)... $ 2,704 9.00% $ 276 4/2001 (12) --------- ------- TOTAL MORTGAGE INDEBTEDNESS............. $ 33,613 $ 2,842 ========= =======
- --------------- (1) "Annual Debt Service" is calculated for the twelve-month period ending December 31, 1996. For loans that bear interest at a variable rate, the rates in effect at September 30, 1996 have been assumed to remain constant for the balance of 1996. (2) On July 31, 1996, this loan was refinanced by paying the former mortgage lender $2.4 million in full satisfaction thereof with the partial proceeds of a new loan from GMAC in the principal amount of $2.5 million. The new mortgage loan matures on August 1, 1998, bears interest at a variable rate equal to LIBOR plus 250 basis points and provides for principal amortization of $4,000 per month during the period September 1, 1997 through July 1, 1998. (3) Both of these properties secure a single loan. (4) Interest rate is variable and equal to the prime rate plus 1.0%. 102 41 (5) These properties secure two loans payable to a single lender. The interest rate was fixed at 9.0% through October 15, 1996 and is currently fixed at 9.31% through April 15, 1998. After April 15, 1998, the interest rate is reset based upon the mortgage lender's evaluation of such factors as financial performance and projected risk of the Properties securing such loan. The mortgage loans are due on April 15, 2001, and the lender has the right to call the loans at par on April 15, 1998. (6) The Company has made an application to the lender that, if accepted, would result in (i) an increase in the principal amount of the Greentree Centre loan to $7.3 million and the Twin Forks loan to $2.7 million, (ii) a fixed interest rate of 7.6%, (iii) a maturity date of 5 years from closing, and (iv) a 20-year amortization of principal. (7) The $8,461,000 debt was incurred as a result of the acquisition of the Property on July 19, 1996 and the amount of debt service reflects debt service from July 19, 1996 through December 31, 1996. Pursuant to the terms of this loan, the Company has the right to borrow up to approximately $1.4 million to fund tenant improvements and leasing commissions. (8) The $910,000 of debt was incurred as a result of the acquisition of the Property on July 19, 1996. The mortgage note payable is in the principal amount of $1.0 million, is due in December 1997 and does not bear interest. The Company recorded a $104,000 adjustment to the purchase price and a corresponding reduction in debt to reflect the fair value of the note payable to the seller and will accrue interest expense to the date of maturity. (9) Four percent through December 31, 1996, which prepayment penalty is reduced by 1% for each subsequent year through 1999. (10) This loan may not be prepaid unless the Twin Forks loan is also prepaid. The prepayment penalty equals greater of 1% of principal amount prepaid or a yield maintenance premium. (11) One percent of any portion of the original acquisition portion of the loan being prepaid. (12) This loan may be prepaid without prepayment of the loan secured by One Greentree Centre, Two Greentree Centre and Three Greentree Centre, provided certain loan-to-value ratios and coverage tests with regard to the Greentree Centre loan are satisfied and upon payment of a premium equal to the greater of 1% of the principal amount prepaid or a yield maintenance premium. CREDIT FACILITY The Company and Operating Partnership have obtained a commitment from Smith Barney Mortgage Capital Group, Inc. and NationsBank, N.A. for a two year, $80 million secured revolving Credit Facility. The Credit Facility will be used to refinance existing indebtedness, fund acquisitions and new development projects, and for general working capital purposes, including capital expenditures and tenant improvements. The amount available to be borrowed under the Credit Facility will be reduced by the amount of the letters of credit issued by the lenders for as long as such letters of credit are outstanding. The Credit Facility will be recourse to the Company and the Operating Partnership and will be secured by, among other items, cross-collateralized and cross-defaulted first mortgage liens on approximately 25 Properties, owned directly or indirectly by the Company, the Operating Partnership or their representative subsidiaries. The Credit Facility will bear interest at a per annum floating rate equal to the 30, 60, or 90-day LIBOR, plus 175 basis points. The Credit Facility will require monthly payments of interest only, with all outstanding advances and all accrued but unpaid interest due 2 years from the closing of the Credit Facility. A fee equal to 0.75% of the maximum amount available under the Credit Facility will be paid to the lenders in respect of the Credit Facility at closing. In addition, a fee of 0.25% per annum (0.125% per annum until 4/1/97) on the unused amount of the Credit Facility will be payable quarterly in arrears. An annual fee in the amount of $35,000 will be payable annually in advance to NationsBank, N.A. as compensation for administration of the Credit Facility. The Credit Facility will carry minimum debt service coverage, fixed charge, debt-to-tangible net worth ratios and other financial covenants and tests, and will require payment of prepayment premiums in certain instances. 103 42 Closing of the Credit Facility is subject to satisfactory completion of this Offering, the negotiation and execution of a definitive Credit Facility agreement and related documentation, and other customary closing conditions. OPTION PROPERTIES At the closing of the SSI/TNC Transaction, the Operating Partnership acquired an option from an affiliate of TNC (C/N Horsham Towne Limited Partnership) entitling the Company to acquire, at its discretion, the four Option Properties at any time during the two-year period ending August 22, 1998 (subject to two extensions of one year each). The Operating Partnership may not exercise its option for less than all of the Option Properties. The parties have agreed that the purchase price payable by the Operating Partnership upon exercise of its option will consist of $10.00 in excess of the mortgage debt encumbering the Option Properties at the time of exercise (which, as of September 30, 1996, aggregated $21.0 million, including approximately $4.2 million of accrued debt and unpaid interest). The right of the Operating Partnership to exercise its option to acquire the Option Properties is conditioned on receipt of consent of the mortgage lender for the Option Properties. As of the date hereof, no lender consent has been requested, and no determination to seek any such consent has been made. There can be no assurance that any of the Option Properties will be acquired. The following table summarizes certain information with respect to the Option Properties:
AVERAGE TOTAL TOTAL BASE RENT PERCENTAGE BASE RENT PLUS EXPENSE LEASED AS OF FOR THE TWELVE RECOVERIES PER NET SEPTEMBER MONTHS ENDED RENTABLE SQUARE YEAR RENTABLE 30, SEPTEMBER 30, 1996 FOOT LEASED AT PROPERTY/LOCATION BUILT SQUARE FEET 1996(1) (000'S)(2) SEPTEMBER 30, 1996(3) - ---------------------------------------- ----- ----------- ------------ --------------------- --------------------- HORSHAM BUSINESS CENTER HORSHAM, PA 255 Business Center Drive............. 1987 50,616 100% $ 524 $ 14.60 355 Business Center Drive............. 1987 26,637 88% 139 8.48 455 Business Center Drive............. 1988 51,505 94% 420 11.97 555 Business Center Drive............. 1988 30,122 99% 340 16.26 ------- ------- 158,880 $ 1,423 ======= ======= TENANTS LEASING 10% OR MORE OF RENTABLE SQUARE FOOTAGE PER PROPERTY AS OF SEPTEMBER 30, PROPERTY/LOCATION 1996 AND LEASE EXPIRATION DATE - ---------------------------------------- ------------------------------ < HORSHAM BUSINESS CENTER HORSHAM, PA 255 Business Center Drive............. Stroehmann (38%) - 6/99; Great Expectations (23%) - 3/97; GMAC (13%) - 9/97-9/01; Buckman Van Buren (21%) - 2/97 355 Business Center Drive............. Anthem Electronic (34%) - 9/01; Seimens Printing Sys. (22%) - 8/98; GE Capital (16%) - 9/01 455 Business Center Drive............. Astea (65%) - 10/02; Letven/Diccicco (29%) - 7/00 555 Business Center Drive............. GMAC (77%) - 9/99; First American Home Care (13%) - 4/00
- --------------- (1) Based on all leases dated on or before September 30, 1996. (2) "Total Base Rent" for the twelve months ended June 30, 1996 represents base rents excluding tenant reimbursements calculated in accordance with generally accepted accounting principles determined on a straight-line basis. Tenant reimbursements generally include payment of real estate taxes, operating expenses and escalations and common area maintenance and utility charges. (3) Represents Total Base Rent for the twelve months ended September 30, 1996, plus tenant reimbursements for the twelve months ended September 30, 1996, divided by net rentable square feet leased. 104 43 AGGREGATE TAX BASIS -- INITIAL PROPERTIES The following table sets forth the aggregate tax basis of the Initial Properties as of December 31, 1995 for federal income tax purposes:
31.5 19 AGGREGATE 40 YEAR 39 YEAR YEAR YEAR 19 YEAR 18 YEAR 7 YEAR 5 YEAR SUBMARKET/PROPERTY TAX BASIS LAND MACRS(1) MACRS(1) MACRS(1) ACRS(2) STRAIGHT-LINE STRAIGHT-LINE MACRS(3) ACRS(2) - ------------------- --------- ------ ------- ------- ------- ------ ------------- ------------- ------- ------ (IN THOUSANDS) HORSHAM/WILLOW GROVE/JENKINTOWN, PA 650 Dresher Road........... $ 2,702 $ 413 -- -- -- $1,158 -- $ 967 $ 120 $ 44 1155 Business Center Drive... 5,434 943 -- $4,491 -- -- -- -- -- -- 500 Enterprise Road........... 4,981 814 -- 4,167 -- -- -- -- -- -- One Progress Avenue......... 3,687 803 -- 2,884 -- -- -- -- -- -- SOUTHERN ROUTE 202 CORRIDOR, PA 456 Creamery Way............ 1,865 311 -- 1,554 -- -- -- -- -- -- 486 Thomas Jones Way............ 4,607 467 -- 322 $3,818 -- -- -- -- -- 468 Creamery Way............ 2,370 253 -- 118 1,999 -- -- -- -- -- WHITELANDS BUSINESS PARK 110 Summit Drive.......... 2,727 343 -- -- 183 888 1,039 -- 265 9 BLUE BELL/PLYMOUTH MEETING/FORT WASHINGTON, PA 2240/50 Butler Pike........... 4,995 448 -- -- 275 903 -- 2,693 548 128 120 West Germantown Pike........... 3,558 379 -- -- 97 2,794 -- -- 283 5 140 West Germantown Pike........... 2,867 318 -- -- 509 1,723 -- -- 292 25 2260 Butler Pike........... 3,023 381 -- -- 496 1,962 -- -- 159 25 MAIN LINE, PA 16 Campus Boulevard...... 6,178 1,082 -- 5,096 -- -- -- -- -- -- 18 Campus Boulevard...... 3,414 692 -- 2,722 -- -- -- -- -- -- LEHIGH VALLEY, PA 7310 Tilghman Street......... 2,789 213 -- -- 414 804 897 -- 437 24 7248 Tilghman Street......... 2,519 371 -- -- 2,148 -- -- -- -- -- 6575 Snowdrift Road........... 3,184 245 -- 245 2,694 -- -- -- -- -- 1510 Gehman Road........... 4,998 526 -- 4,472 -- -- -- -- -- -- BURLINGTON COUNTY, NJ One Greentree Centre......... 7,436 751 401 -- 617 5,667 -- -- -- -- Two Greentree Centre......... 8,030 744 897 -- 594 5,795 -- -- -- -- Three Greentree Centre......... 10,170 987 1,134 -- 423 7,626 -- -- -- -- CAMDEN COUNTY, NJ 457 Haddonfield Road(4)........ 0 -- -- -- -- -- -- -- -- -- OTHER MARKETS 168 Franklin Corner Road, Lawrenceville, NJ............. 3,199 481 -- 2,718 -- -- -- -- -- -- Twin Forks Office Park 5910-6090 Six Forks Raleigh, NC...... 7,779 2,487 961 -- 537 3,794 -- -- -- --
- --------------- (1) Modified accelerated cost recovery system -- straight line. (2) Accelerated cost recovery system. (3) Modified accelerated cost recovery system -- accelerated. (4) Acquired in July 1996. 105 44 C&W MID-YEAR REPORT AND C&W MARKET ANALYSES The C&W Market Analyses were prepared for the Company by Cushman & Wakefield of Pennsylvania, Inc., which is a real estate service firm with significant experience and expertise relating to the Suburban Philadelphia Office and Industrial Market and the various submarkets therein. The information in the C&W Mid-Year Report and C&W Market Analyses reflect data available at June 30, 1996 and August 1, 1996, respectively, and do not reflect data or changes subsequent to those dates. The information contained in the C&W Mid-Year Report and C&W Market Analyses have been gathered by C&W from sources assumed to be reliable, including publicly available records. Because records of all transactions are not readily available, the information contained in the C&W Mid-Year Report and C&W Market Analyses may not reflect all transactions occurring in the geographic area discussed in the C&W Mid-Year Report and C&W Market Analyses. In addition, transactions that are reported may not be described accurately or completely in the publicly available records. C&W shall not be responsible for and does not warrant the accuracy or completeness of any such information derived from such publicly available records (or information relating to transactions that were not reported). In connection with the C&W Mid-Year Report and C&W Market Analyses, C&W made numerous assumptions with respect to industry performance, general business and economic conditions, and other matters. Any estimates or approximations contained therein could reasonably be subject to different interpretations by other parties. Because predictions of future events are inherently subject to uncertainty, none of C&W, the Company or any other person can assume that such predicted rental rates, absorption or other events will occur as outlined or predicted in the C&W Mid-Year Report or C&W Market Analyses. Reported asking rental rates of properties, replacement cost rents or estimated replacement costs do not purport to necessarily reflect the rental rates at which properties may actually be rented, actual rents required to support new development or the actual cost of replacement. In many instances, asking rents and actual rental rates differ significantly. Changes in local, national and international economic conditions will affect the markets described in the C&W Mid-Year Report and C&W Market Analyses. Therefore, C&W can give no assurance that occupancy and absorption levels and rental rates as of the date of the C&W Mid-Year Report or C&W Market Analyses will continue or that such occupancy levels and rental rates will be attained at any time in the future. Forecasts of absorption rates, rental activity, replacement cost rents and replacement costs are C&W's estimates as of the dates of the C&W Mid-Year Report and C&W Market Analyses. Actual future market conditions may differ materially from the forecasts and projections contained therein. C&W is a part of a national network of affiliated companies providing real estate services. As such, from time to time, C&W and its affiliates have provided and in the future may provide real estate related services, including brokerage and leasing agent services, to the Company or its principals, or may represent the Company, its principals or others doing business with the Company. C&W received compensation of $21,000 from the Company in connection with C&W's preparation of the C&W Market Analyses. 106 -----END PRIVACY-ENHANCED MESSAGE-----