-----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, EX5fHXrBF36WagtWOfo3ksQWoB2ipv01pEPH5jCmNXymmIh5rc9g1IpWYU508NiU S3pKO1KBI4GTMUB8H2/Tiw== 0000950116-96-000941.txt : 19960910 0000950116-96-000941.hdr.sgml : 19960910 ACCESSION NUMBER: 0000950116-96-000941 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 14 CONFORMED PERIOD OF REPORT: 19960822 ITEM INFORMATION: Acquisition or disposition of assets FILED AS OF DATE: 19960906 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: 96626533 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 FORM 8-K 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) August 22, 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) Two Greentree Centre, Marlton, New Jersey 08053 (Former address of principal executive offices) (610) 325-5600 (Registrant's telephone number, including area code) Page 1 of 48 pages Item 2. Acquisition or Disposition of Assets. On August 22, 1996, the Trust consummated its previously disclosed transaction (the "SSI/TNC Transaction") with Safeguard Scientifics, Inc. ("SSI") and The Nichols Company ("TNC"). Reference is made to the summary of such transaction contained in the response to Item 5 of the Trust's Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission for the quarter ended June 30, 1996. Such response is hereby incorporated herein by reference. Terms used herein as defined terms but not otherwise defined herein have the meanings assigned to them in the foregoing Form 10-Q. On August 22, 1996, the Trust's shareholders approved the SSI/TNC Transaction at the Trust's Annual Meeting of Shareholders and the SSI/TNC Transaction closed ("Closing") whereby the Trust acquired the Initial Properties at a purchase price of $75.5 million subject to related mortgage debt encumbering the Initial Properties of $63.7 million. Upon Closing, the Trust received $426,250 in cash and obtained a controlling interest in a newly formed limited partnership ("Operating Partnership") which acquired direct and indirect ownership interests of the Initial Properties. In the SSI/TNC Transaction, the Trust issued 775,000 common shares of beneficial interest, par value $.01 per share ("Common Shares"), of the Trust and a six-year warrant exercisable for an additional 775,000 Common Shares at a per share exercise price of $6.50 (subject to customary antidilution adjustments) to a wholly owned subsidiary of SSI. The balance of the consideration was in the form of limited partnership units (1,620,477 Class A Units) of the Operating Partnership issued or issuable, and convertible, under certain circumstances up to 1,620,477 Common Shares, subject to certain potential adjustments. Based on an aggregate of 2,691,149 Common Shares being issued and outstanding immediately following the SSI/TNC Transaction, SSI owned, immediately following the SSI/TNC Transaction, 44.72% of the issued and outstanding Common Shares, computed in a manner consistent with Rule 13d-3. The actual number of Class A Units issued on the closing date of the SSI/TNC Transaction was based on the actual debt balances encumbering the Initial Properties (as defined therein) as of the closing date. Accordingly, at the closing, the Operating Partnership issued, and agreed to issue, the following Class A Units: Units ----- Issuance Class Number Date Recipient - ----- ------ -------- --------- A 1,187,567 Closing Date Owners (2) A 299,943 Closing Date Escrow (3) A 132,967 (1) Owners 1,620,477 - ---------- (1) These units will be issued no later than the 37th full month following the Closing Date. (2) The Owners consist of SSI, TNC and seven other persons who contributed interests in properties to the Operating Partnership at the closing. Of the total Class A Units issued at the closing, 166,366 were issued to SSI, 894,412 were issued to TNC and 126,789 were issued to the other owners. (3) Of the 299,943 units in escrow, 227,712 are issuable to SSI upon release from escrow and 72,231 are issuable to TNC upon release from escrow. 2 As part of the SSI/TNC Transaction, three individuals designated by SSI and TNC (Anthony A. Nichols, Sr., Warren V. Musser and Walter D'Alessio) were elected to the Board of Trustees of the Trust, and one individual (Charles P. Pizzi) designated jointly by SSI, TNC and the Trust was also elected to the Board. Joseph Carboni, Richard M. Osborne and Gerard H. Sweeney have continued as members of the Board. The tables set forth below under the captions "The Initial Properties" identify each of the 19 Initial Properties and provide certain information relating to each such Property: 3 The Initial Properties The Initial Properties are comprised of seven properties that were owned immediately prior to the closing of the SSI/TNC Transaction directly and indirectly by SSI and 12 properties that were owned immediately prior to the closing of the SSI/TNC Transaction by certain of TNC's affiliates and SSI. The Initial Properties aggregate approximately 960,000 square feet. All of the Initial Properties are located in the Greater Philadelphia Region. As of August 31, 1996, the Initial Properties were approximately 95.1% leased to approximately 63 tenants. The following tables set forth summary information about the Initial Properties:
Initial Properties - General Information ================================================================================================================================== Property/ Transfer Use(2) Rentable Acquisition Occupancy Number Annualized Base Rent Location Category(1) Square Price (3) Rate at of June 30, Footage August 31, Tenants 1996(4) 1996 - ---------------------------------------------------------------------------------------------------------------------------------- Horsham Business Center Witmer O 51,388 $5,136,000 99.4% 4 $573,000 (Bldg. 15) 1155 Business Center Dr. Horsham, PA 19044 - ---------------------------------------------------------------------------------------------------------------------------------- Oaklands Corporate Center Witmer F 47,604 $3,136,000 100.0% 1 $334,000 (Bldg. 5) 456 Creamery Way Exton, PA 19341 - ---------------------------------------------------------------------------------------------------------------------------------- Newtown Square Corporate Campus Witmer O 37,700 $3,918,000 82.3% 4 $404,000 (Bldg. 11) 18 Campus Boulevard Newtown Square, PA 19073 - ---------------------------------------------------------------------------------------------------------------------------------- Newtown Square Corporate Campus Witmer O 67,722 $5,800,000 100.0% 4 $362,000 (Bldg. 12) 16 Campus Boulevard Newtown Square, PA 19073 - ---------------------------------------------------------------------------------------------------------------------------------- Keith Valley Business Park Witmer F 67,800 $6,472,000 100.0% 2 $657,000 (Bldg. 7) 500 Enterprise Road Horsham, PA 19044 - ---------------------------------------------------------------------------------------------------------------------------------- Keith Valley Business Park Witmer O 79,204 $6,977,000 100.0% 1 $674,000 One Progress Avenue Horsham, PA 19044 - ---------------------------------------------------------------------------------------------------------------------------------- Lansdale Industrial Park 1510 Gehman Road Witmer I 152,624 $6,000,000 100.0% 2 $771,000 Lansdale, PA 19446 - ---------------------------------------------------------------------------------------------------------------------------------- Lawrenceville Office Park Witmer O 32,000 $2,000,000 54.5% 6 $128,000 168 Franklin Corner Road Lawrenceville, NJ 08648 - ---------------------------------------------------------------------------------------------------------------------------------- Iron Run Industrial Park (Bldg. 2) 7310 Tilghman Street TI F 40,000 $2,782,000 100.0% 5 $322,000 Allentown, PA 18106 - ---------------------------------------------------------------------------------------------------------------------------------- Whitelands Business Park 110 Summit Drive Exton, PA 19341 TI F 43,660 $2,018,000 82.7% 4 $252,000 ==================================================================================================================================
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================================================================================================================================== Property/ Transfer Use(2) Rentable Acquisition Occupancy Number Annualized Base Rent Location Category(1) Square Price (3) Rate at of June 30, Footage August 31, Tenants 1996(4) 1996 - ---------------------------------------------------------------------------------------------------------------------------------- Meetinghouse Business Center TI O 52,183 $5,554,000 100.0% 3 $543,000 (Bldg. 1A and 1B) 2240/50 Butler Pike Plymouth Meeting, PA 19462 - ---------------------------------------------------------------------------------------------------------------------------------- Meetinghouse Business Center PIT O 30,546 $3,445,000 100.0% 3 $363,000 (Bldg. 2) 120 West Germantown Pike Plymouth Meeting, PA 19462 - ---------------------------------------------------------------------------------------------------------------------------------- Meetinghouse Business Center TI O 25,953 $2,420,000 98.7% 4 $292,000 (Bldg. 3) 140 West Germantown Pike Plymouth Meeting, PA 19462 - ---------------------------------------------------------------------------------------------------------------------------------- Meetinghouse Business Center TI O 31,892 $3,327,000 100.0% 3 $352,000 (Bldg. 4) 2260 Butler Pike Plymouth Meeting, PA 19462 - ---------------------------------------------------------------------------------------------------------------------------------- Horsham Business Center TI O 30,138 $3,200,000 100.0% 1 $281,000 (Bldg. 6) 650 Dresher Road Horsham, PA 19044 - ---------------------------------------------------------------------------------------------------------------------------------- Iron Run Industrial Park PIT O 42,863 $3,664,000 93.8% 4 $389,000 (Bldg. 3) 7248 Tilghman Street Allentown, PA 18106 - ---------------------------------------------------------------------------------------------------------------------------------- Iron Run Industrial Park PIT F 46,250 $3,000,000 100.0% 1 $328,000 (Bldg. 5) 6375 Snowdrift Road Allentown, PA 18106 - ---------------------------------------------------------------------------------------------------------------------------------- Oaklands Corporate Center PIT O 28,934 $2,645,000 100.0% 2 $287,000 (Bldg. 45) 468 Creamery Way Exton, PA 19341 - ---------------------------------------------------------------------------------------------------------------------------------- Oaklands Corporate Center PIT O 51,500 $4,000,000 71.8% 9 $443,000 (Bldg. 50) 486 Thomas Jones Way $75,494,000 Exton, PA 19341 ==================================================================================================================================
(1) "Witmer" denotes that the Operating Partnership will acquire the Property through its acquisition of interests in the Witmer Partnership; "TI" denotes that the Operating Partnership will acquire directly title to the Property; and "PIT" denotes that the Operating Partnership will acquire the Property through its acquisition of interests in the limited partnerships that own such Property. (2) "O" is Office; "I" is Industrial; and "F" is Flex. (3) "Acquisition Price" represents the agreed upon price for each of the Properties, computed prior to any reduction on account of indebtedness encumbering such Properties. (4) "Annualized Base Rent" represents base rents excluding tenant reimbursements calculated for the twelve months ended June 30, 1996, in accordance with generally accepted accounting principles for financial reporting purposes which is determined on a straight-line basis. Tenant reimbursements generally include payments on account of real estate taxes, operating expense escalations and utility charges. 5
Initial Properties - Indebtedness ================================================================================================================================== Principal Debt Balance at Property/Location Lender June 30, 1996 Maturity Notes - ---------------------------------------------------------------------------------------------------------------------------------- Horsham Business Center GECC $30,789,000(1) 11/30/00 These properties are all encumbered by (Bldg. 15) this one loan. The loan is a 1155 Business Center Dr. non-recourse obligation, subject to Horsham, PA 19044 stated exclusions. Borrower must pay Additional Amortization (as defined in the loan documents) to reduce principal of the loan. Borrower must also pay Additional Interest (as defined in the loan documents) upon a sale or refinancing. The loan may be prepaid subject to a prepayment penalty but may not be prepaid prior to November 30, 1997 except in conjunction with an equity offering meeting certain conditions. The loan is additionally secured by a $1,500,000 letter of credit provided by SSI, a limited guaranty of TNC, and a pledge and security agreement delivered by the Witmer Partnership. GECC retains a right of first offer to purchase the properties and has a right of first offer to refinance its debt through a debt financing under certain circumstances. - ---------------------------------------------------------------------------------------- Oaklands Corporate Center GECC (1) 11/30/00 (Bldg. 5) 456 Creamery Way Exton, PA 19341 - ---------------------------------------------------------------------------------------- Newtown Square Corporate Campus GECC (1) 11/30/00 (Bldg. 11) 18 Campus Boulevard Newtown Square, PA 19073 - ---------------------------------------------------------------------------------------- Newtown Square Corporate Campus GECC (1) 11/30/00 (Bldg. 12) 16 Campus Boulevard Newtown Square, PA 19073 - ---------------------------------------------------------------------------------------- Keith Valley Business Park GECC (1) 11/30/00 (Bldg. 7) 500 Enterprise Road Horsham, PA 19044 - ---------------------------------------------------------------------------------------- Keith Valley Business Park GECC (1) 11/30/00 One Progress Avenue Horsham, PA 19044 - ---------------------------------------------------------------------------------------- Lansdale Industrial Park GECC (1) 11/30/00 1510 Gehman Road Lansdale, PA 19446 - ---------------------------------------------------------------------------------------- Lawrenceville Office Park 168 Franklin Corner Road Lawrenceville, NJ 08648 GECC (1) 11/30/00 - --------------------------------------------------------------------------------------------------------------------------------- Iron Run Industrial Park Pennsylvania $2,539,000 3/31/00 The loan is a non-recourse obligation (Bldg. 2) State subject to stated exclusions. 7310 Tilghman Street Employees' Allentown, PA 18106 Retirement ==================================================================================================================================
6
================================================================================================================================== Principal Debt Balance at Property/Location Lender June 30, 1996 Maturity Notes - ---------------------------------------------------------------------------------------------------------------------------------- Whitelands Business Park Midlantic $1,604,000 6/1/97 The borrower is liable for the total 110 Summit Drive Bank, N.A. (a amount of the debt. Exton, PA 19341 division of PNC Bank) - ----------------------------------------------------------------------------------------------------------------------------------- Meetinghouse Business Center New England $13,467,000(2) 7/1/00 Meetinghouse buildings 1, 2, 3 and 4 are (Bldg. 1A and 1B) Mutual Life encumbered by this one loan. The loan 2240/50 Butler Pike Insurance Co. is a non-recourse obligation, subject to Plymouth Meeting, PA 19462 stated exclusions. Borrower must pay Additional Interest and Appreciation Interest as such terms are defined in the loan documents. The loan may be prepaid, subject to a prepayment penalty. The loan is additionally secured by a $500,000 letter of credit provided by SSI. - ----------------------------------------------------------------------------------------- Meetinghouse Business Center New England (2) 7/1/00 (Bldg. 2) Mutual Life 120 West Germantown Pike Insurance Co. Plymouth Meeting, PA 19462 - ----------------------------------------------------------------------------------------- Meetinghouse Business Center New England (2) 7/1/00 (Bldg. 3) Mutual Life 140 West Germantown Pike Insurance Co. Plymouth Meeting, PA 19462 - ----------------------------------------------------------------------------------------- Meetinghouse Business Center New England (2) 7/1/00 (Bldg. 4) Mutual Life 2260 Butler Pike Insurance Co. Plymouth Meeting, PA 19462 - ----------------------------------------------------------------------------------------- Horsham Business Center Allmerica $2,894,000 1/1/97 (3) (Bldg. 6) Financial (3) 650 Dresher Road Horsham, PA 19044 Safeguard Scientifics, $364,000 7/31/99 (4) Inc. - ----------------------------------------------------------------------------------------- Iron Run Industrial Park New England $3,218,000 6/1/04 The loan is a non-recourse obligation, (Bldg. 3) Mutual subject to stated exclusions. Borrower 7248 Tilghman Street Life Insurance must pay Additional Interest and Allentown, PA 18106 Co. Appreciation Interest as such terms are defined in the loan documents. Lender retains a right of first refusal on any sale of the property. - ----------------------------------------------------------------------------------------- Iron Run Industrial Park First Union, $2,358,000 2/1/98 The loan is guaranteed by TNC. The (Bldg. 5) National Bank borrower is liable for the total amount 6375 Snowdrift Road of the debt. Allentown, PA 18106 - ----------------------------------------------------------------------------------------- Oaklands Corporate Center First Union, $6,453,000(5) 2/1/98 Oaklands Corporate Center Buildings 45 (Bldg. 45) National Bank and 50 are encumbered by this one loan. 468 Creamery Way The loan is guaranteed by TNC. The Exton, PA 19341 borrower is liable for the total amount of the debt. - ----------------------------------------------------------------------------------------- Oaklands Corporate Center First Union, (5) 2/1/98 (Bldg. 50) National Bank 486 Thomas Jones Way Exton, PA 19341 ===================================================================================================================================
- -------- (1) All of these properties secure the GECC Loan. As of June 30, 1996 the outstanding principal balance of this loan was $30,789,000. (2) All of these Properties secure a single loan. As of June 30, 1996 the outstanding principal balance of this loan was $13,467,000. (3) On July 30, 1996, this loan was refinanced paying the former mortgage lender $2,400,000 with proceeds of a new loan, with GMAC in the amount of $2,500,000. The new mortgage loan matures on August 1, 1998, bears interest at 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. 7 (4) Certain tenant improvements and leasing commissions in the aggregate amount of $460,000 ($364,000 outstanding as of June 30, 1996) are financed by Safeguard Scientifics, Inc. and are secured by a second mortgage on the property. The loan bears interest, payable monthly, at prime and matures on the earlier of (a) the completion of a secondary stock offering by the Trust; (b) a sale or refinance of the property providing sufficient funds to satisfy all other priority debts of the property; or (c) July 31, 1999. (5) Both of these Properties secure a single loan. As of June 30, 1996, the outstanding principal balance of this loan was $6,453,000. The following table sets forth the principal amount of the loans secured by the Initial Properties that is repayable in the years indicated:
================================================================================================================================== Property/Location 1996 1997 1998 1999 2000 2001+ - ---------------------------------------------------------------------------------------------------------------------------------- Horsham Business Center $140,000 $151,000 $150,000 $150,000 $30,197,000 (Bldg. 15) (1) (1) (1) (1) (1) 1155 Business Center Dr. Horsham, PA 19044 - ---------------------------------------------------------------------------------------------------------------------------------- Oaklands Corporate Center (1) (1) (1) (1) (1) (Bldg. 5) 456 Creamery Way Exton, PA 19341 - ---------------------------------------------------------------------------------------------------------------------------------- Newtown Square Corporate Campus (1) (1) (1) (1) (1) (Bldg. 11) 18 Campus Boulevard Newtown Square, PA 19073 - ---------------------------------------------------------------------------------------------------------------------------------- Newtown Square Corporate Campus (1) (1) (1) (1) (1) (Bldg. 12) 16 Campus Boulevard Newtown Square, PA 19073 - ---------------------------------------------------------------------------------------------------------------------------------- Keith Valley Business Park (1) (1) (1) (1) (1) (Bldg. 7) 500 Enterprise Road Horsham, PA 19044 - ---------------------------------------------------------------------------------------------------------------------------------- Keith Valley Business Park (1) (1) (1) (1) (1) One Progress Avenue Horsham, PA 19044 - ---------------------------------------------------------------------------------------------------------------------------------- Lansdale Industrial Park (1) (1) (1) (1) (1) 1510 Gehman Road Lansdale, PA 19446 - ---------------------------------------------------------------------------------------------------------------------------------- Lawrenceville Office Park (1) (1) (1) (1) (1) 168 Franklin Corner Road Lawrenceville, NJ 08648 - ---------------------------------------------------------------------------------------------------------------------------------- Iron Run Industrial Park $24,000 $26,000 $29,000 $25,000 $2,446,000 (Bldg. 2) 7310 Tilghman Street Allentown, PA 18106 - ---------------------------------------------------------------------------------------------------------------------------------- Whitelands Business Park $72,000 $1,572,000 110 Summit Drive Exton, PA 19341 - ---------------------------------------------------------------------------------------------------------------------------------- Meetinghouse Business Center $164,000 $176,000 $188,000 $203,000 $12,818 (Bldg. 1A and 1B) (2) (2) (2) (2) (2) 2240/50 Butler Pike Plymouth Meeting, PA 19462 - ---------------------------------------------------------------------------------------------------------------------------------- Meetinghouse Business Center (2) (2) (2) (2) (2) (Bldg. 2) 120 West Germantown Pike Plymouth Meeting, PA 19462 - ---------------------------------------------------------------------------------------------------------------------------------- ==================================================================================================================================
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================================================================================================================================== Property/Location 1996 1997 1998 1999 2000 2001+ - ---------------------------------------------------------------------------------------------------------------------------------- Meetinghouse Business Center (2) (2) (2) (2) (2) (Bldg. 3) 140 West Germantown Pike Plymouth Meeting, PA 19462 - ---------------------------------------------------------------------------------------------------------------------------------- Meetinghouse Business Center (2) (2) (2) (2) (2) (Bldg. 4) 2260 Butler Pike Plymouth Meeting, PA 19462 - ---------------------------------------------------------------------------------------------------------------------------------- Horsham Business Center $2,894,000 $364,000 (Bldg. 6) 650 Dresher Road (4) Horsham, PA 19044 - ---------------------------------------------------------------------------------------------------------------------------------- Iron Run Industrial Park $3,218,000 (Bldg. 3) 7248 Tilghman Street Allentown, PA 18106 - ---------------------------------------------------------------------------------------------------------------------------------- Iron Run Industrial Park $43,000 $47,000 $2,287,000 (Bldg. 5) 6575 Snowdrift Road Allentown, PA 18106 - ---------------------------------------------------------------------------------------------------------------------------------- Oaklands Corporate Center $117,000 $128,000 $6,260,000 (Bldg. 45) (3) (3) (3) 468 Creamery Way Exton, PA 19341 - ---------------------------------------------------------------------------------------------------------------------------------- Oaklands Corporate Center (3) (3) (3) (Bldg. 50) 486 Thomas Jones Way Exton, PA 19341 ==================================================================================================================================
- -------- (1) All of these properties secure a single loan. (2) All of these properties secure a single loan. (3) Both of these properties secure a single loan. (4) On July 30, 1996, this loan was refinanced paying the former mortgage lender $2,400,000 with proceeds of a new loan, with GMAC in the amount of $2,500,000. The new mortgage loan matures on August 1, 1998, bears interest at 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. 9 Lease Expirations Initial Properties. The table set forth below shows certain information regarding rental rates and lease expirations for the Initial Properties. Scheduled Lease Expirations (The Initial Properties)
Rentable Square Percentage of Total Final Year of Number of Leases Footage Subject to Final Annualized Base Annualized Base Rent From Lease Expiring Within Expiring Rent From Properties Properties Expiration the Year(1) Leases Under Expiring Leases(2) Under Expiring Leases ----------- --------------- ------------------- ------------------------ ----------------------------- 1996 10 46,635 $483,000 5.2% 1997 6 84,108 $685,000 7.3% 1998 8 33,975 $404,000 4.3% 1999 14 259,607 $1,922,000 20.5% 2000 7 47,617 $577,000 6.2% 2001 9 147,320 $1,896,000 20.2% 2002 1 4,517 $63,000 0.7% 2003 2 77,742 $764,000 8.1% 2004 0 -0- $-0- 0.0% 2005 and 6 207,800 $2,578,000 27.5% thereafter -------- --------- ----------- -------- Total 63 909,321 $ 9,372,000 100.0% ======== ========= ============ ========
- -------- (1) A lease is considered to expire if, and at any time, it is terminable by the tenant without payment of penalty or premium. (2) "Final Annualized Base Rent" for each lease scheduled to expire represents the cash rental rate of base rents, excluding tenant reimbursements in the final month prior to expiration multiplied by twelve. Tenant reimbursements generally include payments on account of real estate taxes, operating expense escalations and utility charges. 10 Item 5. Other Events (i) The Trust issued, as of August 23, 1996, 42,405 units (each of which is comprised of one Common Share and one six-year warrant exercisable for one additional Common Share at a per share exercise price of $6.50) to Turkey Vulture Fund XIII, Ltd. (the "RMO Fund") pursuant to, and in accordance with, a promissory note in the original principal amount of $992,293 issued by the Trust to the RMO Fund on June 21, 1996. The foregoing units were issued in partial prepayment of the promissory note. Under the terms of the promissory note, each unit so issued reduced the principal amount of the loan by $5.63 or an aggregate of $238,740. (ii) On August 22, 1996, at the annual meeting of shareholders of the Trust, the shareholders of the Trust approved all but one of the proposals contained in the Trust's proxy statement dated July 18, 1996 by the votes indicated below: Matters Approved: a. SSI/TNC Transaction: Votes for: 1,053,929 Votes against: 66,011 Abstentions: 34,694 Broker Non-Votes: 369,789 b. Amendment to Declaration of Trust to increased authorization number of Common shares from 15,000,000 to 75,000,000: Votes for: 1,040,646 Votes against: 100,238 Abstentions: 30,875 Broker Non-Votes: 352,664 c. Amendment to Declaration of Trust to eliminate the restriction on the Trust's ability to issues Common Shares or preferred shares below book value: Votes for: 932,396 Votes against: 159,730 Abstentions: 79,633 Broker Non-Votes: 352,664 d. Amendment to Declaration of Trust to confirm the authority of the Trust's Board of Trustees to effectuate from time to time and without shareholder approval reverse stock splits: Votes for: 964,775 Votes against: 163,628 Abstentions: 77,174 Broker Non-Votes: 318,846 11 e. Amendment to Declaration of Trust to eliminate the mandatory distribution requirement applicable to net sale and refinancing proceeds attributable to certain properties: Votes for: 977,591 Votes against: 188,042 Abstentions: 39,944 Broker Non-Votes: 318,846 f. Amendment to Declaration of Trust to substitute a new share ownership limitation: Votes for: 1,089,936 Votes against: 79,178 Abstentions: 36,463 Broker Non-Votes: 318,846 g. Reelection to the Board of Trustees of each of Joseph L. Carboni, Richard M. Osborne and Gerard H. Sweeney: Mr. Carboni: Votes for: 1,460,366 Votes Withheld: 64,057 Abstentions: -0- Mr. Osborne: Votes for: 1,459,845 Votes Withheld: 64,578 Abstentions: -0- Mr. Sweeney: Votes for: 1,460, 166 Votes Withheld: 64,257 Abstentions: -0- Matter Not Approved: The shareholders did not cast the requisite affirmative votes to restore voting rights on certain Common Shares beneficially owned by Richard M. Osborne: Votes for: 645,482 Votes against: 146,272 Abstentions: 42,584 Broker Non-Votes: 690,085 12 Item 7. Financial Statements and Exhibits. (a) Financial Statements of Businesses Acquired. Combined Financial Statements of Initial Properties as of December 31, 1995 (b) Pro Forma Financial Information Unaudited Pro Forma Condensed Consolidating Financial Statements o Pro Forma Condensed Consolidating Balance Sheet as of June 30, 1996 o Pro Forma Condensed Consolidating Statements of Operations for the Year Ended December 31, 1995, and the Six-Month Period Ended June 30, 1996 (c) Management's Discussion and Analysis of Financial Condition and Results of Operations (d) Exhibits 13 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Partners and Owners of the Initial Properties: We have audited the accompanying combined balance sheets of the Initial Properties, a nonlegal entity more fully described in Note 1, as of December 31, 1995 and 1994, and the related combined statements of operations, owners' deficit, and cash flows for each of the three years in the period ended December 31, 1995. These financial statements are the responsibility of the Initial Properties' management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the combined financial statements referred to above present fairly, in all material respects, the combined financial position of the Initial Properties and the combined results of their operations and their combined cash flows for each of the three years in the period ended December 31, 1995, in conformity with generally accepted accounting principles. ARTHUR ANDERSEN LLP Philadelphia, Pa., April 12, 1996 14 INITIAL PROPERTIES COMBINED BALANCE SHEETS (NOTE 1) (In thousands)
December 31 June 30, 1995 1994 1996 --------------- --------------- --------------- (Unaudited) ASSETS: Real estate investments (Note 2)- Operating properties, at cost $ 78,190 $ 75,577 $ 79,563 Less- Accumulated depreciation (21,669) (17,858) (23,571) --------------- --------------- --------------- 56,521 57,719 55,992 Cash (Note 2) 773 438 655 Escrowed cash (Note 2) 519 504 513 Accounts receivable 253 386 651 Accrued rental income (Notes 2 902 1,313 785 and 6) Deferred costs, net (Note 2) 1,884 1,526 2,145 Prepaid expenses and other assets 400 393 140 --------------- --------------- --------------- $ 61,252 $ 62,279 $ 60,881 =============== =============== =============== LIABILITIES AND OWNERS' DEFICIT: Mortgage notes payable (Note 3) $ 63,259 $ 70,515 $ 63,322 Note payable (Note 7) -- -- 364 Accrued interest payable 599 1,124 444 Tenant security deposits and other liabilities (Note 2) 947 729 1,320 --------------- --------------- --------------- 64,805 72,368 65,450 COMMITMENTS AND CONTINGENCIES (Note 6) OWNERS' DEFICIT (3,553) (10,089) (4,569) --------------- --------------- --------------- $ 61,252 $ 62,279 $ 60,881 =============== =============== ===============
The accompanying notes are an integral part of these statements. 15 INITIAL PROPERTIES COMBINED STATEMENTS OF OPERATIONS (NOTE 1) (In thousands)
For the Six-Month For the Year Ended Period Ended December 31 June 30 ----------- ------- 1995 1994 1993 1996 1995 ----------- ----------- ----------- ----------- ------------ (Unaudited) REVENUE (Note 4): Base rents (Notes 2 and 6) $ 7,829 $ 8,050 $ 7,955 $ 3,888 $ 3,960 Tenant reimbursements 2,895 3,130 2,754 1,870 1,381 Management operations (Note 2) 617 946 976 277 319 Other income 3 46 2 100 -- ----------- ----------- ----------- ----------- ---------- Total revenue 11,344 12,172 11,687 6,135 5,660 ----------- ----------- ----------- ----------- ----------- OPERATING EXPENSES: Interest (Note 3) 5,855 5,915 5,807 2,581 3,051 Depreciation and amortization (Note 2) 4,336 3,618 3,568 2,103 1,923 Real estate taxes 968 1,076 1,107 511 497 Building operating costs 2,456 2,719 2,073 1,790 1,121 Selling, general and administrative (Note 5) 906 1,220 1,328 456 478 Provision for loss on real estate investments (Note 2) 202 -- -- -- -- ----------- ----------- ----------- ----------- ---------- Total operating expenses 14,723 14,548 13,883 7,441 7,070 ----------- ----------- ----------- ----------- ----------- LOSS BEFORE EXTRAORDINARY ITEMS (3,379) (2,376) (2,196) (1,306) (1,410) EXTRAORDINARY ITEMS-- GAIN ON RESTRUCTURING OF DEBT (Note 3) 5,559 614 -- -- -- ----------- ----------- ----------- ----------- ---------- NET INCOME (LOSS) $ 2,180 $ (1,762) $ (2,196) $ (1,306) $ (1,410) =========== =========== =========== =========== ===========
The accompanying notes are an integral part of these statements. 16 INITIAL PROPERTIES COMBINED STATEMENTS OF OWNERS' DEFICIT (NOTE 1) FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993, AND THE SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED) (In thousands) BALANCE AT JANUARY 1, 1993 $ (6,181) Contributions 752 Net loss (2,196) BALANCE AT DECEMBER 31, 1993 (7,625) Contributions 64 Distributions (766) Net loss (1,762) ----------- BALANCE AT DECEMBER 31, 1994 (10,089) Contributions 4,356 Net income 2,180 BALANCE AT DECEMBER 31, 1995 (3,553) Contributions 323 Distributions (33) Net loss (1,306) ----------- BALANCE AT JUNE 30, 1996 (Unaudited) $ (4,569) =========== The accompanying notes are an integral part of these statements. 17 INITIAL PROPERTIES COMBINED STATEMENTS OF CASH FLOWS (NOTE 1) (In thousands)
For the Six-Month For the Year Ended Period Ended December 31 June 30 ----------- ------- 1995 1994 1993 1996 1995 --------- --------- --------- --------- ----------- (Unaudited) CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ 2,180 $ (1,762) $ (2,196) $ (1,306) $ (1,410) Adjustments to reconcile net income (loss) to net cash provided by operating activities- Extraordinary gain on extinguishment of debt (5,559) (614) -- -- -- Depreciation and amortization 4,336 3,618 3,568 2,103 1,923 Provision for loss on real estate investments 202 -- -- -- -- Changes in assets and liabilities- (Increase) decrease in- Accounts receivable 133 (14) (248) (397) (64) Accrued rental income 411 458 (72) 117 230 Prepaid expenses and other assets (7) 427 (52) 260 273 Increase (decrease) in- Accrued interest payable (525) 253 422 (155) 179 Tenant security deposits and other liabilities 218 (204) 22 373 112 --------- --------- --------- --------- --------- Net cash provided by operating activities 1,389 2,162 1,444 995 1,243 --------- --------- --------- --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures and leasing commissions paid (2,774) (1,802) (908) (1,783) (375) (Increase) decrease in escrowed cash (15) 87 (575) 6 82 --------- --------- --------- --------- --------- Net cash used in investing activities (2,789) (1,715) (1,483) (1,777) (293) --------- --------- --------- --------- ---------
(Continued) 18 INITIAL PROPERTIES COMBINED STATEMENTS OF CASH FLOWS (NOTE 1) (In thousands)
For the Six-Month For the Year Ended Period Ended December 31 June 30 ----------- ------- 1995 1994 1993 1996 1995 --------- --------- --------- --------- --------- (Unaudited) CASH FLOWS FROM FINANCING ACTIVITIES: Contributions $ 4,356 $ 64 $ 752 $ 323 $ 287 Distributions -- (766) -- (33) -- Repayments on mortgage notes payable (1,899) (874) (1,038) (279) (531) Borrowings on mortgage notes payable -- 1,200 414 342 -- Proceeds from note payable -- -- -- 364 -- Costs associated with financing (722) (160) 17 (53) (33) --------- --------- --------- --------- --------- Net cash provided by (used in) financing activities 1,735 (536) 145 664 (277) --------- --------- --------- --------- --------- NET INCREASE (DECREASE) IN CASH 335 (89) 106 (118) 673 CASH, BEGINNING OF PERIOD 438 527 421 773 438 --------- --------- --------- --------- --------- CASH, END OF PERIOD $ 773 $ 438 $ 527 $ 655 $ 1,111 ========= ========= ========= ========= ========= SUPPLEMENTAL DISCLOSURE: Interest paid $ 6,254 $ 5,763 $ 5,411 $ 2,736 $ 2,744 ========= ========= ========= ========= =========
The accompanying notes are an integral part of these statements. 19 INITIAL PROPERTIES NOTES TO COMBINED FINANCIAL STATEMENTS DECEMBER 31, 1995, 1994 AND 1993 1. ORGANIZATION AND BASIS OF COMBINATION: The accompanying combined financial statements consist of the accounts of the following properties and business operations: The Property Management, Leasing, and Development Operations of The Nichols Realty Services Company (the "Company") The Nichols Company ("Nichols") Properties: Property Square Footage -------- -------------- 456 Creamery Way, Exton, PA 47,600* 468 Creamery Way, Exton, PA 28,900 486 Thomas Jones Way, Exton, PA 51,500 7248 Tilghman Street, Allentown, PA 42,900 6575 Snowdrift Road, Allentown, PA 46,250 1510 Gehman Road, Lansdale, PA 152,600* 16 Campus Blvd., Newtown Square, PA 67,700* 18 Campus Blvd., Newtown Square, PA 37,700* One Progress Avenue, Horsham, PA 79,200* 1155 Business Center Drive, Horsham, PA 51,400* 500 Enterprise Avenue, Horsham, PA 67,800* 168 Franklin Corner Road, Lawrenceville, NJ 32,000* - ------------------------------------------ *Included in the "Witmer Partnership" Safeguard Scientifics, Inc. ("Safeguard") Properties: Property Square Footage -------- -------------- 650 Dresher Road, Horsham, PA 30,100 7310 Tilghman Street, Allentown, PA 40,000 2240-50 Butler Pike, Plymouth Meeting, PA 52,200 2260 Butler Pike, Plymouth Meeting, PA 31,900 120 Germantown Pike, Plymouth Meeting, PA 30,500 140 Germantown Pike, Plymouth Meeting, PA 25,900 110 Summit Drive, Exton, PA 43,700 The Initial Properties listed above have common management and were developed by an affiliated ownership group referred to collectively as "Nichols Safeguard." Nichols Safeguard is engaged in the development and ownership of commercial and industrial real estate in the Philadelphia/Delaware Valley Area and provides management, leasing, and development services on a contractual basis to the above properties and third parties. 20 The Initial Properties are intended to be acquired in a transaction with Brandywine Realty Trust (the "Trust"), which intends to remain qualified as a real estate investment trust under the Internal Revenue Code. These financial statements have been prepared on a combined basis to present the financial position and results of operations of the 19 properties and the related management business of Nichols Safeguard as if the operations were managed as a single predecessor business under common control. Accordingly, all inter-entity accounts have been eliminated to reflect the combined results. The combined financial statements as of June 30, 1996, and for the six months ended June 30, 1996 and 1995, are unaudited; however, in the opinion of management, all adjustments (consisting solely of normal recurring adjustments) necessary for a fair presentation of the combined financial statements for the interim periods have been included. The results for the interim periods are not necessarily indicative of the results for the full year. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Use of Estimates in the Preparation of Financial Statements The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Real Estate Investments A summary of real estate investments, less accumulated depreciation and amortization at December 31, 1995 and 1994, and June 30, 1996, follows (in thousands): December 31 June 30 ----------- ------------- 1995 1994 1996 ----------- ------------ ------------- Land $ 9,275 $ 8,975 $ 9,275 Buildings 53,761 52,263 53,821 Tenant improvements 15,107 14,299 16,420 Furniture, fixtures and equipment 47 40 47 ----------- ------------ ------------ 78,190 75,577 79,563 Accumulated depreciation (21,669) (17,858) (23,571) ----------- ------------ ------------ $ 56,521 $ 57,719 $ 55,992 =========== =========== =========== 21 Costs associated with the acquisition, development and construction of these properties are capitalized. Properties are carried at the lower of depreciated cost or net realizable value. For financial reporting purposes, depreciation is computed on a straight-line basis over the estimated useful lives of the assets, as follows: Buildings 31.5 years Tenant improvements 5 to 10 years, which reflect the expected terms of the lease Furniture, fixtures and equipment 3 to 5 years Management reviews the net realizable value of the properties periodically to determine whether an allowance for possible losses is necessary. The carrying value of the properties is evaluated on an individual basis, and to the extent management's estimate of the net realizable value of each investment is less than its carrying value, a provision for loss on real estate investments is recorded. During 1995, a $202,000 provision for loss on real estate investments was recorded. For federal income tax purposes, the Company utilizes straight-line and accelerated methods of depreciation. As a result, accumulated depreciation for tax purposes differs from accumulated depreciation for financial statement purposes by approximately $(408,000) and $1,072,000 at December 31, 1995 and 1994, respectively. In March 1995, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets to be Disposed Of." This statement requires that long-lived assets to be held and used by the Company be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. In performing the review for recoverability, management estimates the future cash flows expected to result from the use of the asset and its eventual disposition. If the sum of the expected future cash flows (undiscounted and without interest charges) is less than the carrying amount of the asset, an impairment loss should be recognized. Measurement of an impairment loss for these assets should be based on the fair market value of the asset. On January 1, 1996, the Company adopted this statement. The effect of adopting this statement was not material to the Initial Properties' financial position or results of operations. Escrowed Cash In accordance with the mortgage agreements of several properties, the owners were required to place funds on deposit in interest-bearing accounts to secure the payments of real estate taxes, debt service and other anticipated capital expenditures. 22 Deferred Costs Fees and costs associated with lease origination and costs incurred to obtain long-term financing have been capitalized and are being amortized on a straight-line basis, which approximates the interest method, over the terms of the respective leases or debt. At December 31, 1995 and 1994, and June 30, 1996, deferred costs include the following (in thousands): December 31 June 30 ----------- ------------ 1995 1994 1996 ---------- ---------- ------------ Deferred financing costs $ 1,009 $ 349 $ 1,061 Deferred leasing costs 2,770 2,957 3,190 ---------- ---------- ----------- 3,779 3,306 4,251 Less- Accumulated amortization 1,895 1,780 2,106 ---------- ---------- ----------- $ 1,884 $ 1,526 $ 2,145 ========== ========== =========== Revenue Recognition Rental income from tenants is recognized on a straight-line basis regardless of when payments are due. Accrued rental income represents rental income recognized in excess of payments currently due (see Note 6). The Company provides management, leasing and development services. Fees for such services are based on contracted rates, which are consistent with the general marketplace. Management fees, leasing commissions, and developer fees are recognized as income in the period earned. Income Taxes No federal or state income taxes are payable by Nichols Safeguard, and none have been provided in the accompanying financial statements. The partners are required to include their respective shares of partnership profits and losses in their individual tax returns. Tenant Security Deposits Cash consists of demand accounts and money market accounts. At December 31, 1995 and 1994, and June 30, 1996, cash includes unrestricted tenant security deposits of $350,000, $270,000, and $353,000, respectively. 23 3. MORTGAGE NOTES PAYABLE: Mortgage notes payable are collateralized by the properties and the assignment of rents and generally require monthly principal and interest payments. Mortgage notes payable totaling $31,092,000 at December 31, 1995, bear fixed annual interest ranging from 7% to 9.25%. Nichols Safeguard also has two mortgage notes payable totaling $30,523,000 and $1,644,000 at December 31, 1995, which have variable rates of interest based on the lender's commercial paper plus 2.75% and prime plus 1%, respectively. At December 31, 1995, these interest rates were 8.6% and 9.5%, respectively. The weighted average interest rates on the mortgage notes for the years ended December 31, 1995, 1994 and 1993, were 8.6%, 8.0% and 8.2%, respectively. Weighted average interest rates for the six months ended June 30, 1996 and 1995, were 8.2% and 8.3%, respectively. In November 1995, Nichols Safeguard refinanced certain mortgage notes on the Witmer properties totaling $37,354,000 with proceeds of mortgage loans totaling up to $32,211,600, including tenant improvement holdbacks of $1,688,000, plus cash of $4,052,000 contributed by Safeguard. At June 30, 1996, $342,000 of the tenant improvement holdbacks had been advanced to Nichols Safeguard and is included in mortgage notes payable. In connection with the refinancing, Nichols Safeguard acquired the Lawrenceville, New Jersey property with outstanding debt of $3,200,000 from the lender. As a result of the debt refinancing, Nichols Safeguard recorded an extraordinary gain of $5,559,000 in 1995. Commencing January 1, 1996, through maturity, November 30, 2000, Nichols Safeguard will make monthly principal and interest payments with interest based on the lender's composite commercial paper plus 2.75% per annum. Minimum monthly principal payments are equal to 1/12 of .5% of the principal balance outstanding on the first day of each loan year beginning December 1. Additional principal payments will be made monthly on the $30,523,000 principal outstanding as of December 31, 1995, based on 100% of the net cash flow from the properties, as defined. No principal payments were made from these participating interests in cash flows during 1995 or the six months ended June 30, 1996. The loans are cross-collateralized and cross-defaulted. The loan is further secured by a $1,500,000 letter of credit provided by Safeguard. The loans are subject to certain prepayment penalties as defined. As additional consideration, the lender may receive additional contingent interest, as defined, at scheduled maturity or upon early loan repayment. The percentage used to compute the additional contingent interest may vary based upon the level of any additional drawdowns under the loan and was 25% at December 31, 1995. No additional contingent interest was paid in 1995 or during the six months ended June 30, 1996. In July 1994, Nichols Safeguard negotiated with a lender to restructure a mortgage note totaling $4,718,000. The principal amount of the loan was reset at $4,100,000. Interest was reset from prime plus 1% to prime plus .5% retroactive to January 1, 1994, and the maturity was extended to March 31, 1996. As a result of the debt restructuring, Nichols Safeguard recorded an extraordinary gain of $614,000 during 1994. This mortgage note was included in the November 1995 refinancing. 24 Mortgage notes are due between December 1996 and June 2004. At December 31, 1995, the carrying value of the mortgage notes payable approximates the fair value as the debt bears interest at rates that approximate current market rates. The annual maturities of the mortgage notes payable as of December 31, 1995, are as follows (in thousands): Recourse Nonrecourse Total -------- ----------- ----- 1996 $ 233 $ 3,222 $ 3,455 1997 1,746 354 2,100 1998 8,548 368 8,916 1999 -- 378 378 2000 -- 45,192 45,192 Thereafter -- 3,218 3,218 ---------- ------------- ------------- $ 10,527 $ 52,732 $ 63,259 ========== ============= ============= At December 31, 1995, mortgage notes payable of $30,523,000 and $13,548,000 are also collateralized by outstanding letters of credit totaling $1,500,000 and $500,000 which expire in November 1996 and July 1996, respectively. Guarantees by the Company and certain other limited partners totaled $10,527,000. Two mortgage notes totaling $13,548,000 and $3,219,000 at December 31, 1995, are entitled to receive additional interest in the form of 50% and 80%, respectively, of the cash flows, as defined. During 1995, 1994 and 1993, additional interest expense recorded as a result of cash flow participation by lenders totaled $61,000, $201,000 and $0, respectively. For the six months ended June 30, 1996 and 1995, additional interest expense totaled $0 and $114,000, respectively. 4. RELATED-PARTY TRANSACTIONS: The Company provides management, leasing and development services for certain affiliated partnerships. Management and leasing fees earned by the Company related to these partnerships totaled $171,000, $420,000 and $359,000, respectively, for the years ended December 31, 1995, 1994 and 1993, and are included in management operations. Nichols Safeguard occupied approximately 28,000 square feet of the properties during 1995, 1994 and 1993. In addition, 4,600 square feet was occupied by a Nichols Safeguard affiliate during 1994 and part of 1993. Base rents from these affiliates for the years ended December 31, 1995, 1994 and 1993, were $246,000, $260,000 and $230,000, respectively. Base rents from these affiliated partnerships for the six months ended June 30, 1996 and 1995, were $117,000 and $126,000, respectively. 5. EMPLOYEE BENEFIT PLAN: Employees of the Company participate in a profit sharing plan covering substantially all employees. Annual contributions are determined at the discretion of the employer. No contributions were made in 1995, 1994 and 1993, respectively. 25 6. OPERATING LEASES: Nichols Safeguard leases its properties to tenants under operating leases with various expiration dates extending to the year 2006. During 1996, leases covering 99,000 square feet or approximately 11% of the net leasable space are scheduled to expire. Future minimum rentals on non-cancelable tenant leases at December 31, 1995, excluding tenant reimbursements for increases in operating expenses are as follows (in thousands):
Decrease Rental in Accrued Minimum Payments Due Rental Income Rental Income ------------- ------------- ------------- 1996 $ 7,122 $ 163 $ 6,959 1997 5,209 227 4,982 1998 4,498 147 4,351 1999 3,358 138 3,220 2000 2,262 135 2,127 Thereafter 2,187 92 2,095 -------------- ------------- -------------- $ 24,636 $ 902 $ 23,734 ============== ============= ==============
During 1995, 1994 and 1993, no tenants individually accounted for more than 10% of rental revenue. 7. SUBSEQUENT EVENTS (UNAUDITED): On August 22, 1996, the Trust consummated its transaction with Nichols and Safeguard. Upon Closing, the Trust obtained controlling ownership interests of the Initial Properties and received $426,250 in cash. In the SSI/TNC Transaction, the Trust issued 775,000 common shares of beneficial interest ("Common Shares") and a six-year warrant exercisable for an additional 775,000 common shares of beneficial interest at a per share exercise price of $6.50. The balance of the consideration was in the form of limited partnership units issued or issuable, and convertible under certain circumstances, up to 1,620,477 Common Shares, subject to certain potential adjustments. In July 1996, Nichols Safeguard refinanced $2,894,000 of mortgage notes which were due in December 1996. The notes were satisfied by the payment of $2,400,000 which represents the partial proceeds of a new mortgage loan of $2,500,000 which bears interest at 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 and a final balance due August 1, 1998. As a result of the refinancing, Nichols Safeguard recorded an extraordinary gain of $494,000. Certain tenant improvements and leasing commissions associated with the same property, in the aggregate amount of $460,000 ($364,000 outstanding as of June 30, 1996) have been financed by a loan from Safeguard and is secured by a second mortgage on the property. The loan requires interest payable monthly at the prime rate and matures on the earlier of: (a) the completion of a secondary stock offering by the Trust (b) a sale or refinance of the property providing sufficient funds to satisfy all other priority debts of the property or (c) July 31, 1999. 26 Item 7(b). BRANDYWINE REALTY TRUST PRO FORMA CONDENSED CONSOLIDATING FINANCIAL INFORMATION The following sets forth the pro forma condensed consolidating balance sheet of Brandywine Realty Trust as of June 30, 1996, and the pro forma condensed consolidating statements of operations for the year ended December 31, 1995, and the six-month period ended June 30, 1996. The pro forma condensed consolidating financial information is presented as if the following completed transactions had been consummated on June 30, 1996, for balance sheet purposes and January 1, 1995, for purposes of the statements of operations; (i) the Trust obtained the sole general partnership interest and approximately 59% limited partnership interest in the Operating Partnership; (ii) the contributions of the Initial Properties in connection with the SSI/TNC transaction; (iii) the investment by the RMO Fund of $1,330,000 in debt and equity securities of the Trust; and (iv) the acquisition of the LibertyView Building directly by the Trust. This unaudited pro forma condensed consolidating financial information should be read in conjunction with the historical financial statements of the Trust, the Initial Properties and the LibertyView Building and the related notes thereto either included elsewhere herein or previously filed by the Trust with the Securities and Exchange Commission on its Form 10-K/A for the year ended December 31, 1995 and its Form 10Q for the quarter ended June 30, 1996 . In management's opinion, all adjustments necessary to reflect the effects of the above referenced transactions have been made. The accounting effecting the pro forma condensed consolidated financial information is summarized as follows: o The Trust formed the Operating Partnership by contributing $3,937,000 of partnership interests in the Initial Properties in exchange for all of the Class B Units (715,818 Units). The Trust is entitled to receive a 9.5% preferential return on this contribution. The Operating Partnership acquired fee title to, and the remaining limited partnership interests in the Initial Properties, which includes the Witmer properties, in exchange for 1,620,477 Class A Units. o Initial Properties have been reflected at the fair value upon acquisition to the extent that such properties are being acquired by the Operating Partnership in exchange for Class A Units. o The Trust's interest in the Operating Partnership has been determined after giving effect to the expected issuance of an additional 132,967 Class A Units in the Operating Partnership in connection with the acquisition of the Residual Interests in the Title Holdings Partnerships since the Operating Partnership and Residual Interests holders have agreed to the purchase and sale of these interests within 37 months of the Closing Date. Accordingly, these Units are included in the 1,620,477 Class A Units issued to SSI, TNC and the other Owners in Note 1 to the pro forma financial information. At a value of $5.50 per Class A Unit, the aggregate value of the additional Class A Units to be issued for the Residual Interests equals $731,319. The agreed purchase price consideration for the Residual Interests is to be paid by 1999 and is equal to the amount of Class A Units in the Operating Partnership that the Residual Interests holders would have received on August 22, 1996, upon the closing of the SSI/TNC Transaction ("Closing") plus the cash amount necessary for the Residual Interests holders to receive the same economic benefit as if these interests had been transferred at Closing. In addition, the Operating Partnership may issue additional Class A Units to the contributors if certain economic performance criteria are achieved in the future. 27 o The Trust owns a 70% controlling general partnership interest in Brandywine Realty Partners ("BRP") as disclosed in the Trust's 1995 financial statements. The Operating Partnership acquired the Trust's interests in BRP in exchange for 1,856,200 Class C Units which will be valued at the Trust's carryover basis since the Trust will continue to consolidate these assets. A total of 1,600,000 Class C Units were issued to the Trust at Closing, and 256,200 Class C Units are expected to be exchanged on August 23, 1997. The impact on the Trust's effective ownership of the Operating Partnership from this second exchange will be to increase its percentage ownership of the Operating Partnership from 59% to 61%. Since the Trust will continue to receive substantially all of the income allocated from BRP, there will be no material impact on the Trust's consolidated results of operations from these exchanges. o The Trust acquired the LibertyView Building and retains 100% of the ownership interests therein and therefore consolidates it at the Trust level. The Trust issued 59,949 share units (each consisting of one common share of beneficial interest, par value $0.01 per share ("Common Stock"), and one warrant exerciseable for six years for an additional share of Common Stock at an initial exercise price of $6.50) to the RMO Fund in exchange for $338,000. The balance of the investment of $992,000 by the RMO Fund was made in the form of a loan. This loan was partially prepaid in the aggregate amount of $238,000 as of August 23, 1996, whereby the Trust issued 42,405 share units to the RMO Fund. o The Operating Partnership owns 5% of the voting common stock of the Management Company and is entitled to receive approximately 95% of the economic benefits through its ownership of all the preferred stock and 5% of the voting common stock of the Management Company. The balance of the common stock is owned by a partnership comprised of officers of the Trust. The Management Company employs all of the key officers of the Trust and a majority of the employees responsible for managing, leasing and developing the Trust's properties. Since the Operating Partnership receives substantially all of the economic benefits of ownership and has common officers and employees, the Management Company is reflected using the consolidation method of accounting. The pro forma condensed consolidating financial information is unaudited and is not necessarily indicative of what the actual financial position would have been at June 30, 1996, nor does it purport to represent the future financial position and the results of operations of the Trust. 28 BRANDYWINE REALTY TRUST PRO FORMA CONDENSED CONSOLIDATING BALANCE SHEET JUNE 30, 1996 (Notes 1 and 2) (Unaudited) (in thousands)
Brandywine Initial Realty Trust Properties Historical Historical LibertyView Consolidated Combined Pro Forma Property Pro Forma (A) (B) Adjustments Subtotal (J) Consolidated ------------- ---------- ----------- -------- --------- ------------ Assets: Real estate investments, net $13,752 $55,992 $ 20,368 (D)(E)(F)(G) $90,112 $10,696 $100,808 Cash and cash equivalents 1,643 655 4 (C)(D) 2,302 (1,120) 1,182 Escrowed cash 629 513 -- 1,142 -- 1,142 Deferred costs, net 1,411 2,145 (1,543)(E)(G) 2,013 100 2,113 Other assets 732 1,576 (785)(G) 1,523 (300) 1,223 --------- -------- -------- ------- ------- -------- Total assets $18,167 $60,881 $ 18,044 $97,092 $ 9,376 $106,468 ======= ======= ======== ======= ======= ======== Liabilities: Mortgages and notes payable $ 9,870 $63,686 $ 162 (D)(F) (I) $73,718 $ 9,376 $ 83,094 Other liabilities 725 1,764 493 (G) 2,982 -- 2,982 --------- -------- -------- ------- ------- -------- Total liabilities 10,595 65,450 655 76,700 9,376 86,076 --------- -------- -------- ------- ------- -------- Minority Interest -- -- 8,469 (D)(G) 8,469 -- 8,469 --------- -------- -------- ------- ------- -------- Shareholders' Equity: Common shares of beneficial interest 19 -- 7 (C) 26 -- 26 Additional paid-in capital 17,068 -- 3,728 (C)(D)(E)(G)(H)(I) 20,796 -- 20,796 Stock warrants 42 -- 616 (C)(I) 658 -- 658 Accumulated equity (deficit) (9,557) (4,569) 4,569 (C)(H) (9,557) -- (9,557) --------- -------- -------- ------- ------- -------- Total shareholders' equity 7,572 (4,569) 8,920 11,923 -- 11,923 --------- -------- -------- ------- ------ -------- Total liabilities and shareholders' equity $18,167 $60,881 $ 18,044 $97,092 $ 9,376 $106,468 ======= ======= ======== ======= ======= ========
The accompanying notes and management assumptions are an integral part of these statements. 29 BRANDYWINE REALTY TRUST PRO FORMA CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1995 (Notes 1 and 3) (Unaudited) (in thousands, except Share and per Share amounts)
Brandywine Initial Liberty Liberty Realty Trust Properties View View Historical Historical Building Building Consolidated Combined Pro Forma Historical Pro Forma Pro Forma (A) (B) Adjustments Subtotal (G) Adjustment Consolidated ----------- ------------ ------------- --------- ---------- ---------------- ------------ Revenue: Base rents $ 3,517 $ 7,829 $ -- $11,346 $ 1,119 $ -- $ 12,465 Tenant reimbursements 66 2,895 -- 2,961 535 -- 3,496 Management fees -- 617 -- 617 -- -- 617 Other 83 3 -- 86 -- -- 86 ---------- --------- -------- ------- --------- -------- ---------- Total revenue 3,666 11,344 -- 15,010 1,654 -- 16,664 ---------- --------- -------- ------- --------- -------- ---------- Operating expenses: Interest 793 5,855 33 (D) 6,681 -- 812 (I)(J)(K) 7,493 Depreciation and amortization 1,402 4,336 (395)(C)(E) 5,343 -- 284 (H)(L) 5,627 Other expenses 2,290 4,532 -- 6,822 798 -- 7,620 ---------- --------- -------- ------- --------- -------- ---------- Total operating expenses 4,485 14,723 (362) 18,846 798 1,096 20,740 ---------- --------- -------- ------- --------- -------- ---------- Income (loss) before (819) (3,379) 362 (3,836) 856 (1,096) (4,076) minority interest Minority interest in income 5 -- (1,237)(F) (1,232) -- -- (1,232) (loss) ---------- --------- -------- ------- --------- -------- --------- Income (loss) before $ (824) $ (3,379) $ 1,599 $(2,604) $ 856 $ (1,096) $ (2,844) extraordinary items --------- ---------- -------- -------- --------- --------- --------- Earnings per share of beneficial $ (0.44) $ (1.03) interest ---------- ---------- Weighted average number of shares outstanding including 1,874,372 2,751,726 share equivalents ========== ==========
The accompanying notes and management assumptions are an integral part of these statements. 30 BRANDYWINE REALTY TRUST PRO FORMA CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 1996 (Notes 1 and 3) (Unaudited) (in thousands, except Share and per Share amounts)
Brandywine Initial Liberty Liberty Realty Trust Properties View View Historical Historical Building Building Consolidated Combined Pro Forma Historical Pro Forma Pro Forma (A) (B) Adjustments Subtotal (G) Adjustments Consolidated ----------- --------- ------------- --------- ---------- ------------ ------------ Revenue: Base rents $ 1,907 $ 3,888 $ -- $ 5,795 $ 605 $ -- $ 6,400 Tenant reimbursements 68 1,870 -- 1,938 241 -- 2,179 Management fees -- 277 -- 277 -- -- 277 Other 52 100 -- 152 -- -- 152 ---------- -------- ------- -------- ------ ------ -------- 2,027 6,135 -- 8,162 846 -- 9,008 ---------- -------- ------- -------- ------ ------ -------- Operating expenses: Interest 416 2,581 17 (D) 3,014 -- 404 (I)(J) (K) 3,418 Depreciation and amortization 465 2,103 (156)(C)(E) 2,412 -- 142 (H)(L) 2,554 Other expenses 1,140 2,757 -- 3,897 368 -- 4,265 ---------- -------- ------- -------- ------ ------ -------- Total operating expenses 2,021 7,441 (139) 9,323 368 546 10,237 ---------- -------- ------- -------- ------ ------ -------- Income (loss) before minority 6 (1,306) 139 (1,161) 478 (546) (1,229) interest Minority interest in income (loss) 5 -- (478)(F) (473) -- -- (473) ---------- -------- ------- -------- ------ ------ --------- Income (loss) before extraordinary $ 1 $ (1,306) $ 617 $ (688) $ 478 $(546) $ (756) items ======== ======== ======= ======== ====== ===== ========= Earnings per share of beneficial interest $ 0.00 $ (0.27) ========= ========== Weighted average number of shares outstanding including share equivalents 1,888,923 2,763,321 ========== =========
The accompanying notes and management assumptions are an integral part of these statements. 31 BRANDYWINE REALTY TRUST NOTES AND MANAGEMENT'S ASSUMPTIONS TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATING FINANCIAL INFORMATION (in thousands, except share and per-share amounts) 1. BASIS OF PRESENTATION: Brandywine Realty Trust (the "Trust") is a Maryland real estate investment trust. As of June 30, 1996, the Trust owns 4 properties. As of August 22, 1996, the Trust owns or holds an interest in 24 properties, consisting of suburban office buildings in three states. Upon the August 22, 1996 closing of the SSI/TNC Transaction discussed herein, the Trust became the sole general partner and holds approximately 59% interest in Brandywine Operating Partnership, L.P. (the "Operating Partnership"). The following is a summary of the units issued upon the completed SSI/TNC Transaction:
Trust TNC SSI Total ----------- ----------- ------------ ----------- General Partner interest 182(1) -- -- 182 Limited Partner interests: Class A units -- 1,216,659(2) 403,818(2) 1,620,477 Class B units 715,818(1) -- -- 715,818 Class C units 1,600,000(3)(4) -- -- 1,600,000 --------- ---------- ---------- ---------- 2,316,000 1,216,659 403,818 3,936,477 ========= ========== ========== ========== Ownership interest 59%(4) 31% 10% 100% ========= ========== ========== ==========
(1) See Note 2(C) for the Trust's acquisition of Class B units. (2) Units issued to TNC, other owners and SSI resulting from the sale to the Operating Partnership by TNC, SSI and other owners of substantially all of their ownership interests in the Initial Properties. The 1,620,477 Class A Units include 132,967 Units to be issued within 37 months following the Closing Date in exchange for Residual Interests (of which 123,227 will be issued to TNC and other Owners and 9,740 will be issued to SSI). SSI owns 40% of the capital stock of TNC. (3) Units issued to the Trust at Closing in exchange for the contribution to the Operating Partnership of a majority of the Trust's general partnership interest in Brandywine Realty Partners ("BRP"). 32 (4) On August 23, 1997, it is expected that the Trust will contribute its remaining general partnership interest in BRP in exchange for an additional 256,200 Class C Units. This contribution will result in an increase in the Trust's ownership of the Operating Partnership from 59% to 61% at such time. These pro forma financial statements should be read in conjunction with the historical financial statements and notes thereto of the Trust, the Initial Properties and the LibertyView Building either included elsewhere herein or previously filed by the Trust with the Securities and Exchange Commission on its form 10-K/A for the year ended December 31, 1995 and its Form 10-Q for the quarter ended June 30, 1996. In management's opinion, all adjustments necessary to reflect the effects of the acquisitions of the Initial Properties and the LibertyView Building by the Trust have been made. 2. ADJUSTMENTS TO PRO FORMA CONDENSED CONSOLIDATING BALANCE SHEET: (A) Reflects the historical consolidated balance sheet of the Trust as of June 30, 1996. (B) Reflects the historical combined balance sheet of the Initial Properties as of June 30, 1996. SSI/TNC Transaction (C) The Trust issued 775,000 Common Shares and Warrants to SSI in exchange for SSI's Ownership Interest in the Witmer Properties and $426,250 in cash. SSI's investment in the Initial Properties reflects SSI's recent cash investment to facilitate a debt financing of the Witmer Properties in November 1995. The Trust issued 699,289 Common Shares and Warrants in exchange for the SSI Ownership Interest at a value of $3,937,000. The $5.63 per Common Share and Warrant value is based on the range of trading prices of the Common Shares at the time the SSI/TNC Transaction was announced ($4-7/8 and $4-7/16 being the high and low sales prices on March 27, 1996, the last full trading day prior to the public announcement) and based on a $.70 per warrant value (based on a modified Black Scholes calculation). The Trust issued 75,711 Common Shares and Warrants at the same $5.63 per unit in exchange for $426,250 in cash.
Dr. Cash $ 426,000 Dr. Accumulated equity (deficit) 3,937,000 Cr. Common shares of beneficial interest $ 7,000 Cr. Additional paid-in capital 3,813,000 Cr. Stock warrants (at $.70 per warrant) 543,000
33
The Trust contributed its investment in the limited partnership to form the Operating Partnership and obtained the general partnership interest and all of the Class B limited partnership interest (715,818 Units) in the Operating Partnership as follows: Dr. Investment in Operating Partnership $ 3,937,000 Cr. Investment in limited partnership $ 3,937,000 (D) To borrow funds from SSI (item i) and pay the costs associated with the acquisition of the real estate investment of the Initial Properties totaling $650,000 (item ii). The costs associated with the acquisition (50% of the total) have been capitalized. The remaining costs are attributed to the cost of issuing the common shares to SSI and other equity interests of the Trust and have been charged against equity and minority interest in proportion to the respective ownership interests (59% to the Trust and 41% to the Minority Interest) by the cash proceeds raised from the stock issuance and by a loan from SSI, payable in 1999, with interest accruing at prime. (i) Dr. Cash $ 228,000 Cr. Mortgages and notes payable $ 228,000 (ii) Dr. Real estate investments $ 325,000 Dr. Additional paid-in capital 192,000 Dr. Minority interest 133,000 Cr. Cash $650,000 (E) To reflect the allocation of previously deferred costs associated with the acquisition of the real estate investments of the Initial Properties and the issuance of equity interests by the Trust. Dr. Real estate investments $ 369,000 Dr. Additional paid-in capital 369,000 Cr. Deferred costs $738,000 (F) To increase real estate investments and related notes payable for the capitalization of the Operating Partnership's portion of the transfer taxes on six of the Initial Properties partially funded by a loan from SSI, payable in 1999, with interest accruing at prime. Dr. Real estate investments $ 172,000 Cr. Mortgages and notes payable $ 172,000
34
(G) To record the purchase of the Initial Properties by the Trust in exchange for 1,620,477 Class A Units at $5.50 per unit ($8,913,000) and 715,818 Class B Units at $5.50 ($3,937,000) for a total consideration value of $12,850,000. Such value was determined based upon (i) the $75,494,000 fair value of the real estate assets received, (ii) the adjusted fair value of other assets received of $3,299,000 and (iii) the fair value of the total liabilities encumbering the Initial Properties of $65,943,000, as adjusted. The step-up adjustment was recorded as additional paid-in-capital after recognition of the minority interest shares of such adjustments as of June 30, 1996, as follows: (a) Real estate investments acquired at fair value per Purchase Agreement $ 75,494,000 (b) Other assets acquired $ 4,889,000 (i) Less: Deferred financing costs (805,000) (ii) Less: Straight-line rent receivables (785,000) (iii) --------------- Net other assets 3,299,000 (c) Mortgage Notes $ (63,686,000) (i) Other liabilities (1,764,000) (i) Other debt transfer costs (493,000) (i) --------------- (65,943,000) ---------------- Total equity consideration $ 12,850,000 Less: Accumulated deficit of Initial Properties (4,569,000) ---------------- Total adjustments 17,419,000 Less: Minority interest share (8,604,000) (iv) ---------------- Trust - Additional paid-in capital $ 8,815,000 ================ (i) Other assets include cash and cash equivalents, escrowed cash, deferred costs, net, and other. The fair values of all assets, mortgage notes payable and other liabilities approximate their carrying amounts. (ii) These financing costs were deferred on a historical basis by the Initial Properties. However, the Trust will write off these deferred financing costs as the debt and related future interest costs have been reflected at fair market value absent these deferred costs. (iii) The accrued straight-line rent receivable has no future fair market value as the leases acquired are at market rates.
35
(iv) Presented below is the calculation of the minority interest share as reflected above and reconciled to the pro formas (in thousands): Allocation Minority Total BRT (59%) Interest (41%) --------------- ---------------- --------------- The Trust: Trust's equity at 6/30/96 $ 7,573 Issuance of shares to SSI in exchange for: LP units 3,937 Cash 426 --------------- Pro Forma Equity at 6/30/96 11,936 $ 7,009 $ 4,927 --------------- Operating Partnership (BOP): Total equity investment $ 12,850 SSI GP interest acquired by BRT (3,937) --------------- BOP adjusted equity 8,913 5,238 3,675 --------------- ------ ------ $ 20,849 $ 12,247 8,602 =============== =============== Charges against minority interest reflecting the cost of issuing the Common Shares to SSI and other equity interests of the Trust (see (D) (ii) (133) ---------------- Total pro forma minority interest at 6/30/96 $ 8,469 =============== (H) To adjust the accumulated deficit of Initial Properties acquired subsequent to the distribution to SSI per 2 (D) (i): Dr. Additional paid-in capital $4,569,000 Cr. Accumulated equity (deficit) $4,569,000 Dr. Additional paid-in capital $3,937,000 Cr. Accumulated equity (deficit) $3,937,000 (I) To reflect the partial prepayment of the note payable to the RMO Fund through the issuance of 42,405 Common Shares and one six year warrant exerciseable for an additional 42,405 Common Shares at a per share exercise price of $6.50. The $7.73 per Common Share and warrant value is based on the trading price of the Common Shares at the time of the prepayment ($6.00 per share) and based on a $1.73 per Warrant Value (based on a modified Black Scholes calculator). Dr. Mortgages and NotesPayable $238,000 Cr. Common Shares of Beneficial Interest $- Cr. Additional paid in capital $165,000 Cr. Stock warrants (at $1.73 per warrant) $73,000
36 LibertyView Building Acquisition (J) Reflects the Trust's acquisition of the LibertyView Building as of June 30, 1996, based upon the purchase price of $10,600,000 plus closing costs of $200,000 acquired with cash of $1,120,000, a mortgage note payable of $8,480,000 due in January 1999 with interest payable monthly at 8% and a note payable to the seller of $1,000,000 due in December 1997 with no interest payable. The Trust recorded a $104,000 adjustment to the purchase price to reflect the fair market value of the note payable to the seller. Deferred financing costs of $100,000 related to the mortgage note payable have been capitalized. Further, $300,000 of deposits included in other assets at June 30, 1996 were applied to the purchase price. 37 3. ADJUSTMENTS TO PRO FORMA CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS: (A) Reflects the historical consolidated operations of the Trust. (B) Reflects the historical operations of the Initial Properties, excluding the extraordinary gain on restructuring of debt of $5,559,000. SSI/TNC Transaction (C) Reflects depreciation of the capitalized transfer taxes and amortization of the deferred costs included in real estate investments on the SSI/TNC Transaction of $7,000 and $26,000, respectively, for the year ended December 31, 1995. For the six months ended June 30, 1996, depreciation and amortization was $4,000 and $13,000, respectively. (D) Reflects the increase in interest expense related to the notes payable to SSI (which bear interest at prime) of $33,000 and $17,000 for the year ended December 31, 1995 and the six month period ended June 30, 1996, assuming a prime rate of 8.25%. (E) Reflects depreciation of the buildings acquired over a 25-year useful life and tenant improvements and other furniture, fixtures and equipment (FF&E) over five years in general. The adjustments to depreciation expense for the year ended December 31, 1995, and for the six-month period ended June 30, 1996, were determined as follows (in thousands):
Pro Forma Pro Forma Fair Market Amounts Amounts Historical Net Book Value: Value 12/31/95 6/30/96 -------------------------- ---------------- -------------- -------------- Land $ 9,275 $ 15,099 $ 15,099 $ 15,099 Buildings $ 41,077 $ 54,226 $ 54,226 $ 53,899 Tenant Improvements $ 6,132 $ 6,132 $ 6,132 $ 6,462 FF&E $ 37 $ 37 $ 37 $ 34 Total $ 56,521 $ 75,494 $ 75,494 $ 75,494 Depreciation Expense: Buildings $ 54,226/25 years $ 2,169 $ $ 53,899/25 years/6 mos. $ 1,078 Tenant Improvements $ 6,132/5 years $ 1,227 $ 6,462/5 years/6 mos. $ 646 FF&E $ 37/5 years $ 7 $ 34/5 years/6 mos. $ 4 Total pro forma depreciation expense $ 3,403 $ 1,728 Historical depreciation expense of the Initial Properties $ 3,831 $ 1,901 ------------- ------------- Pro forma adjustments $ (428) $ (173) ============= =============
38 (F) Minority interest in income (loss) has been reflected in accordance with the terms of the Operating Partnership Agreement. Upon consummation of the SSI/TNC Transaction described herein, the Trust owns 59% of the Operating Partnership. The remaining 41% of the Operating Partnership is owned by TNC, SSI and the other owners whose interests are reflected as Minority Interest. The adjustments to record the income effect of Minority Interest Share of Loss for the periods ended December 31, 1995 and June 30, 1996, in the pro forma statements of operations were computed as follows:
For the For the Six Months Year Ended Ended December 31, June 30, 1995 1996 ----------------- ---------------- Initial Properties loss before Minority Interest $ (3,379,000) $ (1,306,000) Impact of pro forma adjustments(3)(C,D,E) 362,000 139,000 ----------------- ---------------- Total Loss $ (3,017,000) $ (1,167,000) Minority Share (41%) x41% x41% ----------------- ---------------- Pro forma Minority Interest in Loss (F) $ (1,237,000) $ (478,000) ================= ===============
LibertyView Building Acquisition (G) Reflects the historical operations of the LibertyView Building, excluding certain expenses such as interest, depreciation and amortization, professional costs, and other costs not directly related to the future operations of the LibertyView Building. (H) Reflects depreciation totaling $244,000 and $122,000, respectively, of the LibertyView Building using a 35-year depreciable life for the year ended December 31, 1995, and the six-month period ended June 30, 1996. (I) Reflects the increase in interest expense of $680,000 and $340,000, respectively, related to the $8,480,000 mortgage note payable of the LibertyView Building, which has an interest rate of 8% per annum for the year ended December 31, 1995, and for the six-month period ended June 30, 1996. (J) Reflects the increase in interest expense of $70,000 and $35,000 for the year ended December 31, 1995 and the six-month period ended June 30, 1996, respectively, related to the note payable to the seller of the LibertyView Building, which note bears no interest, discounted at an interest rate of 8% per annum. (K) Reflects the increase in interest expense related to the note payable to the RMO Fund (which bears interest at prime) of $62,000 and $29,000 for the year ended December 31, 1995 and the six-month period ended June 30, 1996, assuming a prime rate of 8.25%. (L) Reflects the amortization of deferred financing costs related to the LibertyView Building of $40,000 and $20,000, respectively, for the year ended December 31, 1995, and the six-month period ended June 30, 1996. 39 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS THE TRUST Reference is made to Management's Discussion and Analysis of Financial Condition and Results of Operations contained in the response to Item 2 of the Trust's Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission for the quarter ended June 30, 1996 and to Management's Discussion and Analysis of Financial Condition and Results of Operations contained in the response to Item 7 of the Trust's Annual Report on Form 10-K/A filed with the Securities and Exchange Commission for the year ended December 31, 1995. Such responses are hereby incorporated herein by reference. INITIAL PROPERTIES The following table presents the historical combined results of operations of the Initial Properties acquired by the Operating Partnership for each of the years in the three years ended December 31, 1995 and for the six months ended June 30, 1996 and 1995, respectively.
Six months ended Year Ended December 31 June 30, 1996 ---------------------- ------------- 1995 1994 1993 1996 1995 ---- ---- ---- ---- ---- Revenues $11,344 $12,172 $11,687 $6,135 $5.660 ------- ------- ------- ------ ------ Other operating expenses 4,532 5,015 4,508 2,757 2,096 Depreciation and amortization 4,336 3,618 3,568 2,103 1,923 Interest 5,855 5,915 5,807 2,581 3,051 ----- ----- ----- ----- ----- Total operating expenses 14,723 14,548 13,883 7,441 7,070 ------ ------ ------ ----- ----- Loss before extraordinary items ($3,379) ($2,376) ($2,196) ($1,306) ($1,410) -------- -------- -------- -------- --------
Comparison of Six Months Ended June 30, 1996 to Six Months Ended June 30, 1995 Total revenues increased by $0.5 million or 8%, to $6.1 million from $5.7 million in the first six months of 1996. This increase is primarily attributable to an increase in tenant expense recoveries of $0. 5 million due to an increase in other operating expenses. Base rents during this same period declined due to interim vacancies relating to lease rollovers, offset by certain new tenants and additional rents relating to the Lawrenceville property acquired in November of 1995. 40 Other operating expenses increased by $0.7 million in comparing the first six months of 1996 to the first six months of 1995. This increase was attributable to increases in maintenance; snow removal costs resulting from severe winter storms in the region of the Initial Properties and the additional operating costs associated with the Lawrenceville property. Depreciation and amortization expense increased by $0.2 million in the first six months of 1996 as compared to the first six months of 1995 as a result of additional amortization expense associated with deferred financing costs incurred in November 1995 plus additional amortization expense attributable to tenant improvements and leasing commissions. Interest expense decreased by $0.5 million in the first six months of 1996 as compared to the first six months of 1995. This decrease results from a debt reduction aggregating $7.3 million when comparing 1996 to 1995, which debt reduction is primarily attributable to a $30.5 million debt refinancing in the fourth quarter of 1995. Further, interest rate reductions occurred in two other mortgage loans. The loss before extraordinary items decreased $0.1 million to $1.3 million in the first six months of 1996 from $1.4 million in the first six months of 1995. The decreased loss was attributable to an increase in tenant expense recoveries and a decrease in interest costs partially offset by a decrease in base rents and an increase in other operating expenses. Comparison of Year Ended December 31, 1995 to Year Ended December 31, 1994. Total revenues decreased by $0.9 million or 6.8%, to $11.3 million in 1995 from $12.2 million in 1994. This decrease primarily consisted of a decrease of $0.2 million in base rents due to interim vacancy from lease rollovers, a decrease in tenant expense recoveries of $0.2 million due to a decrease in other operating expenses and a decrease of $0.4 million in management revenue resulting from discontinued contracts on certain managed properties sold and fewer brokerage transactions. Other operating expenses decreased by $0.5 million in 1995 compared to 1994. This decrease was attributable to reductions in real estate taxes resulting from tax assessment appeals, reduction in building operating expenses associated with occupancy levels and reductions in general and administrative expenses due to staff reductions and the elimination of certain non-recurring expenses. Depreciation and amortization expense increased $0.7 million in 1995. This increase is attributable to the additional tenant improvements completed in 1995 and the write off of unamortized tenant improvements associated with leases which terminated. 41 Interest expense decreased by $0.1 million in 1995. This decrease results from interest rate reductions in two restructured loans. The loss before extraordinary items increased $1.0 million to $3.4 million in 1995 from $2.4 million in 1994. The increase was attributable to reductions in rents collected and management revenue, partially offset by reduction in other operating expenses. Comparison of Year Ended December 31, 1994 to Year Ended December 31, 1993 Total revenues increased by $0.5 million or 4.1%, to $12.2 million in 1994 from $11.7 million in 1993. This increase resulted primarily from an increase in base rents of $0.1 million relating to increased occupancy and an increase in tenant expense recoveries of $0.4 million due to increases in other operating expenses. Other operating expenses increased by $0.5 million in 1994 compared to 1993. This increase was attributable to increases in building operating expenses associated with occupancy levels, significant snow removal costs and certain non-recurring operating expenses. Interest expense increased by $0.1 million in 1994. This increase results from prime interest rate increases. The loss before extraordinary items increased $0.2 million to $2.4 million in 1994 from $2.2 million in 1993. The increase was attributable to increases in other operating expenses and interest costs. THE TRUST, PRO FORMA CONDENSED CONSOLIDATING FINANCIAL STATEMENTS Comparison of Pro Forma Consolidated Six Months Ended June 30, 1996 to Historical Six Months Ended June 30, 1996 For the six months ended June 30, 1996, the Trust's consolidated pro forma net loss was ($756,000) or ($0.27) per share as compared to the Trust's consolidated historical results for the six months ended June 30, 1996 of $1,000 or $0.00 per share. Of the loss, on a pro forma basis, ($689,000) is attributable to the inclusion of operations from the Trust's acquisition of the Initial Properties and ($68,000) is attributable to the inclusion of operations from the Trust's acquisition of the LibertyView Building. 42 Total revenues increased by $6.9 million in comparing the Trust's consolidated pro forma revenue for the six months ended June 30, 1996 to the Trust's consolidated historical revenues for the same period. Of this total increase, $6.1 million is attributable to the inclusion of revenues from the Trust's acquisition of the Initial Properties and $0.8 million is attributable to the Trust's acquisition of the LibertyView Building. Pro forma interest expense was $3.4 million for the six months ended June 30, 1996 which represents an increase of $3.0 million in comparison to $0.4 million of interest expense in the Trust's consolidated historical results for the six months ended June 30, 1996. Of this increase, $2.6 million is attributable to debt encumbering the Initial Properties, $375,000 is attributable to debt encumbering the LibertyView Building, $29,000 is attributable to interest on the note payable to the RMO Fund and $17,000 is attributable to financing received from SSI to pay for a portion of the costs of the SSI/TNC Transaction. Pro forma depreciation and amortization expense was $2.6 million for the six months ended June 30, 1996 which represents an increase of $2.1 million in comparison to $0.5 million of depreciation and amortization expense in the Trust's consolidated historical results for the six months ended June 30, 1996. Of this increase, $1.9 million is attributable to the inclusion of depreciation and amortization expense relating to the Initial Properties and $142,000 is attributable to depreciation and amortization expense relating to the LibertyView Building. Pro forma other operating expenses were $4.3 million for the six months ended June 30, 1996 which represents an increase of $3.2 million in comparison to $1.1 million of other operating expenses in the Trust's consolidated historical results for the six months ended June 30, 1996. Of this increase, $2.8 million is attributable to the inclusion of other operating expenses relating to the Initial Properties and $0.4 million is attributable to the inclusion of other operating expenses relating to the LibertyView Building. Comparison of Pro Forma Year Ended December 31, 1995 to Historical Year Ended December 31,1995 For the year ended December 31, 1995, the Trust's consolidated pro forma net loss was $2.8 million or ($1.03) per share as compared to the Trust's consolidated historical results for the year ended December 31, 1995 of ($0.8) million or ($0.44) per share. Of the total increased loss, on a pro forma basis, $1.8 million is attributable to the inclusion of operations from the Trust's acquisition of the Initial Properties and $0.2 million is attributable to the inclusion of operations from the Trust's acquisition of the LibertyView Building. Total revenues increased by $13.0 million in comparing the Trust's consolidated pro forma revenues for the year ended December 31, 1995 to the Trust's consolidated historical revenues for the same period. Of this total increase, $11.3 million is attributable to the inclusion of revenues from the Trust's acquisition of the Initial Properties and $1.7 million is attributable to the Trust's acquisition of the LibertyView Building. 43 Pro forma interest expense was $7.5 million for the year ended December 31, 1995 which represents an increase of $6.7 million in comparison to $0.8 million of interest expense in the Trust's consolidated historical results for the year ended December 31, 1995. Of this increase, $5.9 million is attributable to debt encumbering the Initial Properties, $750,000 is attributable to debt encumbering the LibertyView Building, $62,000 is attributable to interest on the note payable to the RMO Fund and $33,000 is attributable to financing received from SSI to pay for a portion of the costs of the SSI/TNC Transaction. Pro forma depreciation and amortization expense was $5.6 million for the year ended December 31, 1995 which represents an increase of $4.2 million in comparison to $1.4 million of depreciation and amortization expense in the Trust's consolidated historical results for the year ended December 31, 1995. Of this increase, $3.9 million is attributable to the inclusion of depreciation and amortization expense relating to the Initial Properties and $0.3 million is attributable to depreciation and amortization expense relating to the LibertyView Building. Pro forma other operating expenses were $7.6 million for the year ended December 31,1995 which represents an increase of $5.3 million in comparison to $2.3 million of other operating expenses in the Trust's consolidated historical results for the year ended December 31, 1995. Of this increase, $4.5 million is attributable to the inclusion of other operating expenses relating to the Initial Properties and $0.8 million attributable to the inclusion of other operating expenses relating to the LibertyView Building. 44 Liquidity and Capital Resources On July 19, 1996, the Trust acquired the LibertyView Building from an unrelated party for a purchase price of $10.6 million. The Trust financed this acquisition through a combination of proceeds from investments by the RMO Fund aggregating $1.3 million, term financing from a commercial bank (initially funding $8.5 million) and seller financing totaling $1.0 million. On August 22, 1996, the Trust closed on the acquisition of the Initial Properties at a purchase price of $75.5 million subject to related mortgage debt encumbering the Initial Properties of $63.7 million. Upon Closing, the Trust received $426,250 in cash and obtained a controlling interest in a newly formed limited partnership which acquired direct and indirect ownership interests of the Initial Properties. In the SSI/TNC Transaction, the Trust issued 775,000 Common Shares and a six-year warrant exerciseable for an additional 775,000 Common Shares at a per share exercise price of $6.50. The balance of the consideration was in the form of limited partnership units of the Operating Partnership issued or issuable, and convertible, under certain circumstances, up to 1,620,477 Common Shares, subject to certain potential adjustments. As of June 30, 1996, the Trust's consolidated cash balances were $1.6 million and escrowed cash balances were $0.6 million. On a pro forma basis, after giving effect to the Trust's acquisitions of the Initial Properties and the LibertyView Building, the Trust's pro forma consolidated cash balances as of June 30, 1996 were $1.2 million and escrowed cash balances were $1.1 million. The decrease in cash balances of $0.4 million is attributable to $1.1 million utilized in the acquisition of the LibertyView Building offset by the inclusion of $0.7 million of cash relating to the Initial Properties. The increase in escrowed cash balances of $0.5 million is attributable to the Initial Properties' escrowed funds. On a pro forma basis, after giving effect to the Trust's acquisitions of the Initial Properties and the LibertyView Building, the Trust's consolidated cash balances as of June 30, 1996 were $1.2 million and accounts receivable totaled $0.9 million as compared to accounts payable, accrued expenses, tenant security deposits and deferred rents aggregating $3.0 million. Such liabilities include approximately $180,000 of trade payables due beyond a twelve-month period and approximately $185,000 of tenant improvements and leasing commissions which costs were funded in July 1996 under current mortgage loan terms. On a pro forma basis, other available sources of funding are future cash flows from operations and the application of a working capital loan of up to $0.7 million to be provided by SSI in connection with the SSI/TNC Transaction. Management recognizes that following the completion of the SSI/TNC Transaction, the level of current liabilities of the Trust relative to its current assets will require the Trust to take steps to increase its working capital. Such steps will include efforts to improve leasing within the Trust's portfolio, control and reduce operating expenses and obtain third party debt and equity investments in the Trust. 45 The principal sources of funding of the Initial Properties have historically been cash flow from operations, proceeds from construction and permanent debt financing, equity investments and advances from SSI. The principal requirements of the Initial Properties' capital have historically been for debt service, capital expenditures and investment in rental properties in connection with their development program. Management anticipates that these will continue to be the principal uses of the funds generated by the Initial Properties after the acquisition by the Operating Partnership. Management believes the above-mentioned sources of the Initial Properties will be sufficient for the next 12 month period to meet anticipated cash flow requirements, including debt service and capital expenditures. 46 Item 7(d). Exhibits. 3.1 Amended and Restated Declaration of Trust (amended through August 22, 1996) 3.2 Bylaws (amended through August 22, 1996) 10.1 Agreement of Limited Partnership of Brandywine Operating Partnership, L.P. 10.2 Distribution Support and Loan Agreement between the Operating Partnership and SSI. 10.3 Agreement among the Company, SSI and Safeguard Scientifics (Delaware), Inc. 10.4 Registration Rights Agreement Among the Company, SSI, TNC, Turkey Vulture Fund XIII, Ltd. and certain other persons. 10.5 Warrant to purchase 775,000 Common Shares issued by the Company to SSI. 10.6 Third Amendment to Brandywine Realty Partners General Partnership Agreement. 10.7 Form of Warrant issued to executive officers. 10.8 Environmental Indemnity Agreement between the Company and SSI. 10.9 Option Agreement between the Operating Partnership and C/N Horsham Towne Limited Partnership. 10.10 Articles of Incorporation of Brandywine Realty Services Corporation. 23.1 Consent of Arthur Andersen LLP 47 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: September 6, 1996 By: /s/ Gerard H. Sweeney -------------------------- Title: President and Chief Executive Officer 48 EX-3.1 2 EXHIBIT 3.1 BRANDYWINE REALTY TRUST DECLARATION OF TRUST (Amended and Restated as of August 22, 1996 at the Annual Meeting of Shareholders by affirmative vote of the holders of a majority of the outstanding shares of the Trust pursuant to Section 8-202(c) of Title 8 of the Maryland Corporations and Associations Code) This DECLARATION OF TRUST ("Declaration of Trust" or "Declaration") is amended and restated as of the date set forth above by the undersigned Trustees. WHEREAS, the Trustees desire to create a real estate investment trust under Title 8 of the Corporations and Associations Article of the Annotated Code of Maryland, as amended ("Title 8"); and WHEREAS, the Trustees desire that this trust qualify as a "real estate investment trust" under the Internal Revenue Code of 1986, as amended (the "Code"), so long as such qualification, in the opinion of the Trustees, is advantageous to the Shareholders; and WHEREAS, the beneficial interest in the Trust shall be divided into transferable shares of one or more classes evidenced by certificates; NOW, THEREFORE, the Trustees hereby declare that they will hold all property which they have or may hereafter acquire as such Trustees, together with the proceeds thereof, in trust, and manage the Trust Property (as defined herein) for the benefit of the Shareholders as provided by this Declaration of Trust. ARTICLE 1 THE TRUST; DEFINITIONS SECTION 1.1. Name. The name of the trust (the "Trust") is: Brandywine Realty Trust So far as may be practicable, the business of the Trust shall be conducted and transacted under that name, which name (and the word "Trust" wherever used in this Declaration of Trust, except where the context otherwise requires) shall refer to the Trustees collectively but not individually or personally and shall not refer to the Shareholders or to any officers, employees or agents of the Trust or of such Trustees. Under circumstances in which the Trustees determine that the use of the name "Brandywine Realty Trust" is not practicable, they may use any other designation or name for the Trust. SECTION 1.2. Resident Agent. The name of the resident agent for service of process of the Trust in the State of Maryland is The Corporation Trust Incorporated, whose post office address is c/o The Corporation Trust Incorporated, 32 South Street, Baltimore, Maryland 21202. The Trust may have such offices or places of business within or without the State of Maryland as the Trustees may from time to time determine. SECTION 1.3. Nature of Trust. The Trust is a real estate investment trust within the meaning of Title 8. The Trust shall not be deemed to be a general partnership, limited partnership, joint venture, joint stock company or, except as provided in Section 11.4, a corporation (but nothing herein shall preclude the Trust from being treated for tax purposes as an association under the Code). SECTION 1.4. Powers. The Trust shall have all of the powers granted to real estate investment trusts generally by Title 8 or any successor statute and shall have any other and further powers as are not inconsistent with and are appropriate to promote and attain the purposes set forth in this Declaration of Trust. SECTION 1.5. Definitions. As used in this Declaration of Trust, the following terms shall have the following meanings unless the context otherwise requires: "Adviser" means the Person, if any, appointed, employed or contracted with by the Trust pursuant to Section 4.1. "Affiliate" or "Affiliated" means, as to any individual, corporation, partnership, trust or other association (other than the Trust), any Person (i) that holds beneficially, directly or indirectly, 10% or more of the outstanding stock or equity interests thereof or (ii) who is an officer, director, partner or trustee thereof or of any Person which controls, is controlled by, or is under common control with, such corporation, partnership, trust or other association or (iii) which controls, is controlled by or under common control with, such corporation, partnership, trust or other association. "Book Value Per Share" shall mean an amount equal to the quotient obtained by dividing (i) the Shareholders' Equity as shown in the annual or quarterly financial statements of the Trust most recently filed by the Trust with the Securities and Exchange Commission by (ii) the number of Shares outstanding as of the date of such financial statements. For purposes of clause -2- (ii) of the preceding sentence, "outstanding" Shares shall consist of those Common Shares then actually issued and outstanding and those Common Shares issuable upon the exercise or conversion of any then outstanding "in-the-money" warrants, options or other convertible securities. "Code" means the Internal Revenue Code of 1986, as amended from time to time. "Person" means an individual, corporation, partnership, estate, trust (including a trust qualified under Section 401(a) or 501(c)(17) of the Code), a portion of a trust permanently set aside for or to be used exclusively for the purposes described in Section 642(c) of the Code, association, private foundation within the meaning of Section 509(a) of the Code, joint stock company or other entity, or any government or agency or political subdivision thereof, and also includes a group as that term is used for purposes of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended. "Real Property" or "Real Estate" means land, rights in land (including leasehold interests), and any buildings, structures, improvements, furnishings, fixtures and equipment located on or used in connection with land and rights or interests in land. "REIT Provisions of the Code" means Sections 856 through 860 of the Code and any successor or other provisions of the Code relating to real estate investment trusts (including provisions as to the attribution of ownership of beneficial interests therein) and the regulations promulgated thereunder. "Securities" means Shares, any stock, shares or other evidences of equity or beneficial or other interests, voting trust certificates, bonds, debentures, notes or other evidences of indebtedness, secured or unsecured, convertible, subordinated or otherwise, or in general any instruments commonly known as "securities" or any certificates of interest, shares or participations in, temporary or interim certificates for, receipts for, guarantees of, or warrants, options or rights to subscribe to, purchase or acquire, any of the foregoing, or shares or other securities of any successor in interest of the Trust. "Securities of the Trust" means any Securities issued by the Trust. "Shareholders" means holders of record of outstanding Shares. "Shareholders' Equity" means the total shareholders' equity of the Trust or, if the Trust has a class of Preferred -3- Shares outstanding as of the applicable date, "Shareholders' Equity" means the total "common" shareholders' equity of the Trust (computed with appropriate adjustments to reflect any entitlement of Preferred Shares to participate equally and ratably with the Common Shares in the assets of the Trust upon a liquidation of the Trust and computed to include amounts payable upon exercise or conversion of outstanding "in-the-money" warrants, options or other convertible securities issued by the Trust). "Shares" means shares of Preferred Shares or Common Shares (all as defined in Section 6.1). "Specified Properties" means the four real estate projects held by Brandywine Realty Partners on the date hereof and known as: One Greentree Centre; Two Greentree Centre; Three Greentree Centre; and Twin Forks. "Trustees" or "Board of Trustees" means, collectively, all individuals who have been duly elected and qualify as trustees of the Trust hereunder. "Trust Property" means any and all property, real, personal or otherwise, tangible or intangible, which is transferred or conveyed to the Trust or the Trustees (including all rents, income, profits and gains therefrom), which is owned or held by, or for the account of, the Trust. "Voting Shares" means the outstanding Shares entitled to vote generally in the election of trustees. ARTICLE 2 TRUSTEES SECTION 2.1. Number. The number of Trustees shall be four, but such number may be increased or decreased by the unanimous vote of the Trustees then in office from time to time; provided, that the total number of Trustees shall be not fewer than three and not more than 15. No reduction in the number of Trustees shall cause the removal of any Trustee from office prior to the expiration of his term. SECTION 2.2. Initial Board; Term. The Trustees, as of the date on which this Declaration of Trust has been amended and restated, as set forth above (the "Initial Trustees"), shall be Anthony A. Nichols, Sr., Joseph L. Carboni, Richard M. Osborne, Gerard H. Sweeney, Warren V. Musser, Walter D'Alessio and Charles P. Pizzi, but in each case only for so long as he shall continue to serve as a Trustee of the Trust hereunder. The term of the Initial Trustees shall commence on the date hereof and -4- shall continue until the annual meeting of Shareholders in 1997 and until their successors shall have been duly elected and shall have qualified. The names and addresses of the Initial Trustees who shall serve until the annual meeting of the Shareholders held in 1997 and until their successors are duly elected and qualified are: Name Address ---- ------- Anthony A. Nichols, Sr. 16 Campus Boulevard Newtown Square, PA 19073 Joseph L. Carboni 212 Haddon Avenue Westmont, NJ 08108 Richard M. Osborne 7001 Center Street Mentor, Ohio 44060 Gerard H. Sweeney 16 Campus Boulevard Newtown Square, PA 19073 Warren V. Musser 800 The Safeguard Building 435 Devon Park Drive Wayne, PA 19087 Walter D'Alessio 1735 Market Street Philadelphia, PA 19103 Charles P. Pizzi 1234 Market Street Philadelphia, PA 19107 Beginning with the annual meeting of Shareholders in 1996 and at each succeeding annual meeting of Shareholders, the Trustees will be elected to hold office for a term expiring at the succeeding annual meeting. Each Trustee will hold office for the term for which he is elected and until his successor is duly elected and qualified. SECTION 2.3. Resignation, Removal or Death. Any Trustee may resign by written notice to the remaining Trustees, effective upon execution and delivery to the Trust of such written notice or upon any future date specified in the notice. A Trustee may be removed from office only at a meeting of the Shareholders called for that purpose, by the affirmative vote of the holders of not less than a majority of the Shares entitled to vote in the election of Trustees; provided, however, that in the case of any Trustees elected solely by holders of a series of Preferred Shares, such Trustees may be removed by the affirmative vote of a -5- majority of the Preferred Shares of that series then outstanding and entitled to vote in the election of Trustees, voting together as a single class. Upon the resignation or removal of any Trustee, or his otherwise ceasing to be a Trustee, he shall automatically cease to have any right, title or interest in and to the Trust Property and shall execute and deliver such documents as the remaining Trustees require for the conveyance of any Trust Property held in his name, and shall account to the remaining Trustees as they require for all property which he holds as Trustee. Upon the incapacity or death of any Trustee, his legal representative shall perform the acts described in the foregoing sentence. SECTION 2.4. Vacancies. Any vacancy (including a vacancy created by an increase in the number of Trustees) shall be filled, at any regular or special meeting of Trustees called for that purpose, by a majority of the Trustees (although less than a quorum). Any individual so elected as Trustee shall hold office until the next annual meeting of Shareholders and until his successor has been duly elected and qualified. SECTION 2.5. Legal Title. Legal title to all Trust Property shall be vested in the Trustees, but they may cause legal title to any Trust Property to be held by or in the name of any Trustee, or the Trust, or any other Person as nominee. The right, title and interest of the Trustees in and to the Trust Property shall automatically vest in successor and additional Trustees upon their qualification and acceptance of election or appointment as Trustees, and they shall thereupon have all the rights and obligations of Trustees, whether or not conveyancing documents have been executed and delivered pursuant to Section 2.3 or otherwise. Written evidence of the qualification and acceptance of election or appointment of successor and additional Trustees may be filed with the records of the Trust and in such other offices, agencies or places as the Trustees may deem necessary or desirable. ARTICLE 3 POWERS OF TRUSTEES SECTION 3.1. General. Subject to the express limitations herein or in the bylaws of the Trust (the "Bylaws"), (i) the business and affairs of the Trust shall be managed under the direction of the Board of Trustees and (ii) the Trustees shall have full, exclusive and absolute power, control and authority over the Trust Property and over the business of the Trust as if they, in their own right, were the sole owners thereof. The Trustees may take any actions that, in their sole judgment and discretion, are necessary or desirable to conduct the business of the Trust. This Declaration of Trust shall be construed with a -6- presumption in favor of the grant of power and authority to the Trustees. Any construction of this Declaration of Trust or determination made in good faith by the Trustees concerning their powers and authority hereunder shall be conclusive. The enumeration and definition of particular powers of the Trustees included in this Article 3 shall in no way be limited or restricted by reference to or inference from the terms of this or any other provision of this Declaration of Trust or construed or deemed by inference or otherwise in any manner to exclude or limit the powers conferred upon the Trustees under the general laws of the State of Maryland as now or hereafter in force. SECTION 3.2. Specific Powers and Authority. Subject only to the express limitations herein, and in addition to all other powers and authority conferred by this Declaration or by law, the Trustees, without any vote, action or consent by the Shareholders, shall have and may exercise, at any time or times, in the name of the Trust or on its behalf the following powers and authorities: (a) Investments. Subject to Section 8.5, to invest in, purchase or otherwise acquire and to hold real, personal or mixed, tangible or intangible, property of any kind wherever located, or rights or interests therein or in connection therewith, all without regard to whether such property, interests or rights are authorized by law for the investment of funds held by trustees or other fiduciaries, or whether obligations the Trust acquires have a term greater or lesser than the term of office of the Trustees or the possible termination of the Trust, for such consideration as the Trustees may deem proper (including cash, property of any kind or Securities of the Trust); provided, however, that the Trustees shall take such actions as they deem necessary and desirable to comply with any requirements of Title 8 relating to the types of assets held by the Trust. (b) Sale, Disposition and Use of Property. Subject to Section 8.5, to sell, rent, lease, hire, exchange, release, partition, assign, mortgage, grant security interests in, encumber, negotiate, dedicate, grant easements in and options with respect to, convey, transfer (including transfers to entities wholly or partially owned by the Trust or the Trustees) or otherwise dispose of any or all of the Trust Property by deeds (including deeds in lieu of foreclosure with or without consideration), trust deeds, assignments, bills of sale, transfers, leases, mortgages, financing statements, security agreements and other instruments for any of such purposes executed and delivered for and on behalf of the Trust or the Trustees by one or more of the Trustees or by a duly authorized officer, employee, agent or nominee of the Trust, on such terms as they deem appropriate; to give consents and make contracts relating to the Trust Property and its use or other property or matters; to develop, improve, manage, use, alter and otherwise -7- deal with the Trust Property; and to rent, lease or hire from others property of any kind; provided, however, that the Trust may not use or apply land for any purposes not permitted by applicable law. (c) Financings. To borrow or in any other manner raise money for the purposes and on the terms they determine, and to evidence the same by issuance of Securities of the Trust, which may have such provisions as the Trustees determine; to reacquire such Securities of the Trust; to enter into other contracts or obligations on behalf of the Trust; to guarantee, indemnify or act as surety with respect to payment or performance of obligations of any Person; to mortgage, pledge, assign, grant security interests in or otherwise encumber the Trust Property to secure any such Securities of the Trust, contracts or obligations (including guarantees, indemnifications and suretyships); and to renew, modify, release, compromise, extend, consolidate or cancel, in whole or in part, any obligation to or of the Trust or participate in any reorganization of obligors to the Trust. (d) Loans. Subject to the provisions of Section 8.5, to lend money or other Trust Property on such terms, for such purposes and to such Persons as they may determine. (e) Issuance of Securities. Subject to the provisions of Article 6, to create and authorize and direct the issuance (on either a pro-rata or a non-pro-rata basis) by the Trust, in shares, units or amounts of one or more types, series or classes, of Securities of the Trust, which may have such voting rights, dividend or interest rates, preferences, subordinations, conversion or redemption prices or rights, maturity dates, distribution, exchange, or liquidation rights or other rights as the Trustees may determine, without vote of or other action by the Shareholders, to such Persons for such consideration, at such time or times and in such manner and on such terms as the Trustees determine; to list any of the Securities of the Trust on any securities exchange; and to purchase or otherwise acquire, hold, cancel, reissue, sell and transfer any Securities of the Trust. (f) Expenses and Taxes. To pay any charges, expenses or liabilities necessary or desirable, in the sole discretion of the Trustees, for carrying out the purposes of this Declaration of Trust and conducting the business of the Trust, including compensation or fees to Trustees, officers, employees and agents of the Trust, and to Persons contracting with the Trust, and any taxes, levies, charges and assessments of any kind imposed upon or chargeable against the Trust, the Trust Property, or the Trustees in connection therewith; and to prepare and file any tax returns, reports or other documents and take any other appropriate action relating to the payment of any such charges, expenses or liabilities. -8- (g) Collection and Enforcement. To collect, sue for and receive money or other property due to the Trust; to consent to extensions of the time for payment, or to the renewal, of any Securities or obligations; to engage or to intervene in, prosecute, defend, compound, enforce, compromise, release, abandon or adjust any actions, suits, proceedings, disputes, claims, demands, security interests, or things relating to the Trust, the Trust Property, or the Trust's affairs; to exercise any rights and enter into any agreements; and take any other action necessary or desirable in connection with the foregoing. (h) Deposits. To deposit funds or Securities constituting part of the Trust Property in banks, trust companies, savings and loan associations, financial institutions and other depositories, whether or not such deposits will draw interest, subject to withdrawal on such terms and in such manner as the Trustees determine. (i) Allocation; Accounts. To determine whether moneys, profits or other assets of the Trust shall be charged or credited to, or allocated between, income and capital, including whether or not to amortize any premium or discount and to determine in what manner any expenses or disbursements are to be borne as between income and capital (regardless of how such items would normally or otherwise be charged to or allocated between income and capital without such determination); to treat any dividend or other distribution on any investment as, or apportion it between, income and capital; in their discretion to provide reserves for depreciation, amortization, obsolescence or other purposes in respect of any Trust Property in such amounts and by such methods as they determine; to determine what constitutes net earnings, profits or surplus; to determine the method or form in which the accounts and records of the Trust shall be maintained; and to allocate to the Shareholders equity account less than all of the consideration paid for Shares and to allocate the balance to paid-in capital or capital surplus. (j) Valuation of Property. To determine the value of all or any part of the Trust Property and of any services, Securities, property or other consideration to be furnished to or acquired by the Trust, and to revalue all or any part of the Trust Property, all in accordance with such appraisals or other information as are reasonable, in their sole judgment. (k) Ownership and Voting Powers. To exercise all of the rights, powers, options and privileges pertaining to the ownership of any mortgages, Securities, Real Estate and other Trust Property to the same extent that an individual owner might, including without limitation to vote or give any consent, request, or notice or waive any notice, either in person or by proxy or power of attorney, which proxies and powers of attorney -9- may be for any general or special meetings or action, and may include the exercise of discretionary powers. (l) Officers, Etc.; Delegation of Powers. To elect, appoint or employ such officers for the Trust and such committees of the Board of Trustees with such powers and duties as the Trustees may determine or the Trust's Bylaws provide; to engage, employ or contract with and pay compensation to any Person (including, subject to Section 8.5, any Trustee and any Person who is an Affiliate of any Trustee) as agent, representative, Adviser, member of an advisory board, employee or independent contractor (including advisers, consultants, transfer agents, registrars, underwriters, accountants, attorneys-at-law, real estate agents, property and other managers, appraisers, brokers, architects, engineers, construction managers, general contractors or otherwise) in one or more capacities, to perform such services on such terms as the Trustees may determine; to delegate to one or more Trustees, officers or other Persons engaged or employed as aforesaid or to committees of Trustees or to the Adviser, the performance of acts or other things (including granting of consents), the making of decisions and the execution of such deeds, contracts or other instruments, either in the names of the Trust, the Trustees or as their attorneys or otherwise, as the Trustees may determine; and to establish such committees as they deem appropriate. (m) Associations. Subject to Section 8.5, to cause the Trust to enter into joint ventures, general or limited partnerships, participation or agency arrangements or any other lawful combinations, relationships, or associations of any kind. (n) Reorganizations, Etc. Without limiting the scope of Section 9.2, to cause to be organized or assist in organizing any Person under the laws of any jurisdiction to acquire all or any part of the Trust Property or carry on any business in which the Trust shall have an interest; to sell, rent, lease, hire, convey, negotiate, assign, exchange or transfer all or any part of the Trust Property to or with any Person in exchange for Securities of such Person or otherwise; and to lend money to, subscribe for and purchase the Securities of, and enter into any contracts with, any Person in which the Trust holds, or is about to acquire, Securities or any other interests. (o) Reverse Stock Splits. Upon the approval of not less than 80% of the Trustees, to cause the Shares of the Trust to be recapitalized or consolidated by effectuating a reverse stock split of one or more series or classes of Shares based upon a reverse stock split ratio (the "Ratio") approved by not less than 80% of the Trustees, such that following the consummation of such reverse stock split, each Share of the series or class(es) of Shares in question will automatically, without vote of or other action by the Shareholders, be deemed to be a fewer number -10- of Shares computed in accordance with such Ratio; and, if determined by the Trustees to be appropriate or desirable, to cause any fractional Shares resulting therefrom to be canceled in exchange for a cash payment equal to (x) with respect to Common Shares, the "market value" of such Share determined in accordance with the provisions of ss.3-601 et seq. of the Maryland General Corporation Law (computed for the period ending on the business day prior to the effective date of such reverse stock split), or for Shares other than Common Shares traded on the American Stock Exchange, as determined by the Trustees in good faith, multiplied by (y) the applicable fraction. (p) Insurance. To purchase and pay for out of Trust Property insurance policies insuring the Trust and the Trust Property against any and all risks, and insuring the Shareholders, Trustees, officers, employees and agents of the Trust individually against all claims and liabilities of every nature arising by reason of holding or having held any such status, office or position or by reason of any action alleged to have been taken or omitted (including those alleged to constitute misconduct, gross negligence, reckless disregard of duty or bad faith) by any such Person in such capacity, whether or not the Trust would have the power to indemnify such Person against such claim or liability. (q) Executive Compensation, Pension and Other Plans. To adopt and implement executive compensation, pension, profit sharing, stock option, stock bonus, stock purchase, stock appreciation rights, savings, thrift, retirement, incentive or benefit plans, trusts or provisions, applicable to any or all Trustees, officers, employees or agents of the Trust, or to other Persons who have benefitted the Trust, all on such terms and for such purposes as the Trustees may determine. (r) Distributions. To declare and pay dividends or other distributions to Shareholders, subject to the provisions of Section 6.4. (s) Indemnification. Without regard to the indemnification provided for in Section 8.4, to indemnify any Person, including any Adviser or independent contractor, with whom the Trust has dealings. (t) Charitable Contributions. To make donations for the public welfare or for community, charitable, religious, educational, scientific, civic or similar purposes, regardless of any direct benefit to the Trust. (u) Discontinue Operations; Bankruptcy. To discontinue the operations of the Trust; to petition or apply for relief under any provision of federal or state bankruptcy, insolvency or reorganization laws or similar laws for the relief -11- of debtors; to permit any Trust Property to be foreclosed upon without raising any legal or equitable defenses that may be available to the Trust or the Trustees or otherwise defending or responding to such foreclosure; to confess judgment against the Trust; or to take such other action with respect to indebtedness or other obligations of the Trustees, in such capacity, the Trust Property or the Trust as the Trustees in their discretion may determine. (v) Trustees. To nominate persons for election as Trustees. (w) Fiscal Year. Subject to the Code, to adopt, and from time to time change, a fiscal year for the Trust. (x) Seal. To adopt and use a seal, but the use of a seal shall not be required for the execution of instruments or obligations of the Trust. (y) Bylaws. To adopt, implement and from time to time alter, amend or repeal Bylaws of the Trust relating to the business and organization of the Trust which are not inconsistent with the provisions of this Declaration of Trust. (z) Accounts and Books. To determine from time to time whether and to what extent, and at what times and places, and under what conditions and regulations, the accounts and books of the Trust, or any of them, shall be open to the inspection of Shareholders. (aa) Voting Trust. To participate in, and accept Securities issued under or subject to, any voting trust. (ab) Proxies. To solicit proxies of the Shareholders at the expense of the Trust. (ac) Further Powers. To do all other acts and things and execute and deliver all instruments incident to the foregoing powers, and to exercise all powers which they deem necessary, useful or desirable to carry on the business of the Trust or to carry out the provisions of this Declaration of Trust, even if such powers are not specifically provided hereby. SECTION 3.3. Limitations on Powers and Authority. Notwithstanding any provision hereof to the contrary, in no event shall the Trustees have the power or authority to cause the Trust to do any of the following without the prior approval of the Shareholders: (a) Commodities Contracts. To invest in commodities or commodity future contracts other than interest rate futures intended to hedge the Trust against interest rate risk. -12- (b) Trading Activities. To engage in trading (as compared with investment activities) or engage in the underwriting or agency distribution or sale of securities issued by others. (c) Certain Holdings. To hold property primarily for sale to customers in the ordinary course of business; provided, however, that the Trust may sell properties if necessary, advisable or desirable or if effected pursuant to an intent to liquidate the Trust. ARTICLE 4 ADVISER SECTION 4.1. Appointment. The Trustees are responsible for setting the general policies of the Trust and for the general supervision of its business conducted by officers, agents, employees, advisers or independent contractors of the Trust. However, the Trustees are not required personally to conduct the business of the Trust, and they may (but need not) appoint, employ or contract with any Person (including a Person Affiliated with any Trustee) as an Adviser and may grant or delegate such authority to the Adviser as the Trustees may, in their sole discretion, deem necessary or desirable. The Trustees may determine the terms of retention and the compensation of the Adviser and may exercise broad discretion in allowing the Adviser to administer and regulate the operations of the Trust, to act as agent for the Trust, to execute documents on behalf of the Trust and to make executive decisions which conform to general policies and principles established by the Trustees. SECTION 4.2. Affiliation and Functions. The Trustees, by resolution or in the Bylaws, may provide guidelines, provisions or requirements concerning the affiliation and functions of the Adviser. ARTICLE 5 INVESTMENT POLICY The fundamental investment policy of the Trust is to make investments in such a manner as to comply with the REIT Provisions of the Code and with the requirements of Title 8, with respect to the composition of the Trust's investments and the derivation of its income. The Trustees will use their best efforts to carry out this fundamental investment policy and to conduct the affairs of the Trust in such a manner as to continue to qualify the Trust for the tax treatment provided in the REIT Provisions of the Code; however, no Trustee, officer, employee or -13- agent of the Trust shall be liable for any act or omission resulting in the loss of tax benefits under the Code, except to the extent provided in Section 8.2. The Trustees may change from time to time, by resolution or in the Bylaws of the Trust, such investment policies as they determine to be in the best interests of the Trust, including prohibitions or restrictions upon certain types of investments. ARTICLE 6 SHARES SECTION 6.1. Authorized Shares. The total number of shares of beneficial interest which the Trust is authorized to issue is 80,000,000, of which 5,000,000 shares shall be preferred shares, par value $.01 per share ("Preferred Shares"), and 75,000,000 shares shall be common shares, $0.01 par value per share ("Common Shares"). SECTION 6.2. Common Shares. (a) Dividend Rights. Subject to the preferential dividend rights of the Preferred Shares, if any, as may be determined by the Board of Trustees pursuant to Section 6.3, the holders of Common Shares shall be entitled to receive such dividends as may be declared by the Board of Trustees. (b) Rights Upon Liquidation. Subject to the preferential rights of the Preferred Shares, if any, as may be determined by the Board of Trustees pursuant to Section 6.3, in the event of any voluntary or involuntary liquidation, dissolution or winding up of, or any distribution of the assets of, the Trust, each holder of Common Shares shall be entitled to receive, ratably with each other holder of Common Shares, that portion of the assets of the Trust available for distribution to the holders of Common Shares that bears the same relation to the total amount of such assets of the Trust as the number of Common Shares held by such holder bears to the total number of Common Shares then outstanding. (c) Voting Rights. The holders of the Common Shares shall be entitled to vote on all matters (for which a common shareholder shall be entitled to vote thereon) at all meetings of the Shareholders of the Trust, and shall be entitled to one vote for each Common Share entitled to vote at such meeting, voting together with the holders of the Preferred Shares who are entitled to vote (except as otherwise may be determined by the Board of Trustees pursuant to Section 6.3). SECTION 6.3. Preferred Shares. With respect to the Preferred Shares, the Board of Trustees shall have the power from -14- time to time (a) to classify or reclassify, in one or more series, any unissued Preferred Shares and (b) to reclassify any unissued shares of any series of Preferred Shares, in the case of either (a) or (b) by setting or changing the number of shares constituting such series and the designation, preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends, qualifications and terms and conditions of redemption of such shares and, in such event, the Trust shall file for record with the State Department of Assessments and Taxation of Maryland articles supplementary to this Declaration of Trust in substance and form as prescribed by Title 8. SECTION 6.4. Dividends or Distributions. The Trustees may from time to time declare and cause the Trust to pay to Shareholders such dividends or distributions in cash, property or other assets of the Trust or in Securities of the Trust or from any other source as the Trustees in their discretion shall determine. The Trustees shall endeavor to declare and pay such dividends and distributions as shall be necessary for the Trust to qualify as a real estate investment trust under the REIT Provisions of the Code; however, Shareholders shall have no right to any dividend or distribution unless and until declared by the Trustees. The exercise of the powers and rights of the Trustees pursuant to this section shall be subject to the provisions of any class or series of Shares at the time outstanding. The receipt by any Person in whose name any Shares are registered on the records of the Trust or by his duly authorized agent shall be a sufficient discharge for all dividends or distributions payable or deliverable in respect of such Shares and from all liability to see to the application thereof. SECTION 6.5. General Nature of Shares. All Shares shall be personal property entitling the Shareholders only to those rights provided in this Declaration of Trust or in the resolution creating any class or series of Shares. The legal ownership of the Trust Property and the right to conduct the business of the Trust are vested exclusively in the Trustees; the Shareholders shall have no interest therein other than beneficial interest in the Trust conferred by their Shares and shall have no right to compel any partition, division, dividend or distribution of the Trust or any of the Trust Property. The death of a Shareholder shall not terminate the Trust or give his legal representative any rights against other Shareholders, the Trustees or the Trust Property, except the right, exercised in accordance with applicable provisions of the Bylaws, to receive a new certificate for Shares in exchange for the certificate held by the deceased Shareholder. Holders of Shares shall not have any preemptive right to subscribe to any securities of the Trust. SECTION 6.6. Restrictions on Ownership and Transfer: Exchange For Excess Shares. -15- (a) Definitions. For the purposes of Sections 6.6, 6.7 and 6.8, the following terms shall have the following meanings: "Beneficial Ownership" shall mean ownership of Shares either directly or constructively through the application of Section 544 of the Code, as modified by Section 856(h)(1)(B) of the Code. The terms "Beneficial Owner," "Beneficially Owns" and "Beneficially Owned" shall have the correlative meanings. Accordingly, for purposes hereof, Beneficial Ownership shall be calculated for any Person by dividing two numbers, (a) the number that is the numerator being the sum of (i) such Person's ownership of outstanding Shares plus (ii) the maximum number of Shares issuable upon the exercise or conversion of outstanding warrants, preferred stock or other securities exercisable for or convertible into Shares owned by such Person and (b) the number that is the denominator being the sum of (i) all outstanding Shares plus (ii) the maximum number of Shares issuable upon the exercise or conversion of outstanding warrants, preferred stock or other securities exercisable for or convertible into Shares owned by such Person; provided that the Board of Trustees shall retain full authority to adopt such other approach to determining Beneficial Ownership as it may deem appropriate. Notwithstanding the foregoing, for purposes of determining compliance with this Section 6.6 by any Person to whom the Trust issues an option or warrant (or any Shareholder of any such Person), such option or warrant shall not be deemed to confer upon such Person Beneficial Ownership or Constructive Ownership of the Shares issuable upon the exercise thereof, and the Shares issuable upon the exercise thereof shall be excluded from both the numerator and denominator of the foregoing calculation. "Beneficiary" shall mean the beneficiary of the Special Trust as determined pursuant to Section 6.8(e). "Common Equity Shares" shall mean outstanding Shares that are either Common Shares or Excess Common Shares. "Constructive Ownership" shall mean ownership of Shares either directly or constructively through the application of Section 318(a) of the Code, as modified by Section 856(d)(5) of the Code. The terms "Constructive Owner," "Constructively Owns" and "Constructively Owned" shall have the correlative meanings. Accordingly, for purposes hereof, Constructive Ownership shall be calculated for any Person by dividing two numbers, (a) the number that is the numerator being the sum of (i) such Person's ownership of outstanding Shares plus (ii) the maximum number of Shares issuable upon the exercise or conversion of outstanding warrants, preferred stock or other securities exercisable for or convertible into Shares owned by such Person and (b) the number that is the denominator being the sum of (i) all outstanding Shares plus (ii) the maximum number of Shares issuable upon the -16- exercise or conversion of outstanding warrants, preferred stock or other securities exercisable for or convertible into Shares owned by such Person; provided that the Board of Trustees shall retain full authority to adopt such other approach to determining Constructive Ownership as it may deem appropriate. Notwithstanding the foregoing, for purposes of determining compliance with Sections 6.6(b) and (c) by any Person to whom the Trust issues an option or warrant (or any Shareholder of any such Person), such option or warrant shall not be deemed to confer upon such Person Beneficial Ownership or Constructive Ownership of the Shares issuable upon the exercise thereof, and the Shares issuable upon the exercise thereof shall be excluded from both the numerator and denominator of the foregoing calculation. "Event" shall have the meaning assigned to it in Section 6.6(c). "Excess Common Shares" shall mean Excess Shares that would, under Section 6.8(e)(i), automatically be exchanged for Common Shares in the event of a transfer of an interest in the Special Trust in which such Excess Shares are held. "Excess Preferred Shares" shall mean Excess Shares that would, under Section 6.8(e)(i), automatically be exchanged for Preferred Shares in the event of a transfer of an interest in the Special Trust in which such Excess Shares are held. "Excess Shares" shall mean, as applicable, Excess Common Shares or Excess Preferred Shares. "Exempt Parties" shall mean (i) (A) The Richard M. Osborne Trust (the "Osborne Trust"), (B) Turkey Vulture Fund XIII, Ltd., (C) Richard M. Osborne ("Osborne") and all of the members of Osborne's immediate family, as such term is defined in Section 544(a)(2) of the Code and (D) any Section 544 Subsidiary of the entity or the individuals described in (A), (B) or (C), above (the entities and individuals described in clauses (A), (B), (C) and (D) above being collectively referred to herein as the "Osborne Affiliates"), (ii) Safeguard Scientifics, Inc. and any Section 544 Subsidiary thereof (collectively, the "SSI Affiliates") and (iii) The Nichols Company and any Section 544 Subsidiary thereof (collectively, the "Nichols Affiliates"). The term "Exempt Party" shall mean any of the foregoing. "Market Price" shall mean the last reported sales price reported on the American Stock Exchange of Shares on the trading day immediately preceding the relevant date, or if the Shares are not then traded on the American Stock Exchange, the last reported sales price of Shares on the trading day immediately preceding the relevant date as reported on any exchange or quotation system over which the Shares may be traded, or if the Shares are not then traded over any exchange or quotation system, then the -17- market price of the Shares on the relevant date as determined in good faith by the Board of Trustees of the Trust. The Market Price of the Common Shares shall be determined separately from the Market Price of any outstanding class of Preferred Shares. "Ownership Limit" shall mean 4.16% in value of the outstanding Shares. "Ownership Limitation Termination Date" shall mean the first day after the date on which the Board of Trustees determines that it is no longer in the best interests of the Trust to attempt to, or continue to, qualify as a REIT. "Permissible Ownership Threshold" shall mean as to the Osborne Affiliates, the SSI Affiliates and The Nichols Affiliates, respectively, 33.33%, 35.25% and 9.25%; provided that, once an Exempt Party transfers Shares such that such Exempt Party following such transfer Beneficially Owns and Constructively Owns less in value than the Ownership Limit, then such Exempt Party's Permissible Ownership Threshold shall equal the Ownership Limit; provided, further, however, that the foregoing proviso shall not restrict SSI Affiliates or Nichols Affiliates from acquiring Shares upon the redemption of Class A Units issued to them by Brandywine Operating Partnership, L.P. if such acquisition would not result in such SSI Affiliates or Nichols Affiliates exceeding the applicable percentage (35.25% or 9.25%) specified above. "Person" shall mean an individual, corporation, partnership, limited liability company, estate, trust (including a trust qualified under Section 401(a) or 501(c)(17) of the Code), a portion of a trust permanently set aside for or to be used exclusively for the purposes described in Section 642(c) of the Code, association, private foundation within the meaning of Section 509(a) of the Code, joint stock company or other entity or any government or agency or political subdivision thereof and also includes a group as that term is used for purposes of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended, but does not include an underwriter which participates in a public offering of Shares for a period of 25 days following the purchase by such underwriter of those Shares. "Purported Beneficial Holder" shall mean, with respect to any event other than a purported Transfer which results in Excess Shares, the person for whom the Purported Record Holder of the Shares that were, pursuant to Section 6.6(c), automatically exchanged for Excess Shares upon the occurrence of such event held such Shares. "Purported Beneficial Transferee" shall mean, with respect to any purported Transfer which results in Excess Shares, the purported beneficial transferee for whom the Purported Record -18- Transferee would have acquired Shares, if such Transfer had been valid under Section 6.6(b). "Purported Record Holder" shall mean, with respect to any event other than a purported Transfer which results in Excess Shares, the record holder of the Shares that were, pursuant to Section 6.6(c), automatically exchanged for Excess Shares upon the occurrence of such event. "Purported Record Transferee" shall mean, with respect to any purported Transfer which results in Excess Shares, the record holder of the Shares if such Transfer had been valid under Section 6.6(b). "REIT" shall mean a real estate investment trust under Section 856 of the Code. "Section 544 Subsidiary" of any individual or entity shall mean any entity, over 50% of the ownership interest in which is owned, directly or indirectly (applying the principles of Section 544 of the Code) by the individual or entity in question. "Special Trust" shall mean the trust created pursuant to Section 6.8(a). "Transfer" shall mean any issuance, sale, transfer, gift, assignment, devise or other disposition of Shares or capital stock of any Person (including (i) the granting of any option or entering into any agreement for the sale, transfer or other disposition of Shares, (ii) the sale, transfer, exercise, assignment or other disposition of any securities or rights convertible into or exchangeable for Shares or (iii) the establishment of a put or the granting to a third party of a call right with respect to Shares), whether voluntary or involuntary, whether of record or beneficially and whether by operation of law or otherwise. "Trustee" shall mean, for purposes of this Article VI only, the Trust, as trustee for the Special Trust, and any successor trustee appointed by the Trust. (b) Restrictions on Ownership and Transfer. (i) Except as provided in Section 6.6(k), prior to the Ownership Limitation Termination Date, no Person (other than an Exempt Party) shall Beneficially Own or Constructively Own any Shares to the extent such ownership would exceed the Ownership Limit. In addition, except as provided in Section 6.6(k), prior to the Ownership Limitation Termination Date, no Exempt Party shall Beneficially Own or Constructively Own any Shares in excess of the Permissible Ownership Threshold for such Exempt Party. -19- (ii) Except as provided in Section 6.6(k), prior to the Ownership Limitation Termination Date, any Transfer that, if effective, would result in any Person (other than an Exempt Party) Beneficially Owning or Constructively Owning Shares in excess of the Ownership Limit shall be void ab initio as to the Transfer of such Shares which would be otherwise Beneficially Owned or Constructively Owned by such Person in excess of such Ownership Limit; and the intended transferee shall acquire no rights in or to such Shares. (iii) Except as provided in Section 6.6(k), prior to the Ownership Limitation Termination Date, any Transfer that, if effective, would result in any Exempt Party Beneficially Owning or Constructively Owning Shares in excess of the Permissible Ownership Threshold for such Exempt Party shall be void ab initio as to the Transfer of such Shares which would be otherwise Beneficially Owned or Constructively Owned by such Exempt Party in excess of the Permissible Ownership Threshold for such Exempt Party; and such Exempt Party shall acquire no rights in or to such Shares. (iv) Prior to the Ownership Limitation Termination Date, any Transfer that, if effective, would result in Shares being beneficially owned by less than 100 Persons (determined without reference to any rules of attribution) shall be void ab initio as to the Transfer of such Shares which would be otherwise beneficially owned by the transferee; and the intended transferee shall acquire no rights in such Shares. (v) Prior to the Ownership Limitation Termination Date, any Transfer that, if effective, would result in the Trust being "closely held" within the meaning of Section 856(h) of the Code shall be void ab initio as to the Transfer of the Shares which would cause the Trust to be "closely held" within the meaning of Section 856(h) of the Code; and the intended transferee shall acquire no rights in such Shares. (vi) The Board of Trustees shall have the authority to select the Ownership Limitation Termination Date. (c) Exchange For Excess Stock. (i) If, notwithstanding the other provisions contained in this Section 6.6, at any time prior to the Ownership Limitation Termination Date, there is a purported Transfer such that any Person (other than an Exempt Party) would Beneficially Own or Constructively Own Shares in excess of the Ownership Limit, then, except as otherwise provided in Section 6.6(k), such number of Shares in excess of such Ownership Limit (rounded up to the nearest whole Share) shall be automatically exchanged for an equal number of shares of Excess Shares. Such exchange shall be -20- effective as of the close of business on the business day prior to the date of the Transfer. (ii) If, notwithstanding the other provisions contained in this Section 6.6, at any time prior to the Ownership Limitation Termination Date, there is a purported Transfer such that an Exempt Party would Beneficially Own or Constructively Own Shares in excess of the applicable Permissible Ownership Threshold, then, except as otherwise provided in Section 6.6(k), such number of Shares in excess of the applicable Permissible Ownership Threshold (rounded up to the nearest whole Share) shall be automatically exchanged for an equal number of Excess Shares. Such exchange shall be effective as of the close of business on the business day prior to the date of the Transfer. (iii) If, notwithstanding the other provisions contained in this Section 6.6, at any time prior to the Ownership Limitation Termination Date, there is a purported Transfer which, if effective, would cause the Trust to become "closely held" within the meaning of Section 856(h) of the Code, then the Shares being Transferred which would cause the Trust to be "closely held" within the meaning of Section 856(h) of the Code (rounded up to the nearest whole Share) shall be automatically exchanged for an equal number of Excess Shares. Such exchange shall be effective as of the close of business on the business day prior to the date of the Transfer. (iv) If, notwithstanding the other provisions contained in this Section 6.6, at any time prior to the Ownership Limitation Termination Date, an event other than a purported Transfer (an "Event") occurs which would (i) cause any Person (other than an Exempt Party) to Beneficially Own or Constructively Own Shares in excess of the Ownership Limit, or (ii) cause an Exempt Party to Beneficially Own or Constructively Own Shares in excess of such Exempt Party's applicable Permissible Ownership Threshold, then, except as otherwise provided in Section 6.6(k), Shares Beneficially Owned or Constructively Owned by such Person or Exempt Party, as the case may be (rounded up to the nearest whole Share), shall be automatically exchanged for an equal number of Excess Shares to the extent necessary to eliminate such excess ownership. Such exchange shall be effective as of the close of business on the business day prior to the date of the Event. In determining which Shares are exchanged, Shares directly held or Beneficially Owned by any Person who caused the Event to occur shall be exchanged before any Shares not so held are exchanged. Where several such Persons exist, the exchange shall be pro rata. (d) Remedies For Breach. If the Board of Trustees or its designee(s) shall at any time determine that a Transfer has taken place in violation of Section 6.6(b) or that a Person intends to acquire or has attempted to acquire beneficial -21- ownership (determined without reference to any rules of attribution) of any Shares that would result in Shares being beneficially owned by less than 100 persons as contemplated by Section 6.6(b)(iv), or in Beneficial Ownership or Constructive Ownership of any Shares in violation of Section 6.6(b), the Board of Trustees or its designees shall take such action as it deems advisable to refuse to give effect to or to prevent such Transfer (or any Transfer related to such intent), including, but not limited to, refusing to give effect to such Transfer on the books of the Trust or instituting proceedings to enjoin such Transfer; provided, however, that any Transfers or attempted Transfers in violation of Sections 6.6(b)(ii), (iii), (iv) or (v) shall automatically result in the exchange described in Section 6.6(c), irrespective of any action (or non-action) by the Board of Trustees or its designees. (e) Notice of Ownership or Attempted Ownership in Violation of Section 6.6(b). Any Person who acquires or attempts to acquire Beneficial Ownership or Constructive Ownership of Shares in violation of Section 6.6(b) shall immediately give written notice to the Trust of such acquisition or attempted acquisition and shall provide to the Trust such other information as the Trust may request in order to determine the effect, if any, of such acquisition or attempted acquisition on the Trust's status as a REIT. (f) Owners Required to Provide Information. Prior to the Ownership Limitation Termination Date: (i) every Beneficial Owner or Constructive Owner of more than 4.0% in value of the outstanding Shares shall, within 30 days after January 1 of each year, give written notice to the Trust stating the name and address of such Beneficial Owner or Constructive Owner, the number of Shares Beneficially Owned or Constructively Owned, and a description of how such Shares are held. Each such Beneficial Owner or Constructive Owner shall provide to the Trust such additional information as the Trust may request in order to determine the effect, if any, of such Beneficial Ownership or Constructive Ownership on the Trust's status as a REIT. (ii) Each Person who is a Beneficial Owner or Constructive Owner of Shares and each Person (including the shareholder of record) who is holding Shares for a Beneficial Owner or Constructive Owner shall provide to the Trust such information as the Trust may request in order to determine the Trust's status as a REIT or to comply with regulations promulgated under the REIT provisions of the Code. (g) Remedies Not Limited. Nothing contained in this Section 6.6 shall limit the authority of the Board of Trustees to take such other action as it deems necessary or -22- advisable to protect the Trust and the interests of its Shareholders by preserving the Trust's REIT status. (h) Ambiguity. In the case of an ambiguity in the application of any of the provisions of this Article VI including any definition contained in Section 6.6(a) and any ambiguity with respect to which Shares are to be exchanged for Excess Shares in a given situation, the Board of Trustees shall have the authority to determine the application of the provisions of this Section 6.6 with respect to any situation based on the facts known to it. (i) Increase in Ownership Limit. Subject to the limitations provided in Section 6.6(j), the Board of Trustees may from time to time increase the Ownership Limit. (j) Limitations on Modifications. (i) The Ownership Limit may not be increased if, after giving effect to such increase, five Beneficial Owners of Shares would Beneficially Own, in the aggregate, more than 49.9% of the outstanding Shares. (ii) Prior to an increase in the Ownership Limit pursuant to Section 6.6(i), the Board of Trustees may require such opinions of counsel or the Trust's tax accountants, affidavits, undertakings or agreements as it may deem necessary or advisable in order to determine or ensure the Trust's status as a REIT. (k) Exceptions. The Board of Trustees, with a ruling from the Internal Revenue Service or an opinion of counsel or the Trust's tax accountants to the effect that such exemption will not result in the Trust being "closely held" within the meaning of Section 856(h) of the Code, may exempt a Person from the Ownership Limit or the Permissible Ownership Threshold, as the case may be, if the Board of Trustees obtains such representations and undertakings from such Person as the Board of Trustees may deem appropriate and such Person agrees that any violation or attempted violation of any of such representations or undertakings will result in, to the extent necessary or otherwise deemed appropriate by the Board of Trustees, the exchange of Shares held by such Person for Excess Shares in accordance with Section 6.6(c). (l) American Stock Exchange Transactions. Nothing in this Section 6.6 shall preclude the settlement of any transaction entered into through the facilities of the American Stock Exchange, any successor exchange or quotation system thereto, or any other exchange or quotation system over which the Shares may be traded from time to time. -23- SECTION 6.7. Legend. (a) Each certificate for Common Shares hereafter issued shall bear the following legend: "The Common Shares represented by this certificate are subject to restrictions on ownership and transfer for the purpose of the Trust's maintenance of its status as a real estate investment trust under the Internal Revenue Code of 1986, as amended (the "Code"). No Person may Beneficially Own or Constructively Own Shares in excess of 4.16% in value (or such greater percentage as may be determined by the Board of Trustees) of the outstanding Shares of the Trust (unless such Person is an Exempt Party). No Person who is an Exempt Party may Beneficially Own or Constructively Own Shares in excess of the Permissible Ownership Threshold for such Exempt Party. Any Person who attempts to Beneficially Own or Constructively Own Shares in excess of the above limitations must immediately notify the Trust. All capitalized terms used in this legend have the meanings set forth in the Declaration of Trust, a copy of which, including the restrictions on ownership and transfer, will be sent without charge to each Shareholder who so requests. If the restrictions on ownership and transfer are violated, the Common Shares represented hereby will be automatically exchanged for Excess Shares which will be held in trust by the Trust." (b) Each certificate for Preferred Shares hereafter issued shall bear the following legend: "The Preferred Shares represented by this certificate are subject to restrictions on ownership and transfer for the purpose of the Trust's maintenance of its status as a real estate investment trust under the Internal Revenue Code of 1986, as amended (the "Code"). No Person may Beneficially Own or Constructively Own Shares in excess of 4.16% in value (or such greater percentage as may be determined by the Board of Trustees) of the outstanding Shares of the Trust (unless such Person is an Exempt Party). No Person who is an Exempt Party may Beneficially Own or Constructively Own Shares in excess of the Permissible Ownership Threshold for such Exempt Party. Any Person who attempts to Beneficially Own or Constructively Own Shares in excess of the above limitations must immediately notify the Trust. All capitalized terms used in this legend have the meanings set forth in the Declaration of Trust, a copy of which, including the restrictions on ownership and transfer, will be sent without charge to each Shareholder who so requests. If the restrictions on ownership and transfer are -24- violated, the Preferred Shares represented hereby will be automatically exchanged for Excess Shares which will be held in trust by the Trust." SECTION 6.8. Excess Shares. (a) Ownership in Trust. Upon any purported Transfer or Event that results in an exchange of Shares for Excess Shares pursuant to Section 6.6(c), such Excess Shares shall be deemed to have been transferred to the Trust, as Trustee of a Special Trust for the exclusive benefit of the Beneficiary or Beneficiaries to whom an interest in such Excess Shares may later be transferred pursuant to Section 6.8(e). Excess Shares so held in trust shall be issued and outstanding Shares of the Trust. The Purported Record Transferee or Purported Record Holder shall have no rights in such Excess Shares except as and to the extent provided in Section 6.8(e). (b) Dividend Rights. Excess Shares shall not be entitled to any dividends or distributions. Any dividend or distribution paid prior to the discovery by the Trust that the Shares with respect to which the dividend or distribution was made had been exchanged for Excess Shares shall be repaid to the Trust upon demand. (c) Rights Upon Liquidation. In the event of any voluntary or involuntary liquidation, dissolution or winding up of, or any distribution of the assets of, the Trust, (i) subject to the preferential rights of the Preferred Shares, if any, as may be determined by the Board of Trustees pursuant to Section 6.3 and the preferential rights of the Excess Preferred Shares, if any, each holder of Excess Common Shares shall be entitled to receive, ratably with each other holder of Common Shares and Excess Common Shares, that portion of the assets of the Trust available for distribution to the holders of Common Shares or Excess Common Shares which bears the same relation to the total amount of such assets of the Trust as the number of Excess Common Shares held by such holder bears to the total number of Common Shares and Excess Common Shares then outstanding and (ii) each holder of Excess Preferred Shares shall be entitled to receive that portion of the assets of the Trust which a holder of the Preferred Shares that were exchanged for such Excess Preferred Shares would have been entitled to receive had such Preferred Shares remained outstanding. The Trust, as holder of the Excess Shares in trust, or if the Trust shall have been dissolved, any trustee appointed by the Trust prior to its dissolution, shall distribute ratably to the Beneficiaries of the Special Trust, when determined, any such assets received in respect of the Excess Shares in any liquidation, dissolution or winding up of, or any distribution of the assets of the Trust. -25- (d) Voting Rights. The holders of Excess Shares shall not be entitled to vote on any matters (except as required by law). (e) Restrictions On Transfer: Designation of Beneficiary. (i) Excess Shares shall not be transferrable. The Purported Record Transferee or Purported Record Holder may freely designate a Beneficiary of an interest in the Special Trust (representing the number of Excess Shares held by the Special Trust attributable to a purported Transfer or Event that resulted in the Excess Shares) if (i) the Excess Shares held in the Special Trust would not be Excess Shares in the hands of such Beneficiary and (ii) the Purported Beneficial Transferee or Purported Beneficial Holder does not receive a price, as determined on a Share-by-Share basis, for designating such Beneficiary that reflects a price for such Excess Shares that, (I) in the case of a Purported Beneficial Transferee, exceeds (x) the price such Purported Beneficial Transferee paid for the Shares in the purported Transfer that resulted in the exchanges of Shares for Excess Shares, or (y) if the Purported Beneficial Transferee did not give value for such Shares (having received such Shares pursuant to a gift, devise or other transaction), the Market Price of such Shares on the date of the purported Transfer that resulted in the exchange of Shares for Excess Shares or (II) in the case of a Purported Beneficial Holder, exceeds the Market Price of the Shares that were automatically exchanged for such Excess Shares on the date of such exchange. Upon such a transfer of an interest in the Special Trust, the corresponding shares of Excess Shares in the Special Trust shall be automatically exchanged for an equal number of Common Shares or Preferred Shares (depending upon the type of Shares that were originally exchanged for such Excess Shares) and such Common Shares or Preferred Shares shall be transferred of record to the transferee of the interest in the Special Trust if such Common Shares or Preferred Shares would not be Excess Shares in the hands of such transferee. Prior to any transfer of any interest in the Special Trust, the Purported Record Transferee or Purported Record Holder, as the case may be, must give advance notice to the Trust of the intended transfer and the Trust must have waived in writing its purchase rights under Section 6.8(f). (ii) Notwithstanding the foregoing, if a Purported Beneficial Transferee or Purported Beneficial Holder receives a price for designating a Beneficiary of an interest in the Special Trust that exceeds the amounts allowable under Section 6.8(e)(i), such Purported Beneficial Transferee or Purported Beneficial Holder shall pay, or cause such Beneficiary to pay, such excess to the Trust. -26- (f) Purchase Right in Excess Shares. Excess Shares shall be deemed to have been offered for sale to the Trust, or its designee, at a price per share equal to, (I) in the case of Excess Shares resulting from a purported Transfer, the lesser of (i) the price per share in the transaction that created such Excess Shares (or, in the case of a gift, devise or other transaction, the Market Price at the time of such gift, devise or other transaction) or (ii) the Market Price on the date the Trust, or its designee, accepts such offer or (II) in the case of Excess Shares created by an Event, the lesser of (i) the Market Price of the Shares originally exchanged for the Excess Shares on the date of such exchange or (ii) the Market Price of such Shares on the date the Trust, or its designee, accepts such offer. The Trust shall have the right to accept such offer for a period of ninety (90) days after the later of (i) the date of the purported Transfer or Event which resulted in an exchange of Shares for such Excess Shares and (ii) the date the Board of Trustees determines that a purported Transfer or other event resulting in an exchange of Shares for such Excess Shares has occurred, if the Trust does not receive a notice of any such Transfer pursuant to Section 6.6(e). SECTION 6.9. Severability; Agent for Trust. If any provision of Section 6.6, 6.7 or 6.8 or any application of any such provision is determined to be invalid by any federal or state court having jurisdiction over the issues, the validity of the remaining provisions shall not be affected and other applications of such provision shall be affected only to the extent necessary to comply with the determination of such court. In any event, to the extent such court holds the Purported Record Transferee to be the record and beneficial owner of Shares which, had the provisions of Sections 6.6, 6.7 and 6.8 been enforced, would have been exchanged for Excess Shares, such Purported Record Transferee shall be deemed, at the option of the Trust, to have acted as agent on behalf of the Trust in acquiring such transferred Shares and to hold such Shares on behalf of the Trust. ARTICLE 7 SHAREHOLDERS SECTION 7.1. Meetings of Shareholders. There shall be an annual meeting of the Shareholders, to be held at such time and place as shall be determined by or in the manner prescribed in the Bylaws at which the Trustees shall be elected and any other proper business may be conducted. Except as otherwise provided in this Declaration of Trust, special meetings of Shareholders may be called in the manner provided in the Bylaws. Special meetings of Shareholders may be called upon the written request of Shareholders holding an aggregate of not less than ten -27- percent (10%) of the Common Shares. Special meetings of shareholders may also be called by holders of Preferred Shares to the extent, if any, determined by the Board of Trustees in connection with the establishment of a class or series of Preferred Shares. If there are no Trustees, the officers of the Trust shall promptly call a special meeting of the Shareholders entitled to vote for the election of successor Trustees. Any meeting may be adjourned and reconvened as the Trustees determine or as provided in the Bylaws. SECTION 7.2. Voting Rights of Shareholders. Subject to the provisions of any class or series of Preferred Shares then outstanding and the mandatory provisions of any applicable laws or regulations, the Shareholders shall be entitled to vote only on the following matters: (a) election or removal of Trustees as provided in Sections 7.1 and 2.3 and Section 8-202 of Title 8 and the Bylaws; (b) amendment of this Declaration of Trust as provided in Section 9.1; (c) a matter specified in Section 3.3; and (d) a merger of the Trust with or into another entity as and to the extent required by Section 8-501.1 of Title 8. Except with respect to the foregoing matters, no action taken by the Shareholders at any meeting shall in any way bind the Trustees. SECTION 7.3. Shareholder Action to be Taken by Meeting. Any action required or permitted to be taken by the Shareholders of the Trust must be effected at a duly called annual or special meeting of Shareholders of the Trust and may not be effected by any consent in writing of such Shareholders. Notwithstanding anything contained in this Declaration of Trust to the contrary, the affirmative vote of at least a majority of the then outstanding Shares entitled to vote in the election of Trustees, voting together as a single class, shall be required to amend, repeal, or adopt any provision inconsistent with this Section 7.3 and the affirmative vote of such number or percentage of the then outstanding Shares as is specified in this Declaration of Trust or, if not so specified, in the Bylaws shall be required to take any other action required or permitted to be taken by the Shareholders. ARTICLE 8 LIABILITY OF SHAREHOLDERS, TRUSTEES, OFFICERS, EMPLOYEES AND AGENTS AND TRANSACTIONS BETWEEN AFFILIATES AND THE TRUST SECTION 8.1. Limitation of Shareholder Liability. No Shareholder shall be liable for any debt, claim, demand, judgment or obligation of any kind of, against or with respect to the Trust by reason of his being a Shareholder, nor shall any Shareholder be subject to any personal liability whatsoever, in tort, contract or otherwise, to any Person in connection with the -28- Trust Property or the affairs of the Trust. All written contracts to which the Trust is a party shall include a provision to the effect that the Shareholders shall not be personally liable thereon. SECTION 8.2. Limitation of Trustee and Officer Liability. To the maximum extent that Maryland law in effect from time to time permits limitation of the liability of trustees and officers of a real estate investment trust, no Trustee or officer of the Trust shall be liable to the Trust or to any Shareholder for money damages. Neither the amendment nor repeal of this Section, nor the adoption or amendment of any other provision of this Declaration of Trust inconsistent with this Section, shall apply to or affect in any respect the applicability of the preceding sentence with respect to any act or failure to act which occurred prior to such amendment, repeal or adoption. In the absence of any Maryland statute limiting the liability of trustees and officers of a Maryland real estate investment trust for money damages in a suit by or on behalf of the Trust or by any Shareholder, no Trustee or officer of the Trust shall be liable to the Trust or to any Shareholder for money damages except to the extent that (i) the Trustee or officer actually received an improper benefit or profit in money, property, or services, for the amount of the benefit or profit in money, property, or services actually received; or (ii) a judgment or other final adjudication adverse to the Trustee or officer is entered in a proceeding based on a finding in the proceeding that the Trustee's or officer's action or failure to act was the result of active and deliberate dishonesty and was material to the cause of action adjudicated in the proceeding. SECTION 8.3. Express Exculpatory Clauses in Instruments. Neither the Shareholders nor the Trustees, officers, employees or agents of the Trust shall be liable under any written instrument creating an obligation of the Trust, and all Persons shall look solely to the Trust Property for the payment of any claim under or for the performance of that instrument. The omission of the foregoing exculpatory language from any instrument shall not affect the validity or enforceability of such instrument and shall not render any Shareholder, Trustee, officer, employee or agent liable thereunder to any third party, nor shall the Trustees or any officer, employee or agent of the Trust be liable to anyone for such omission. No amendment of this Declaration of Trust or repeal of any of its provisions shall limit or eliminate the limitation of liability provided to Trustees and officers hereunder with respect to any act or omission occurring prior to such amendment or repeal. SECTION 8.4. Indemnification. The Trust shall indemnify (i) its Trustees and officers, whether serving the Trust or at its request any other entity, to the full extent -29- required or permitted by the general laws of the State of Maryland applicable to ordinary business corporations now or hereafter in force, including the advance of expenses under the procedures and to the full extent permitted by such laws, and (ii) the Shareholders and other employees and agents of the Trust to such extent as shall be authorized by the Trustees or the Bylaws and as permitted by law. Nothing contained herein shall be construed to protect any Person against any liability to the extent such protection would violate Maryland statutory or decisional law applicable to real estate investment trusts organized under Title 8 or any successor provision. The foregoing rights of indemnification shall not be exclusive of any other rights to which those seeking indemnification may be entitled. The Trustees may take such action as is necessary to carry out these indemnification provisions and are expressly empowered to adopt, approve and amend from time to time such bylaws, resolutions or contracts implementing such provisions or such further indemnification arrangements as may be permitted by law. No amendment of this Declaration of Trust or repeal of any of its provisions shall limit or eliminate the right of indemnification provided hereunder with respect to acts or omissions occurring prior to such amendment or repeal. SECTION 8.5. Transactions Between the Trust and its Trustees, Officers, Employees and Agents. Subject to any express restrictions in this Declaration of Trust or adopted by the Trustees in the Bylaws or by resolution, the Trust (which, for purposes of this Section 8.5, shall include the Trust and any of its subsidiaries) may enter into any contract or transaction of any kind (including without limitation for the purchase or sale of property or for any type of services, including those in connection with underwriting or the offer or sale of Securities of the Trust) with any Person, including any Trustee, officer, employee or agent of the Trust or any Person Affiliated with the Trust or a Trustee, officer, employee or agent of the Trust, whether or not any of them has a financial interest in such transaction; provided, however, that the following contracts and transactions may not be consummated by the Trust unless first approved by the affirmative vote of a majority of the Trustees who have no interest in the contract or transaction: any contract or transaction between the Trust and any Trustee, officer, employee or agent of the Trust or any person Affiliated with the Trust or a Trustee, officer, employee or agent of the Trust. -30- ARTICLE 9 AMENDMENT; REORGANIZATION; MERGER, ETC. SECTION 9.1. Amendment. (a) This Declaration of Trust may be amended by the affirmative vote of the holders of not less than a majority of the Shares then outstanding and entitled to vote thereon, except that Section 11.5 shall not be amended or repealed, nor shall provisions inconsistent therewith be adopted, except by the affirmative vote of the holders of not less than 80% of the Shares then outstanding and entitled to vote. (b) An amendment to this Declaration of Trust shall become effective as provided in Section 11.6. (c) This Declaration of Trust may not be amended except as provided in this Section 9.1. SECTION 9.2. Merger, Consolidation or Sale of Trust Property. Subject to the provisions of any class or series of Preferred Shares at the time outstanding and subject to Section 8-501.1 of Title 8, as and to the extent applicable, the Trustees shall have the power to (i) merge the Trust with or into another entity, (ii) consolidate the Trust with one or more other entities into a new entity or (iii) sell or otherwise dispose of all or substantially all of the Trust Property. ARTICLE 10 DURATION AND TERMINATION OF TRUST SECTION 10.1. Duration of Trust. The Trust shall continue perpetually unless terminated pursuant to Section 10.2 or pursuant to any applicable provision of Title 8. SECTION 10.2. Termination of Trust. (a) Subject to the provisions of any class or series of Preferred Shares at the time outstanding and subject to Section 8-501.1 of Title 8, as and to the extent applicable, the Trustees shall have the power to terminate the Trust. Upon the termination of the Trust: (i) The Trustees shall proceed to wind up the affairs of the Trust and all of the powers of the Trustees under this Declaration of Trust shall continue, including the powers to fulfill or discharge the Trust's contracts, collect its assets, sell, convey, assign, exchange, transfer or otherwise -31- dispose of all or any part of the remaining Trust Property to one or more Persons at public or private sale for consideration which may consist in whole or in part of cash, Securities or other property of any kind, discharge or pay its liabilities and do all other acts appropriate to liquidate its business. (ii) After paying or adequately providing for the payment of all liabilities, and upon receipt of such releases, indemnities and agreements as they deem necessary for their protection, the Trustees may distribute the remaining Trust Property, in cash or in kind or partly in each, among the Shareholders according to their respective rights, so that after payment in full or the setting apart for payment of such preferential amounts, if any, to which the holders of any Shares (other than Common Shares) at the time outstanding shall be entitled, the remaining Trust Property available for payment and distribution to Shareholders shall, subject to any participating or similar rights of Shares (other than Common Shares) at the time outstanding, be distributed ratably among the holders of Common Shares at the time outstanding. (b) After termination of the Trust, the liquidation of its business, and the distribution to the Shareholders as herein provided, a majority of the Trustees shall execute and file with the Trust's records a document certifying that the Trust has been duly terminated, and the Trustees shall be discharged from all liabilities and duties hereunder, and the rights and interests of all Shareholders shall cease. ARTICLE 11 MISCELLANEOUS SECTION 11.1. Governing Law. This Declaration of Trust is executed by the undersigned Trustees and delivered in the State of Maryland with reference to the laws thereof, and the rights of all parties and the validity, construction and effect of every provision hereof shall be subject to and construed according to the laws of the State of Maryland without regard to conflicts of laws provisions thereof. SECTION 11.2. Reliance by Third Parties. Any certificate shall be final and conclusive as to any Persons dealing with the Trust if executed by an individual who, according to the records of the Trust or of any recording office in which this Declaration of Trust may be recorded, appears to be the Secretary or an Assistant Secretary of the Trust or a Trustee, and if certifying to: (i) the number or identity of Trustees, officers of the Trust or Shareholders; (ii) the due authorization of the execution of any document; (iii) the action -32- or vote taken, and the existence of a quorum, at a meeting of Trustees or Shareholders; (iv) a copy of this Declaration or of the Bylaws as a true and complete copy as then in force; (v) an amendment to this Declaration; (vi) the termination of the Trust; or (vii) the existence of any fact or facts which relate to the affairs of the Trust. No purchaser, lender, transfer agent or other Person shall be bound to make any inquiry concerning the validity of any transaction purporting to be made on behalf of the Trust by the Trustees or by any officer, employee or agent of the Trust. SECTION 11.3. Provisions in Conflict with Law or Regulations. (a) The provisions of this Declaration of Trust are severable, and if the Trustees shall determine, with the advice of counsel, that any one or more of such provisions (the "Conflicting Provisions") are in conflict with the REIT Provisions of the Code, Title 8 or other applicable federal or state laws, the Conflicting Provisions shall be deemed never to have constituted a part of this Declaration of Trust, even without any amendment of this Declaration pursuant to Section 9.1; provided, however, that such determination by the Trustees shall not affect or impair any of the remaining provisions of this Declaration of Trust or render invalid or improper any action taken or omitted prior to such determination. No Trustee shall be liable for making or failing to make such a determination. (b) If any provision of this Declaration of Trust shall be held invalid or unenforceable in any jurisdiction, such holding shall not in any manner affect or render invalid or unenforceable such provision in any other jurisdiction or any other provision of this Declaration of Trust in any jurisdiction. SECTION 11.4. Construction. In this Declaration of Trust, unless the context otherwise requires, words used in the singular or in the plural include both the plural and singular and words denoting any gender include all genders. The title and headings of different parts are inserted for convenience and shall not affect the meaning, construction or effect of this Declaration. In defining or interpreting the powers and duties of the Trust and its Trustees and officers, reference may be made, to the extent appropriate and not inconsistent with the Code or Title 8, to Titles 1 through 3 of the Corporations and Associations Article of the Annotated Code of Maryland. In furtherance and not in limitation of the foregoing, in accordance with the provisions of Title 3, Subtitles 6 and 7, of the Corporations and Associations Article of the Annotated Code of Maryland, the Trust shall be included within the definition of "corporation" for purposes of such provisions. -33- SECTION 11.5. Business Combinations. The provisions of Subtitle 6 of Title 3 of the Corporations and Associations Article of the Annotated Code of Maryland, as such provisions exist as of June 4, 1986, are by this reference incorporated herein as if here set forth in their entirety. Such provisions shall be interpreted in a manner consistent with that in which they would be interpreted pursuant to the above referenced statute as such statute exists as of June 4, 1986, assuming the validity of such statute and its applicability to the Trust. SECTION 11.6. Recordation. This Declaration of Trust and any amendment hereto shall be filed for record with the State Department of Assessments and Taxation of Maryland and may also be filed or recorded in such other places as the Trustees deem appropriate, but failure to file for record this Declaration or any amendment hereto in any office other than in the State of Maryland shall not affect or impair the validity or effectiveness of this Declaration or any amendment hereto. A restated Declaration shall, upon filing, be conclusive evidence of all amendments contained therein and may thereafter be referred to in lieu of the original Declaration and the various amendments thereto. IN WITNESS WHEREOF, this Amended and Restated Declaration of Trust has been signed on this 22nd day of August, 1996 by the undersigned Trustees, each of whom acknowledges, under penalty of perjury, that this document is his free act and -34- deed, and that to the best of his knowledge, information, and belief, the matters and facts set forth herein are true in all material respects. ------------------------------- Anthony A. Nichols, Sr. ------------------------------- Joseph L. Carboni ------------------------------- Richard M. Osborne ------------------------------- Gerard H. Sweeney ------------------------------- Warren V. Musser ------------------------------- Walter D'Alessio ------------------------------- Charles P. Pizzi -35- EX-3.2 3 EXHIBIT 3.2 BRANDYWINE REALTY TRUST BYLAWS ARTICLE I. OFFICES Section 1. Principal Office. The principal office of Brandywine Realty Trust (the "Trust") shall be located at such place or places as the Trustees may designate. Section 2. Additional Offices. The Trust may have additional offices at such places as the Trustees may from time to time determine or the business of the Trust may require. ARTICLE II. MEETINGS OF SHAREHOLDERS Section 1. Place. All meetings of shareholders shall be held at the principal place of the Trust or at such other place within the United States as shall be stated in the notice of the meeting. Section 2. Annual Meeting. An annual meeting of the shareholders for the election of Trustees and the transaction of any business within the powers of the Trust shall be held annually and at the time set by the Trustees. Section 3. Special Meetings. Subject to the rights of the holders of any series of Preferred Shares of Beneficial Interest (as defined in the Declaration of Trust) to elect additional Trustees under specified circumstances, special meetings of the shareholders may be called by the chairman or by a resolution adopted by one-half or more of the total number of Trustees which the Trust would have if there were no vacancies (the "Whole Board"). Special meetings of shareholders may also be called upon the written request of shareholders to the extent permitted in Article 7 of the Declaration of Trust. Section 4. Notice. Not less than ten nor more than 90 days before each meeting of shareholders, the secretary shall give to each shareholder entitled to vote at such meeting and to each shareholder not entitled to vote who is entitled to notice of the meeting written or printed notice stating the time and place of the meeting and, in the case of a special meeting or as otherwise may be required by statute, the purpose for which the meeting is called, either by mail or by presenting it to such shareholder personally or by leaving it at his residence or usual place of business. If mailed, such notice shall be deemed to be given when deposited in the United States mail addressed to the shareholder at his post office address as it appears on the records of the Trust, with postage thereon prepaid. Section 5. Scope of Notice. Any business of the Trust may be transacted at an annual meeting of shareholders without being specifically designated in the notice, except such business as is required by statute to be stated in such notice. No business shall be transacted at a special meeting of shareholders except as specifically designated in the notice. Section 6. Quorum. At any meeting of shareholders, the presence in person or by proxy of shareholders entitled to cast a majority of all the votes entitled to be cast at such meeting shall constitute a quorum; but this section shall not affect any requirement under any statute or the Declaration of Trust for the vote necessary for the adoption of any measure. If, however, such quorum shall not be present at any meeting of the shareholders, the shareholders entitled to vote at such meeting, present in person or by proxy, shall have power to adjourn the meeting from time to time to a date not more than 120 days after the original record date without notice other than announcement at the meeting. At such adjourned meeting at which a quorum shall be present, any business may be transacted which might have been transacted at the meeting as originally notified. Section 7. Voting. A plurality of all the votes cast at a meeting of shareholders duly called and at which a quorum is present shall be sufficient to elect a Trustee. Shareholders shall not be entitled to cumulate their votes in the election of Trustees. A majority of the votes cast at a meeting of shareholders duly called and at which a quorum is present shall be sufficient to approve any other matter which may properly come before the meeting, unless more than a majority of the votes cast is required by statute or by the Declaration of Trust. Unless otherwise provided in the Declaration, each outstanding share, regardless of class, shall be entitled to one vote on each matter submitted to a vote at a meeting of shareholders. Section 8. Proxies. A shareholder may vote the shares owned of record by him, either in person or by proxy executed in writing by the shareholder or by his duly authorized attorney in fact. Such proxy shall be filed with the secretary of the Trust before or at the time of the meeting. No proxy shall be valid after eleven months from the date of its execution, unless otherwise provided in the proxy. Section 9. Voting of Shares by Certain Holders. Shares registered in the name of a corporation, partnership, trust or other entity, if entitled to be voted, may be voted by the chief executive officer or a vice president, a general -2- partner or trustee thereof, as the case may be, or a proxy appointed by any of the foregoing individuals, unless some other person who has been appointed to vote such shares pursuant to a bylaw or a resolution of the board of directors of such corporation or other entity presents a certified copy of such bylaw or resolution, in which case such person may vote such shares. Any trustee or other fiduciary may vote shares registered in his name as such fiduciary, either in person or by proxy. Shares of the Trust directly or indirectly owned by it shall not be voted at any meeting and shall not be counted in determining the total number of outstanding shares entitled to be voted at any given time, unless they are held by it in a fiduciary capacity, in which case they may be voted and shall be counted in determining the total number of outstanding shares at any given time. The Trustees may adopt by resolution a procedure by which a shareholder may certify in writing to the Trust that any shares registered in the name of the shareholder are held for the account of a specified person other than the shareholder. The resolution shall set forth the class of shareholders who may make the certification, the purpose for which the certification may be made, the form of certification and the information to be contained in it; if the certification is with respect to a record date or closing of the share transfer books, the time after the record date or closing of the share transfer books within which the certification must be received by the Trust; and any other provisions with respect to the procedure which the Trustees consider necessary or desirable. On receipt of such certification, the person specified in the certification shall be regarded as, for the purposes set forth in the certification, the shareholder of record of the specified shares in place of the shareholder who makes the certification. Section 10. Inspectors. At any meeting of shareholders, the chairman of the meeting may, or upon the request of any shareholder shall, appoint one or more persons as inspectors for such meetings. Such inspectors shall ascertain and report the number of shares represented at the meeting based upon their determination of the validity and effect of proxies, count all votes, report the results and perform such other acts as are proper to conduct the election and voting with impartiality and fairness to all the shareholders. Each report of an inspector shall be in writing and signed by him or by a majority of them if there is more than one inspector acting at such meeting. If there is more than one inspector, the report of a majority shall be the report of the inspectors. The report of the inspector or inspectors on the -3- number of shares represented at the meeting and the results of the voting shall be prima facie evidence thereof. Section 11. Reports to Shareholders. Not later than 90 days after the close of each fiscal year of the Trust, the Trustees shall deliver or cause to be delivered a report of the business and operations of the Trust during such fiscal year to the shareholders, containing a balance sheet and a statement of income and surplus of the Trust, accompanied by the certification of an independent certified public accountant, and such further information as the Trustees may determine is required pursuant to any law or regulation to which the Trust is subject. A signed copy of the annual report and the accountant's certificate shall be filed by the Trustees with the State Department of Assessments and Taxation of Maryland, and with such other governmental agencies as may be required by law and as the Trustees may deem appropriate. Section 12. Voting by Ballot. Voting on any question or in any election may be viva voce unless the presiding officer shall order or any shareholder shall demand that voting be by ballot. Section 13. No Shareholder Action by Written Consent. Subject to the rights of the holders of any series Preferred Shares to elect additional Trustees under specific circumstances, any action required or permitted to be taken by the shareholders of the Trust must be effected at an annual or special meeting of shareholders and may not be effected by any consent in writing by such shareholders. Section 14. Exemption of Certain Shares. The common shares of beneficial interest ("Common Shares") of the Trust now or hereafter owned by Safeguard Scientifics, Inc., The Nichols Company and any of their current or future affiliates or associates (the "SSI/TNC Affiliates") are hereby exempted from the restrictions contained in Subtitle 7 of Title 3 of the Maryland General Corporation Law, and the Trust shall have no right to exercise the redemption right with respect to such Common Shares arising under said Subtitle 7. In no event will any Shareholder of the Trust have any rights under Section 3-708 of said Subtitle 7 as a result of the ownership by the SSI/TNC Affiliates of Common Shares as aforesaid. As used herein, the terms "affiliates" and "associates" have the respective meanings assigned to them in Subtitles 6 and 7, respectively, of said Title 3. -4- ARTICLE III. TRUSTEES Section 1. General Powers: Qualifications. The business and affairs of the Trust shall be managed under the direction of its Board of Trustees. A Trustee shall be an individual at least 21 years of age who is not under legal disability. Section 2. Annual and Regular Meetings. An annual meeting of the Trustees shall be held immediately after and at the same place as the annual meeting of shareholders, no notice other than this Bylaw being necessary. The Trustees may provide, by resolution, the time and place, either within or without the State of Maryland, for the holding of regular meetings of the Trustees without other notice than such resolution. Section 3. Special Meetings. Special meetings of the Trustees may be called by or at the request of the chairman or chief executive officer or by one-half or more of the Trustees then in office. The person or persons authorized to call special meetings of the Trustees may fix any place, either within or without the State of Maryland, as the place for holding any special meeting of the Trustees called by them. Section 4. Notice. Notice of any special meeting shall be given by written notice delivered personally, transmitted by facsimile, telegraphed or mailed to each Trustee at his business or residence address. Personally delivered, facsimile transmitted or telegraphed notices shall be given at least two days prior to the meeting. Notice by mail shall be given at least five days prior to the meeting. If mailed, such notice shall be deemed to be given when deposited in the United States mail properly addressed, with postage thereon prepaid. If given by telegram, such notice shall be deemed to be given when the telegram is delivered to the telegraph company. Neither the business to be transacted at, nor the purpose of, any annual, regular or special meeting of the Trustees need be stated in the notice, unless specifically required by statute or these Bylaws. Section 5. Quorum. A whole number of Trustees equal to at least a majority of the Whole Board Trustees shall constitute a quorum for transaction of business at any meeting of the Trustees, provided that, if less than a quorum are present at said meeting, a majority of the Trustees present may adjourn the meeting from time to time without further notice, and provided further that if, pursuant to the Declaration of Trust or these Bylaws, the vote of a majority of a particular group of Trustees -5- is required for action, a quorum must also include a majority of such group. The Trustees present at a meeting which has been duly called and convened may continue to transact business until adjournment, notwithstanding the withdrawal of enough Trustees to leave less than a quorum. Section 6. Voting. The action of the majority of the Trustees present at a meeting at which a quorum is present shall be the action of the Trustees, unless the concurrence of a greater proportion is required for such action by applicable statute. Section 7. Telephone Meetings. Trustees may participate in a meeting by means of a conference telephone or similar communications equipment if all persons participating in the meeting can hear each other at the same time. Participation in a meeting by these means shall constitute presence in person at the meeting. Section 8. Informal Action by Trustees. Any action required or permitted to be taken at any meeting of the Trustees may be taken without a meeting, if a consent in writing to such action is signed by each Trustee and such written consent is filed with the minutes of proceedings of the Trustees. Section 9. Vacancies. If for any reason any or all the Trustees cease to be Trustees, such event shall not terminate the Trust or affect these Bylaws or the powers of the remaining Trustees hereunder (even if fewer than three Trustees remain). Any vacancy (including a vacancy created by an increase in the number of Trustees) shall be filled, at any regular meeting or at any special meeting called for that purpose, by a majority of the Trustees (although less than a quorum). Any individual so elected as Trustee shall hold office until the next annual meeting of shareholders and until his successor has been duly elected and qualified. Section 10. Compensation. Trustees shall not receive any stated salary for their services as Trustees but, by resolution of the trustees, fixed sums per year and/or per meeting. Expenses of attendance, if any, may be allowed to trustees for attendance at each annual, regular or special meeting of the Trustees or of any committee thereof; but nothing herein contained shall be construed to preclude any Trustees from serving the Trust in any other capacity and receiving compensation therefor. Section 11. Removal of Trustees. The shareholders may, at any time, remove any Trustee in the manner provided in the Declaration of Trust. -6- Section 12. Loss of Deposits. No Trustee shall be liable for any loss which may occur by reason of the failure of the bank, trust company, savings and loan association, or other institution with whom moneys or shares have been deposited. Section 13. Surety Bonds. Unless required by law, no Trustee shall be obligated to give any bond or surety or other security for the performance of any of his duties. Section 14. Reliance. Each Trustee, officer, employee and agent of the Trust shall, in the performance of his duties with respect to the Trust, be fully justified and protected with regard to any act or failure to act in reliance in good faith upon the books of account or other records of the Trust, upon an opinion of counsel or upon reports made to the Trust by any of its officers or employees or by the adviser, accountants, appraisers or other experts or consultants selected by the Trustees or officers of the Trust, regardless of whether such counsel or expert may also be a Trustee. Section 15. Certain Rights of Trustees, Officers, Employees and Agents. The Trustees shall have no responsibility to devote their full time to the affairs of the Trust. Any Trustee or officer, employee or agent of the Trust, in his personal capacity or in a capacity as an affiliate, employee, or agent of any other person, or otherwise, may have business interests and engage in business activities similar to or in addition to those of or relating to the Trust. ARTICLE IV. COMMITTEES Section 1. Number, Tenure and Qualifications. The Trustees may, by resolution or resolutions passed by a majority of the whole Board, appoint from among its members an Executive Committee, an Audit Committee and other committees, composed of two or more Trustees. Section 2. Powers. The Trustees may delegate to committees appointed under Section 1 of this Article any of the powers of the Board of Trustees, provided, however that the Trustees may not delegate to a committee the power to declare dividends or other distributions, elect Trustees, issue Shares of Beneficial Interest in the Trust other than as provided in the next sentence, recommend to the shareholders any action which requires shareholder approval, amend the Bylaws, or approve any merger or share exchange which does not require shareholder approval. If the Board of Trustees has given general authorization for the issuance of Shares of Beneficial Interest in the Trust, a committee of the board, in accordance with a -7- general formula or method specified by the Board by resolution or by adoption of an option or other plan, may fix the terms of the Shares of Beneficial Interest subject to classification or reclassification and the terms on which the shares may be issued, including all terms and conditions required or permitted to be established or authorized by the Board of Trustees. Section 3. Committee Procedures. Each Committee may fix rules of procedure for its business. A majority of the members of a committee shall constitute a quorum for the transaction of business and the action of a majority of those present at a meeting at which a quorum is present shall be action of the committee. In the absence of any member of any committee, the members thereof present at any meeting, whether or not they constitute a quorum, may appoint another Trustee to act in the place of such absent member. Any action required or permitted to be taken at a meeting of a committee may be taken without a meeting, if a unanimous written consent which sets forth the action is signed by each member of the committee and filed with the minutes of the proceedings of such committee. The members of a committee may conduct any meeting thereof by means of a conference telephone or similar communications equipment if all persons participating in the meeting can hear each other at the same time. Participation in a meeting by such means shall constitute presence in person at the meeting. Section 4. Emergency. In the event of a state of disaster of sufficient severity to prevent the conduct and management of the affairs and business of the Trust by its Trustees and officers as contemplated by the Declaration of Trust and these Bylaws, any two or more available members of the then incumbent Executive Committee, if any, shall constitute a quorum of that Committee for the full conduct and management of the affairs and business of the Trust in accordance with the provisions of this Article. In the event of the unavailability, at such time, of a minimum of two members of the then incumbent Executive Committee, the available Trustees shall elect an Executive Committee composed of any two members of the Board of Trustees, whether or not they be officers of the Trust, which two members shall constitute the Executive Committee for the full conduct and management of the affairs of the Trust in accordance with the foregoing provisions of this Section. This Section shall be subject to implementation by resolution of the Board of Trustees passed form time to time for that purpose, and any provisions of the Bylaws (other than this Section) and any resolutions which are contrary to the provisions of this Section or to the provisions of any such implementing resolutions shall be suspended until it shall be determined by any interim Executive Committee acting under this Section that it shall be to the advantage of the Trust to resume the conduct and management of its affairs and business under all the other provisions of these Bylaws. -8- ARTICLE V. OFFICERS Section 1. General Provisions. The officers of the Trust may consist of a chairman of the board, a chief executive officer, one or more vice presidents, a chief financial officer, a secretary, and one or more assistant secretaries. In addition, the Trustees may from time to time appoint such other officers with such powers and duties as they shall deem necessary or desirable. The officers of the Trust shall be elected annually by the Trustees at the first meeting of the Trustees held after each annual meeting of shareholders. If the election of officers shall not be held at such meeting, such election shall be held as soon thereafter as may be convenient. Each officer shall hold office until his successor is elected and qualifies or until his death, resignation or removal in the manner hereinafter provided. Any two or more offices may be held by the same person. In their discretion, the Trustees may leave unfilled any office. Election of an officer or agent shall not of itself create contract rights between the Trust and such officer or agent. Section 2. Removal and Resignation. Any officer or agent of the Trust may be removed by a majority of the members of the Whole Board if in their judgment the best interests of the Trust would be served thereby, but such removal shall be without prejudice to the contract rights, if any, of the person so removed. Any officer of the Trust may resign at any time by giving written notice of his resignation to the Trustees, the chairman of the board, the chief executive officer or the secretary. Any resignation shall take effect at any time subsequent to the time specified therein or, if the time when it shall become effective is not specified therein, immediately upon its receipt. The acceptance of a resignation shall not be necessary to make it effective unless otherwise stated in the resignation. Section 3. Vacancies. A vacancy in any office may be filled by the Trustees for the balance of the term. Section 4. Chairman of the Board. The chairman of the board shall preside over the meetings of the Trustees and of the shareholders at which he shall be present. The chairman of the board shall perform such other duties as may be assigned to him by the Trustees. Except where by law the signature of the chief executive officer is required, the chairman of the board shall possess the same power as the chief executive officer to sign deeds, mortgages, bonds, contracts or other instruments. Section 5. Chief Executive Officer. The Trustees may designate a chief executive officer from among the elected officers. In the absence of such designation, the chairman of -9- the board shall be the chief executive officer of the Trust. The chief executive officer shall have general responsibility for implementation of the policies of the Trust, as determined by the Trustees, and for the management of the business affairs of the Trust. The chief executive officer shall in general supervise and control all of the business and affairs of the Trust. He may execute any deed, mortgage, bond, contract or other instrument, except in cases where the execution thereof shall be expressly delegated by the Trustees or by these Bylaws to some other officer or agent of the Trust or shall be required by law to be otherwise executed; and in general shall perform all duties incident to the office of chief executive officer and such other duties as may be prescribed by the Trustees from time to time. Section 6. Vice Presidents. In the absence of the chief executive officer or in the event of a vacancy in such office, the vice president (or in the event there be more than one vice president, the vice presidents in the order designated at the time of their election or, in the absence of any designation, then in the order of their election ) shall perform the duties of the chief executive officer and when so acting shall have all the powers of and be subject to all the restrictions upon the chief executive officer; and shall perform such other duties as form time to time may be assigned to him by the chief executive officer or by the Trustees. The Trustees may designate one or more vice presidents as executive vice president or as vice president for particular areas of responsibility. Section 7. Secretary. The secretary shall (a) keep the minutes of the proceedings of the shareholders, the Trustees and committees of the Trustees in one or more books provided for that purpose; (b) see that all notices are duly given in accordance with the provisions of these Bylaws or as required by law; (c) be custodian of the trust records and of the seal of the Trust; (d) keep a register of the post office address of each shareholder which shall be furnished to the secretary by such shareholder; (e) have general charge of the share transfer books of the Trust; and (f) in general perform such other duties as from time to time may be assigned to him by the chief executive officer or by the Trustees. Section 8. Chief Financial Officer. The chief financial officer shall have the custody of the funds and securities of the Trust and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Trust and shall deposit all moneys and other valuable effects in the name and to the credit of the Trust in such depositories as may be designated by the Trustees. The chief financial officer shall disburse the funds of the Trust as may be ordered by the Trustees, taking proper vouchers for such disbursements, and shall render to the chief -10- executive officer and Trustees, at the regular meetings of the Trustees or whenever they may require it, an account of all his transactions as chief financial officer and of the financial condition of the Trust. If required by the Trustees, he shall give the Trust a bond in such sum and with such surety or sureties as shall be satisfactory to the Trustees for the faithful performance of the duties of his office and for the restoration of the Trust, in case of his death, resignation, retirement or removal from office, all books, papers, vouchers, moneys and other property of whatever kind in his possession or under his control belonging to the Trust. Section 9. Assistant Secretaries. The assistant secretaries, in general, shall perform such duties as shall be assigned to them by the secretary, or by the chief executive officer or the Trustees. Section 10. Salaries. The salaries of the officers shall be fixed from time to time by the Trustees and no officer shall be prevented from receiving such salary by reason of the fact that he is also a Trustee. ARTICLE VI. CONTRACTS, LOANS, CHECKS AND DEPOSITS Section 1. Contracts. The Trustees may authorize any officer or agent to enter into any contract or to execute and deliver any instrument in the name of and on behalf of the Trust and such authority may be general or confined to specific instances. Any agreement, deed, mortgage, lease or other document executed by one or more of the Trustees or by an authorized person shall be deemed valid and binding upon the Trustees and upon the Trust when so authorized or ratified by action of the Trustees. Section 2. Checks and Drafts. All checks, drafts or other orders for the payment of money, notes or other evidences of indebtedness issued in the name of the Trust shall be signed by such officer or officers, agent or agents of the Trust and in such manner as shall from time to time be determined by the Trustees. Section 3. Deposits. All funds of the Trust not otherwise employed shall be deposited from time to time to the credit of the Trust in such banks, trust companies or other depositories as the Trustees may designate. -11- ARTICLE VII. SHARES Section 1. Certificates. Each shareholder shall be entitled to a certificate or certificates which shall represent and certify the number of shares of each class of beneficial interests held by him in the Trust. Each certificate shall be signed by the chief executive officer or a vice president and countersigned by the secretary or an assistant secretary or the chief financial officer or an assistant treasurer and may be sealed with the seal, if any, of the Trust. The signatures may be either manual or facsimile. Certificates shall be consecutively numbered; and if the Trust shall, from time to time, issue several classes of shares, each class may have its own number series. A certificate is valid and may be issued whether or not an officer who signed it is still an officer when it is issued. Each certificate representing shares which are restricted as to their transferability or voting powers, which are preferred or limited as to their dividends or as to their allocable portion of the assets upon liquidation or which are redeemable at the option of the Trust, shall have a statement of such restriction, limitation, preference or redemption provision, or a summary thereof, plainly stated on the certificate. In lieu of such statement or summary, the Trust may set forth upon the face or back of the certificate a statement that the Trust will furnish to any shareholder, upon request and without charge, a full statement of such information. Section 2. Transfers. Certificates shall be treated as negotiable and title thereto and to the shares they represent shall be transferred by delivery thereof to the same extent as those of a Maryland stock corporation. Upon surrender to the Trust or the transfer agent of the Trust of a share certificate duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, the Trust shall issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books. The Trust shall be entitled to treat the holder of record of any share or shares as the holder in fact thereof and, accordingly, shall not be bound to recognize any equitable or other claim to or interest in such share on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of the State of Maryland. Section 3. Lost Certificate. The Trustees may direct a new certificate to be issued in place of any certificate previously issued by the Trust alleged to have been lost, stolen or destroyed upon the making of an affidavit of that fact by the -12- person claiming the certificate to be lost, stolen or destroyed. When authorizing the issuance of a new certificate, the Trustees may, in their discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificate or his legal representative to advertise the same in such manner as they shall require and/or to give bond, with sufficient surety, to the Trust to indemnify it against any loss or claim which may arise as a result of the issuance of a new certificate. Section 4. Closing of Transfer Books or Fixing of Record Date. The Trustees may set, in advance a record date for the purpose of determining shareholders entitled to notice of or to vote at any meeting of shareholders, or shareholders entitled to receive payment of any dividend or the allotment of any other rights, or in order to make a determination of shareholders for any other proper purpose. Such date, in any case, shall not be prior to the close of business on the day the record date is fixed and shall be not more than 90 days and, in the case of a meeting of shareholders not less than ten days, before the date on which the meeting or particular action requiring such determination of shareholders is to be held or taken. In lieu of fixing a record date, the Trustees may provide that the share transfer books shall be closed for a stated period but not longer than 20 days. If the share transfer books are closed for the purpose of determining shareholders entitled to notice of or to vote at a meeting of shareholders, such books shall be closed for at lest ten days before the date of such meeting. If no record date is fixed and the share transfer books are not closed for the determination of shareholders, (a) the record date for the determination of shareholders entitled to notice of or to vote at a meeting of shareholders shall be at the close of business on the day on which the notice of meeting is mailed or the 30th day before the meeting, whichever is the closer date to the meeting; and (b) the record date for the determination of shareholders entitled to receive payment of a dividend or an allotment of any other rights shall be the close of business on the day on which the resolution of the Trustees, declaring the dividend or allotment of rights, is adopted. When a determination of shareholders entitled to vote at any meeting of shareholders has been made as provided in this section, such determination shall apply to any adjournment thereof, except where the determination has been made through the closing of the transfer books and the stated period of closing has expired. Section 5. Share Ledger. The Trust shall maintain at its principal office or at the office of its counsel, accountants -13- or transfer agent, an original or duplicate share ledger containing the name and address of each shareholder and the number of shareholders of each class held by such shareholder. Section 6. Fractional Shares; Issuance of Units. Trustees may issue fractional shares or provide for the issuance of scrip, all on such terms and under such conditions as they may determine. Notwithstanding any other provision of the Declaration or these Bylaws, the Trustees may issue units consisting of different securities of the Trust. Any security issued in a unit shall have the same characteristics as any identical securities issued by the Trust, except that the Trustees may provide that for a specified period securities of the Trust issued in such unit may be transferred on the books of the Trust only in such unit. ARTICLE VIII. ACCOUNTING YEAR The Trustees shall have the power, from time to time, to fix the fiscal year of the Trust by a duly adopted resolution. ARTICLE IX. DIVIDENDS Section 1. Declaration. Dividends upon the shares of the Trust may be declared by the Trustees, subject to the provisions of law and the Declaration of Trust. Dividends may be paid in cash, property or shares of the Trust, subject to the provisions of law and the Declaration. Section 2. Contingencies. Before payment of any dividends, there may be set aside out of any funds of the Trust available for dividends such sum or sums as the Trustees may from time to time, in their absolute discretion, think proper as the reserve fund for contingencies, for equalizing dividends, for repairing or maintaining any property of the Trust or for such other purpose as the Trustees shall determine to be in the best interest of the Trust, and the Trustees may modify or abolish any such reserve in the manner in which it was created. -14- ARTICLE X. INVESTMENT POLICY Subject to the provisions of the Declaration of Trust, the Trustees may from time to time adopt, amend, revise or terminate any policy or policies with respect to investments by the Trust as they shall deem appropriate in their sole discretion. ARTICLE XI. SEAL Section 1. Seal. The Trustees may authorize the adoption of a seal by the Trust. The seal shall have inscribed thereon the name of the Trust and the year of its organization. The Trustees may authorize one or more duplicate seals and provide for the custody thereof. Section 2. Affixing Seal. Whenever the Trust is required to place its seal to a document, it shall be sufficient to meet the requirements of any law, rule or regulation relating to a seal to place the word "(SEAL)" adjacent to the signature of the person authorized to execute the document on behalf of the Trust. ARTICLE XII. INDEMNIFICATION To the maximum extent permitted by Maryland law in effect from time to time, the Trust, without requiring a preliminary determination of the ultimate entitlement to indemnification, shall indemnify (a) any Trustee, officer or shareholder or any former Trustee, officer or shareholder (including among the foregoing, for all purposes of this Article XII and without limitation, any individual who, while a Trustee and at the request of the Trust, serves or has served another corporation, partnership, joint venture, trust, employee benefit plan or any other enterprise as a director, officer, partner or trustee of such corporation, partnership, joint venture, trust, employee benefit plan or other enterprise), who has been successful, on the merits or otherwise, in the defense of a proceeding to which he was made a party by reason of such status, against reasonable expenses incurred by him in connection with the proceeding, (b) any Trustee or officer or any former Trustee or officer against any claim or liability to which he may become subject by reason of such status unless it is established that -15- (i) his act or omission was committed in bad faith or was the result of active and deliberate dishonesty, (ii) he actually received an improper personal benefit in money, property or services, or (iii) in the case of a criminal proceeding, he had reasonable cause to believe that his act or omission was unlawful and (c) each shareholder or former shareholder against any claim or liability to which he may be subject by reason of his status as a shareholder or former shareholder. In addition, the Trust shall pay or reimburse, in advance of final disposition of a proceeding, reasonable expenses incurred by a Trustee, officer or shareholder or former Trustee, officer or shareholder made a party to a proceeding by reason of his status as a Trustee, officer or shareholder provided that, in the case of a Trustee or officer, the Trust shall have received (i) a written affirmation by the Trustee or officer of his good faith belief that he has met the applicable standard of conduct necessary for indemnification by the Trust as authorized by these Bylaws and (ii) a written undertaking by or on his behalf to repay the amount paid or reimbursed by the Trust if it shall ultimately be determined that the applicable standard of conduct was not met. The Trust may, with the approval of its Trustees, provide such indemnification and payment or reimbursement of expenses to any Trustee, officer or shareholder or any former Trustee, officer or shareholder who served a predecessor of the Trust and to any employee or agent of the Trust or a predecessor of the Trust. Neither the amendment nor repeal of this Section, nor the adoption or amendment of any other provision of the Declaration of Trust or these Bylaws inconsistent with this Section, shall apply to or affect in any respect the applicability of this paragraph with respect to any act or failure to act which occurred prior to such amendment, repeal or adoption. Any indemnification or payment or reimbursement of the expenses permitted by these Bylaws shall be furnished in accordance with the procedures provided for indemnification and payment or reimbursement of expenses under Section 2-418 of the Maryland General Corporation Law (the "MGCL") for directors of Maryland corporations. The Trust may provide to Trustees, officers and shareholders such other and further indemnification or payment or reimbursement of expenses as may be permitted by the MGCL, as in effect from time to time, for directors of Maryland corporations. ARTICLE XIII. WAIVER OF NOTICE Whenever any notice is required to be given pursuant to the Declaration of Trust or Bylaws or pursuant to applicable law, a waiver thereof in writing, signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice. Neither the business to be transacted at nor the purpose of any -16- meeting need be set forth in the waiver of notice, unless specifically required by statute. The attendance of any person at any meeting shall constitute a waiver of notice of such meeting, except where such person attends a meeting for the express purpose of objecting to the transaction of any business on the ground that the meeting is not lawfully called or convened. ARTICLE XIV. AMENDMENT OF BYLAWS The Trustees shall have the exclusive power to adopt, alter or repeal any provision of these Bylaws and to make new Bylaws. The foregoing are certified as the Bylaws of the Trust adopted by the Trustees as of August 22, 1996. /s/ Francine M. Haulenbeek --------------------------------- Secretary -17- EX-10.1 4 EXHIBIT 10.1 AGREEMENT OF LIMITED PARTNERSHIP OF BRANDYWINE OPERATING PARTNERSHIP, L.P. TABLE OF CONTENTS Page ---- BACKGROUND:................................................................. 1 AGREEMENTS.................................................................. 4 ARTICLE I: DEFINITIONS............................................... 4 ARTICLE II: FORMATION OF PARTNERSHIP.................................. 18 Section 2.1 Formation of Partnership......................... 18 Section 2.2 Name, Principal Place of Business and Registered Office................................ 18 Section 2.3 Purpose.......................................... 19 Section 2.4 Powers........................................... 19 Section 2.5 Term............................................. 20 Section 2.6 Amendment of Certificate......................... 20 Section 2.7 Partnership Assets............................... 20 Section 2.8 Limitation on Liability of Persons Related to Partners.............................. 21 Section 2.9 Conflicts of Interest and Transactions with Affiliates.................................. 21 Section 2.10 Statutory Compliance............................. 21 ARTICLE III: PARTNERSHIP INTERESTS..................................... 22 Section 3.1 In General....................................... 22 Section 3.2 Class A, Class B and Class C Limited Partnership Interests............................ 22 Section 3.3 Creation and Issuance of Additional Classes of Partnership Interests................. 23 Section 3.4 Other Provisions Relating to All Classes of Partnership Interests......................... 24 Section 3.5 Register......................................... 24 ARTICLE IV: CONTRIBUTIONS TO CAPITAL AND ISSUANCES OF PARTNERSHIP INTERESTS..................................... 25 Section 4.1 General Partner and Initial Class B Limited Partner Capital Contributions............ 25 Section 4.2 Initial Class A Limited Partner Capital Contributions.................................... 25 Section 4.3 Initial Class C Limited Partner Capital Contributions.................................... 26 Section 4.4 Option to Acquire Retained Interests in Title Holding Partnerships....................... 27 Section 4.5 Issuance of Additional Class A and General Partner Units Upon Achievement of Mortgage Discounts............................ 28 Section 4.6 Forfeiture of Class A Units Upon Payment of Certain Mortgage Indebtedness With Equity Participation Rights...................... 29 Page --- Section 4.7 Forfeiture of Certain Class A Units and General Partners' Units Upon Payment of the GECC Equity Participation, and Upon Foreclosure of GECC Loan......................... 30 Section 4.8 Forfeiture of Certain Class A Units Upon Payment of Certain Lease Equity Participations................................... 32 Section 4.9 Capital Contributions Generally.................. 33 Section 4.10 No Third Party Beneficiary....................... 34 Section 4.11 SSI Right of First Refusal....................... 34 ARTICLE V: CAPITAL ACCOUNTS.......................................... 34 Section 5.1 Establishment and Maintenance of Capital Accounts......................................... 34 Section 5.2 Succession to Capital Accounts................... 35 Section 5.3 Certain Adjustments.............................. 35 ARTICLE VI: DISTRIBUTIONS............................................. 35 Section 6.1 Distributions Prior to Qualified Offering......................................... 35 Section 6.2 Distributions After Qualified Offering........... 37 Section 6.3 Distributions to Pay Taxes....................... 37 Section 6.4 Distributions upon Liquidation................... 38 Section 6.5 Additional Distribution Rules.................... 38 Section 6.6 Taxes Withheld................................... 39 Section 6.7 In-Kind Distributions............................ 39 Section 6.8 No Other Distributions Permitted................. 40 Section 6.9 Special Distributions............................ 40 ARTICLE 7: ALLOCATIONS...................................... 40 Section 7.1 Allocation of Net Income and Net Loss Before a Qualified Offering...................... 41 Section 7.2 Allocation of Net Income and Net Loss in Connection with and After a Qualified Offering......................................... 42 Section 7.3 Special Allocations.............................. 42 Section 7.4 Tax Allocations.................................. 44 Section 7.5 Additional Special Allocations................... 45 ARTICLE VIII: EXPENSES; RIGHTS, DUTIES AND RESTRICTIONS OF THE GENERAL PARTNER; VOTING RIGHTS OF CLASS A PARTNERS......................................... 45 Section 8.1 Expenses Borne by the Partnership................ 45 Section 8.2 Powers and Duties of General Partner............. 47 Section 8.3 Voting Rights.................................... 51 Section 8.4 Proscriptions.................................... 52 Section 8.5 Qualified Offering............................... 53 Section 8.6 Additional Partners.............................. 54 Section 8.7 Compensation of the General Partner.............. 54 -ii- Page ---- Section 8.8 Waiver and Indemnification..................... 54 Section 8.9 Operation in Accordance with REIT Requirements................................... 55 Section 8.10 Reliance by Third Parties...................... 55 Section 8.11 Other Matters Concerning the General Partner........................................ 55 Section 8.12 Meetings of Partners........................... 56 ARTICLE IX: ACCOUNTING AND RECORDS.................................. 58 Section 9.1 Books and Records.............................. 58 Section 9.2 Annual Reports................................. 58 Section 9.3 Tax Returns.................................... 59 Section 9.4 Fiscal Year.................................... 59 Section 9.5 Bank Accounts.................................. 59 ARTICLE X: CHANGES IN GENERAL PARTNERS............................. 60 Section 10.1 Permitted Assignment of General Partnership Interest; Permitted Withdrawal by the General Partner.............. 60 Section 10.2 Admission of Additional General Partners....................................... 60 Section 10.3 Effect of Withdrawal of General Partner........ 60 Section 10.4 Liability of a Withdrawn General Partner........................................ 61 ARTICLE XI: TRANSFERS OF LIMITED PARTNERSHIP INTERESTS.............. 61 Section 11.1 General Transfer Provisions and Restric- tions.......................................... 61 Section 11.2 Expenses....................................... 63 Section 11.3 Allocations with Respect to Transferred Interest....................................... 63 Section 11.4 Section 754 Election........................... 63 Section 11.5 Transferee's Rights............................ 64 ARTICLE XII: ADMISSION OF PARTNERS................................... 64 Section 12.1 Procedure...................................... 64 ARTICLE XIII: DISSOLUTION, LIQUIDATION AND WINDING-UP................. 64 Section 13.1 Events of Dissolution.......................... 64 Section 13.2 Continuation of the Business of the Partnership After Certain Events of Dissolution.................................... 65 Section 13.3 Effect of Event of Dissolution................. 65 Section 13.4 Accounting..................................... 66 Section 13.5 Distribution on Dissolution.................... 66 Section 13.6 Timing Requirements............................ 67 Section 13.7 Sale of Partnership Assets..................... 67 Section 13.8 Distributions in Kind.......................... 67 Section 13.9 Documentation of Liquidation................... 68 -iii- Page ---- Section 13.10 Liability of the Liquidating Trustee............ 68 ARTICLE XIV: RIGHTS AND OBLIGATIONS OF THE LIMITED PARTNERS................................................. 68 Section 14.1 No Participation in Management.................. 68 Section 14.2 Death, Incompetence, Bankruptcy, Etc............ 69 Section 14.3 No Withdrawal................................... 69 Section 14.4 Power of Attorney............................... 69 Section 14.5 Limited Liability of Limited Partners........... 70 ARTICLE XV: GRANT OF REDEMPTION RIGHTS TO LIMITED PARTNERS................................................. 70 Section 15.1 Grant of Redemption Rights...................... 70 Section 15.2 General Partner Exchange........................ 70 Section 15.3 Certain Limitations on Redemption Right........................................... 72 Section 15.4 Adjustments..................................... 72 Section 15.5 Certain Covenants............................... 76 ARTICLE XVI: CONVERSION OF CLASS B UNITS AND CLASS C UNITS INTO GENERAL PARTNER UNITS............................... 77 Section 16.1 Automatic Conversion of Class C Units into General Partner Units...................... 77 Section 16.2 Automatic Conversion of Class B Units into General Partner Units...................... 77 ARTICLE XVII: LIMITED PARTNER REPRESENTATIONS AND WARRANTIES............................................... 77 Section 17.1 Representations and Warranties of the Limited Partners................................ 77 ARTICLE XVIII: GENERAL PARTNER REPRESENTATIONS AND WARRANTIES............................................... 79 Section 18.1 Organization.................................... 79 Section 18.2 Due Authorization; Binding Agreement............ 79 Section 18.3 Consents and Approvals.......................... 79 ARTICLE XIX: INDEMNIFICATION.......................................... 80 Section 19.1 Indemnification................................. 80 Section 19.2 Limitations on Indemnification Obligations..................................... 80 Section 19.3 Security and Remedies........................... 81 Section 19.4 Restriction on Transfer......................... 82 Section 19.5 No Credit to Capital Accounts................... 83 Section 19.6 Release of Collateral........................... 83 ARTICLE XX ARBITRATION OF DISPUTES.................................. 84 Section 20.1 Settlement of Disputes.......................... 84 Section 20.2 Arbitration..................................... 84 -iv- 4.WP5 Page ---- Section 20.3 Binding Character............................ 85 Section 20.4 Exclusivity.................................. 85 Section 20.5 No Alteration of Agreement................... 85 ARTICLE XXI: ASSUMPTION OF LIABILITIES AND INDEMNIFICATIONS...................................... 85 Section 21.1 Assumption of Liabilities.................... 85 Section 21.2 Indemnification.............................. 85 ARTICLE XXII: GENERAL PROVISIONS.................................... 86 Section 22.1 Notices...................................... 86 Section 22.2 Successors................................... 86 Section 22.3 Effect and Interpretation.................... 86 Section 22.4 Counterparts................................. 86 Section 22.5 Partners Not Agents.......................... 86 Section 22.6 Entire Understanding; Etc.................... 87 Section 22.7 Amendments................................... 87 Section 22.8 Severability................................. 88 Section 22.9 Trust Provision.............................. 88 Section 22.10 Pronouns and Headings........................ 88 Section 22.11 Assurances................................... 88 EXHIBITS Exhibit A List of Limited Partners Exhibit B List of Portfolio A Title Holding Partnerships and Properties Exhibit C List of Portfolio C Title Holding Partnerships and Properties Exhibit D List of Portfolio B Title Holding Partnerships and Properties Exhibit E List of BRT OP Properties Exhibit F List of Contributed Assets Exhibit G List of Existing Mortgage Indebtedness Encumbering Portfolio B and C Properties Exhibit H List of Existing Mortgage Indebtedness with Equity Participation Rights Encumbering Portfolio B and C Properties Exhibit I List of Retained Interests Exhibit J Lease Equity Participation Schedule Exhibit K GECC Participation Payment Schedule Exhibit L Allocation of Transaction Expenses Exhibit M List of Permitted Encumbrances SCHEDULES Schedule 1 Form of Notice of Redemption -v- AGREEMENT OF LIMITED PARTNERSHIP OF BRANDYWINE OPERATING PARTNERSHIP, L.P. AGREEMENT OF LIMITED PARTNERSHIP dated August 22, 1996 by and among BRANDYWINE REALTY TRUST, a Maryland real estate investment trust as general partner (the "General Partner"), and the PERSONS NAMED IN EXHIBIT "A" attached hereto, as limited partners (together with any other Person who becomes a limited partner in the Partnership as hereinafter provided, the "Limited Partners"). The General Partner and the Limited Partners are sometimes referred to individually as a "Partner" and collectively as the "Partners". BACKGROUND: A. Witmer Operating Partnership I, L.P. ("Witmer Partnership") is a Delaware limited partnership that owns substantially all of the partnership interests in certain limited partnerships that own office and/or industrial properties. These partnerships, and the properties owned by them (referred to herein as the "Portfolio A Properties") are listed on Exhibit "B" attached hereto. Witmer Partnership also owns in fee the office property known as the Lawrenceville Office Park, Lawrenceville, New Jersey (the "Lawrenceville Property"). B. Safeguard Scientifics, Inc., a Pennsylvania corporation ("Safeguard"), owns all of the issued and outstanding shares of BRT Witmer, Inc. ("Witmer GP"), a Pennsylvania corporation that is the sole general partner of Witmer Partnership, and all of the issued and outstanding shares of SSI Real, Inc., a Pennsylvania corporation ("SSI Real") that owns all of the Class B partnership units issued by Witmer Partnership (the "Witmer Class B Units"). The Nichols Company, a Pennsylvania corporation ("The Nichols Company") and certain other existing limited partners of Witmer Partnership own the Class A partnership units issued by Witmer Partnership (the "Witmer Class A Units"), as shown on Exhibit "B" attached hereto. C. The Nichols Company and certain other persons own all of the partnership interests in certain limited partnerships that own office and/or industrial properties. These partnerships, and the properties owned by them (referred to herein as the "Portfolio C Properties") are listed on Exhibit "C" attached hereto. The partnerships owning the Portfolio A Properties and the Portfolio C Properties and one of the Portfolio B Properties described in paragraph D below are sometimes referred to herein as the "Title Holding Partnerships". D. Safeguard owns certain office and industrial properties that are listed on Exhibit "D" attached hereto and referred to herein as the "Portfolio B Properties" in fee and through a Title Holding Partnership described on Exhibit "D". E. Brandywine Realty Trust, a Maryland real estate investment trust ("BRT"), is a real estate investment trust and a general partner of Brandywine Realty Partners, a general partnership ("BRT OP"), which owns certain office properties which are described on Exhibit "E" attached hereto (the "BRT OP Properties"). F. The Portfolio A Properties, Portfolio B Properties and Portfolio C Properties, and the BRT OP Properties are referred to herein collectively as the "Properties" and individually as a "Property". G. This Agreement is being executed as part of a larger transaction, in which: (i) Safeguard and BRT are entering into a Share and Warrant Purchase Agreement whereby Safeguard or a wholly-owned subsidiary designated by it will acquire common stock and warrants to purchase Common Stock of BRT in consideration for the assignment to BRT of all of the Witmer Class B Units owned by SSI Real and payment of $426,250, the assignment to a wholly-owned qualified real estate subsidiary of BRT of all of the general partnership interest of Witmer Partnership owned by Witmer GP, and the assignment to BRT of all of the limited partnership interest owned by Witmer GP in certain Title Holding Partnerships that own Portfolio A Properties; (ii) BRT, The Nichols Company and Safeguard Scientifics (Delaware), Inc., a wholly-owned subsidiary of Safeguard ("SSI"), will form and organize the Partnership described in paragraph H below to own, hold, operate and manage the Properties directly or through the Title Holding Partnerships and BRT OP; (iii) the Partnership will acquire options to purchase certain properties known as Horsham 11 through 14 from the owners of such properties; (iv) SSI will enter into a distribution support and loan agreement with the Partnership whereby SSI will commit to lend the Partnership certain funds; and (v) The Nichols Company and BRT will execute a bill of sale and assignment whereby The Nichols Company will transfer to BRT or its designee substantially all of The Nichols Company's furniture, fixtures and equipment. H. BRT, The Nichols Company, SSI and the other persons executing this Agreement as a Partner now desire to form a limited partnership under the law of the State of Delaware to be known as Brandywine Operating Partnership, L.P. (the "Partnership"), to which (i) BRT will contribute all of the Witmer Class B Units of the Witmer Partnership, all of the limited partnership interest that it has acquired in certain Title Holding Partnerships that own Portfolio A Properties, $1,000, and the furniture, fixtures and equipment that BRT is -2- acquiring on the date hereof from The Nichols Company in return for the issuance of general partner interests in the Partnership and Class B Units of Limited Partnership Interest to BRT; (ii) BRT will contribute all its interest (in a two-step transaction) as general partner of BRT OP to the Partnership in return for issuance of Class C Units of Limited Partnership Interest to BRT; (iii) The Nichols Company and the other existing partners of Witmer holding the Witmer Class A Units will contribute the Witmer Class A Units in return for issuance to them of Class A Limited Partnership Interests in the Partnership; (iv) Safeguard will contribute its title to the Portfolio B Properties in return for the issuance to SSI of Class A Limited Partnership Interests in the Partnership; and (v) The Nichols Company and certain other persons will contribute partnership interests, representing 99% of the profits interest and 89% of the capital interest, in the Title Holding Partnerships owning the Portfolio C Properties to the Partnership (or in certain cases to a qualified real estate subsidiary wholly-owned by the General Partner) in return for the issuance to them of Class A Limited Partnership Interests in the Partnership. Such contributions are being made by such persons concurrently with the execution of this Agreement pursuant to that certain Contribution Agreement dated July 31, 1996 between and among BRT, Safeguard, SSI and The Nichols Company. I. As a result of the transactions described above, upon the execution of this Agreement and the simultaneous contributions to the Partnership created hereby provided for in the Contribution Agreement: o The Partnership is created with BRT serving as the Partnership's General Partner and owning all of the general partnership interest in the Partnership. o The Partnership owns (i) a portion of BRT's prior equity interest in BRT OP (and will be entitled to acquire the balance 12 months and a day after the date hereof) which in turn owns the BRT OP Properties; (ii) all of the outstanding limited partnership interest in Witmer Partnership; (iii) all of the Portfolio B Properties directly or through a Title Holding Partnership; and (iv) substantially all of the outstanding partnership interests in the Title Holding Partnerships that own the Portfolio C Properties. o The Partnership holds options to purchase the Horsham 11 through 14 Properties. o The Limited Partners of the Partnership consist of SSI, The Nichols Company, BRT and the other persons listed on Exhibit "A" as Limited Partners -3- who have contributed property to the Partnership pursuant to the Contribution Agreement. Now, the General Partner and the Limited Partners named in Exhibit "A" hereto wish to organize the Partnership as a limited partnership formed under the Act with the General Partner as the sole general partner and such named Limited Partners as the initial limited partners, for the purpose of owning and operating the business of the Partnership as hereinafter set forth. AGREEMENTS: In consideration of the foregoing and the mutual promises herein contained, and intending to be legally bound, the parties hereto hereby agree as follows: ARTICLE I: DEFINITIONS Except as otherwise herein expressly provided, the following terms and phrases used in this Agreement and the Exhibits hereto shall have the meanings set forth below: "Act" shall mean the Revised Uniform Limited Partnership Act of the State of Delaware as in effect on the date hereof, and as the same may hereafter be amended from time to time. "Adjusted Capital Account Deficit" shall mean, with respect to any Partner, the deficit balance, if any, in such Partner's Capital Account as of the end of any relevant fiscal year and after giving effect to the following adjustments: (a) credit to such Capital Account any amounts which such Partner is obligated or treated as obligated to restore with respect to any deficit balance in such Capital Account pursuant to Section 1.704-1(b)(2)(ii)(c) of the Regulations, or is deemed to be obligated to restore with respect to any deficit balance pursuant to the penultimate sentences of Sections 1.704-2(g)(1) and 1.704-2(i)(5) of the Regulations; and (b) debit to such Capital Account the items described in Sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6) of the Regulations. The foregoing definition of Adjusted Capital Account Deficit is intended to comply with the requirements of the alternate test for economic effect contained in Section 1.704-1(b)(2)(ii)(d) of the Regulations and shall be interpreted consistently therewith. -4- "Affiliate" shall mean, with respect to any Partner (or as to any other Person the affiliates of whom are relevant for purposes of any of the provisions of this Agreement), (a) any member of the Immediate Family of such Partner; (b) any shareholder, director, officer, trustee, general partner, shareholder of a general partner or beneficiary of a Partner; (c) any legal representative, successor, or assignee of any Person referred to in the preceding clauses (a) and (b); (d) any trustee for the benefit of any Person referred to in the preceding clauses (a) through (c); or (e) any Entity which directly or indirectly through one or more intermediaries, Controls, is Controlled by, or is under common Control with any Person referred to in the preceding clauses (a) through (d). "Agreement" shall mean this Agreement of Limited Partnership, as originally executed and as amended, modified, supplemented or restated from time to time, as the context requires. "Assumed Liability" shall have the meaning set forth in Section 21.1 hereof. "Audited Financial Statements" shall mean financial statements (balance sheet, statement of operations, statement of partners' equity and statement of cash flows) prepared in accordance with generally accepted accounting principles and accompanied by an independent auditor's report. "Bankruptcy" shall mean, with respect to any Partner, (a) the commencement by such Partner of any proceeding seeking relief under any provision or chapter of the federal Bankruptcy Code, 11 U.S.C. ss.101 et seq., as the same may be amended from time to time, or any other federal or state law relating to insolvency, bankruptcy or reorganization; (b) an adjudication that such Partner is insolvent or bankrupt; (c) the entry of an order for relief under the federal Bankruptcy Code with respect to such Partner; (d) the filing of any such petition or the commencement of any such case or proceeding against such Partner, unless such petition and the case or proceeding initiated thereby are stayed or dismissed within ninety (90) days from the date of such filing; (e) the filing of an answer by such Partner admitting the allegations of any such petition; (f) the appointment of a trustee, receiver or custodian for all or substantially all of the assets of such Partner unless such appointment is stayed, vacated or dismissed within ninety (90) days from the date of such appointment but not less than five (5) days before the proposed sale of any assets of such Partner; (g) the insolvency of such Partner or the execution by such Partner of a general assignment for the benefit of creditors; (h) the convening by such Partner of a meeting of its creditors, or any class thereof, for purposes of effecting a moratorium upon or extension or composition of its debts; (i) the failure of such Partner to pay -5- its debts as they mature; (j) the levy, attachment, execution or other seizure of substantially all of the assets of such Partner where such seizure is not discharged within thirty (30) days thereafter; (k) the admission by such Partner in writing of its inability generally to pay its debts as they mature or that it is generally not paying its debts as they become due; or (l) the taking of any corporate or partnership action in connection with the foregoing. "BRT Administrative Expenses" shall mean all those administrative costs and expenses of BRT described in Section 8.1(c). "BRT OP" shall mean Brandywine Realty Partners, a general partnership, which owns the BRT OP Properties. "BRT OP Properties" shall have the meaning given to such term in paragraph (E) under the caption "Background" to this Agreement. "Business Day" shall mean any day other than a Saturday, a Sunday or a day on which the American or New York Stock Exchange or The NASDAQ Stock Market is closed. "Capital Account" shall mean, with respect to any Partner, the separate "book" account which the Partnership shall establish and maintain for such Partner in accordance with Section 704(b) of the Code and Section 1.704-1(b)(2)(iv) of the Regulations and such other provisions of Section 1.704-1(b) of the Regulations that must be complied with in order for the Capital Accounts to be determined in accordance with the provisions of said Regulations. "Capital Contribution" shall mean, with respect to any Partner, the amount of money and assets contributed to the Partnership by such Partner (net of liabilities to which such contributed assets are subject). "Cash Amount" shall mean an amount of cash per Class A Unit equal to the Current Per Share Market Price of the number of shares of Common Stock issuable in respect of one Class A Unit pursuant to Section 15.2. "Cash Equivalents" shall mean obligations of the United States government with a maturity of not more than 60 days and time deposits and accounts maintained in a national banking association and fully insured by the federal Deposit Insurance Corporation. "Certificate" shall mean the Certificate of Limited Partnership establishing the Partnership, as filed with the office of the Secretary of State of Delaware, as amended and as -6- it may hereafter be amended from time to time in accordance with the terms of this Agreement and the Act. "Class A Limited Partnership Interest" shall have the meaning ascribed to it in Section 3.1. "Class A Units" shall have the meaning ascribed to it in Section 3.2. "Class B Accumulated Preferred Distributions" shall have the meaning given to such term in Section 6.1(b)(iii). "Class B Limited Partnership Interest" shall have the meaning ascribed to it in Section 3.1 "Class B Liquidation Preference" shall mean the sum of (i) the amount of all then unpaid Class B Accumulated Preferred Distributions, plus (ii) $3,937,000 (which represents the agreed monetary value of (x) the capital stock of Witmer GP and (y) the Class B Units in the Witmer Partnership contributed by BRT to the Partnership) reduced by any return of such capital under Section 6.1(c). "Class B Preferred Distribution" shall mean the amount that represents (for the period in respect of which the distribution is being made) an annualized return of 9.5% on $3.937 million (which $3.937 million represents the agreed monetary value of (i) the capital stock of Witmer GP and (ii) the Class B Units in the Witmer Partnership contributed by BRT to the Partnership), reduced by any return of capital under Section 6.1(c). "Class B Units" shall have the meaning ascribed to it in Section 3.2. "Class C Liquidation Preference" shall mean 100% of the Net Sale Proceeds realized by the Partnership indirectly through BRT OP from the sale or other disposition of the BRT Properties in connection with the dissolution and liquidation of the Partnership. "Class C Limited Partnership Interest" shall have the meaning ascribed to it in Section 3.1. "Class C Units" shall have the meaning ascribed to it in Section 3.2. "Closing Price" on any date shall mean the last sale price of the Common Stock, regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices of the Common Stock, regular way, in either case as reported in the principal consolidated transaction reporting -7- system with respect to securities listed or admitted to trading on the American Stock Exchange, or such other national securities exchange or The NASDAQ Stock Market on which the Common Stock is then listed or admitted to trading. "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time. "Collateral" shall have the meaning set forth in Section 19.3(a) hereof. "Common Stock" shall mean the common shares of beneficial interest, par value $.01 per share, of BRT. "Contributed Assets" shall mean, with respect to a Partner, the real property, personal property, contract rights, contracts, agreements and other assets contributed by the Partner to the Partnership and shall include the assets set forth on Exhibit "F" as being contributed to the Partnership on the date hereof as the initial capital contribution of the Limited Partners named on Exhibit "F". "Contribution Agreement" shall mean the Contribution Agreement among The Nichols Company, BRT, Safeguard and SSI dated July 31, 1996 pursuant to which the Contributed Assets have been contributed by the Partners to the Partnership. "Control" shall mean the ability, whether by the direct or indirect ownership of shares or other equity interests, by contract or otherwise, to elect a majority of the directors of a corporation, to select the managing partner of a partnership, or otherwise to select, or have the power to remove and then select, a majority of those persons exercising governing authority over an Entity. In the case of a limited partnership, the sole general partner, all of the general partners to the extent each has equal management control and authority, or the managing general partner or managing general partners thereof shall be deemed to have control of such partnership and, in the case of a trust, any trustee thereof or any Person having the right to select any such trustee shall be deemed to have control of such trust. "Current Per Share Market Price of the Common Stock" on any date shall mean the average of the Closing Price of the Common Stock for the five (5) consecutive Trading Days ending on such date. "Depreciation" shall mean, with respect to any asset of the Partnership for any fiscal year or other period, the depreciation, depletion or amortization, as the case may be, allowed or allowable for federal income tax purposes in respect of such asset for such fiscal year or other period; provided, however, -8- that if there is a difference between the Gross Asset Value and the adjusted tax basis of such asset, Depreciation shall mean "book depreciation, depletion or amortization" as determined under Section 1.704-1(b)(2)(iv)(g)(3) of the Regulations. "Discount" shall have the meaning ascribed to it in Section 4.5(c). "Distribution Support and Loan Agreement" shall mean that certain Distribution Support and Loan Agreement between the Partnership and Safeguard Delaware of even date herewith pursuant to which Safeguard Delaware has committed, on the terms and subject to the conditions set forth in such agreement, to loan the Partnership funds needed (i) to make certain preferential distributions to the Limited Partner holding the Class B Units, (ii) to pay certain closing costs and transfer taxes, and (iii) for working capital for the operation of the Portfolio B Properties and Portfolio C Properties. "Economic Capital Account" shall mean, with respect to any Partner, the balance, if any, in such Partner's Capital Account as of the end of any relevant period, increased by such Partner's share of Partnership Minimum Gain and Minimum Gain Attributable to Partner Nonrecourse Debt, and decreased by the items described in Regulations Sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6). "Encumbrance" shall mean any liens, security interests, mortgages, deeds of trust, charges, claims, encumbrances, pledges, options, rights of first offer or first refusal and any other rights or interests of others of any kind or nature, actual or contingent, or other similar encumbrances of any nature whatsoever. "Entity" shall mean any general partnership, limited partnership, corporation, joint venture, limited liability company, trust, business trust, cooperative or association. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time (or any corresponding provisions of succeeding laws). "Event of Withdrawal" shall mean any event specified in Section 17-402 of the Act or any corresponding provision of succeeding law. "Excluded Common Shares" shall mean shares of Common Stock issued by BRT on or after May 1, 1996, the net proceeds of which are not contributed to the Partnership. "Existing Mortgage Indebtedness" shall mean the mortgage indebtedness on the Portfolio B and Portfolio C -9- Properties in the aggregate principal amounts on the date hereof reflected on Exhibit G hereto. "Fiscal Year" shall have the meaning ascribed to it in Section 9.4. "General Partner" shall mean Brandywine Realty Trust, a Maryland real estate investment trust, in its capacity as general partner of the Partnership, its duly admitted successors and assigns and any other person who is a general partner of the Partnership at the time of reference thereto. "GECC" shall mean General Electric Capital Corporation, a New York corporation. "GECC Loan" shall have the meaning given to such term in Section 4.7(a). "GECC Participation Payment" shall have the meaning given to such term in Section 4.7 hereof. "General Partnership Interest" shall mean the Partnership Interest of any General Partner. "GP Shares Amount" shall mean one share of Common Stock, as such number may be adjusted pursuant to Section 15.4. "Gross Asset Value" shall mean, with respect to any asset, the asset's adjusted basis for federal income tax purposes except as follows: (1) The initial Gross Asset Value of any asset contributed by a Partner to the Partnership shall be the gross fair market value of such asset at the time of such contribution, as agreed to by the Partners; (2) The Gross Asset Values of all Partnership assets shall be adjusted to equal their respective gross fair market values, as agreed to by the Partners, as of the following times: (a) the acquisition of an additional interest in the Partnership by any new or existing Partner in exchange for more than a de minimis capital contribution; (b) the distribution by the Partnership to a Partner of more than a de minimis amount of Partnership property other than money, unless all Partners receive simultaneous distributions of undivided interests in the distributed property in proportion to their respective Percentage Interests; (c) the liquidation of the Partnership within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g); and (d) the termination of the Partnership for federal income tax purposes pursuant to Section 708(b)(1)(B) of the Code; and -10- (3) The Gross Asset Value of any Partnership asset distributed to any Partner shall be the gross fair market value of such asset on the date of distribution. If the Gross Asset Value of an asset has been determined or adjusted pursuant to subparagraph (1) or (2) hereof, such Gross Asset Value shall thereafter be adjusted by the Depreciation taken into account with respect to such asset for purposes of computing Net Income and Net Loss. "Indemnity Notice" shall have the meaning set forth in Section 19.3(b) hereof. "Lawrenceville Deficiency" shall have the meaning given to such term in Section 4.7(b). "Lawrenceville Property" shall mean the office building project located in Lawrenceville, New Jersey known as the Lawrenceville Office Park owned in fee simple title by Witmer Partnership. "Liabilities" shall have the meaning set forth in Section 19.1 hereof. "Limited Partners" shall mean those Persons listed on Exhibit A hereto in their respective capacities as limited partners of the Partnership, their permitted successors or assigns as a limited partner hereof, or any Person who, at the time of reference thereto, is a limited partner of the Partnership. "Limited Partnership Interest" shall mean any equity interest in the Partnership held by any person or entity as a Limited Partner. "Liquidating Trustee" shall mean such individual or Entity as is selected as the Liquidating Trustee hereunder by the General Partner, which individual or Entity may include the General Partner or an Affiliate of the General Partner, provided such Liquidating Trustee agrees in writing to be bound by the terms of this Agreement. The Liquidating Trustee shall be empowered to give and receive notices, reports and payments in connection with the dissolution, liquidation and/or winding-up of the Partnership and shall hold and exercise such other rights and powers as are necessary or required to permit all parties to deal with the Liquidating Trustee in connection with the dissolution, liquidation and/or winding-up of the Partnership. "Major Decisions" shall have the meaning set forth in Section 8.3 hereof. -11- "Management Company" means Brandywine Realty Services Corporation, a Pennsylvania corporation, all of whose nonvoting preferred stock and 5% of whose common stock is owned by the Partnership and whose business is to manage the Properties. "Management Contracts" means the various management contracts assigned to the Management Company on the date hereof by (i) The Nichols Realty Services Company, an affiliate of The Nichols Company, pursuant to which the Management Company will manage each of the Portfolio A Properties, Portfolio B Properties and Portfolio C Properties, and (ii) BRT pursuant to which the Management Company will manage each of the BRT OP Properties, other than the Twin Forks Property located in North Carolina. "Minimum Gain Attributable to Partner Nonrecourse Debt" shall mean "partner nonrecourse debt minimum gain" as determined in accordance with Regulation Section 1.704-2(i)(2). "Mortgage Indebtedness With Equity Participation Rights" shall mean the Existing Mortgage Indebtedness on certain of the Portfolio B and Portfolio C Properties in the aggregate principal amounts on the date hereof reflected on Exhibit H hereto, pursuant to the terms of which the lender has an equity participation in the cash flow and/or sales proceeds of the Property. "Net Cash Flow" shall mean, with respect to any fiscal period of the Partnership, the excess, if any, of "Receipts" over "Expenditures." For purposes hereof, the term "Receipts" means the sum of all cash receipts of the Partnership from all sources for such period, excluding Net Sale Proceeds and Net Financing Proceeds, Capital Contributions, and including any amounts held as reserves as of the last day of such period which the General Partner reasonably deems to be in excess of necessary reserves as determined below. The term "Expenditures" means the sum of (i) all cash expenses of the Partnership for such period, (ii) the amount of all payments of principal and interest on account of any indebtedness of the Partnership, or amounts due on such indebtedness during such period, and (iii) such additional cash reserves as of the last day of such period as the General Partner deems necessary for any capital or operating expenditure permitted hereunder. "Net Financing Proceeds" shall mean the proceeds realized from any financing or refinancing of a Portfolio A, B, or C Property or group of Portfolio A, B or C Properties prior to a Qualified Offering, net of the amounts used to retire any indebtedness existing immediately prior to the transaction, to pay transaction costs, and to fund reserves established by the General Partner. -12- "Net Income or Net Loss" shall mean, for each Fiscal Year or other applicable period, an amount equal to the Partnership's net income or loss for such year or period as determined for federal income tax purposes and in accordance with Section 703(a) of the Code (for this purpose, all items of income, gain, loss or deduction required to be stated separately pursuant to Section 703(a) of the Code shall be included in taxable income or loss), with the following adjustments: (a) by including as an item of gross income any tax-exempt income received by the Partnership; (b) by treating as a deductible expense any expenditure of the Partnership described in Section 705(a)(2)(B) of the Code (including amounts paid or incurred to organize the Partnership (unless an election is made pursuant to Code Section 709(b)) or to promote the sale of interests in the Partnership and by treating deductions for any losses incurred in connection with the sale or exchange of Partnership property disallowed pursuant to Section 267(a)(1) or Section 707(b) of the Code as expenditures described in Section 705(a)(2)(B) of the Code; (c) in lieu of depreciation, depletion, amortization, and other cost recovery deductions taken into account in computing total income or loss, there shall be taken into account Depreciation; (d) gain or loss resulting from any disposition of Partnership property with respect to which gain or loss is recognized for federal income tax purposes shall be computed by reference to the Gross Asset Value of such property rather than its adjusted tax basis; and (e) in the event of an adjustment of the Gross Asset Value of any Partnership asset which requires that the Capital Accounts of the Partnership be adjusted pursuant to Regulation Section 1.704-1(b)(2)(iv)(e), (f) and (m), the amount of such adjustment is to be taken into account as additional Net Income or Net Loss pursuant to Article VII hereof. "Net Sale Proceeds" shall mean the net proceeds realized from any sale of a Portfolio Property or group of Portfolio Properties prior to a Qualified Offering, net of amounts used to repay indebtedness and transaction costs and to fund reserves established by the General Partner. "Nichols Group" shall mean The Nichols Company and Anthony A. Nichols. "Non-Lawrenceville Proceeds" shall have the meaning given to such term in Section 4.7(b). "Nonrecourse Deductions" shall have the meaning set forth in Sections 1.704-2(b)(1) and (c) of the Regulations. "Nonrecourse Liabilities" shall have the meaning set forth in Section 1.704-2(b)(3) of the Regulations. -13- "Notice of Redemption" shall mean the Notice of Redemption referred to in Section 15.1 hereof and substantially in the form of Schedule 1 to this Agreement. "Option Agreements" shall mean those certain Option Agreements of even date herewith between the Partnership and C/N Horsham Towne Limited Partnership, a limited partnership, pursuant to which the Partnership has the right and option to purchase the Option Properties. "Option Properties" shall mean the office building properties known as Horsham 11-14 that the Partnership has the right to purchase pursuant to the Option Agreements. "Partner Nonrecourse Deductions" shall have the meaning set forth in Section 1.704-2(i)(2) of the Regulations. "Partners" shall mean the General Partner and the Limited Partners, their duly admitted successors or assigns or any Person who is a partner of the Partnership at the time of reference hereto. "Partnership" shall mean the limited partnership hereby constituted, as such limited partnership may from time to time be constituted. "Partnerships" shall mean the Partnership and the Witmer Partnership, as they may hereafter from time to time be constituted. "Partnership Minimum Gain" shall have the meaning set forth in Section 1.704-2(b)(2) of the Regulations. "Partnership Interest" shall mean the entire ownership interest of a Partner in the Partnership at any particular time, including the right of such Partner to any and all benefits to which a Partner may be entitled as provided in this Agreement and in the Act, together with the obligations of such Partner to comply with all of the terms and provisions of this Agreement and of the Act. "Partnership Units" shall mean a unit of interest in the Partnership issued under this Agreement. "Percentage Interest" shall mean, with respect to any Partner, (i) prior to a Qualified Offering, the ratio of the number of GP Units, Class A Units and Class B Units (but not the Class C Units) held by such Partner to the aggregate number of Units of all such classes (excluding the Class C Units) outstanding in the Partnership at the time of determination, and (ii) after a Qualified Offering, the ratio of the number of GP Units and Class A Units held by such Partner to the aggregate -14- number of Units of all such classes outstanding in the Partnership at the time of determination. "Permitted Encumbrance" means any liens and security interests on the Collateral granted on or prior to the date hereof by the owners of the Collateral as security for repayment of any Existing Mortgage Indebtedness listed on Exhibit "M", and the liens and security interests granted pursuant to Section 19.3 hereof. "Person" shall mean any individual or Entity. "Portfolio A Properties, Portfolio B Properties, and Portfolio C Properties" shall have the meanings given to such terms set forth in paragraphs (A), (C) and (D), respectively, under the caption "Background" to this Agreement. "Property" shall mean any real property in which the Partnership, directly or indirectly, acquires ownership of all or a portion of a fee or leasehold interest, and shall mean as of the date of this Agreement the Portfolio A Properties, Portfolio B Properties, Portfolio C Properties, and the BRT OP Properties. "Proxy Statement" shall mean the definitive proxy statement mailed by BRT to the holders of its Common Stock soliciting proxies to be voted in favor of the approval of the transactions contemplated by the Transaction Documents at the Annual Shareholders' Meeting of BRT held on August 22, 1996. "Qualified Offering" shall mean either an offering by BRT of its Common Stock to the public registered under the Securities Act of 1933, as amended, or an offering of its securities exempt from such registration, in which BRT receives either (i) net offering proceeds of at least $35 million at an offering price per share not less than the net book value of BRT's Common Stock at the last day of the fiscal quarter immediately preceding the quarter in which the offering occurs, calculated in accordance with generally accepted accounting principles, or (ii) net offering proceeds of at least $25 million, but less than $35 million, at an offering price per share of not less than $5.50, as adjusted in accordance with customary practice for stock splits, stock combinations and stock dividends occurring after the date hereof. "Redeeming Partner" shall have the meaning set forth in Section 15.1 hereof. "Redemption Rights" shall have the meaning set forth in Section 15.1 hereof. -15- "Register" shall mean the register established pursuant to Section 3.5. "Registered Office" shall mean the location of the principal office of the Partnership as set forth in filings made by the Partnership pursuant to the Act. "Registration Rights Agreement" shall mean the Registration Rights Agreement by and among BRT, SSI, The Nichols Company, The Richard M. Osborne Trust, and certain other persons, of even date herewith. "Regulations" shall mean the final or temporary income tax regulations promulgated under the Code, as such regulations may be amended and in affect from time to time (including corresponding provisions of succeeding regulations). "Regulatory Allocations" shall have the meaning set forth in Section 7.3(f). "REIT" shall mean a real estate investment trust as defined in Section 856 of the Code. "REIT Requirements" shall mean the requirements for qualifying as a real estate investment trust under the Code and Regulations. "Requesting Party" shall have the meaning set forth in Section 20.2 hereof. "Retained Interest" shall mean the 11% capital interest and 1% profits interest retained by (A) SSI in the Title Holding Partnership that owns Building 2 of the Meetinghouse Business Center, one of the Portfolio B Properties, contributed to the Partnership pursuant to Section 4.2 hereof, and (B) The Nichols Company in (i) the Title Holding Partnerships that own the Portfolio C Properties contributed to the Partnership pursuant to Section 4.2 hereof, and (ii) the Title Holding Partnerships in which the Witmer Partnership serves as the sole general partner and owns directly and indirectly 89% of the capital interest and 99% of the profits interest. "Safeguard" shall mean Safeguard Scientifics, Inc., a Pennsylvania corporation. "Sales Price Threshold" shall have the meaning set forth in Section 4.8(b). "Section 704(c) Tax Items" shall have the meaning set forth in Section 7.4(c). -16- "Securities Act" shall mean the Securities Act of 1933, as amended. "Specified Redemption Date" shall mean the tenth (10th) Business Day after receipt by the General Partner of a Notice of Redemption delivered to the Partnership at any time after a Qualified Offering, or if no Qualified Offering has then occurred, mailed or otherwise delivered to the Partnership within five days of the end of any period of 20 consecutive business days occurring after the second anniversary of the date of this Agreement during which such 20 business day period the market price of a share of BRT Common Stock averaged not less than $5.50 per share as adjusted in accordance with customary practice for stock splits, stock combinations and stock dividends occurring after the date hereof. "SSI" means Safeguard Scientifics (Delaware), Inc., a wholly-owned subsidiary of Safeguard. "Share and Warrant Purchase Agreement" shall mean the Share and Warrant Purchase Agreement dated July 31, 1996 between Safeguard and BRT pursuant to which Safeguard is acquiring Common Stock and Warrants of BRT on the date hereof as described in Paragraph G under Background. "Tax Items" shall have the meaning set forth in Section 7.4(a). "Tax Matters Partner" shall have the meaning ascribed to it in Section 9.3. "Tax Payment Loan" shall have the meaning ascribed to it in Section 6.6. "The Nichols Company" shall mean The Nichols Company, a Pennsylvania corporation. "Title Holding Partnership" shall mean any partnership in which either the Partnership or the Witmer Partnership is the sole general partner and which holds fee title to either a Portfolio A Property, a Portfolio B Property, or a Portfolio C Property. The Title Holding Partnerships of the Partnership as of the date hereof are listed on Exhibits B and C. "Trading Day" shall mean a day on which the principal national securities exchange or market on which the Common Stock is listed or admitted to trading is open for the transaction of business or, if the Common Stock is not listed or admitted to trading on any national securities exchange, shall mean any Business Day. -17- "Transaction Documents" shall mean the Share and Warrant Purchase Agreement, the Contribution Agreement, the Option Agreements, and all documents and certificates executed and delivered by the Partners in connection with the formation of the Partnership. "Transfer" as a noun, shall mean any sale, assignment, conveyance, pledge, hypothecation, gift, encumbrance or other transfer, and as a verb, shall mean to sell, assign, convey, pledge, hypothecate, give, encumber or otherwise transfer. "Unit" shall have the meaning ascribed to it in Section 3.1(c). "Withholding Tax Act" shall have the meaning ascribed to it in Section 6.6. "Witmer Class A Units" shall have the meaning ascribed to it in paragraph (B) under the caption "Background" to this Agreement. "Witmer Class B Units" shall have the meaning ascribed to it in paragraph (B) under the caption "Background" to this Agreement. "Witmer GP" shall mean BRT Witmer, Inc., a Pennsylvania corporation that serves as the sole general partner of Witmer Partnership. "Witmer Partnership" shall mean Witmer Operating Partnership I, L.P., organized pursuant to an Agreement of Limited Partnership dated November 21, 1995, of which Witmer GP serves as sole general partner, and which partnership (i) serves as sole general partner of the Title Holding Partnerships that own the Portfolio A Properties, and (ii) holds fee title to the Lawrenceville Property. ARTICLE II: FORMATION OF PARTNERSHIP Section 2.1 Formation of Partnership. The Partners hereby agree to form the Partnership as a limited partnership pursuant to the provisions of the Act for the purposes and upon the terms and conditions hereinafter set forth. The Partners agree that the rights and liabilities of the Partners shall be as provided herein, except as otherwise expressly required by the Act or other applicable law, if any. Section 2.2 Name, Principal Place of Business and Registered Office. -18- (a) The business of the Partnership shall be conducted under the name of "BRANDYWINE OPERATING PARTNERSHIP, L.P." or such other name as the General Partner may select, and all transactions of the Partnership and title to all of the Partnership's assets, to the extent permitted by applicable law, shall be carried on and completed in such name. (b) The principal place of business and registered office of the Partnership shall be located at Newtown Corporate Campus, 16 Campus Boulevard, Suite 150, Newtown Square, PA 19073. The General Partner may change the principal place of business or the registered office of the Partnership at any time in its sole discretion, and, in such event, shall give written notice thereof to all Limited Partners and file any required amendments to the Certificate required by the Act. Section 2.3 Purpose. The purpose of the Partnership shall be, directly or indirectly, to acquire, hold, own, develop, redevelop, construct, improve, maintain, operate, manage, sell, lease, rent, transfer, encumber, mortgage, convey, exchange, and otherwise dispose of or deal with real and personal, tangible and intangible, property of every kind and nature, including without limitation, the Portfolio A Properties, Portfolio B Properties, Portfolio C Properties, Option Properties and BRT OP Properties; to act as and exercise all of the powers of the general partner or a limited partner, as the case may be, in partnerships or joint ventures in which the Partnership has an interest; to acquire, own, deal with and dispose of securities and other interests in partnerships, corporations or joint ventures, including corporations, partnerships, joint ventures and other associations formed for the acquisition, development or redevelopment of real and personal property or the provision of services thereto; to undertake such other activities as may be necessary, advisable, desirable or convenient to the business of the Partnership; to engage in such other ancillary activities as shall be necessary or desirable to effectuate the foregoing purposes; and to otherwise engage in or conduct any enterprise, business or activity in which a limited partnership may engage in or conduct under the Act. Section 2.4 Powers. The Partnership shall have and exercise all powers now or hereafter permitted by the State of Delaware to be exercised by a limited partnership formed under the laws of that state. In connection with (and without limiting) the foregoing, the Partnership shall have full power and authority, directly or through its interests in other partnerships, corporations, joint ventures or other associations, to enter into, perform, and carry out contracts of any kind, to borrow and lend money and to issue evi- -19- dences of indebtedness, whether or not secured by mortgages, trust deeds, pledges or other liens, and to guaranty, provide security for or cause any subsidiary joint venture or other association in which the Partnership has an interest to guaranty or provide security for indebtedness or other obligations of the Partnership or any subsidiary. Section 2.5 Term. The Partnership shall commence existence upon the filing of the Certificate with the Secretary of the State of Delaware and shall dissolve at 12:01 a.m. on December 31, 2094, unless sooner dissolved pursuant to law or this Agreement. Section 2.6 Amendment of Certificate. Promptly upon the execution and delivery hereof, the General Partner shall cause the Certificate to be filed with the Secretary of State of Delaware and such other elections, notices, instruments, documents or certificates as may be required by applicable law, including, without limitation, applications to do business in all jurisdictions where the Partnership will own property, and which may be necessary to enable the Partnership to conduct its business, and to own its properties, under the Partnership's name, to be amended and/or filed or recorded in all appropriate public offices. Section 2.7 Partnership Assets. (a) The Partners shall use the Partnership's credit and assets solely for the benefit of the Partnership. All real and personal property owned by the Partnership shall be owned by the Partnership, and the Partners as such shall have no direct interest therein. (b) To the extent allowable under applicable law, title to all or any part of the properties of the Partnership may be held in the name of the Partnership or any other Person as nominee for the Partnership. Any such title holder shall perform any and all of its respective functions to the extent and upon such terms and conditions as may be determined from time to time by the General Partner. (c) No Partner shall, either directly or indirectly, take any action to require partition or appraisement of the Partnership or of any of its assets or properties or cause the sale of any Partnership property for other than a Partnership purpose, and notwithstanding any provision of applicable law to the contrary, each Partner (and its legal representatives, successors and assigns) hereby irrevocably waives any and all right to maintain any action for partition or to compel any sale with respect to its Partnership Interest or with respect to any -20- assets or properties of the Partnership, except as expressly provided in this Agreement. Section 2.8 Limitation on Liability of Persons Related to Partners. Except as otherwise required by applicable law or as expressly agreed in writing, no director, trustee, officer, shareholder, partner, employee or agent of any Partner shall be personally liable for the payment of any sums owing by such Partner to the Partnership or any other Partner under the terms of this Agreement or for the performance of any other covenant or agreement of such Partner contained herein. Section 2.9 Conflicts of Interest and Transactions with Affiliates. (a) Subject to the limitations expressly set forth herein, any Partner and any Affiliate of any Partner may engage in or possess an interest in any business or activity whatsoever, whether now existing or hereafter created, without any accountability to the Partnership or any Partner. This Agreement shall not give the Partnership or any Partner any interest in, or right to, any such business or activity or any proceeds, income or profit thereof or therefrom. No Partner shall be obligated to offer any business opportunity to the Partnership or any other Partner. (b) Subject to the limitations expressly set forth herein, the Partnership may enter into any arrangement, contract, agreement or business venture that is not prohibited under the Act with any Partner or any Partner's Affiliates. Each Partner understands and acknowledges that the conduct of the business of the Partnership will involve business dealings with such other business ventures or undertakings of the Partners and their Affiliates. Without limiting the generality of the foregoing, the Partnership, at the discretion of the General Partner, may borrow funds from any Partner or any Partner's Affiliates. Except to the extent otherwise provided herein, any material transaction between the Partnership and any Partner or Affiliate of a Partner shall be on terms reasonably determined by the General Partner to be no less favorable than the terms which could be obtained from unrelated third parties. Section 2.10 Statutory Compliance. The General Partner has executed and shall promptly cause to be filed the Certificate in the Office of the Secretary of the State of Delaware pursuant to the Act and hereafter shall execute such further documents and take such further action as shall be appropriate to comply with the Act and all other all requirements of law for the formation and operation of a limited -21- partnership in the State of Delaware and all other jurisdictions in which the Partnership may elect to do business. ARTICLE III: PARTNERSHIP INTERESTS Section 3.1 In General. (a) The Partnership initially shall have four classes of Partnership Interest: "General Partnership Interests," "Class A Limited Partnership Interests," "Class B Limited Partnership Interests", and "Class C Limited Partnership Interests", each of which shall be divided into units as provided in paragraph (c) below. The Class A Limited Partnership Interests, Class B Limited Partnership Interests and Class C Limited Partnership Interests are sometimes referred to herein as "Limited Partnership Interests." The Partnership may create and issue additional classes of General or Limited Partnership Interests in accordance with Section 3.3. (b) Any Person may at the same time hold more than one class of Partnership Interest and, in such event, shall for the purposes of this Agreement be separately entitled to the rights afforded a Partner in each of such classes under this Agreement. If a General Partner contributes to the capital of the Partnership as a Limited Partner or purchases any Limited Partnership Interest, it shall be treated in all respects as a Limited Partner as to such Limited Partnership Interests. (c) Each class of Partnership Interest issued by the Partnership shall be divided into units ("Units") with each Unit within a class representing an equal undivided fractional share of each item of Partnership income, gain, and loss, and in each distribution of Partnership assets, allocable to the Units of that class. Section 3.2 Class A, Class B and Class C Limited Partnership Interests. (a) An aggregate of 1,487,509 Class A Units is hereby authorized for issuance pursuant to Section 4.2. The Class A Units shall be entitled to the rights of redemption specified in Article XV hereof and such voting and other rights as may be herein specified. Additional Class A Units are authorized for issuance in the future to acquire the Retained Interests as provided in Section 4.4, upon the achievement of Discounts as provided in Section 4.5, pursuant to the Option Agreements and as otherwise provided for or contemplated by this Agreement. Otherwise, no additional Class A Units may be issued. (b) An aggregate of 715,818 Class B Units is hereby authorized for issuance pursuant to Section 4.1. The -22- Class B Units shall have the preferential distribution and liquidation rights specifically provided for herein and shall be automatically converted into Class A Units at the times provided in Article XVI. No additional Class B Units may be issued after the date hereof. (c) An aggregate of 1,856,200 Class C Units is hereby authorized for issuance pursuant to Section 4.3. The Class C Units shall have the right to a special allocation of all income, gain, profits, losses and cash flow realized from the ownership, operation and disposition of the BRT OP Properties, and shall have no rights to allocation of any such items arising from the ownership, operation or disposition of the Portfolio A Properties, Portfolio B Properties, Portfolio C Properties or Option Properties. Class C Units shall be automatically converted into Class A Units at the time provided in Article XVI. No additional Class C Units may be issued after the date hereof except as provided in Section 4.3. Section 3.3 Creation and Issuance of Additional Classes of Partnership Interests. (a) Subject only to the limitations expressly set forth in this Agreement, the General Partner may from time to time solicit and accept additional Capital Contributions from any Person and/or cause the Partnership to create and issue such additional classes of Partnership Interests, rights, options, or warrants exercisable for or convertible into Partnership Interests, or other securities or instruments of any type or class whatsoever. Any such Partnership Interests, rights, options, warrants, securities or instruments may be issued for cash, property, services, or such other type, form, and amount of consideration (including notes, other evidences of indebtedness or obligations of the Person acquiring the interest, instrument or security, as the case may be) as the General Partner may determine to be appropriate. Each such class of additional Partnership Interest shall have such rights, privileges and preferences, and be subject to such limitations, as the General Partner shall specify. (b) The creation of an additional class of Partnership Interest permitted hereunder may be made by the General Partner by setting forth either in an amendment or an addendum to this Agreement the relative rights, obligations, duties, and preferences of each new class of Partnership Interests created. A copy of this Agreement as so amended, or the addendum as so adopted, as the case may be, shall be provided to each other Partner. All filings necessary to be made under the Act or applicable law in connection with the creation of such interests shall be made by the General Partner on behalf of the Partnership. -23- (c) Prior to a Qualified Offering, the written consent of the holders of not less than 75% of the then-outstanding Class A Units shall be required to take any action otherwise permitted under this Section 3.3. After a Qualified Offering, no such consent shall be required. (d) Following a Qualified Offering, if a Capital Contribution to the Partnership is being made by the General Partner with the proceeds realized from the sale of additional shares of Common Stock of BRT, the Partnership shall issue to the General Partner in exchange therefor that number of GP Units equal to the number of shares of BRT Common Stock the net proceeds of which are contributed and no other class of Partnership Interest or other consideration. Section 3.4 Other Provisions Relating to All Classes of Partnership Interests. (a) Fractional Units may be issued, with the amount of any such fractional interest being rounded to the fourth decimal place. (b) By executing this Agreement, each Partner consents and authorizes the Partnership, acting solely through the General Partner, to issue, subject to the express requirements and limitations hereof, such interests, instruments and securities upon such terms and conditions as the General Partner may from time to time determine to be appropriate. (c) Certificates for Units may be issued, at the request of the holder of any Units, but no Class A Units comprising Collateral may be certificated prior to the time such Units cease to be Collateral hereunder unless the certificates are delivered to the holder of the first priority security interest thereon, duly endorsed in blank for transfer or accompanied by duly executed transfer powers. Section 3.5 Register. The General Partner shall maintain a Register at the principal place of business of the Partnership setting forth the names, addresses and Capital Accounts of the Partners, and the number and class of Partnership Interests held by each Partner. Upon any adjustment or cancellation of any Partner's Partnership Interest, the General Partner shall make such adjustment or cancellation in the Register and send written notice thereof to the Partner so affected. Upon an assignment by a Partner of all or a part of its Partnership Interest in the Partnership pursuant to the terms hereof and as permitted hereby, the General Partner shall register such assignment in the Register. The General Partner shall note on the Register any restrictions on the -24- transfer of any Partner's Partnership Interests and any such Partnership Interests that are held in escrow hereunder. In the absence of manifest error, the Register shall constitute conclusive evidence of the interest of each Partner and other Person in Partnership Units. ARTICLE IV: CONTRIBUTIONS TO CAPITAL AND ISSUANCES OF PARTNERSHIP INTERESTS Section 4.1 General Partner and Initial Class B Limited Partner Capital Contributions. (a) Concurrently herewith, pursuant to the Contribution Agreement, the General Partner shall contribute, or cause to be contributed, as its initial Capital Contribution to the Partnership as General Partner the sum of $1,000 cash and the furniture, fixtures and equipment acquired from The Nichols Company on the date hereof and all other furniture, fixtures and equipment owned by it, and the Partnership shall issue to and register in the name of the General Partner on the Register 182 General Partner Units. (b) Concurrently herewith, pursuant to the Contribution Agreement, the General Partner shall contribute, or cause to be contributed, as its initial Capital Contribution to the Partnership as the Class B Limited Partner, all of the Class B Units in the Witmer Partnership that it acquired from SSI on the date hereof and all of the limited partnership interest in certain Title Holding Partnerships that own Portfolio A Properties that it acquired from Witmer GP on the date hereof. In return, the Partnership shall issue to the General Partner, and register in the name of BRT on the Register, an aggregate of 715,818 Class B Units. Section 4.2 Initial Class A Limited Partner Capital Contributions. (a) Concurrently herewith, pursuant to the Contribution Agreement, each of the Persons identified on Exhibit "F" as a Limited Partner shall contribute, or cause to be contributed, as its or his initial Capital Contribution to the Partnership, all Witmer Partnership Class A Units owned by it or him and set forth after such Limited Partner's name on Exhibit "F," and in the case of The Nichols Company that certain Promissory Note of Witmer Partnership described on Exhibit "F" and the Partnership shall issue to and register in the name of such Limited Partner on the Register that number of Class A Units in the Partnership set forth opposite such Limited Partner's name on Exhibit "F." As shown on Exhibit F, the total number of Class A Units issued under this paragraph (a) is 882,234, none of which shall be held in escrow. -25- (b) Concurrently herewith, pursuant to the Contribution Agreement, each of the Persons identified as a Limited Partner on Exhibit "F" shall contribute, or cause to be contributed, as its or his initial Capital Contribution to the Partnership, the interest that such Person has as a partner in the Title Holding Partnerships that hold the Portfolio C Properties to the extent provided therein (other than any interests shown on Exhibit "F" as being assigned at the direction of the Partnership by such persons to a wholly-owned qualified real estate subsidiary of the General Partner), and the Partnership shall issue to and register in the name of such Limited Partner on the Register the number of Class A Units in the Partnership set forth opposite such Limited Partner's name on Exhibit "F," a portion of which Units designed on Exhibit "F" shall be held in escrow as provided in Section 4.6. As shown on "Exhibit F," the total number of Class A Units issued under this paragraph (b) is 211,197 of which 72,231 shall be held in escrow. (c) Concurrently herewith, pursuant to the Contribution Agreement, SSI shall contribute, or caused to be contributed, all of its right, title and interest in six of the Portfolio B Properties identified on Exhibit "F," and all of its partnership interest other than the Retained Interest in the Title Holding Partnership that owns the remaining Portfolio B Property, as its initial Capital Contribution to the Partnership, and the Partnership shall issue to and register in the name of SSI on the Register the number of Class A Units in the Partnership set forth on Exhibit "F," a portion of which Units designated on Exhibit "F" shall be held in escrow as provided in Section 4.6. As shown on Exhibit "F," the total number of Class A Units issued under this paragraph (c) is 394,078 Units, of which 227,712 shall be held in escrow. (d) At the Partnership's instruction, a Limited Partner named on Exhibit "F" shall assign to BRT his units of limited partnership interest in a Title Holding Partnership in lieu of contributing them to the Partnership, but the amount of interest so assigned shall be limited to a .1% limited partnership interest. Section 4.3 Initial Class C Limited Partner Capital Contributions. (a) Concurrently herewith, pursuant to the Contribution Agreement, BRT shall contribute as an additional initial Capital Contribution to the Partnership, that portion of its interest as general partner in BRT OP representing a 97% profits interest and a 49% capital interest. BRT shall contribute the balance of its interest as general partner in BRT OP to the Partnership on the date which occurs 1 year and 1 day after the date of this Agreement. -26- (b) In return, the Partnership shall issue to BRT, and register in the name of BRT on the Register, an aggregate of 1,856,200 Class C Units, of which 1,600,000 shall be issued on the date hereof, and the balance thereof at the time of the contribution by BRT of the balance of its interest as general partner in BRT OP as provided in paragraph (a) above. Section 4.4 Option to Acquire Retained Interests in Title Holding Partnerships. (a) Following the contribution by the Class A Limited Partners of the Contributed Assets to the Partnership, (i) The Nichols Company will continue to hold the Retained Interests in each of the Title Holding Partnerships identified on Exhibit "I," that owns a Portfolio A or Portfolio C Property and SSI will continue to hold the Retained Interest in the Title Holding Partnership identified on Exhibit "I" that owns a Portfolio B Property. After giving effect to the capital contributions under Sections 4.1 through 4.3 hereof, all of the Title Holding Partnerships are subsidiaries of either Witmer Partnership or the Partnership as indicated on Exhibits "B" and "C." (b)(i) The Nichols Company and Safeguard each hereby grants to the Partnership the irrevocable right and option with respect to each Retained Interest owned by it reflected on Exhibit "I" in a Title Holding Partnership that owns a Portfolio B or Portfolio C Property, to acquire, free and clear of any Encumbrance, such Retained Interest in exchange for Class A Units upon written notice to such effect being given by the Partnership to The Nichols Company or Safeguard, as the case may be, at least five days prior to the exercise of such option. Such option may be exercised by the Partnership at any time prior to the first Business Day of the 37th month after the date hereof. The exercise notice shall contain the agreement of the Partnership to pay all Pennsylvania real estate transfer taxes that may become payable as a result of the transfer of such Retained Interest as a result of such option being exercised prior to the first Business Day of the 37th full month after the date hereof. (ii) If the option granted pursuant to the preceding paragraph has not been exercised prior thereto, then on the first Business Day of the 37th full month after the date hereof, the Partnership shall acquire from The Nichols Company and Safeguard, and The Nichols Company and Safeguard shall each Transfer to the Partnership, all Retained Interests described in paragraph (b)(i), free and clear of any Encumbrance. (c)(i) Concurrently with the acquisition of the Retained Interests pursuant to paragraph (b) above, the -27- Partnership shall cause Witmer Partnership or its designee to acquire all of The Nichols Company's Retained Interest owned by it reflected on Exhibit "I" in each Title Holding Partnership owning a Portfolio A Property in exchange for Class A Units of Limited Partnership Interest in Witmer Partnership in accordance with the provisions of Section 13 of the Agreement of Limited Partnership dated November 21, 1995 of Witmer Partnership no later than the first Business Day of the 37th month after the date hereof. The Partnership shall pay, or cause to be paid, all Pennsylvania real estate taxes that may become payable as a result of the acquisition of such Retained Interest prior to the first Business Day of the 37th full month after the date hereof. (ii) Immediately upon Witmer Partnership acquiring such Retained Interests, the Partnership shall issue to The Nichols Company Class A Units in exchange for the Class A Units of Limited Partnership Interest in Witmer Partnership acquired by The Nichols Company in exchange for such Retained Interests. (d) The total number of Class A Units to be issued by the Partnership to acquire all of the Retained Interests and Class A Units of Witmer Partnership described in paragraphs (b) and (c) above shall be 132,968 Class A Units. At the closing for the Transfer of the Retained Interests and Class A Units of Witmer Partnership to the Partnership in accordance with the preceding Sections 4.4(b) and (c), the Partnership shall issue to Safeguard and The Nichols Company, or to their successors or designees, that number of such 132,968 Class A Units as is indicated opposite their names on Exhibit "I" and shall pay to each such person the amount, if any, that is equal to the aggregate amount that would have been distributed in respect of such Units had they been issued on the date hereof. All such Class A Units shall be, when issued, validly issued, fully paid, and, except as otherwise required under the Act, nonassessable. Section 4.5 Issuance of Additional Class A and General Partner Units Upon Achievement of Mortgage Discounts. (a) Exhibit "G" sets forth for the Portfolio B Properties and Portfolio C Properties identified thereon: (i) the Existing Mortgage Indebtedness outstanding in respect of such Property; (ii) the institutional lender that holds such Existing Mortgage Indebtedness; and (iii) the net equity of the Partnership in the Property at the date hereof (i.e. the value of the Property ascribed to it by the Partners less the outstanding principal balance of the Existing Mortgage Debt) as of the date hereof. (b) If at any time after the date hereof, any such Existing Mortgage Indebtedness is repaid or otherwise discharged or satisfied at a Discount, and as a result thereof -28- additional net equity in the Property is realized, the Partnership shall issue the number of additional Class A and General Partner Units that is equal in the aggregate to (x) the dollar amount of the additional net equity so achieved divided by (y) $5.50 as adjusted in accordance with customary practice for stock splits, stock combinations and stock dividends occurring after the date hereof. Except as otherwise provided in the last sentence of this paragraph (b), (i) twenty-five percent (25%) of such additional Units shall be General Partner Units and issued to the General Partner; and (ii) the remaining seventy-five percent (75%) of such additional Units shall be Class A Units and issued to the persons identified on Exhibit "G" in the relative proportions indicated thereon. (c) For purposes of this Section 4.5, the Discount shall be the amount greater than zero obtained by subtracting from (A) the outstanding principal balance of such Existing Mortgage Indebtedness immediately prior to its repayment, (B) the amount of the cash paid, plus the fair value of any other assets conveyed, to fully discharge the Identified Indebtedness. If such computation does not result in a number greater than zero, there shall be no Discount realized in the repayment of such Identified Indebtedness. (d) For purposes of this Section 4.5, the additional net equity in a Property realized through the repayment of Mortgage Indebtedness at a Discount shall be the amount, greater than zero, obtained by (A) if the original net equity of the Property is positive, (i) adding the amount of the Discount to the original net equity of the Property shown on Exhibit G, and (ii) subtracting therefrom the original net equity assigned to the Property on Exhibit G; or (B) if the original net equity of the Property is negative, by subtracting from the Discount, the amount of such negative net equity. (e) Whenever the Partnership shall issue additional Class A Units to any person under this Section 4.5, it shall pay to each such person the amount, if any, that is equal to the aggregate amount that would have been distributed in respect of such Units had they been issued on the date hereof. Section 4.6 Forfeiture of Class A Units Upon Payment of Certain Mortgage Indebtedness With Equity Participation Rights. (a) Exhibit H sets forth for the Portfolio B Properties and Portfolio C Properties identified thereon: (i) the Mortgage Indebtedness With Equity Participation Rights outstanding in respect of such Property; (ii) the institutional lender that holds such indebtedness; (iii) the amount of the lender's equity participation in the cash flow and/or sales proceeds of the Property; and (iv) the net equity of the -29- Partnership in the Property at the date hereof (i.e., the value of the Property ascribed to it by the Partners less the outstanding principal balance of the mortgage debt as of the date hereof). (b) The Partnership will use its best efforts to obtain the consent of the holder of the Mortgage Indebtedness With Equity Participation Rights on each such Property to waive its rights under the mortgage loan documents to receive its equity participation. If despite such efforts, the Partnership is required at the time the Partnership repays or otherwise satisfies Mortgage Indebtedness With Equity Participation Rights encumbering a Property in full to make a payment to the lender in satisfaction of its equity participation in the Property, then on the date on which such Mortgage Indebtedness With Equity Participation Rights is paid in full, the Limited Partners shown on Exhibit H shall forfeit to the Partnership, in the relative proportions indicated thereon, that number of Class A Units owned by them which are held in escrow by the Partnership pursuant to paragraph (c) below that is equal to the amount of the equity participation payment made to the lender divided by $5.50, as adjusted in accordance with customary practice for stock splits, stock combinations and stock dividends occurring after the date hereof. Upon such forfeiture, which shall be made free of all Encumbrances, such Units will then be cancelled and shall not be available for reissuance. (c) A total of 299,943 Class A Units issued by the Partnership under Sections 4.2(b) and 4.2(c) hereof have been deposited in escrow with the Partnership pending repayment of the Mortgage Indebtedness With Equity Participation Rights described in this Section, as indicated on Exhibit F. Such Class A Units, while held in escrow, shall be deemed outstanding for all purposes and the holders of such Class A Units shall be entitled to receive all distributions made in respect thereof and to all voting rights associated with such Class A Units. Each time the Mortgage Indebtedness With Equity Participation Rights encumbering a particular Portfolio B or C Property is paid or otherwise discharged in full, the Class A Units escrowed in respect of that Property shall be cancelled to the extent required under paragraph (b) above, and the remainder of such Class A Units shall be automatically released from escrow and thereafter held free of escrow by the Limited Partner that deposited such Class A Units into escrow. Section 4.7 Forfeiture of Certain Class A Units and General Partners' Units Upon Payment of the GECC Equity Participation, and Upon Foreclosure of GECC Loan. (a)(i) Witmer Partnership has financed the Portfolio A Properties owned by it through the Title Holding Partnerships with the proceeds of a mortgage loan from GECC, the -30- outstanding principal balance of which is $31,145,397 date hereof (the "GECC Loan"). Under the terms of the mortgage loan documents, GECC also has an equity participation in the Portfolio A Properties under which GECC has the right to receive certain cash payments from the Witmer Partnership in excess of the amount required to pay all of the outstanding principal balance of the mortgage debt. The amount paid by the Witmer Partnership to satisfy the GECC equity participation at the time of the repayment of the GECC Mortgage is hereinafter called the "GECC Participation Payment." (ii) On the date on which the GECC Participation Payment is paid in full, the Partners identified in paragraph (iii) below shall transfer to the Partnership that number of Units that is equal to the amount of the GECC Participation Payment divided by $5.50, as adjusted in accordance with customary practice for stock splits, stock combinations and stock dividends occurring after the date hereof. Upon such transfer, which shall be made free of all Encumbrances, such Units shall be cancelled. (iii) Of the total Units required to be transferred to the Partnership pursuant to paragraph (ii) above: (I) the General Partner shall transfer that number of its General Partner Units equal to the lesser of (A) 25% of the total number of Units so required to be transferred to the Partnership, and (B) that number of General Partner Units issued to the General Partner under Section 4.5 hereof; and (II) the Limited Partners named on Exhibit K hereto shall transfer, in the relative proportions indicated thereon, that number of their Class A Units equal to the remaining balance of Units required to be transferred to the Partnership under paragraph (ii). (b) The portion of the GECC Loan allocated to the Lawrenceville Property ($3,200,000) exceeded the value assigned to that property by the parties as of the date of closing of the GECC Loan ($2,000,000) by $1,200,000. In the event of a foreclosure of the GECC Loan resulting in an execution sale of the Portfolio A Properties, the Limited Partners named on Exhibit K hereto shall transfer, in the relative proportions indicated thereon, that number of their Class A Units equal to the amount of the Lawrenceville Deficiency, if any, divided by $5.50, as adjusted in accordance with customary practice for stock splits, stock combinations and stock dividends occurring after the date hereof. The term "Lawrenceville Deficiency" shall mean the difference, if any, between the cash proceeds (net of sales proceeds paid to the holder of the GECC Loan) which the Partnership would have received upon the execution sale of the Portfolio A Properties excluding the Lawrenceville Property assuming the original GECC Loan amount had been reduced by $3,200,000 (the "Non-Lawrenceville Proceeds") and the actual cash proceeds which the Partnership receives following the sale of the -31- entire Portfolio A Properties, including the Lawrenceville Property. In no event shall the Lawrenceville Deficiency exceed $1,200,000. In the event the Partnership would not have realized any Non-Lawrenceville Proceeds, then there will be no Lawrenceville Deficiency. Section 4.8 Forfeiture of Certain Class A Units Upon Payment of Certain Lease Equity Participations and Certain Deferred Leasing Commissions. (a)(i) An affiliate of a tenant of the Portfolio A Property known as Newtown Square Corporate Campus, Building 12, 16 Campus Boulevard, Newtown Square, Pennsylvania, is a special limited partner in the Title Holding Partnership that owns such Property. Under the terms of the partnership agreement creating that Title Holding Partnership, such special limited partner has a 35% profits interest in the Title Holding Partnership which entitles the special limited partner to participate in distribution of the Title Holding Partnership's operating cash flow as well as the right to receive a distribution equal to a 35% participation in the net sales proceeds in excess of a certain threshold realized by the Title Holding Partnership from the sale of the Property. (ii) If (I) the Portfolio Property described in Section 4.8(a) above shall be sold at any time while the mortgage loan from GECC to Witmer Partnership in existence on the date hereof is then outstanding, (II) the sales price of such Portfolio A Property is less than an amount equal to the sum (such sum, the "Sales Price Threshold") of (x) $6,071,250 plus (y) an amount representing a 10% per annum return on $261,587, such return to be computed from the date of this Partnership Agreement through the date of the sale of such Portfolio A Property, and (III) such special limited partner receives a payment of a share of the net sales proceeds of such property, then in such event, the Limited Partners shown on "Exhibit J" shall transfer to the Partnership, in the relative proportions indicated thereon, that number of Class A Units owned by them that is equal to the lesser of (A) the amount of the equity participation payment made to the special limited partner up to a maximum of $271,250 and (B) the amount of the "Sales Price Threshold" less the actual sales price of the Property, in either case divided by $5.50, as adjusted in accordance with customary practice for stock splits, stock combinations and stock dividends occurring after the date hereof. Upon such transfer, which shall be made free of all Encumbrances, such Units will then be cancelled. (iii) The payment of a share of the operating cash flow or, except as provided in paragraph (ii) above, the payment of a share of the net sales proceeds of such Property, to the -32- special limited partner shall not result in any return of Class A Units by any of the Class A Limited Partners. (b) Schedules H and L to the Contribution Agreement list certain deferred leasing commissions payable by The Nichols Company in the case of the lessees listed on Schedule H, and by Safeguard in the case of the leases listed on Schedule L, as and when rents are collected under leases of certain of the Portfolio A, Portfolio B, or Portfolio C Properties, all of which leases were executed and became effective prior to the date hereof. Such deferred leasing commissions are not being assumed by the Partnership and shall remain obligations of The Nichols Company or Safeguard following the formation of the Partnership. However, in the event that the Partnership shall pay any of such deferred leasing commissions following a default in the payment of such obligations, then Safeguard in the case of the payment of leasing commissions described on Schedule L, or The Nichols Company in the case of the payment of leasing commissions described on Schedule H, shall transfer to the Partnership that number of Class A Units owned by it that is equal to the amount of the deferred leasing commissions so paid by the Partnership, divided by $5.50, as adjusted in accordance with customary practice for stock splits, stock combinations and stock dividends occurring after the date hereof. Upon such transfer, which shall be made free of all Encumbrances, such Units will then be cancelled. The Transfer of Units to the Partnership provided for herein shall be the sole and exclusive remedy of the Partnership against Safeguard and The Nichols Company for failure to pay such deferred leasing commissions. Section 4.9 Capital Contributions Generally. Except as otherwise expressly provided herein or to the extent that a Partner agrees to make a Capital Contribution to, or to purchase Partnership Interests from, the Partnership: (i) no Partner shall be required to contribute any capital to the Partnership; (ii) no Partner may withdraw any of its capital from the Partnership; (iii) no Partner shall be required to make any loan to the Partnership; (iv) loans by a Partner to the Partnership shall not be considered a contribution of capital, shall not increase the Capital Account of the lending Partner or the lending Partner's ownership interest in the Partnership and the repayment of such loans by the Partnership shall not decrease, or result in any adjustment to, the Capital Account of the Partner making the loans; (v) no interest shall be paid on any capital contributed to the Partnership by any Partner; (vi) under any circumstances requiring a return of all or any portion of a Capital Contribution, no Partner shall have the right to receive property other than cash; and (vii) no Partner shall be required at any time to restore any deficit in such Partner's Capital Account. -33- Section 4.10 No Third Party Beneficiary. No creditor or other third party having dealings with the Partnership shall have the right to enforce the right or obligation of any Partner to make Capital Contributions or loans or to pursue any other right or remedy hereunder or at law or in equity, it being understood and agreed that the provisions of this Agreement shall be solely for the benefit of, and may be enforced solely by, the parties hereto and their respective successors and assigns. None of the rights or obligations of the Partners herein set forth to make Capital Contributions or loans to the Partnership shall be deemed an asset of the Partnership for any purpose by any creditor or other third party, nor may such rights or obligations be sold, transferred or assigned by the Partnership or pledged or encumbered by the Partnership to secure any debt or other obligation of the Partnership or of any of the Partners. Section 4.11 SSI Right of First Refusal. (a) Each time the Partnership shall propose to issue any additional Partnership Interests for cash at any time after the date hereof and on or before the fifth anniversary of the date of this Agreement, the Partnership shall first offer in writing to SSI the right to acquire such Partnership Interests on terms no less favorable to SSI than those on which the Partnership proposes to issue such additional Partnership Interests to other persons. SSI shall have a period of 30 days in which to exercise its right of first refusal. (b) This Section shall not apply to Partnership Interests issued pursuant to or under Article IV or Section 8.5 hereof. ARTICLE V: CAPITAL ACCOUNTS Section 5.1 Establishment and Maintenance of Capital Accounts. (a) A Capital Account shall be established for each Partner in the amount of such Partner's initial Capital Contribution to the Partnership. Unless otherwise provided in this Agreement, each Partner's Capital Account shall be determined and maintained in accordance with the rules of Regulation Section 1.704-1(b)(2)(iv) (or any corresponding provision of succeeding law), and all provisions of this Agreement relating to the maintenance of Capital Accounts shall be interpreted and applied in a manner consistent with such regulations. If the General Partner shall determine that it is prudent to modify the manner in which the Capital Accounts, or any debits or credits thereto, are computed in order to comply with such regulations, the General Partner shall make such modifications. -34- (b) Pursuant to the foregoing accounting rules, a Partner's Capital Account shall be increased, decreased, adjusted, and maintained as provided in Article VII. Section 5.2 Succession to Capital Accounts. Subject to Section 11.4, in the event of a transfer of any Partnership Interest permitted herein, the Capital Account of the transferor Partner that is attributable to the transferred Partnership Interest shall be carried over to the transferee of such interest and adjusted as provided in the Regulations under Code section 704. Section 5.3 Certain Adjustments. In connection with any Capital Contribution to the Partnership in consideration for a Partnership Interest, or a distribution by the Partnership to a Partner in respect of a Partnership Interest, the General Partner shall be authorized to increase or decrease the Capital Accounts to reflect a revaluation of Partnership property as provided in Regulation Section 1.704-1(b)(2)(iv)(f). Moreover, upon completion of a Qualified Offering, the Capital Accounts shall be so adjusted to reflect a revaluation of Partnership property, and each Partner's Capital Account shall be adjusted so as to be proportionate to the number of Units held by such Partner at such time. ARTICLE VI: DISTRIBUTIONS Section 6.1 Distributions Prior to Qualified Offering. (a) Distributions to Class C Unit Holders. (i) Prior to the completion of a Qualified Offering, the Partnership's share of all Net Cash Flow, Net Sales Proceeds and Net Financing Proceeds realized by BRT OP from the ownership, operation, sale and refinancing of the BRT OP Properties shall be distributed by the Partnership only to the holders of the Class C Units, and no other class of Partnership Interest shall have any rights to share in such distributions. (ii) The General Partner shall distribute the Partnership's share of such Net Cash Flow, Net Sale Proceeds and Net Financing Proceeds to the Class C Unit holders at such times and in such amounts as it may determine in its sole discretion. (b) Class B Preferred Distributions. (i) Until the completion of a Qualified Offering, the Partnership shall declare and pay quarterly, to the holders of the Class B Units at the end of the quarter in respect of which the payment is being made, out of the source of funds described in clause (ii) below, -35- an amount in cash equal to the Class B Preferred Distribution for such quarter, plus any then unpaid Class B Accumulated Preferred Distribution. Each such quarterly distribution shall be made within thirty days after the end of the calendar quarter in respect of which the distribution is being paid. (ii) The source of funds for the distributions provided for in this paragraph (b) shall consist of: (A) the Partnership's share of all cash realized by the Witmer Partnership from the operation of the Portfolio A Properties that is permitted to be distributed to the Partnership by the Witmer Partnership under the GECC mortgage loan documents, plus (B) to the extent needed, Net Cash Flow of the Partnership from the operation of the Portfolio B and Portfolio C Properties, plus (C) to the extent needed, funds required to be advanced by SSI for such purpose under the Distribution Support and Loan Agreement. (iii) If for any distribution period the amounts distributed by the Partnership are insufficient to fully discharge the Partnership's obligations to make cash distributions to the holders of the Class B Units in an amount equal to their Class B Preferred Distribution pursuant to Section 6.1(b)(i) and (ii), the deficiency between the amounts distributed and the amounts distributable pursuant to such Sections shall accumulate, without interest (any such deficiency, a "Class B Accumulated Preferred Distribution"). (c) Distributions Constituting Return of Capital to Class B Unit Holders. Any Net Sale Proceeds or Net Financing Proceeds realized directly or indirectly by the Partnership prior to the completion of a Qualified Offering from the sale or refinancing of a Portfolio A Property shall be distributed to the Class B Unit holders first to pay any then unpaid Class B Accumulated Preferred Distributions and then as a return of the Capital Contributions made by them in respect of their Class B Units, provided, however, that the maximum amount distributed to the Class B Unit holders as a return of their Capital Contributions under this paragraph shall not exceed $3.937 million. (d) Distributions to General Partner, Class A Unit Holders and Class B Unit Holders. (i) Prior to the completion of a Qualified Offering, and provided that (A) all Class B Preferred Distributions then due the holders of the Class B Units under Section 6.1(b) have been made or provided for and there is no unpaid Class B Accumulated Preferred Distributions, and (B) all accrued interest that is then due and payable to SSI under the Distribution Support and Loan Agreement has been paid in full and no borrowings are then outstanding under the $700,000 line of credit extended to the Partnership pursuant to Section 2.1.1 of such Distribution Support and Loan -36- Agreement or under Section 2.1.2 of such Distribution Support and Loan Agreement which provides for advances to pay transaction expenses, the General Partner may, from time to time, in its discretion, cause the Partnership to make cash distributions to the General Partner, the Class A Limited Partners and the Class B Limited Partners pro rata in accordance with their respective Percentage Interests in the Partnership. The restriction on distributions contained in clause (B) of the preceding sentence shall be applicable only to distributions pursuant to this Section 6.1(d) and not to distributions pursuant to Sections 6.1(a), (b) or (c). Such distributions may be made from any source of funds available to the Partnership, including from Partnership revenues, borrowings or Capital Contributions, except that no distributions shall be made pursuant to this paragraph (d) out of funds required to be distributed solely to the Class C Unit holders pursuant to paragraph (a) above or to the Class B Unit holders pursuant to paragraph (c) above. Section 6.2 Distributions After Qualified Offering. After a Qualified Offering, the General Partner shall cause the Partnership to declare and pay quarterly distributions to the holders of the General Partner Units and Class A Units at the end of the quarter in respect of which the payment is made, out of funds legally available therefor, in such aggregate amount as the General Partner in its discretion shall determine, and in the following proportions: (a) to the holders of the Class A Units, as a group, an amount equal to the product that results from multiplying the total amount to be distributed by the ratio of (i) the number of shares of Common Stock then issuable to the holders of the outstanding Class A Units in redemption of such Class A Units, assuming redemption of such Class A Units entirely for shares, to (ii) the number of the shares of Common Stock described in clause (i) plus the number of outstanding shares of Common Stock of BRT (other than outstanding Excluded Common Shares); and (b) the balance to the holder of the General Partner Units. Section 6.3 Distributions to Pay Taxes. (a) Notwithstanding anything to the contrary in Sections 6.1 and 6.2, if the Partnership has taxable income for any Fiscal Year (including any taxable gain associated with the sale of section 704(c) property (as defined in Regulation Section 1.704-3)), the Partnership shall, out of any funds legally available therefor, distribute to the Partners, on or before the 90th day following the end of the calendar year that includes the last day of such Fiscal Year, the amount necessary -37- for the Partners (and all Persons who are required to pay taxes on the taxable income of the Partnership by reason of their direct or indirect ownership of any interest in the Partnership) to pay federal, state and local income taxes with respect to such taxable income, computed by multiplying such taxable income by the highest combined federal, state and local income tax rate applicable to any such Person for the calendar year that includes the last day of the Fiscal Year in which such taxable income is allocated to such Partner. (b) The Partnership shall not make a distribution under this Section 6.3 if it does not have sufficient cash on hand to fund such distribution, or if after making such distribution the Partnership will need to borrow funds under the Distribution Support and Loan Agreement for one of the purposes permitted thereunder. Section 6.4 Distributions upon Liquidation. Liquidating distributions shall in all cases be made in accordance with the provisions of Section 13.5. Section 6.5 Additional Distribution Rules. (a) Effective Date. Distributions shall be charged against the Partners' Capital Accounts as of the date the distributions are made. (b) Division Among Limited Partners. Except as may otherwise be provided herein or in the instruments creating a class of Partnership Interests, each distribution made to the Limited Partners of a given class pursuant to this Article VI shall be divided among the Limited Partners of such class so that each of them shall receive the same proportion thereof as the Units of such class owned by such Limited Partner bear to all Units of the same class then owned by all Limited Partners. (c) Obligation to Repay Distribution. In the absence of fraud or mistake, or except as otherwise required by law, no Partner shall have any obligation or responsibility to repay to the Partnership any distribution made by the Partnership to a Partner pursuant to this Agreement. (d) Legal Requirements. Notwithstanding anything contained herein to the contrary, the General Partner may withhold making a distribution to any Limited Partner, or to any transferee of a Limited Partner, until the Limited Partner or the transferee has provided the General Partner with all necessary information and assurances, including an opinion of counsel satisfactory to the General Partner requested by the General Partner, to determine that such distribution will be in compliance with all applicable laws. -38- Section 6.6 Taxes Withheld. Unless treated as a Tax Payment Loan (as hereinafter defined), any amount paid by the Partnership for or with respect to any Partner on account of any withholding tax or other tax payable with respect to the income, profits or distributions of the Partnership pursuant to the Code, the Regulations, or any state or local statute, regulation or ordinance requiring such payment (a "Withholding Tax Act") shall be treated as a distribution to such Partner for all purposes of this Agreement, consistent with the character or source of the income, profits or cash which gave rise to the payment or withholding obligation. To the extent that the amount required to be remitted by the Partnership under the Withholding Tax Act exceeds the amount then otherwise distributable to such Partner, the excess shall constitute a loan from the Partnership to such Partner (a "Tax Payment Loan") which shall be payable upon demand and shall bear interest, from the date that the Partnership makes the payment to the relevant taxing authority, at the federal tax underpayment rate, under section 6621(a)(2) of the Code, as reported from time to time. So long as any Tax Payment Loan or the interest thereon remains unpaid, the Partnership shall make future distributions due to such Partner under this Agreement by applying the amount of any such distribution first to the payment of any unpaid interest on all Tax Payment Loans of such Partner and then to the repayment of the principal of all Tax Payment Loans of such Partner. The General Partner shall have the authority to take all actions necessary to enable the Partnership to comply with the provisions of any Withholding Tax Act applicable to the Partnership and to carry out the provisions of this Section. Nothing in this Section shall create any obligation on the General Partner to advance funds to the Partnership or to borrow funds from third parties in order to make any payments on account of any liability of the Partnership under a Withholding Tax Act. Section 6.7 In-Kind Distributions. If, at the discretion of the General Partner, any assets of the Partnership other than cash are distributed to the Partners in kind, such assets shall be valued on the basis of the fair market value thereof as determined by the General Partner in its reasonable discretion on the date of distribution. Without limiting the General Partner's discretion to make such a valuation or requiring that any such appraisal be made, the valuation of any asset by the General Partner on the basis of the determination of its fair market value by an independent appraiser shall be deemed to be a reasonable value for such asset and a reasonable exercise of such discretion. If any Partnership property other than cash is distributed to a Partner, the Capital Accounts of the Partners shall be adjusted to reflect the manner in which the unrealized income, gain, loss or deduction inherent in such property (that has not previously been reflected in the -39- Partners' Capital Accounts) would be allocated among the Partners if there had been a taxable disposition of such property at its fair market value on the date of distribution. The Capital Accounts of the Partner receiving a distribution in kind shall then be reduced by the fair market value of the property distributed. Subject to the limitations on such distributions in connection with any distribution of property of the Partnership in kind, including any distribution in connection with the liquidation of the Partnership, the General Partner need not distribute each asset ratably to all Partners, so long as all Partners concurrently receive distributions of cash and other property, valued as provided above, in the proportion to which they would otherwise be entitled. Section 6.8 No Other Distributions Permitted. Prior to a Qualified Offering, no distribution of assets of the Partnership not provided for under this Agreement, as amended from time to time, shall be made by the Partnership to any Partner without the prior written consent of the holders of a majority of the Class A Units then outstanding. This provision shall not prohibit the payment of principal of and interest on loans to the Partnership made by a Partner. Section 6.9 Special Distributions. Notwithstanding anything to the contrary in Sections 6.1, 6.2 or elsewhere in this Agreement, a portion of any distributions received by the Partnership from certain partnerships in which it holds interests shall first be specially allocated and distributed to the Partners other than BRT. The portion of such distributions that shall be specially allocated and distributed to the Partners other than BRT shall equal the sum of (i) 1.01% multiplied by R% of any distributions received by the Partnership from Witmer Partnership, (ii) 2.041% multiplied by R% of any distributions received by the Partnership from C/N Oaklands Limited Partnership III and Iron Run Limited Partnership V and (iii) in the case of any distributions received by the Partnership from BRT OP after a Qualified Offering but before contribution to the Partnership of BRT's remaining interest in BRT OP, (a) 42.857% multiplied by R% of any such distributions received by the Partnership from BRT OP that are attributable to proceeds of any sale of property of BRT OP, to the extent of the fair market value of such property as of this date, and (b) 1.031% multiplied by R% of any other such distributions received by the Partnership from BRT OP, where R% equals the quotient of (x) 100% minus BRT's Percentage Interest divided by (y) BRT's Percentage Interest. ARTICLE 7: ALLOCATIONS -40- Section 7.1 Allocation of Net Income and Net Loss Before a Qualified Offering. For all periods ending before the completion of a Qualified Offering, Net Income and Net Loss shall, except as otherwise provided herein, be allocated as follows: (a) Net Income and Net Loss Realized by BRT OP. All Net Income and Net Loss realized by the Partnership on account of BRT OP shall be allocated to the holders of the Class C Units. No other items shall be allocated with respect to such Class C Units, and the portion of the Capital Account of the holder of the Class C Units that is attributable to the Class C Units shall not be taken into account for the remainder of this Section. (b) Other Net Income. Except as provided in subsection (a) above, Net Income shall be allocated (i) First, to the Partners in proportion to their deficit Economic Capital Account balances, if any, until such deficit balances have been eliminated; (ii) Next, to the holder of the Class B Units to the extent, if any, that the Class B Liquidation Preference exceeds the Economic Capital Account balance of the holder of the Class B Units; (iii) Next, to the Partners in such amounts as to cause, as quickly as possible, the positive Economic Capital Account balance of each Partner, or, in the case of the holder of the Class B Units, the excess of such positive Economic Capital Account balance over the Class B Liquidation Preference, to be in proportion to their Percentage Interests; and (iv) Thereafter, the balance of such Net Income, if any, shall be allocated to the Partners in proportion to their Percentage Interests. (c) Other Net Loss. Except as provided in subsection (a) above, Net Loss shall be allocated (i) First, to the Partners in such amounts as to cause, as quickly as possible, the positive Economic Capital Account balance, if any, of each Partner, or, in the case of the holder of the Class B Units, the excess of such positive Economic Capital Account balance over the sum of the Class B Accumulated Preferred Distribution and the Class B Liquidation Preference, to be in proportion to their Percentage Interests; (ii) Next, to the Partners with positive Economic Capital Account balances, in proportion to their -41- Percentage Interests, until the Economic Capital Account balances of the Partners other than the holders of the Class B Units equal zero; (iii) Next, to the holder of the Class B Units until its Economic Capital Account balance equals zero; and (iv) Thereafter, to the Partners in proportion to their Percentage Interests. Section 7.2 Allocation of Net Income and Net Loss in Connection with and After a Qualified Offering. Any Net Income or Net Loss recognized by reason of the revaluation of Partnership property pursuant to Regulation Section 1.704-1(b)(2)(iv)(f) upon the completion of a Qualified Offering, and any Net Income or Net Loss for periods ending after the completion of a Qualified Offering, shall, except as otherwise provided herein, be allocated among the Partners as follows: (a) First, Net Income or Net Loss shall be allocated to the Partners in such manner as to cause, as quickly as possible, their Capital Accounts to be proportionate to their Percentage Interests; and (b) Any remaining Net Income or Net Loss shall be allocated to the Partners in proportion to their Percentage Interests. Section 7.3 Special Allocations. Notwithstanding anything to the contrary contained in this Agreement: (a) Minimum Gain Chargeback (Nonrecourse Liabilities). If there is a net decrease in Partnership Minimum Gain for any Partnership fiscal year (except as a result of conversion or refinancing of Partnership indebtedness, certain capital contributions or revaluation of the Partnership property as further outlined in Regulation Sections 1.704-2(d)(4), (f)(2) or (f)(3)), each Partner shall be specially allocated items of Partnership income and gain for each year (and, if necessary, subsequent years) in an amount equal to that Partner's share of the net decrease in Partnership Minimum Gain. The items to be so allocated shall be determined in accordance with Regulation Section 1.704-2(f). This paragraph (a) is intended to comply with the minimum gain chargeback requirement in said section of the Regulations and shall be interpreted consistently therewith. Allocations pursuant to this paragraph (a) shall be made in proportion to the respective amounts required to be allocated to each Partner pursuant hereto. -42- (b) Minimum Gain Attributable to Partner Nonrecourse Debt. If there is a net decrease in Minimum Gain Attributable to Partner Nonrecourse Debt during any fiscal year (other than due to the conversion, refinancing or other change in the debt instrument causing it to become partially or wholly nonrecourse, certain capital contributions, or certain revaluations of Partnership property as further outlined in Regulation Section 1.704-2(i)(4)), each Partner shall be specially allocated items of Partnership income and gain for such year (and, if necessary, subsequent years) in an amount equal to that Partner's share of the net decrease in the Minimum Gain Attributable to Partner Nonrecourse Debt. The items to be so allocated shall be determined in accordance with Regulation Section 1.704-2(i)(4) and (j)(2). This paragraph (b) is intended to comply with the minimum gain chargeback requirement with respect to Partner Nonrecourse Debt contained in said section of the Regulations and shall be interpreted consistently therewith. Allocations pursuant to this paragraph (b) shall be made in proportions to the respective amounts required to be allocated to each Partner pursuant hereto. (c) Qualified Income Offset. In the event a Partner receives any adjustments, allocations or distributions described in Regulation Section 1.704-1(b)(2)(ii)(d)(4), (5) or (6), and such Partner has an Adjusted Capital Account Deficit, items of Partnership income and gain shall be specially allocated to such Partner in an amount and manner sufficient to eliminate the Adjusted Capital Account Deficit as quickly as possible. This paragraph (c) is intended, among other things, to meet the requirements for a "qualified income offset" under Regulation Section 1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith. (d) Nonrecourse Deductions. Nonrecourse Deductions for any fiscal year or other applicable period shall be allocated to the Partners in accordance with their respective Percentage Interests. (e) Partner Nonrecourse Deductions. Partner Nonrecourse Deductions for any fiscal year or other applicable period shall be specially allocated to the Partner that bears the economic risk of loss for the debt (i.e., the Partner Nonrecourse Debt) in respect of which such Partner Nonrecourse Deductions are attributable (as determined under Regulation Section 1.704-2(b)(4) and (i)(1)). (f) Curative Allocations. The Regulatory Allocations shall be taken into account in allocating other items of income, gain, loss and deduction among the Partners so that, to the extent possible, the cumulative net amount of allocations of Partnership items under Sections 7.1 and 7.2 shall be equal to the net amount that would have been allocated to each Partner if -43- the Regulatory Allocations had not occurred. This paragraph (f) is intended to minimize to the extent possible and to the extent necessary any economic distortions which may result from application of the Regulatory Allocations and shall be interpreted in a manner consistent therewith. For purposes hereof, "Regulatory Allocations" shall mean the allocations provided under this Section 7.3 (save paragraphs (d) and (f) hereof). Section 7.4 Tax Allocations. (a) Generally. Subject to paragraphs (b), (c) and (d) hereof, items of income, gain, loss, deduction and credit to be allocated for income tax purposes (collectively, "Tax Items") shall be allocated among the Partners on the same basis as their respective book items. (b) Sections 1245/1250 Recapture. If any portion of gain from the sale of property is treated as gain which is ordinary income by virtue of the application of Code Sections 1245 or 1250 ("Affected Gain"), then (i) such Affected Gain shall be allocated among the Partners in the same proportion that the depreciation and amortization deductions giving rise to the Affected Gain were allocated and (ii) other Tax Items of gain of the same character that would have been recognized, but for the application of Code Sections 1245 and/or 1250, shall be allocated away from those Partners who are allocated Affected Gain pursuant to clause (i) so that, to the extent possible, the other Partners are allocated the same amount, and type, of capital gain that would have been allocated to them had Code Sections 1245 and/or 1250 not applied. For purposes hereof, in order to determine the proportionate allocations of depreciation and amortization deductions for each fiscal year or other applicable period, such deductions shall be deemed allocated on the same basis as Net Income and Net Loss for such respective period. (c) Allocations Respecting Section 704(c) and Revaluations. Notwithstanding paragraph (b) hereof, Tax Items with respect to Partnership property that is subject to Code Section 704(c) and/or Regulation Section 1.704-1(b)(2)(iv)(f) (collectively "Section 704(c) Tax Items") shall be allocated in accordance with said Code section and/or Regulation Section 1.704-1(b)(4)(i), as the case may be. The Partnership shall apply the "traditional method" for such allocations, as described in Regulation Section 1.704-3(b), and the allocation of Tax Items shall be subject to the ceiling rule stated in Regulation Section 1.704-3(b)(1). (d) Precontribution Gain. In the event that, during any fiscal year or other applicable period, any Title Holding Partnership allocates to the Partnership Precontribution Gain (as defined below), each Partner (or its successors in -44- interest) who, pursuant to Article IV hereof, contributed to the capital of the Partnership the Contributed Asset to which a distributive share of Precontribution Gain is attributable shall be allocated that Precontribution Gain in accordance with its respective interest in such Precontributed Gain. For purposes hereof, "Precontribution Gain" shall mean, with respect to each Property owned by a Title Holding Partnership, that unrealized gain attributable to the excess of (i) the fair market value of such Property on the date at which the Contributed Asset is contributed to the capital of the Partnership pursuant to Article IV hereof, over (ii) the adjusted tax basis of such Property on the date of such contribution; provided, however, that the amount of any Precontribution Gain associated with a Property shall be adjusted to account for allocations made in accordance with the provisions of paragraph (c) of this Section 7.4 and shall not, in any event, exceed that amount of gain actually allocated to the Partnership by a Title Holding Partnership as a result of the sale or other disposition of such Property. Section 7.5 Additional Special Allocations. Notwithstanding anything to the contrary in Sections 7.1, 7.2 or elsewhere in this Agreement, a portion of any Net Income or Net Loss allocable to the Partnership from certain partnerships in which it holds interests that would otherwise be allocable to the holder of the General Partner Units shall instead be allocable to the other Partners in proportion to their Percentage Interests. Such portion shall equal (i) 1.01% multiplied by R% of the Partnership's Net Income or Net Loss from Witmer Partnership, (ii) 2.041% multiplied by R% of the Partnership's Net Income or Net Loss from C/N Oaklands Limited Partnership III and Iron Run Limited Partnership V and (iii) in the case of any period after a Qualified Offering but before contribution to the Partnership of BRT's remaining interest in BRT OP, 1.031% multiplied by R% of the Partnership's Net Income or Net Loss from BRT OP, where R% equals the quotient of (x) 100% minus BRT's Percentage Interest divided by (y) BRT's Percentage Interest. Solely for purposes of subsection 7.2(a) above, Capital Accounts shall be computed as if this Section 7.5 and Section 6.9 were not in this Agreement. ARTICLE VIII: EXPENSES; RIGHTS, DUTIES AND RESTRICTIONS OF THE GENERAL PARTNER; VOTING RIGHTS OF CLASS A PARTNERS. Section 8.1 Expenses Borne by the Partnership. (a) The General Partner estimates that the total costs and expenses to be incurred by BRT and the Partnership in connection with the transactions contemplated by this Agreement and the Proxy Statement will aggregate approximately $1,216,000, -45- as more fully set forth on Exhibit "L." Of these amounts, BRT shall pay $707,500 and the Partnership $762,000. If the actual costs and expenses differ from the estimate, BRT and the Partnership shall pay 58% and 42%, respectively of such actual costs and expenses. BRT and SSI shall provide the Partnership with the funds needed to pay the Partnership's share of expenses allocated to the Partnership under this paragraph (a) as provided in paragraph (e) below. (b) The Partnership shall pay all fees and other costs that it incurs for legal and accounting services provided to the Partnership by third parties after the date hereof, including such costs and expenses incurred in connection with the preparation and maintenance of the books and records, financial statements, and tax returns of the Partnership. The General Partner shall be entitled to reimbursement by the Partnership for any such expenditures incurred by it on behalf of the Partnership. (c) Except as otherwise provided in paragraph (d) below, all fees and other costs that BRT incurs for legal and accounting services provided to BRT after the date hereof by third parties in connection with the preparation and maintenance of BRT's books and records, financial statements, tax returns and reports to stockholders and the Securities and Exchange Commission (collectively "BRT Administrative Expenses"), shall (i) prior to a Qualified Offering, be allocated 58% to BRT and 42% to the Partnership; and (ii) after a Qualified Offering, all such BRT Administrative Expenses shall be allocated to the Partnership. (d) In the event that BRT hereafter acquires any Properties outside of the Partnership or an entity wholly-owned by the Partnership, the percentage of BRT Administrative Expenses allocated to the Partnership shall be reduced to an amount that is fair and equitable to the Partnership under the circumstances, as determined by the General Partner with the consent of the holders of a majority of the then outstanding Class A Units. (e) (i) SSI shall advance funds to the Partnership for the purpose of providing the Partnership with the cash it needs to pay a portion of the transaction costs allocated to the Partnership under paragraph (a) above. Such advances shall be made in accordance with the provisions of the Distribution Support and Loan Agreement. The amount of such expenses to be funded with loans by SSI shall be the percentage obtained by multiplying the amount of the Partnership's transaction expenses allocated to it under paragraph (a) by a fraction, the numerator of which is the number of Class A Units issued on the date hereof and the denominator of which is the number of Class A Units and Class B Units so issued. -46- (ii) BRT shall pay on behalf of the Partnership the remaining portion of the Partnership's share of transaction costs allocated to it under paragraph (a) above. Section 8.2 Powers and Duties of General Partner. (a) The General Partner shall be responsible for the management of the Partnership's business and affairs. Except as otherwise herein expressly provided, and subject to the limitations contained in Section 8.3 hereof, the General Partner shall have, and is hereby granted, full and complete power, authority and discretion to take such action for and on behalf of the Partnership as the General Partner shall, in its sole and absolute discretion, deem necessary or appropriate to carry out the purposes for which the Partnership was organized. Except as otherwise expressly provided herein, and subject to Section 8.3 hereof, the General Partner shall exercise all of the powers of the Partnership and have specifically, without limiting the foregoing the right, power and authority: (i) To manage, control, invest, reinvest, acquire by purchase, lease or otherwise, sell, contract to purchase or sell, grant, obtain, or exercise options to purchase, options to sell or conversion rights, assign, transfer, convey, deliver, endorse, exchange, pledge, mortgage, abandon, improve, repair, maintain, insure, lease for any term and otherwise deal with any and all property of whatsoever kind and nature, and wheresoever situated, in furtherance of the business or purposes of the Partnership; (ii) To acquire, directly or indirectly, interests in real estate of any kind and of any type, and any and all kinds of interests therein and interests in Entities investing therein, and to determine the manner in which title thereto is to be held; to manage (directly or through property managers), insure against loss, protect and subdivide any of the real estate, interests therein or parts thereof; to improve, develop or redevelop any such real estate; to participate in the ownership and development of any property; to dedicate for public use, to vacate any subdivisions or parts thereof, to re-subdivide, to contract to sell, to grant options to purchase or lease, to sell on any terms; to convey, to mortgage, pledge or otherwise encumber said property, or any part thereof; to lease said property or any part thereof from time to time, upon any terms and for any period of time, and to renew or extend leases, to amend, change or modify the terms and provisions of any leases and to grant options to lease and options to renew leases and options to purchase; to partition or to exchange said real property, or any part thereof, for other real or personal property; to collect all rental and other income accruing to the Partnership; to grant easements or charges of any kind; to release, convey or assign any right, title or interest in or about or easement appurtenant -47- to said property or any part thereof; to construct and reconstruct, remodel, alter, repair, add to or take from buildings on said premises; to insure any Person having an interest in or responsibility for the care, management or repair of such property; to direct the trustee of any land trust to mortgage, lease, convey or contract to convey the real estate held in such land trust or to execute and deliver deeds, mortgages, notes, and any and all documents pertaining to the property subject to such land trust or in any matter regarding such trust; to execute assignments of all or any part of the beneficial interest in such land trust; (iii) To employ, engage or contract with or dismiss from employment or engagement Persons to the extent deemed necessary or appropriate by the General Partner for the operation and management of the Partnership business, including but not limited to, contractors, subcontractors, engineers, architects, surveyors, mechanics, consultants, accountants, attorneys, insurance brokers, real estate brokers and others; (iv) To enter into, make, amend, perform and carry out or cancel and rescind, contracts and other obligations on behalf of the Partnership and to cause all Administrative Expenses to be paid; (v) To borrow money, procure loans and advances from any Person for Partnership purposes, and to apply for and secure, from any Person, credit or accommodations; to contract liabilities and obligations, direct or contingent and of every kind and nature (including interest rate swaps, caps and hedges) with or without security; and to repay, discharge, settle, adjust, compromise, or liquidate any such loan, advance, credit, obligation or liability; (vi) To pledge, hypothecate, mortgage, assign, deposit; deliver, enter into sale and leaseback arrangements or otherwise give as security or as additional or substitute security, or for sale or other disposition any and all Partnership property, tangible or intangible, including, but not limited to, real estate and beneficial interests in land trusts, and to make substitutions thereof, and to receive any proceeds thereof upon the release or surrender thereof; to sign, execute and deliver any and all assignments, deeds and other contracts and instruments in writing; to authorize, give, make, procure, accept and receive moneys, payments, property, notices, demands, vouchers, receipts, releases, compromises and adjustments; to waive notices, demands, protests and authorize and execute waivers of every kind and nature; to enter into, make, execute, deliver and receive written agreements, undertakings and instruments of every kind and nature; to give oral instructions and make oral agreements; and generally to do any and all other acts and things incidental to any of the foregoing or with reference -48- to any dealings or transactions which the General Partner may deem necessary, proper or advisable to effect or accomplish any of the foregoing or to carry out the business and purposes of the Partnership; (vii) To sell or otherwise dispose of any or all assets of the Partnership; (viii) To acquire and enter into any contract of insurance which the General Partner deems necessary or appropriate for the protection of the Partnership, for the conservation of the Partnership's assets or for any purpose convenient or beneficial to the Partnership and to settle claims under such insurance; (ix) To conduct any and all banking transactions on behalf of the Partnership; to adjust and settle checking, savings, and other accounts with such institutions as the General Partner shall deem appropriate; to draw, sign, execute, accept, endorse, guarantee, deliver, receive and pay any checks, drafts, bills of exchange, acceptances, notes, obligations, undertakings and other instruments for or relating to the payment of money in, into, or from any account in the Partnership's name; to execute, procure, consent to and authorize extensions and renewals of the same; to make deposits and withdraw the same and to negotiate or discount commercial paper, acceptances, negotiable instruments, bills of exchange and dollar drafts; to pay all taxes, assessments, rents and other impositions applicable to the assets of the Partnership and to seek to reduce the same; to invest all monies of the Partnership; (x) To demand, sue for, receive, and otherwise take steps to collect or recover all debts, rents, proceeds, interests, dividends, goods, chattels, income from property, damages and all other property, to which the Partnership may be entitled or which are or may become due the Partnership from any Person; to commence, prosecute or enforce, or to defend, answer or oppose, contest and abandon all legal proceedings in which the Partnership is or may hereafter be interested; and to settle, compromise or submit to arbitration any accounts, debts, claims, disputes and matters which may arise between the Partnership and any other Person and to grant an extension of time for the payment or satisfaction thereof on any terms, with or without security; (xi) To confess judgment against the Partnership; (xii) To make arrangements for financing, including the taking of all action deemed necessary or appropriate by the General Partner to cause any approved loans to be closed including, without limitation, the execution and delivery -49- on behalf of the Partnership of notes, mortgages, deeds of trust and like instruments; (xiii) To take all reasonable measures necessary to insure compliance by the Partnership with applicable arrangements, and other contractual obligations and arrangements entered into by the Partnership from time to time in accordance with the provisions of this Agreement, including periodic reports as required to be submitted to lenders and using all due diligence to insure that the Partnership is in compliance with its contractual obligations; (xiv) To maintain the Partnership's books and records; (xv) To prepare and deliver, or cause to be prepared and delivered by the Partnership's accountants, all financial and other reports with respect to the operations of the Partnership, and all federal and state tax returns and reports; (xvi) To act in any state or nation in which the Partnership may lawfully act, for itself or as principal, agent or representative for any Person, including the Partnership, with respect to any business of the Partnership; (xvii) To become a partner or member in, and perform the obligations of a partner or member of, any general or limited partnership or limited liability company; (xviii) To apply for, register, obtain, purchase or otherwise acquire trademarks, trade names, labels and designs relating to or useful in connection with any business of the Partnership, and to use, exercise, develop and license the use of the same; (xix) To pay or reimburse any and all actual fees, costs and expenses incurred in the formation and organization of the Partnership; (xx) To do all acts which are necessary, customary or appropriate for the protection and preservation of the Partnership's assets, including the establishment of reserves; (xxi) To exercise all rights, and to perform all duties, responsibilities and obligations, granted to or required of the General Partner by this Agreement; and (xxii) In general, to exercise all of the general rights, privileges and powers permitted to be had and exercised by the provisions of the Act. -50- (b) Concurrently with the execution and delivery of this Agreement, the Management Company is acquiring the Management Contracts. The Management Company shall (i) provide the Partnership with all office space and administrative services needed by the Partnership in the ordinary course of its business, and (ii) perform all of its duties under the Management Contracts. All costs and expenses of the Management Company so incurred, such as for office rent, telephone, postage, travel and entertainment, and compensation of officers and employees and other overhead shall be borne by the Management Company out of the management fees payable under the Management Contracts and shall not be separately charged back to the Partnership, except for compensation and other related expenses of property management and maintenance personnel that are permitted under a Management Contract to be charged against a Property. (c) The Partnership is authorized to guaranty the Management Company's payment and performance of the Employment Agreements of even date herewith between the Management Company and its executive officers described in the Proxy Statement, and of each amendment thereof and each successor contract thereto. Section 8.3 Voting Rights. (a) Prior to the completion of the Qualified Offering, the General Partner shall not, without the affirmative consent of the holders of not less than 75% of the then outstanding Class A Units, take, or permit or suffer any other person to take, any of the following actions, each of which shall constitute a Major Decision: (i) Except as otherwise required by this Agreement, issue any additional Class A Units, Class B Units, Class C Units or General Partner Units, or any other class of Partnership Interest; (ii) Dissolve and liquidate the Witmer Partnership; (iii) Cause the Partnership to enter into any arrangement, contract, agreement or business venture (including, without limitation, any loans or other arrangement relating to the advancement of funds to or by the General Partner or any Affiliate thereof) with the General Partner or any Affiliate of the General Partner involving payments by the Partnership to the General Partner or any Affiliate thereof of an aggregate of more than $100,000 unless such transaction (i) is expressly contemplated by this Agreement or the Transaction Documents, in each case as in effect on the date hereof or (ii) such transaction involves a loan from the General Partner to the Partnership on terms and conditions substantially similar to those customarily comprising commercial loans of similar size and -51- credit risk and at an interest rate not exceeding .5% above the General Partners' internal cost of funds as at the date the loan is made; (iv) Permit the Partnership to merge with or into, or consolidate its operations with, any other entity; or (v) Permit, suffer or cause Witmer Partnership or Witmer GP to take any affirmative action that would violate this Agreement or the Agreement of Limited Partnership creating the Witmer Partnership or that would result in a breach of Witmer Partnership's loan agreement with GECC. (b) The Partnership shall not refinance or pay off (other than payments of principal and interest in accordance with the existing mortgage amortization schedule) any mortgage indebtedness encumbering a Portfolio B Property without SSI's consent unless it shall first have given SSI at least 30 days' prior written notice thereof. (c) The Net Sales Proceeds or Net Refinancing Proceeds realized by the Partnership from the sale or refinancing of a Portfolio A, Portfolio B or Portfolio C Property, or any Option Property, prior to a Qualified Offering shall be used by the Partnership to pay such outstanding indebtedness of the Partnership to SSI or its Affiliates as SSI shall designate. Section 8.4 Proscriptions. The General Partner shall not have the authority to: (a) Do any act in contravention of this Agreement or which would make it impossible to carry on the ordinary business of the Partnership; (b) Possess any Partnership property or assign rights in specific Partnership property for other than Partnership purposes; (c) Do any act in contravention of applicable law; or (d) Without the consent of the holders of at least 75% of the then outstanding Class A Units, cause the Partnership to make a general assignment for the benefit of creditors, or appoint or acquiesce in the appointment of a custodian, receiver or trustee for all or any part of the Partnership's assets, or commence any proceeding seeking relief for the Partnership under any provision of the federal Bankruptcy Code 11 U.S.C. ss.101 et seq. or any other federal or state law relating to insolvency, bankruptcy or reorganization. -52- Nothing herein contained shall impose any obligation on any Person or firm doing business with the Partnership to inquire as to whether or not the General Partner has properly exercised its authority in executing any contract, lease, mortgage, deed or other instrument on behalf of the Partnership, and any such third Person shall be fully protected in relying upon such authority. Section 8.5 Qualified Offering. (a) The General Partner shall use its reasonable efforts to complete a Qualified Offering as promptly as practicable after the date hereof. (b) Except as provided in paragraph (c), if such Qualified Offering is completed, the General Partner shall contribute sufficient proceeds therefrom to the Partnership as shall be necessary to repay or refinance the mortgage indebtedness which on the date hereof encumbers the Portfolio A, Portfolio B, and Portfolio C Properties. In exchange for such contribution, the Partnership shall issue to the General Partner additional GP Units equal in number to the number of shares of Common Stock of BRT issued in the Qualified Offering the net proceeds of which are contributed to the Partnership. (c) In lieu of contributing the net proceeds of a Qualified Offering to the Partnership under paragraph (b) above, the General Partner may instead, at its expense, (i) obtain general releases from the holders of the mortgage debt releasing the Partners who contributed the Properties to the Partnership from all liability, however incurred (whether in the capacity as maker, co-maker, guarantor, surety, indemnitor or accommodation party under a letter of credit held by the lender) that they or any of them have to pay or perform all or part of such mortgage indebtedness; or (ii) make other arrangements satisfactory to such Partners to indemnify them against such liability. Such releases and/or indemnity agreements shall be satisfactory to the Partners entitled to the benefit of such releases and/or indemnity agreements in their sole discretion. (d) If the Qualified Offering has not occurred by the fifth anniversary of the date of this Agreement, then the holders of a majority of the Class A Units shall have the right and option, exercisable by them at any time prior to the occurrence of the Qualified Offering, to require the Partnership to utilize its best efforts to sell the Portfolio A Properties, Portfolio B Properties and Portfolio C Properties of the Partnership, provided that the Net Sale Proceeds realized from the disposition of such Properties are sufficient in amount to pay the holders of the Class B Units an amount equal to their Class B Liquidation Preference. Promptly upon the completion of the sale of the Portfolio A, Portfolio B, and Portfolio C -53- Properties, the General Partner shall distribute the Net Sale Proceeds to the holders of the GP Units, Class B Units and Class A Units as contemplated by Section 6.1(c) and Section 6.1(d) hereof. Section 8.6 Additional Partners. Additional Partners may be admitted to the Partnership only as provided in Article XII hereof. Section 8.7 Compensation of the General Partner. The General Partner shall not be entitled to any compensation for services rendered to the Partnership solely in its capacity as General Partner except with respect to reimbursement for those costs and expenses pursuant to Section 8.1 hereof including those constituting BRT Administrative Expenses. Section 8.8 Waiver and Indemnification. (a) Except as otherwise provided in Article XIX, neither the General Partner nor any Person acting on its behalf, pursuant hereto, shall be liable, responsible or accountable in damages or otherwise to the Partnership or to any Partner for any acts or omissions performed or omitted to be performed by it within the scope of the authority conferred upon the General Partner by this Agreement and the Act, provided that the General Partner's or such other Person's conduct or omission to act was taken in good faith and in the belief that such conduct or omission was in the best interests of the Partnership and, provided further, that the General Partner or such other Person shall not be guilty of fraud, willful misconduct or gross negligence. (b) The Partnership shall, and hereby does, indemnify and hold harmless the General Partner and its Affiliates and any individual acting on their behalf from any loss, cost or expense, damage, claim or liability, including, but not limited to, reasonable attorneys' fees and expenses, incurred by them by reason of any act performed by them for or on behalf of the Partnership or the General Partner, or omitted to be performed by them, in accordance with the standards set forth above or in enforcing the provisions of this indemnity; provided, however, no Partner or any of its Affiliates shall have any personal liability with respect to the foregoing indemnification, and any such liability or indemnification shall be satisfied solely out of the assets of the Partnership. (c) All rights of any indemnitee hereunder shall survive the dissolution of the Partnership; provided, however, that a claim for indemnification under this Agreement must be made by or on behalf of the Person seeking indemnification prior -54- to the time the Partnership is liquidated hereunder. The indemnification rights contained in this Agreement shall be cumulative of, and in addition to, any and all other rights, remedies and recourse to which the person seeking indemnification shall be entitled, whether at law or at equity. Section 8.9 Operation in Accordance with REIT Requirements. The Partners acknowledge and agree that the Partnership shall be operated in a manner that will enable the General Partner to (a) satisfy the REIT Requirements and (b) avoid the imposition of any federal income or excise tax liability on either the General Partner or the Partnership. The General Partner shall not be required to take any action which would result in the General Partner ceasing to satisfy the REIT Requirements or the imposition of any federal income or excise tax liability on the General Partner. Section 8.10 Reliance by Third Parties. (a) Notwithstanding anything to the contrary in this Agreement, any Person dealing with the Partnership shall be entitled to assume that the General Partner has full power and authority to encumber, sell or otherwise use in any manner any and all assets of the Partnership and to enter into any contracts on behalf of the Partnership, and such Person shall be entitled to deal with the General Partner as if it were the Partnership's sole party in interest, both legally and beneficially. (b) Each Limited Partner hereby waives any and all defenses or other remedies which may be available against such Person to contest, negate or disaffirm any action of the General Partner in connection with any such dealing. In no event shall any Person dealing with the General Partner or its representatives be obligated to ascertain that the terms of this Agreement have been complied with or to inquire into the necessity or expedience of any act or action of the General Partner or its representatives. Each and every certificate, document or other instrument executed on behalf of the Partnership by the General Partner shall be conclusive evidence in favor of any and every person relying thereon or claiming thereunder that (i) at the time of the execution and delivery of such certificate, document or instrument, this Agreement was in full force and effect, (ii) the Person executing and delivering such certificate, document or instrument was duly authorized and empowered to do so for and on behalf of the Partnership, and (iii) such certificate, document or instrument was duly executed and delivered in accordance with the terms and provisions of this Agreement and is binding upon the Partnership. Section 8.11 Other Matters Concerning the General Partner. -55- (a) The General Partner may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, or other document believed by it to be genuine and to have been singed or presented by the proper party or parties. (b) The General Partner may consult with legal counsel, accountants, appraisers, management consultants, investment bankers and other consultants and advisers selected by it, and any act taken or omitted to be taken in reliance upon the opinion of such Persons as to matters which such General Partner reasonably believes to be within such Person's professional expertise shall be conclusively presumed to have been done or omitted in good faith and in accordance with such opinion. (c) The General Partner shall have the right, in respect of any of its powers or obligations hereunder, to act through any of its duly authorized officers and any attorney or attorneys-in-fact duly appointed by the General Partner; and any Person dealing with the Partnership shall be entitled to rely on any certificate, document or other instrument executed on behalf of the Partnership by a duly authorized officer or by a duly authorized attorney or attorneys-in-fact of the General Partner. Each such attorney-in-fact shall, to the extent provided by the General Partner in the power of attorney, have full power and authority to do and perform all and every act and duty which is permitted or required to be done by the General Partner hereunder. (d) Notwithstanding any other provisions of this Agreement or the Act, any action of the General Partner on behalf of the Partnership or any decision of the General Partner to refrain from acting on behalf of the Partnership, undertaken in the good faith belief that such action or omission is necessary or advisable in order (i) to protect or further the ability of the General Partner to continue to qualify as a REIT or (ii) to avoid the General Partner incurring any taxes under Section 857 or Section 4981 of the Code, is expressly authorized under this Agreement and is deemed approved by all of the Limited Partners. Nothing however in this Agreement shall be deemed to give rise to any liability on the part of the Limited Partners for the General Partner's failure to qualify or continue to qualify as a REIT or failure to avoid incurring any taxes under the foregoing Sections of the Code. Section 8.12 Meetings of Partners. (a) Meetings of Partners may be called at any time by the General Partner to consider, and shall be so called so that the Partners may act on, any matter on which they are entitled to act under the terms of this Agreement or the Act. In addition, the General Partner shall call a meeting of Class A -56- Limited Partners when directed to do so by holders of not less than 25% of the then outstanding Class A Units. Such direction shall be given by delivering to the General Partner a request in writing stating that such holders desire to call a meeting and indicating the general or specific purpose for which the meeting is to be called. (b) The General Partner may fix a date not more than 60 nor less than five (5) days preceding the date of any meeting of Partners, or preceding the last day on which the consent of Partners may be effectively expressed for any purpose without a meeting, as a record date for the determination of the Partners entitled to notice of, and to vote at, such meeting or to express such consent. In either such case, such Partners, and only such Partners as shall be Partners of record on the record date shall be entitled to notice of, and to vote at, such meeting and any adjournment thereof, or to express such consent, as the case may be, notwithstanding any transfer of any Partnership Interest on the Register after any such record date fixed as aforesaid. (c) Notice of any meeting at which Partners are entitled to vote, or of any matter upon which action by written consent of such Partners is to be taken, shall be given to each Partner of record not less than five (5) nor more than 60 days prior to the date of such meeting or the date on which consent must be given, as the case may be. Each such notice will include a statement setting forth (i) the date, time and place of the meeting or the date by which such action is to be taken, (ii) a description of the matter on which such Partners are entitled to vote or of such matter upon which written consent is sought and (iii) instructions for the delivery of proxies or consents. (d) Except as otherwise provided by law, at any meeting of Partners, the holders of a majority of the Units entitled to vote as such meeting shall constitute a quorum at such meeting. In the absence of a quorum, the holders of a majority of the Units entitled to vote thereat present in person or by proxy may adjourn any meeting, from time to time, until a quorum shall be present. At any such adjourned meeting at which a quorum shall be present, any business may be transacted which might have been transacted at the meeting as originally called. (e) Each Partner entitled to vote at a meeting or to express consent to Partnership action in writing without a meeting may authorize another person or persons to act for him by proxy. A proxy acting for any Partner shall be duly appointed by an instrument in writing subscribed by such Partner and reasonably acceptable in form and substances to the General Partner. Except as otherwise provided by law, no vote on any question upon which a vote of the Partners may be taken need be by ballot unless the General Partner shall determine that it -57- shall be by ballot or the holders of a majority of all Units present in person or by proxy and entitled to participate in such vote shall so demand. In a vote by ballot each ballot shall state the Partnership Interests voted and the name of the Partner or proxy voting. Unless otherwise provided by law or by this Agreement, all questions shall be decided by the vote of the holders of a majority of the Units present in person or by proxy at the meeting and entitled to vote on the question. (f) Any action required to or which may be taken at a meeting of Partners may be taken without a meeting, without prior notice and without a vote, if a consent or consents in writing, setting forth the action so taken, shall be signed by Partners having not less than the minimum number of votes that would be necessary to authorize such action at a meeting at which all Units entitled to vote thereon were present and voted, and shall be delivered to the Partnership by delivery to the General Partner (who shall have custody of the books in which proceedings of meetings of Partners are recorded). Prompt notice of the taking of action without a meeting shall be given to the Partners entitled to vote who have not consented in writing. (g) The General Partner, in its sole discretion, shall establish all other provisions relating to meetings of Partners, in addition to those expressly provided herein, including notice of the time, place or purpose of any meeting at which any matter is to be voted on by any Partner, waiver of any such notice, action by consent without a meeting, the establishment of a record date, quorum requirements, voting in person or by proxy or any other matter with respect to the exercise of any such right to vote, in each case consistent with the terms hereof and in accordance with the Act. ARTICLE IX: ACCOUNTING AND RECORDS Section 9.1 Books and Records. The General Partner shall keep books of account for the Partnership in accordance with the method of accounting used for federal income tax purposes. Upon at least five Business Days' prior notice to the General Partner, any Limited Partner shall have the right, to the extent provided for in the Act, to inspect and copy at its own expense the Partnership's books and records during normal business hours. Section 9.2 Annual Reports. (a) Not later than 90 days after the end of each Fiscal Year (or such earlier date as may be required under the Code) the General Partner shall deliver to each Partner a report indicating each Partner's share for federal income tax purposes -58- of the Partnership's income, credits and deductions for the immediately preceding Fiscal Year, together with all other information concerning the Partnership which may be required by the Code from time to time. (b) The General Partner shall also cause an annual report of the operation of the Partnership to be distributed to the Partners within 120 days after the end of each Fiscal Year together with Audited Financial Statements reflecting the Partnership's operation during such year. (c) The General Partner may also furnish the Limited Partners with such other periodic reports concerning the Partnership's business and activities as the General Partner considers necessary to advise all Partners properly about their investment in the Partnership and shall, upon the written request of any Limited Partner, provide such Partner with: (i) a copy of any report filed with the Securities and Exchange Commission by the General Partner pursuant to the Securities Exchange Act of 1934; (ii) a copy of the Partnership's federal, state and local income tax returns for each Fiscal Year; (iii) a current list of the name and last known business, residence or mailing address of each Partner; and (iv) a copy of this Agreement and the Certificate and all amendments thereto, together with executed copies of all powers of attorney pursuant to which this Agreement, the Certificate and all amendments thereto have been executed. Section 9.3 Tax Returns. The General Partner shall cause all income and other tax returns of the Partnership to be prepared and filed in a timely manner. The General Partner shall be the Tax Matters Partner (as defined in section 6231(a)(7) of the Code) of the Partnership. Section 9.4 Fiscal Year. The fiscal year ("Fiscal Year") of the Partnership shall be the calendar year. Section 9.5 Bank Accounts. All funds of the Partnership shall be deposited in such accounts established in the Partnership's name with such financial institutions as may be determined from time to time by the -59- General Partner. Withdrawals from any such accounts shall be made in the Partnership's name upon the signature of such officers of the General Partner and such other signature or signatures, if any, as the General Partner shall from time to time designate. Funds in such accounts shall not be commingled with the funds of any Partner. ARTICLE X: CHANGES IN GENERAL PARTNERS Section 10.1 Permitted Assignment of General Partnership Interest; Permitted Withdrawal by the General Partner. The General Partner shall not have the right to resign or withdraw or to Transfer all or any portion of its General Partnership Interest represented by GP Units, except that the General Partner may assign all or a portion of its General Partnership Interest represented by outstanding GP Units to a substitute or additional General Partner permitted under and selected in accordance with Section 10.2; (b) assign its General Partnership Interest represented by outstanding GP Units to any Entity that has, by merger, consolidation or otherwise, acquired substantially all of its assets and continued its business and has been designated to succeed to its rights and obligations under this Agreement in accordance herewith; and (c) pledge or grant a security interest in its right to receive payments and distributions under this Agreement. In connection with any Transfer described in clauses (a) and(b) of all the General Partnership Interest, the General Partner may withdraw as such upon the admission of the assignee. Sections 10.2 and 10.4 shall apply in the case of a Transfer of all or a portion of a General Partnership Interest. Section 10.2 Admission of Additional General Partners. One or more additional or substitute General Partners may be admitted to the Partnership from time to time by the General Partner in the circumstances contemplated by Section 10.1, provided the additional or substitute general partner is reasonably expected, as determined by a majority of the Board of Trustees of BRT, to be able to fulfill the duties of a general partner hereunder. Otherwise, no additional General Partner may be admitted to the Partnership except as provided in Section 13.2. The terms of such assignment and the nature of the duties of the newly admitted General Partner shall be as agreed upon between the General Partner and such additional General Partner. Section 10.3 Effect of Withdrawal of General Partner. (a) Upon the occurrence of an Event of Withdrawal of the General Partner (other than one permitted by Sec- -60- tion 10.1), the General Partner shall cease to be such, and its Partnership Interest shall be converted to an undesignated Limited Partnership Interest entitling the holder thereof to the same share of the Partnership's income, gain, loss, deduction and distributions as are allocated to the General Partner hereunder, subject to the Partnership's right to set off (i) any damages caused to it if the Event of Withdrawal is in violation of this Agreement and (ii) any obligation of the General Partner under paragraph (b). (b) Upon the occurrence of an Event of Withdrawal of the General Partner, the General Partner shall pay to the Partnership in cash the amount of any deficit balance in its Capital Account unless the Event of Withdrawal is permitted by Section 10.1. Section 10.4 Liability of a Withdrawn General Partner. Any General Partner who shall commit or suffer an Event of Withdrawal or shall otherwise withdraw from the Partnership shall remain liable for obligations and liabilities incurred by it as General Partner prior to the occurrence of such Event of Withdrawal or other withdrawal, but it shall be free of any such obligation or liability incurred on account of the activities of the Partnership thereafter. ARTICLE XI: TRANSFERS OF LIMITED PARTNERSHIP INTERESTS Section 11.1 General Transfer Provisions and Restrictions. (a) Subject to Section 11.1(d), any Class A, Class B or Class C Limited Partner may Transfer all or any portion of, or right in or to, Class A, Class B or Class C Units of Limited Partnership Interest, without the consent of the General Partner or any other Partner, except that no Class A Limited Partner may Transfer Class A Units comprising Collateral in violation of the provisions of Article XIX below. (b) Limited Partnership Interests, if any, other than Class A, Class B or Class C Limited Partnership Interests, shall be subject to such restrictions on Transfer (in addition to the restrictions set forth in Section 11.1(c) below) as the General Partner may determine to be appropriate. (c) Notwithstanding the foregoing, (i) no Transfer of any Limited Partnership Interest shall be permitted if, in the opinion of the General Partner based on the advice of counsel, there is a significant possibility that such Transfer: -61- (A) may not be effected without registration under the Securities Act of 1933, or would result in the violation of any applicable state securities laws; or (B) would result in the termination of the Partnership within the meaning of section 708 of the Code, or would have a material adverse effect on any Partner for federal income tax purposes; or (C) would cause the Partnership to be taxed other than as a partnership for federal income tax purposes or impair the ability of the Partnership to take advantage of any favorable tax election or treatment as a result of being taxed as a partnership (whether such impairment shall arise from the termination of the Partnership for federal tax purposes or otherwise); or (D) would cause the Partnership to become, with respect to any employee benefit plan subject to Title 1 of ERISA, a "party-in-interest" (as defined in Section 3(14) of ERISA) or a "disqualified person" (as defined in Section 4975(c) of the Code); or (E) would cause any portion of the assets of the Partnership to constitute assets of any employee benefit plan pursuant to Department of Labor Regulations Section 2510.2-101; and (ii) No Limited Partner shall effect any Transfer: (A) to any person or entity who lacks the legal right, power or capacity to own Partnership Units; (B) in violation of any provision of any mortgage or trust deed (or the note or bond secured thereby) to which the Partnership is a party or is otherwise bound; (C) of any component portion of Partnership Units, such as the Capital Account, or rights to distribution, separate and apart from all other components of Partnership Units; or (D) in the event such Transfer would cause BRT or any successor thereto to cease to comply with the REIT Requirements. In furtherance of this subsection, the General Partner and the Partnership shall in no event recognize any trade of a Limited Partnership Interest in a secondary market or the substantial -62- equivalent thereof and shall take such actions as are necessary so that such trades are not recognized. (d) All Transfers of Limited Partnership Interests shall be by instrument in form and substance reasonably satisfactory to the General Partner. Any Transfer of Limited Partnership Interests in violation of this Agreement shall be null and void and shall not operate to vest any rights in any transferee. (e) In no event shall the Partnership dissolve or terminate upon the admission of any Partner to the Partnership or upon any permitted Transfer of a Partnership Interest by any Partner. Each Partner hereby waives its right to dissolve, liquidate or terminate the Partnership in such event. No Transfer of any Limited Partnership Interest in the Partnership shall constitute a change of Control of the Partnership. Section 11.2 Expenses. All expenses of the Partnership and of the Partners occasioned by a permitted Transfer shall be borne by the Partner effecting such Transfer. Section 11.3 Allocations with Respect to Transferred Interest. Upon the permitted Transfer of all or any part of a Partnership Interest, each item of Partnership income (or loss) and deduction allocable to such Partnership Interest shall be pro rated (as to the Transferred Partnership Interest) between the transferor and transferee on the basis of the number of days in the taxable year of the Partnership preceding (and including) and succeeding, respectively, the date as of which the assignment is executed. Unless otherwise agreed by the Transferor and Transferee Partners, gain or loss from the sale or other taxable disposition of a Partnership capital asset shall be allocated to the Persons who were Partners at the time such gain or loss was recognized by the Partnership. Section 11.4 Section 754 Election. The General Partner may, in its sole discretion, cause the Partnership to elect, pursuant to section 754 of the Code, to adjust the basis of Partnership property as provided in sections 734(b) and 743(b) of the Code. The General Partner shall be responsible for determining the adjustments required or permitted by said sections of the Code, except that, in the case of any adjustment required or permitted under section 743(b) of the Code, the Transferee Partner or Partners shall be solely responsible for determining the adjustments required thereunder unless such Partner or Partners provide the General Partner with all the information necessary for the General Partner to -63- determine the adjustments. If any adjustments to the basis of Partnership property are made pursuant to section 732(d), 734(b) or 743(b), the capital accounts of the Partners shall be adjusted as specified in Regulation Section 1.704-1(b)(2)(iv)(m). Section 11.5 Transferee's Rights. The Transfer of a Limited Partnership Interest in accordance with this Agreement entitles the transferee to share in such profits and losses, to receive such distributions, and to receive such allocations of income, gain, loss, deduction, or credit or similar item to which the transferor Partner was entitled (to the extent of the interest Transferred) but does not entitle the transferee to become or to exercise any other rights of a Partner unless and until the transferor Partner has advised the General Partner that such transferor Partner is to be admitted as a Partner pursuant to Article XII. ARTICLE XII: ADMISSION OF PARTNERS Section 12.1 Procedure. (a) Substitute or additional General or Limited Partners may be admitted to the Partnership as a result of a permitted Transfer of Partnership Interests pursuant to Article X or XI. Additional General or Limited Partners shall also be admitted to the Partnership as a result of the issuance of additional Partnership Interests pursuant to Article III. Each substitute or additional Partner shall sign a supplement to this Agreement at the time such Partner is admitted confirming the admission of the new Partner hereunder, and containing such Person's binding agreement to be bound by all of the terms of this Agreement. (b) In connection with the admission of any new Partner to the Partnership, the General Partner shall have the power, right and authority to amend this Agreement to reflect the rights and obligations of such new Partner, including without limitation its obligations to contribute to the capital of the Partnership, rights to distributions, or rights to approve or consent to Partnership actions. ARTICLE XIII: DISSOLUTION, LIQUIDATION AND WINDING-UP Section 13.1 Events of Dissolution. The occurrence of any of the following shall constitute an event of dissolution of the Partnership (an "Event of Dissolution"): -64- (a) the expiration of the term of the Partnership as provided herein; (b) the sale or other disposition in a single transaction or series of related transactions of all or substantially all of the assets of the Partnership unless such sale or other disposition involves any deferred payment of the consideration for such sale or disposition, in which case the General Partner may elect to defer the dissolution of the Partnership until the last day of the Fiscal Year during which the Partnership shall receive the balance of such deferred payment; (c) subject to Section 13.2, the occurrence of an Event of Withdrawal with respect to a General Partner; (d) the acquisition by a single Person of all of the Partnership Interests; (e) the issuance of a decree of dissolution by a court of competent jurisdiction pursuant to the Act; or (f) the consent of the General Partner and the holders of at least 75% of the then outstanding Class A Units. Section 13.2 Continuation of the Business of the Partnership After Certain Events of Dissolution. (a) Notwithstanding Section 13.1(c), if, at the time of an Event of Withdrawal, there shall be one or more General Partners not affected by the Event of Withdrawal, then such other General Partner or General Partners shall (and are hereby authorized to) carry on the business of the Partnership, and if they do so the Partnership shall not be liquidated and its business wound up. (b) Notwithstanding Section 13.1(c), at the time of an Event of Withdrawal to which subsection (a) is not applicable, the Partnership shall not be liquidated and its business wound up if, within 90 days after the occurrence of the Event of Withdrawal, Limited Partners owning a majority of the Units of each class agree in writing to continue the business of the Partnership and to the appointment of one or more replacement General Partners who agree to serve as such. Section 13.3 Effect of Event of Dissolution. Upon the occurrence of an Event of Dissolution, unless otherwise provided in Section 13.2, the Partnership shall be dissolved and shall continue solely for the purposes of winding up its business and liquidating in accordance with this Article all of its assets and collecting the proceeds from such -65- liquidation, at which time the Partnership shall be wound up. Unless the business of the Partnership is continued as provided in Section 13.2, after the occurrence of an Event of Dissolution the Partnership shall engage in no further business other than as necessary to operate on an interim basis and for the Partnership to collect its receivables, liquidate its assets and pay or discharge its liabilities in accordance with this Article. Section 13.4 Accounting. In the event of the dissolution, liquidation and winding-up of the Partnership, a proper accounting (which shall be certified) shall be made of the Capital Account of each Partner and of the Net Income or Net Losses of the Partnership from the date of the last previous accounting to the date of dissolution. Financial statements presenting such accounting shall include a report thereon of a certified public accountant selected by the Liquidating Trustee. Section 13.5 Distribution on Dissolution. (a) In the event of the dissolution and liquidation of the Partnership for any reason, the assets of the Partnership shall be liquidated for distribution and distributed in the following rank and order: (i) First, for payment of creditors of the Partnership (other than Partners) in the order of priority as provided by law; (ii) Next, for establishment of reserves as provided by the Liquidating Trustee to provide for contingent liabilities, if any; (iii) Next,for payment of debts of the Partnership to Partners, if any, in the order of priority provided by law; (iv) Next, for payment of the Class C Liquidation Preference, if any Class C Units are then outstanding, provided, however, that such payment shall only be made out of the Net Sale Proceeds realized from the liquidation of the BRT OP Properties; (v) Next, for payment of the Class B Liquidation Preference if any Class B Units are then outstanding; and (vi) Last, for payment to the General Partner, to the holders of the Class A Units, and to the holders of the Class B Units if any are then outstanding, in accordance with the positive balances in their respective Capital Accounts -66- after giving effect to all contributions, distributions and allocations for all periods, including the period in which such distribution occurs (other than those adjustments made pursuant to this Section 13.5(a)(vi)). (b) Whenever the Liquidating Trustee reasonably determines that any reserves established pursuant to paragraph (a)(ii) above are in excess of the reasonable requirements of the Partnership, the amount determined to be excess shall be distributed to the Partners in accordance with the above provisions. Section 13.6 Timing Requirements. In the event that the Partnership is "liquidated" within the meaning of Section 1.704-1(b)(2)(ii)(g) of the Regulations, any and all distributions to the Partners pursuant to Section 13.5(a) hereof shall be made no later than the later to occur of (i) the last day of the taxable year of the Partnership in which such liquidation occurs, or (ii) ninety (90) days after the date of such liquidation. Section 13.7 Sale of Partnership Assets. In the event of the liquidation of the Partnership in accordance with the terms of this Agreement, the Liquidating Trustee may sell Partnership or Title Holding Partnership property if the Liquidating Trustee has in good faith solicited bids from unrelated third parties before making any such sale; provided, however, all sales, leases, encumbrances or transfers of Partnership assets shall be made by the Liquidating Trustee solely on an "arm's-length" basis, at the best price and on the best terms and conditions as the Liquidating Trustee in good faith believes are reasonably available at the time and under the circumstances and on a non-recourse basis to the Limited Partners. The liquidation of the Partnership shall not be deemed finally completed until the Partnership shall have received cash payments in full with respect to obligations such as notes, installment sale contracts or other similar receivables received by the Partnership in connection with the sale of Partnership assets and all obligations of the Partnership have been satisfied, released or assumed by the General Partner. The Liquidating Trustee shall continue to act to enforce all of the rights of the Partnership pursuant to any such obligations until such obligations are paid in full or otherwise satisfied. Section 13.8 Distributions in Kind. In the event that it becomes necessary to make a distribution of Partnership property in kind, the Liquidating Trustee may transfer and convey such property to the distributees as tenants in common, subject to any liabilities attached thereto, so as to vest in them undivided interests in the whole of -67- such property in proportion to their respective rights to share in the proceeds of the sale of such property (other than as a creditor) in accordance with the provisions of Section 13.5 hereof. Section 13.9 Documentation of Liquidation. Upon the completion of the dissolution and liquidation of the Partnership, the Partnership shall terminate and the Liquidating Trustee shall have the authority to execute and record any and all documents or instruments required to effect the dissolution, liquidation and termination of the Partnership. Section 13.10 Liability of the Liquidating Trustee. The Liquidating Trustee shall be indemnified and held harmless by the Partnership from and against any and all claims, demands, liabilities, costs, damages and causes of action of any nature whatsoever arising out of or incidental to the Liquidating Trustee's taking of any action authorized under or within the scope of this Agreement; provided, however, that the Liquidating Trustee shall not be entitled to indemnification, and shall not be held harmless, where the claim, demand, liability, cost, damage or cause of action at issue arose out of: (a) A matter entirely unrelated to the Liquidating Trustee's action or conduct pursuant to the provisions of this Agreement; or (b) The willful misconduct or gross negligence of the Liquidating Trustee. ARTICLE XIV: RIGHTS AND OBLIGATIONS OF THE LIMITED PARTNERS Section 14.1 No Participation in Management. The Limited Partners shall not take part in the management or control of the Partnership's business, transact any business in the Partnership's name, have the power to sign documents for or otherwise bind the Partnership or except as required by the Act or expressly provided by this Agreement, have any right to vote on or consent to any matter, provided, however, that nothing in the foregoing shall be deemed to prohibit or preclude any Limited Partner or its Affiliates from serving as an officer, trustee, director or employee of the General Partner or its Affiliates or otherwise transacting business with the Partnership. -68- Section 14.2 Death, Incompetence, Bankruptcy, Etc. The death, incompetence, Bankruptcy, dissolution or liquidation of a Limited Partner shall not cause a dissolution of the Partnership. The rights of such a Limited Partner to share in the income and losses of the Partnership, to receive distributions and to assign its Partnership Interest pursuant to this Article, on the happening of such an event, shall devolve on such Limited Partner's beneficiary or other successor, executor, administrator, guardian or other legal representative for the purpose of settling the estate or administering the property of such Limited Partner. Such successor or personal representative, however, shall be admitted as a Limited Partner only upon compliance with the requirements set forth in Section 12.1(a). Section 14.3 No Withdrawal. No Limited Partner may withdraw from the Partnership without the prior written consent of the General Partner, other than as expressly provided in this Agreement. Section 14.4 Power of Attorney. (a) Each Limited Partner constitutes and appoints the General Partner, any Liquidating Trustee, and authorized officers and attorneys-in-fact of each, and each of those acting singly, in each case with full power of substitution, as its true and lawful agent and attorney-in-fact, with full power and authority in its name, place and stead to: execute, swear to, acknowledge, deliver, file and record in the appropriate public offices (i) all certificates, documents and other instruments (including, without limitation, this Agreement and the Certificate and all amendments or restatements thereof) that the General Partner or the Liquidating Trustee deems appropriate or necessary to form, qualify or continue the existence or qualification of the Partnership as a limited partnership (or a partnership in which the limited partners have limited liability) in the State of Delaware and in all other jurisdictions in which the Partnership may conduct business or own property; (ii) all instruments that the General Partner deems appropriate or necessary to reflect any amendment, change, modification or restatement of this Agreement in accordance with its terms; (iii) all conveyances and other instruments or documents that the General Partner deems appropriate or necessary to reflect the dissolution and liquidation of the Partnership pursuant to the terms of this Agreement, including, without limitation, a certificate of cancellation; and (iv) all instruments relating to the admission, withdrawal, removal or substitution of any Partner pursuant to the provisions of this Agreement, or the Capital Contribution of any Partner. -69- (b) The foregoing power of attorney is irrevocable and a power coupled with an interest, in recognition of the fact that each of the Partners will be relying upon the power of the General Partner to act as contemplated by this Agreement in any filing or other action by it on behalf of the Partnership, and it shall survive the death, incapacity or incompetency of a Limited Partner to the effect and extent permitted by law and the Transfer of all or any portion of such Limited Partner's Partnership Units and shall extend to such Limited Partner's heirs, distributees, successors, assigns and personal representatives. Section 14.5 Limited Liability of Limited Partners. The Limited Partners shall not be personally liable for any obligations or debts of the Partnership to third parties, except to the extent provided in the Act. ARTICLE XV: GRANT OF REDEMPTION RIGHTS TO LIMITED PARTNERS Section 15.1 Grant of Redemption Rights. The Partnership does hereby grant to each Limited Partner owning Class A Units and each such Limited Partner does hereby accept the right, but not the obligation (hereinafter such right sometimes referred to as the "Redemption Right"), to require the Partnership to redeem, for cash, on the Specified Redemption Date all or any portion of the Class A Units held by such Limited Partner at a redemption price equal to the Cash Amount. The Redemption Right of a Limited Partner may be exercised on one or more occasions by the Limited Partner. The Redemption Right shall be exercised pursuant to a Notice of Redemption delivered to the Partnership (with a copy to the General Partner) by the Limited Partner who is exercising the redemption right (the "Redeeming Partner"). A Limited Partner may not exercise the Redemption Right as to fewer Class A Units than the number of such Units that is equal to the lesser of (a) 100 Units or (b) all of the Class A Units held by such Limited Partner. Neither the Redeeming Partner nor any assignee of any Limited Partner shall have any right with respect to any Class A Units so redeemed to receive any distributions from the Partnership made after the Specified Redemption Date. The assignee of any Limited Partner may exercise the rights of such Limited Partner pursuant to this Section 15.1, and such Limited Partner shall be deemed to have assigned such rights to such assignee and shall be bound by the exercise of such rights by such Limited Partner's assignee. In connection with any exercise of such rights by such assignee on behalf of such Limited Partner, the Cash Amount shall be paid by the Partnership directly to such assignee and not to such Limited Partner. Section 15.2 General Partner Exchange. -70- (a) Notwithstanding the provisions of Section 15.1, if a Limited Partner elects to exercise the Redemption Right, the General Partner may, in its sole and absolute discretion, elect to assume directly and satisfy a Redemption Right by paying to the Redeeming Partner either the Cash Amount or the GP Shares Amount for each Class A Unit redeemed, as elected by the General Partner (in its sole and absolute discretion) on the Specified Redemption Date, whereupon the General Partner shall acquire the Class A Units offered for redemption by the Redeeming Partner and shall be treated for all purposes of this Agreement as the owner of such Partnership Interests. (b) In the event that the Partnership shall fail to pay the Cash Amount to any Redeeming Partner on the Specified Redemption Date pursuant to Section 15.1, and the General Partner shall not have elected pursuant to Section 15.2(a) to assume the obligations of the Partnership with respect thereto, the General Partner shall on the Specified Redemption Date contribute to the capital of the Partnership in cash (or, at its election, pay directly to the Redeeming Partner the full Cash Amount or GP Shares Amount) the full amount necessary to permit the Partnership to satisfy its obligations to pay to the Redeeming Partner the Cash Amount on the Specified Redemption Date, and the Partnership shall thereupon immediately pay to such Redeeming Partner such Cash Amount. (c) The General Partner shall provide the Redeeming Partner with at least five days' written notice prior to the Specified Redemption Date whether the Redemption Right will be redeemed by the Partnership or the General Partner for the Cash Amount or GP Shares Amount. The Redeeming Partner may rescind his or its Notice of Redemption at any time prior to the Specified Redemption Date if the Redemption Right is to be redeemed for the Cash Amount. (d) In the event that the General Partner satisfies the Redemption Right in the manner described in Sections 15.2(a) or (b), each of the Redeeming Partner, the Partnership, and the General Partner shall treat the transaction between the General Partner and the Redeeming Partner for federal income tax purposes as a sale of the Redeeming Partner's Partnership Units to the General Partner. (e) Each Redeeming Partner shall execute such documents as the General Partner may reasonably require in connection with the issuance of Common Stock upon exercise of the Redemption Right, including, without limitation, acknowledgement that the shares will be issued without registration under the Securities Act of 1933, as amended, and may not be resold unless subsequently registered or an exemption from registration is available. -71- (f) If the Redemption Right is satisfied by the delivery of Common Stock, the Redeeming Partner shall be deemed to become a holder of Common Stock as of the close of business on the Specified Redemption Date. Section 15.3 Certain Limitations on Redemption Right. Notwithstanding the provisions of Section 15.1, no Limited Partner shall have the right to require the Partnership to redeem any Class A Units until such Collateral is required to be released pursuant to the provisions of Section 19.3, unless the Limited Partner acknowledges and agrees at the time of conversion that the cash paid or Common Stock issued in redemption of the Class A Units shall continue to constitute Collateral under Article XIX. Section 15.4 Adjustments. The number of shares of Common Stock comprising the GP Shares Amount shall be subject to adjustment from time to time upon the occurrence of certain events, as follows: (a) Adjustment for Change in Capital Stock. If at any time after the date of this Agreement, the General Partner: (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 capital stock other than Common Stock; or (v) issues by reclassification of its Common Stock any shares of its capital stock; then the number of shares of Common Stock comprising the GP Shares Amount shall be adjusted so that the holder of a Class A Unit may receive in an exchange therefor pursuant to Section 15.2, the number of shares of capital stock of the General Partner which the holder of the Class A Unit would have owned immediately following such action if such Unit had been exchanged immediately prior thereto. The adjustment shall become effective immediately after the record date in the case of a dividend or distribution, and -72- immediately after the effective date in the case of a subdivision, combination or reclassification. (b) Adjustment for Other Distributions. If at any time after the date of this Agreement, the General Partner distributes to all holders of its Common Stock any of its assets or debt securities, the number of shares of Common Stock comprising the GP Shares Amount that are issuable in respect of each Class A Unit in an exchange therefor pursuant to Section 15.2 following the record date for such distribution shall be adjusted by multiplying the GP Shares Amount immediately prior to the distribution by a fraction, the numerator of which is CMP and the denominator of which is X: Where X = (CMP x NO) - F NO where: NO = Total number of shares of Common Stock outstanding. CMP = the Current Per Share Market Price of Common Stock on the record date of the distribution. F = the aggregate fair market value (determined by the Board of Trustees of the General Partner) on the record date of the distribution of the assets or debt securities being distributed. 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. In the event that such distribution or issuance is not actually made, the number of shares issuable in respect of each Class A Unit shall be readjusted to eliminate the effect to the calculation provided hereby. This subsection does not apply to (i) ordinary quarterly cash dividends or cash distributions on the Common Stock paid out of consolidated current or retained earnings of the General Partner as shown on the books of the General Partner and paid in the ordinary course of business, or (ii) cash dividends or cash distributions on the Common Stock paid entirely out of distributions made by the Partnership on its Class C Units as and to the extent permitted hereunder. (c) Adjustment for Common Stock Issue. (i) If at any time after the date of this Agreement, the General Partner issues shares of Common Stock for a consideration per share that is less than 100% (or 95%, or -73- such lesser percentage as the holders of the outstanding Class A Units may consent in writing, in the case of a firm commitment underwritten public offering) of the Current Market Price per share on the date the General Partner fixes the offering price of such additional shares, the number of shares of Common Stock comprising the GP Shares Amount issuable in respect of each Class A Unit in an exchange therefor pursuant to Section 15.2 shall be adjusted by multiplying the number of shares of Common Stock issuable in exchange for such Unit immediately prior to the issuance by a fraction, the numerator of which is the Current Per Share Market Price immediately prior to such issuance and the denominator of which is (X) where X = (O x CMP) + (I x IP) TO where: I = the additional shares of Common Stock being issued. O = the number of shares outstanding immediately prior to the issuance of such additional shares. IP = the per share consideration received for the issuance of such additional shares. CMP = the Current Per Share Market Price of Common Stock immediately prior to the adjustment. TO = the number of shares outstanding immediately after the issuance of such additional shares. The adjustment shall be made successively whenever any such issuance is made, and shall become effective immediately after such issuance. (ii) This subsection 15.4(c) does not apply to (A) any of the transactions described in subsection (b) of this Section 15.4, (B) Common Stock issued pursuant to options and warrants outstanding on the date hereof, (C) Common Stock issued to officers, directors, trustees or employees of, or consultants to, BRT or the Management Company 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 BRT's Board of Trustees or an appropriate committee of BRT's Board of Trustees, and (y) have an exercise price not less than 85% of the Current Market Price of BRT's Common Stock at the time of issuance of such warrant, right or option, (D) the issuance of Common Stock in redemption of Class A Units pursuant to Section 15.2, (E) shares of Common Stock issuable to Anthony A. Nichols, Jack -74- Gallagher, Brian F. Belcher, Gerard H. Sweeney, and certain other employees of the Management Company upon exercise of warrants issued to them on the date hereof pursuant to their employment agreements with the Management Company or otherwise, all as described with Proxy Statement, (F) shares of Common Stock issuable to SSI upon the exercise of Warrants acquired by SSI on the date hereof under the Common Share and Warrant Purchase Agreement, (G) shares of Common Stock issuable to Richard M. Osborne and/or the RMO Trust, a trust formed by Richard M. Osborne, upon the exercise of the warrants acquired them in June 1996 described in the Proxy Statement, and (H) units consisting of shares of BRT Common Stock, and warrants to purchase Common Stock, issuable to the RMO Trust in repayment of certain loans from the RMO Trust to BRT, and the shares of Common Stock issuable upon exercise of such warrants, all as described in the Proxy Statement. (d) Adjustment for Convertible Securities Issue. If at any time after the date hereof, the General Partner issues any securities convertible into or exchangeable or exercisable for Common Stock for consideration per share of Common Stock initially deliverable upon conversion, exchange or exercise of such securities, together with the consideration paid upon issuance of such securities, less than the Current Per Share Market Price of the Common Stock, on the date the General Partner fixes the offering price of such securities, the number of shares of Common Stock comprising the GP Shares Amount issuable in respect of each Class A Unit in an exchange therefore pursuant to Section 15.2 shall be adjusted by multiplying the number of shares of Common Stock issuable in exchange for such Unit immediately prior to the issuance by a fraction, the numerator of which is the Current Per Share Market Price of the Common Stock immediately prior to such issuance and the denominator of which is X ("X") where X equals: (O x CMP) + (I x IP) TO where: O = the number of shares of Common Stock outstanding immediately prior to the issuance of such securities. IP = the consideration per share of Common Stock received and receivable for the issuance of such securities, calculated on the basis of the maximum number of shares of Common Stock deliverable upon conversion, exchange or exercise of such securities at the initial conversion, exchange or exercise rate. I = the maximum number of shares of Common Stock deliverable upon conversion, exchange or -75- exercise of such securities at the initial conversion, exchange or exercise rate. TO = the sum of (1) the number of shares of Common Stock outstanding immediately prior to the issuance of such securities, plus (2) the maximum number of shares of Common Stock deliverable upon conversion, exchange or exercise of such securities at the initial conversion, exchange or exercise rate. CMP = the Current Per Share Market Price of Common Stock immediately prior to the adjustment. The adjustment shall be made successively whenever any such issuance is made, and shall become effective immediately after such issuance. If all of the Common Stock deliverable upon conversion, exchange or exercise of such securities has not been issued when such securities are no longer outstanding, then the Exercise Price shall promptly be readjusted to the Exercise Price which would then be in effect had the adjustment upon the issuance of such securities been made on the basis of the actual number of shares of Common Stock issued upon conversion, exchange or exercise of such securities. This subsection 15.4(d) does not apply to any of the transactions described in subsections (b) or (c) of this Section 15.4. (e) When No Adjustment Required. No adjustment need be made for a change in the par value or no par value of the Common Stock. Section 15.5 Certain Covenants. Each Limited Partner covenants and agrees with the General Partner that all Class A Units delivered for redemption by it pursuant to this Article XV shall be delivered to the Partnership or the General Partner, as the case may be, free and clear of all Encumbrances. -76- ARTICLE XVI: CONVERSION OF CLASS B UNITS AND CLASS C UNITS INTO GENERAL PARTNER UNITS Section 16.1 Automatic Conversion of Class C Units into General Partner Units. Simultaneously with the completion of a Qualified Offering by BRT of shares of its Common Stock, each outstanding Class C Unit shall be automatically converted into one General Partner Unit, without any action being required on the part of either the holders of the Class C Units or the Partnership to effect such automatic conversion. Section 16.2 Automatic Conversion of Class B Units into General Partner Units. (a) Simultaneously with the completion of a Qualified Offering by BRT of shares of its Common Stock, each outstanding Class B Unit shall be automatically converted into one General Partner Unit, without any action being required on the part of either the holders of the Class B Units or the Partnership to effect such automatic conversion. (b) At the time of such conversion, the Partnership shall make a cash distribution to the holders of the Class B Units in an amount equal to the sum of (i) any then unpaid Class B Preferred Distribution accrued through the date of conversion, plus (ii) any then unpaid Accumulated Class B Distributions. ARTICLE XVII: LIMITED PARTNER REPRESENTATIONS AND WARRANTIES Section 17.1 Representations and Warranties of the Limited Partners. (a) Each of the Limited Partners hereby represents and warrants, severally and not jointly, to the Partnership and the General Partner as follows: (i) That such Partner, if a corporation, partnership or other entity formed pursuant to any statute or other governmental authority, is validly formed and in good standing under the laws of the jurisdiction of its formation. (ii) That, if such Partner is an Entity, the execution, delivery and performance of this Agreement by such Partner has been duly and validly authorized by all necessary corporate, partnership, or other similar action. (iii) That this Agreement has been duly executed and delivered by such Limited Partner, and constitutes -77- such Partner's legal, valid and binding obligation, enforceable against it in accordance with the terms hereof. (iv) That no consent, waiver, approval or authorization of, or filing, registration or qualification with, or notice to any governmental unit or other person is required to be made, obtained or given by such Limited Partner in connection with the execution, delivery and performance of this Agreement and the transactions contemplated hereby other than consents, waivers, approvals or authorizations which have been obtained prior to the date hereof, or which are disclosed on a Schedule to the Contribution Agreement. (v) That such Partner understands that the Class A Units to be issued hereunder and the shares of Common Stock issuable in redemption of Class A Units pursuant to Article XV hereof will not be registered (except pursuant to the Registration Rights Agreement) under the Securities Act, on the grounds that the issuance of such securities is exempt from registration pursuant to Section 4(2) of the Securities Act or Regulation D promulgated thereunder, and that the reliance of the General Partner and the Partnership on such exemptions is predicated in part on the Limited Partner's representations, warranties and covenants set forth herein. (vi) That the Units and any shares of Common Stock acquired in exchange therefor by such Partner will be acquired for its own account, not as a nominee or agent, and without a view to resale or other distribution within the meaning of the Securities Act and the rules and regulations thereunder and that it will not distribute any such securities in violation of the Securities Act. (vii) That such Partner's principal residence or place of business is as set forth on Exhibit A. (viii) That such Partner understands that the Units and Common Stock issued in respect thereof must be held indefinitely unless subsequently registered under the Securities Act or an exemption from registration is available, and that any routine sales of Common Stock made under Rule 144 of the Securities and Exchange Commission under the Securities Act may be made only in limited amounts and in accordance with the terms and conditions of that Rule and that Rule 144 will not be available for use in connection with resales of any shares of Common Stock issued in respect of Units for at least two years after the date of issuance or for any Units at any time. (ix) That such Partner is well versed in financial matters, has had dealings in securities, including "restricted securities," and is fully capable of understanding -78- the type of investment being made in the Units and the Common Stock and the risks involved in connection therewith. (x) That such Partner will not sell transfer or otherwise dispose of any of the Units or the Common Stock acquired in exchange therefor unless such securities have been registered under the Securities Act or the holder thereof shall have furnished to the General Partner such information as the General Partner may reasonably require to the effect that such securities may be sold without registration thereunder. (b) Each Limited Partner also agrees that certificates, if any, representing Units or Common Stock issued to it may contain a restrictive legend noting the restrictions on transfer described in this section and required by federal and applicable state securities laws and that appropriate "stop-transfer" instructions may be given to the transfer agent for the General Partner and the Partnership. ARTICLE XVIII: GENERAL PARTNER REPRESENTATIONS AND WARRANTIES The General Partner represents and warrants to the Partnership and the Limited Partners as follows: Section 18.1 Organization. The General Partner is duly validly existing and in good standing under the laws of the State of Maryland. Section 18.2 Due Authorization; Binding Agreement. The execution, delivery and performance of this Agreement by the General Partner has been duly and validly authorized by all necessary trust action of the General Partner. This Agreement has been duly executed and delivered by the General Partner, and constitutes a legal, valid and binding obligation of the General Partner, enforceable against the General Partner in accordance with the terms hereof. Section 18.3 Consents and Approvals. No consent, waiver, approval 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 General Partner in connection with the execution, delivery and performance of this Agreement other than consents, waivers, approvals or authorizations which have been obtained prior to the date hereof. -79- ARTICLE XIX: INDEMNIFICATION Section 19.1 Indemnification. (a) Subject to the provisions of Section 19.2, the General Partner hereby indemnifies and holds harmless the Partnership and each Limited Partner against and from any and all liabilities, demands, claims, actions, causes of action, assessments, losses, fines, penalties, costs, damages and expenses (including, without limitation, attorneys' and accounting fees and expenses) (any such item, a "Liability," and collectively "Liabilities") sustained or incurred by such Limited Partner or the Partnership as a result of or arising out of (i) any inaccuracy in any representation or warranty made in this Agreement by the General Partner, or (ii) any inaccuracy in any representation or warranty made in any Transaction Document by the General Partner, or (iii) any breach by the General Partner of any of its obligations under any Transaction Document or this Agreement. (b) Subject to the provisions of Section 19.2 hereof, each Limited Partner who is a Pledgor (as defined in Section 19.3(a)), severally and not jointly, indemnifies and holds harmless the Partnership and the General Partner against and from all Liabilities sustained or incurred by the Partnership or the General Partner as a result of or arising out of (i) any inaccuracy in a representation or warranty made under this Agreement by such Limited Partner, or (ii) any inaccuracy in any representation or warranty made in any Transaction Document by such Limited Partner, or (iii) any breach by such Limited Partner of its obligations hereunder or under any Transaction Document. Section 19.2 Limitations on Indemnification Obligations. (a) No indemnified person shall be entitled to indemnification under Section 19.1 hereof unless the indemnified person shall have delivered a written notice specifying in reasonable detail the matter giving rise to such person's right to indemnification to the indemnifying party on or before the second anniversary of the date hereof. (b) No person providing indemnification hereunder shall be liable under Section 19.1 hereof unless the total amount recoverable from such indemnifying person exceeds, with respect to all indemnities provided by such indemnifying person hereunder, an aggregate of $75,000 in the case of SSI, an aggregate of $75,000 in the case of The Nichols Company, and an aggregate of $75,000 in the case of BRT. (c) If a claim for indemnification arises from a third party claim asserted against the Partnership, the indemnifying party shall have the right, at its own expense, to -80- participate in the defense of the claim, action or proceeding which resulted in the claim for indemnification, and if such right is exercised, the parties shall cooperate in the defense of such action or proceeding; provided, however, the indemnified party shall at all times have the right to be in control of such defense. (d) Indemnification pursuant to Section 19.1 hereof and the remedies in respect thereof as set forth in Section 19.3 hereof shall be the sole and exclusive remedy of the indemnified parties for any matter covered thereby, including claims for breaches of representations, warranties, covenants, or other duties or obligations set forth in the Contribution Agreement or other Transaction Document, regardless of the legal theories on which the claim for indemnification is based. Section 19.3 Security and Remedies. (a) Each of Safeguard and Nichols, on behalf of themselves and their affiliates (collectively, "Pledgors") hereby grants to the Partnership a lien upon and continuing security interest in such Pledgor's Class A Units, and in any shares of Common Stock of BRT issued upon redemption of such Class A Units pursuant to Article XV (collectively, the "Collateral") which shall be security for the indemnification obligations of such Pledgor hereunder. The indemnification obligation of each Pledgor shall be payable out of such Pledgor's entire Collateral, but only from such Collateral. Any transfer by a Pledgor of such Pledgor's Class A Units, or shares of Common Stock issued upon redemption of Class A Units, shall be subject to the lien and security interest granted hereby. Each Pledgor represents and warrants that his or its Class A Units constituting Collateral are owned by it free and clear of Encumbrances other than Permitted Encumbrances, which Permitted Encumbrances are senior in priority to the lien and security interest created under this Section 19.3. (b) Any person claiming indemnification hereunder shall (when the amount claimed is known) deliver written notice (the "Indemnity Notice") to the party or parties from whom indemnification is claimed describing in reasonable detail the rationale for the amount for which indemnification is sought. A Limited Partner shall be entitled to satisfy his indemnification obligation by directing the Partnership to cancel in the Register that number of Class A Units included in the Collateral as shall be equal in value (based on the Current Per Share Market Price of the Common Stock issuable in exchange therefor pursuant to Section 15.2 as of the date of the Indemnity Notice) to the amount recoverable from such Limited Partner hereunder. If such indemnification obligation shall not have been satisfied by any party within thirty (30) days after its receipt of an Indemnity -81- Notice, the matter shall be submitted for binding arbitration in accordance with the provisions of Article XX below. (c) In the case of an adverse decision by the arbitrators in respect of indemnification being provided by any Limited Partner, if such Limited Partner does not satisfy the obligations within ten (10) days after the decision is rendered in the arbitration, then the Partnership shall cancel in the Register, without the payment of any consideration to or the taking of any action required by the Limited Partner, that number of Class A Units included in the Collateral as shall be equal in value (based on the Current Per Share Market Price of the Common Stock issuable in exchange therefor pursuant to Section 15.2 as of the date of the Indemnity Notice) to the amount recoverable from such Limited Partner hereunder. Within ten (10) days thereafter, the General Partner shall deliver notice of such cancellation to the Limited Partner affected. (d) The rights of the Partnership and General Partner to cancel Collateral shall be the sole and exclusive remedy of the General Partner or the Partnership under this Article XIX and no Limited Partner shall have any personal liability hereunder, except as otherwise provided in the next succeeding section. Section 19.4 Restriction on Transfer. (a) In connection with the security interests granted by the Limited Partners to the Partnership under Section 19.3 hereof, except as provided in paragraph (b), the Limited Partners agree that any Class A Units owned by such Limited Partners shall not be Transferred, without the consent of the General Partner until the second anniversary of the date hereof. In addition, in the event that notice of a claim for indemnification has been duly given pursuant to Section 19.2(a) but the matter for which indemnification is sought or the amount of the indemnification required to be paid has not been finally determined at the second anniversary of the date hereof, Class A Units having a sufficient value (based on the Current Per Share Market Price at such date of the Common Stock issuable in exchange therefor pursuant to Section 15.2) shall remain subject to the restrictions of this Section 19.4(a), until such time as the matter in question has been finally determined. (b) Nothing in this Agreement shall prohibit the following Transfers: (i) transfers of Class A Units to the Partnership under Sections 4.6, 4.7 and 4.8; (ii) transfers occurring by reason of a Limited Partner's exercise of his Redemption Rights subject to the pledge of the Common Stock received upon redemption pursuant to Section 19.3 (a); (iii) transfers by The Nichols Company of Class A Units to its equity owners; (iv) transfers by a Limited Partner to his or its -82- Affiliates; or (v) transfers in connection with the foreclosure of a Permitted Encumbrance. In the event of a Transfer permitted under clause (iii) or (iv), the transferee shall as a condition of such transfer execute an agreement acknowledging that the Class A Units are Collateral and are being transferred subject to the Partnership's security interest therein. (c) Notwithstanding the foregoing, a Limited Partner may, with the consent of the General Partner exercised by its independent trustees in their sole and absolute discretion, be relieved of the restrictions on transferability contained in this Section 19.4 by (i) consenting to personal liability (by execution and delivery of an agreement to such effect in form and substance reasonably satisfactory to the General Partner) for any indemnification obligations secured by the Partnership Units, or (ii) pledging (by execution and delivery of a pledge agreement in form and substance reasonably satisfactory to the General Partner) substitute collateral which, in the reasonable determination of the General Partner, is substantially equivalent in value to the Class A Units then comprising Collateral. In the event that a Limited Partner is relieved of the restrictions on transferability in accordance with the terms of this Section 19.4, the security interest in such Limited Partner's Class A Units hereunder shall terminate without further action, and the Partnership, at the request of such Limited Partner, shall promptly execute and deliver any document or instrument reasonably requested by such Limited Partner to evidence such termination. Section 19.5 No Credit to Capital Accounts. No payments made by a Limited Partner pursuant to this Article XIX shall be credited to the Capital Account of such Limited Partner. Section 19.6 Release of Collateral. The lien and security interest on the Collateral shall terminate on the second anniversary of the date of this Agreement, except to the extent provided in the next sentence. In the event that notice of a claim for indemnification has been duly given pursuant to Section 19.2(a) but the matter for which indemnification is sought or the amount of the indemnification required to be paid has not been finally determined at the second anniversary of the date hereof, Class A Units having a sufficient value (based on the Current Per Share Market Price at such date of the Common Stock issuable in exchange therefor pursuant to Section 15.2) shall remain subject to the lien and security created under Section 19.3, until such time as the matter in question has been finally determined. -83- ARTICLE XX ARBITRATION OF DISPUTES Section 20.1 Settlement of Disputes. The parties will attempt in good faith to resolve any and all controversies of every kind and nature between the parties to this Agreement arising out of or in connection with the existence, construction, validity, interpretation or meaning, performance, non-performance, enforcement, operation, breach, continuance or termination of this Agreement (each, a "Dispute") promptly by negotiations between senior executives of the parties who have authority to settle the Dispute (and who do not have direct responsibility for administration of this Agreement). The disputing party shall give the other party written notice of the Dispute. Within twenty days after receipt of said notice, the receiving party shall submit to the other a written response. The notice and response shall include (a) a statement of each party's position and a summary of the evidence and arguments supporting its position, and (b) the name and title of the executive who will represent that party. The executives shall meet at a mutually acceptable time and place within thirty 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 sixty days of the disputing party's notice, or if the party receiving said notice will not meet within thirty 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. Section 20.2 Arbitration. (a) If the Dispute has not been resolved pursuant to the aforesaid mediation procedure within sixty days of the initiation of such procedure, or if either party will not participate in a mediation, the Dispute shall be submitted to binding 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 shall be held in Philadelphia, Pennsylvania before a panel of three (3) arbitrators, one selected by the Partnership, and one selected by the SSI and The Nichols Company, and the third selected by the arbitrators selected by the parties. All deadlines specified in this Section may be extended by mutual agreement. (b) The arbitration panel shall have the discretion to include in its decision a direction that all or part of the attorneys' fees and costs of any party or parties and/or the costs of such arbitration be paid by any other party or parties. On the application of a party before or after the initial decision of the arbitration panel, and proof of its attorneys' fees and costs, the arbitration panel shall order the other party to make any payments directed pursuant to the preceding sentence. -84- Section 20.3 Binding Character. Any decision rendered by the arbitration panel pursuant to this Article XX shall be final and binding on the parties hereto, and judgment thereon may be entered by any state or federal court of competent jurisdiction. Section 20.4 Exclusivity. Arbitration shall be the exclusive method available for resolution of claims, disputes and controversies described in Section 20.1 hereof, and the Partnership and its Partners stipulate that the provisions hereof shall be a complete defense to any suit, action, or proceeding in any court or before any administrative or arbitration tribunal with respect to any such claim, controversy or dispute. The provisions of this Article XX shall survive the dissolution of the Partnership. Section 20.5 No Alteration of Agreement. Nothing contained herein shall be deemed to give the arbitrators any authority, power or right to alter, change, amend, modify, add to, or subtract from any of the provisions of this Agreement. ARTICLE XXI: ASSUMPTION OF LIABILITIES AND INDEMNIFICATIONS Section 21.1 Assumption of Liabilities. The Partnership hereby assumes and shall pay, perform and discharge when due, each of those liabilities and obligations relating to the Contributed Assets expressly set forth in Section 2.6 of the Contribution Agreement as being assumed by the Partnership (the "Assumed Liabilities"). Section 21.2 Indemnification. From and after the date hereof, the Partnership shall indemnify and hold harmless each of the Limited Partners and its Affiliates against and from all liability, demands, claims, actions or causes of action, assessments, losses, fines, penalties, costs, damages and expenses (including, without limitation, reasonable attorneys' and accountants' fees and expenses) sustained or incurred by such Limited Partner or Affiliate or any assignee or successor thereof (including, without limitation, any Substituted Limited Partner) as a result of or arising out of any Assumed Liability. If a claim for indemnification is asserted against the Partnership hereunder, the Partnership shall have the right, at its own expense, to participate in the defense of any claim asserted against such Limited Partner or its Affiliate which resulted in the claim for indemnification, and if such -85- right is exercised, the parties shall cooperate in the defense of such action or proceeding. ARTICLE XXII: GENERAL PROVISIONS Section 22.1 Notices. All notices, offers or other communications required or permitted to be given pursuant to this Agreement shall be in writing and may be personally served, telecopied, delivered by reputable courier service or sent by United States mail and shall be deemed to have been given when delivered in person, upon receipt of telecopy or courier service or three business days after deposit in United States Mail, registered or certified, postage prepaid, and properly addressed, by or to the appropriate party. For purposes of this Section 22.1, the addresses of the parties hereto shall be as set forth on Exhibit "A" hereto. The address of any party hereto may be changed by a notice in writing given in accordance with the provisions hereof. Section 22.2 Successors. This Agreement and all the terms and provisions hereof shall be binding upon and shall inure to the benefit of all Partners, and their legal representatives, heirs, successors and permitted assigns, except as expressly herein otherwise provided. Section 22.3 Effect and Interpretation. This Agreement and all of the terms and provisions hereof shall be governed by and construed in accordance with the law, including the law on conflicts of law, of the State of Delaware. Section 22.4 Counterparts. This Agreement may be executed in counterparts, each of which shall be an original, but all of which shall constitute one and the same instrument. Section 22.5 Partners Not Agents. Nothing contained herein shall be construed to constitute any Partner the agent of another Partner, except as specifically provided herein, or in any manner to limit the Partners in the carrying on of their own respective businesses or activities. Notwithstanding anything to the contrary contained herein, no recourse shall be had by the Partnership or any Partner against any trustee, director, shareholder, officer, employee, agent or attorney of the General Partner under this Agreement, and none of -86- the foregoing shall have any personal liability for or with respect to any of the foregoing. Section 22.6 Entire Understanding; Etc. This Agreement constitutes the entire agreement and understanding among the Partners and supersedes any prior understandings and/or written or oral agreements among them respecting the subject matter within. Section 22.7 Amendments. (a) Except as provided in Sections 22.7(b) and (c), the General Partner shall have the power and authority, in its sole discretion and without the consent of any other Partner, to amend any and all of the provisions of this Agreement to issue additional Partnership Interests, or to establish the rights, privileges, duties and obligations of any Partner or class of Partnership Interest, or otherwise, except that, without the consent of each existing Partner adversely affected thereby, the General Partner shall not (except, in each and every case, as may be required to correct plain errors or ambiguities in this Agreement) amend this Agreement so as to (i) require any Partner to make any additional contribution to the capital of the Partnership; or (ii) require any Partner to restore any negative balance in its capital account or otherwise to contribute any capital to the Partnership, except as required under the Act, the Code or other applicable laws or as expressly provided herein. In addition, this Agreement shall not be amended without the prior written consent of each Partner adversely affected if such amendment would (i) convert a Limited Partnership Interest in the Partnership into a General Partnership Interest, or (ii) modify the limited liability of a Limited Partner. (b) In addition to the foregoing, for so long as any Class A Units remain outstanding, this Agreement may not be amended unless such amendment is approved by the holders of 75% of the Class A Units then outstanding, except to: (i) add to the obligations of the General Partner or surrender any right or power granted to the General Partner or any Affiliate of the General Partner for the benefit of the Limited Partners; (ii) reflect the issuance of additional Partnership Interests, and the admission, substitution, termination or withdrawal of Partners, in each case in accordance with the provisions of this Agreement; (iii) record permitted Transfers of Partnership Units on the books of the Partnership; -87- (iv) reflect a change that is of an inconsequential nature and does not adversely affect the holders of the Class A Units in any material respect; or (v) cure any ambiguity or correct plain errors in this Agreement. (c) The General Partner will provide notice to the Limited Partners promptly after any action under Section 22.7(b) if taken. (d) This Section 22.7 may not be amended except with the prior written consent of the General Partner and the holders of 75% of the then outstanding Limited Partnership Units of each class. Section 22.8 Severability. If any provision of this Agreement, or the application of such provision to any person or circumstance, shall be held invalid by a court of competent jurisdiction, the remainder of this Agreement, or the application of such provision to persons or circumstances other than those to which it is held invalid by such court, shall not be affected thereby. Section 22.9 Trust Provision. This Agreement, to the extent executed by the trustee of a trust, is executed by such trustee solely as trustee and not in a separate capacity. Nothing herein contained shall create any liability on, or require the performance of any covenant by, any such trustee individually, nor shall anything contained herein subject the individual personal property of any trustee to any liability. Section 22.10 Pronouns and Headings. As used herein, all pronouns shall include the masculine, feminine and neuter, and all defined terms shall include the singular and plural thereof wherever the context and facts require such construction. The headings, titles and subtitles herein are inserted for convenience of reference only and are to be ignored in any construction of the provisions hereof. Any references in this Agreement to "including" shall be deemed to mean "including without limitation". Section 22.11 Assurances. Each of the Partners shall hereafter execute and deliver such further instruments and do such further acts and things as may be required or useful to carry out the intent and -88- purpose of this Agreement and as are not inconsistent with the terms hereof. IN WITNESS WHEREOF, the parties hereto have executed this Agreement or caused this Agreement to be executed as of the date and year first above written. GENERAL PARTNER: BRANDYWINE REALTY TRUST By: /s/ Gerard H. Sweeney ---------------------------------- Name: Gerard H. Sweeney, President CLASS A LIMITED PARTNERS: Safeguard Scientifics (Delaware), Inc. By: /s/ Donald R. Caldwell ---------------------------------- Name: Donald R. Caldwell Title: President The Nichols Company By: /s/ Anthony A. Nichols ---------------------------------- Anthony A. Nichols, President Brian F. Belcher By: /s/ Anthony A. Nichols ---------------------------------- Anthony A. Nichols, his attorney-in-fact Jack R. Loew By: /s/ Anthony A. Nichols ---------------------------------- Anthony A. Nichols, his attorney-in-fact -89- Craig C. Hough By: /s/ Anthony A. Nichols ------------------------------- Anthony A. Nichols, his attorney-in-fact Gary C. Bender By: /s/ Anthony A. Nichols ------------------------------- Anthony A. Nichols, his attorney-in-fact Werner Fricker By: /s/ Anthony A. Nichols ------------------------------- Anthony A. Nichols, his attorney-in-fact Lotz Designers, Engineers and Constructors, Inc. By: /s/ Anthony A. Nichols ------------------------------- Anthony A. Nichols, his attorney-in-fact RDC Institute, Inc. By: /s/ Anthony A. Nichols ------------------------------- Anthony A. Nichols, his attorney-in-fact CLASS B LIMITED PARTNER: BRANDYWINE REALTY TRUST By: /s/ Gerard H. Sweeney ------------------------------- Gerard H. Sweeney, President -90- CLASS C LIMITED PARTNER: BRANDYWINE REALTY TRUST By: /s/ Gerard H. Sweeney ----------------------------------- Gerard H. Sweeney, President The Management Company joins in this Agreement solely for the purpose of agreeing to be bound by the provisions of Section 8.2(b) hereof. BRANDYWINE REALTY SERVICES CORPORATION By: /s/ Gerard H. Sweeney ----------------------------------- Authorized Officer -91- EX-10.2 5 EXHIBIT 10.2 DISTRIBUTION SUPPORT AND LOAN AGREEMENT THIS DISTRIBUTION SUPPORT AND LOAN AGREEMENT (this "Agreement"), dated as of this 22nd day of August, 1996, between SAFEGUARD SCIENTIFICS (DELAWARE), INC., a Delaware corporation ("Lender") and BRANDYWINE OPERATING PARTNERSHIP, L.P., a Delaware limited partnership ("Borrower"). RECITALS: A. Lender's parent company, Safeguard Scientifics, Inc. ("Safeguard"), has entered into a certain letter of intent with Brandywine Realty Trust ("BRT") and The Nichols Company ("TNC") dated March 20, 1996 (the "Letter of Intent") which provides, inter alia, that Lender will advance certain funds to Borrower. B. Lender and Borrower now desire to set forth the terms and conditions of such advances. NOW, THEREFORE, in consideration of the foregoing Recitals and the mutual covenants contained herein, Borrower and Lender, intending to be legally bound, hereby agree as follows: ARTICLE I DEFINITIONS AND ACCOUNTING TERMS SECTION 1.1. Certain Defined Terms. As used in this Agreement, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined). Any capitalized terms used but not defined herein shall have the respective meanings given to such terms in the Operating Partnership Agreement. "Advance Request" has the meaning given to such term in Section 2.2. "Advances" means funds advanced or deemed advanced by Lender to Borrower under Section 2.1. "Business Day" means a day other than a Saturday, Sunday or other day on which federal savings banks located in Pennsylvania are authorized or required to close. "Closing Cost Advances" means any Advances made pursuant to Section 2.1.2. "Collateral" has the meaning given to such term in Section 3.1. "Event of Default" has the meaning given to such term in Section 4.1. "GAAP" means generally accepted accounting principles in effect from time to time, applied in a consistent manner. "GECC Letter of Credit" means that certain Letter of Credit dated November 24, 1995 (LC#100921) in the amount of $1,500,000 issued by MidLantic Bank, NA in respect of the GECC Loan on which Safeguard is the account party. "GECC Loan" means the loan made by GE Capital Corporation to finance the acquisition of Lawrenceville Office Park, which is one of the Portfolio A Properties. "Horsham 6 Tenant Improvement Loan" means the $460,000 loan advanced by Lender to finance certain tenant improvements to Horsham Business Center Building 6, Pennsylvania, one of the Portfolio B Properties. "Letter of Credit Advances" means any Advances made pursuant to Section 2.1.4. "Liquidation" means any payment or distribution of assets of Borrower of any kind or character, whether in cash, property or securities, to creditors upon any dissolution or winding up or total or partial liquidation or reorganization of Borrower, whether voluntary or involuntary or in bankruptcy, insolvency, receivership or other proceeding. "Loan" has the meaning given to such term in Section 2.1. "Maturity Date" has the meaning given to such term in Section 2.5. "Meetinghouse Letter of Credit" means that certain Letter of Credit dated July 12, 1993 (LC #100148) in the amount of $500,000 issued by Continental Bank to New England Mutual Life Insurance Company in respect of the mortgage indebtedness encumbering the Meetinghouse Business Center Properties 1-4, which are part of the Portfolio B Properties, on which Safeguard is the account party. "Note" has the meaning given to such term in Section 2.3. "Operating Partnership Agreement" means the Agreement of Limited Partnership of Brandywine Operating Partnership, L.P. of even date herewith. "Portfolio A Properties" has the meaning given to such term in the Operating Partnership Agreement. -2- "Portfolio B Properties" has the meaning given to such term in the Operating Partnership Agreement. "Portfolio C Properties" has the meaning given to such term in the Operating Partnership Agreement. "Preferred Equity Position" means BRT's capital contribution in Borrower of $3,937,000, in exchange for Units of Class B Limited Partnership Interests in Borrower, as reduced from time to time by distributions treated as a return of capital as provided in the Operating Partnership Agreement. "Preferred Return" means BRT's 9.5% annual, cumulative, non- compounding preferred rate of return on the Preferred Equity Position, calculated as provided in the Operating Partnership Agreement. "Preferred Return Advances" means any Advances made pursuant to Section 2.1.3. "Prime Rate" means the "prime rate" as reported by the Wall Street Journal, which presently defines the term as "the base rate on corporate loans posted by at least 75% of the nation's 30 largest banks." If at any time the Wall Street Journal ceases to report such prime rate or changes its definition, Lender shall have the right to select a substituted rate that Lender determines, in the exercise of its reasonable commercial discretion, to be most comparable to the prime rate as reported and defined by the Wall Street Journal today. Such substituted rate shall, upon the sending of written notice to Borrower, constitute the "Prime Rate." "Qualified Offering" means the time at which BRT completes a public or private offering of debt or equity securities generating either: (a) at least $35,000,000 of net unrestricted cash proceeds at a price per share no less than the book value of BRT's common stock on the last day of the quarter immediately preceding the quarter in which the Qualified Offering occurs; or (b) net unrestricted cash proceeds of at least $25,000,000, but less than $35,000,000, at a price per share of not less than $5.50, as adjusted in accordance with customary practice for stock splits, stock combinations and stock dividends occurring after the date hereof. "Refinancing" means a refinancing of the Portfolio A Properties, Portfolio B Properties, and/or Portfolio C Properties of the Borrower, or any of them, that results in net proceeds sufficient for repayment of the Loan. "Transaction Documents" means this Agreement, the Note and each other document, instrument, certificate, or agreement reflecting the transactions described in the Operating Partnership Agreement. -3- "Working Capital Advances" means any Advances made pursuant to Section 2.1.1. "Working Capital Advances Period" has the meaning given to such term in Section 2.1.1. SECTION 1.2. Accounting Terms. All accounting terms not specifically defined herein shall be construed, and all financial data submitted pursuant to this Agreement shall be prepared, in accordance with GAAP. ARTICLE II THE LOAN SECTION 2.1. The Loan. Subject to the terms and conditions hereinafter provided, Borrower may request (and in the case of Letter of Credit Advances shall be deemed to have requested), and Lender shall make (and in the case of Letter of Credit Advances shall be deemed to have made), advances to Borrower in such amounts as will not exceed the following amounts (collectively, the "Loan"): 2.1.1. Working Capital Advances. From time to time from the date hereof until the earlier to occur of the Maturity Date or January 31, 1998 (the "Working Capital Advances Period"), up to the aggregate principal amount of Seven Hundred Thousand Dollars ($700,000), to be used for working capital needs of a Portfolio B Property or a Portfolio C Property in excess of cash flow and available reserves for the operation of the relevant Property, as reduced by any monies advanced by Lender after the date hereof in respect of amounts drawn under the Meetinghouse Letter of Credit. Borrower may borrow, repay amounts borrowed and reborrow during the Working Capital Advances Period. 2.1.2. Closing Cost Advances. From time to time until December 31, 1996, amounts calculated as provided in the next sentence to be used to pay the Borrower's 50% share of the transfer taxes on the Portfolio B Properties contributed to Borrower by Lender on the date hereof, which share is presently estimated at $172,000, and the other closing costs incurred by Borrower in acquiring the Portfolio A Properties, the Portfolio B Properties and the Portfolio C Properties contributed to Borrower by Lender on the date hereof directly and via the contribution of partnership interests in the Title Holding Partnerships that own such Properties. The amount of such expenses to be funded with loans by Lender under this Section 2.1.2 shall be the percentage obtained by multiplying the amount of such expenses by a fraction, the numerator of which is the number of Class A Units issued on the date hereof under the Operating Partnership Agreement and the denominator of which is the sum of the number of Class A Units and Class B Units so issued on the date hereof. Lender's total advances under this Section 2.1.2 shall not exceed $400,000. -4- 2.1.3. Preferred Return Advances. From time to time until the earlier to occur of (i) the completion of a Qualified Offering (ii) the satisfaction in full of the GECC Loan, (iii) a Liquidation, or (iv) December 31, 2001, to the extent that Borrower is unable to distribute fully in any quarter the Preferred Return out of its other sources of cash available for such purposes under the Operating Partnership Agreement, up to the amount of such shortfall in the Preferred Return for such quarter but in no event shall the amount that Lender is required to advance under this Section 2.1.3 for any quarter exceed the aggregate amount payable for such quarter, if any, on the 775,000 common shares of BRT purchased by Safeguard or a wholly-owned subsidiary of Safeguard on the date hereof. 2.1.4. Letter of Credit Advances. Any and all monies paid by Lender on or after the date hereof in respect of amounts drawn under, or costs and expenses incurred in connection with, the GECC Letter of Credit and the Meetinghouse Letter of Credit (as the same may be replaced, reinstated or substituted from time to time) shall for all purposes hereof be treated as additional amounts advanced to Borrower hereunder which comprise part of the Loan. Lender shall confirm to Borrower in writing as to the date, amount and types of Letter of Credit Advances. SECTION 2.2. Requests and Disbursements; Conditions Precedent. On or before the date of any proposed Advance other than a Letter of Credit Advance, Borrower shall submit to Lender a loan advance requisition in the form of Exhibit 2.2 attached hereto (an "Advance Request"), including a detailed breakdown of items to be funded. Within seven (7) days after receiving an Advance Request, Lender shall make such Advance to Borrower by certified or bank check or by wire transfer of immediately available funds to Borrower's account at a bank designated by Borrower in the Advance Request; provided, however, that: 2.2.1. Appraisals. If Lender shall so request, Lender shall have received at the time of any Working Capital Advance a written valuation of the Portfolio B Property or the Portfolio C Property for which such Advance is to be used, prepared by a Pennsylvania certified appraiser, in form and amount satisfactory to Lender; and 2.2.2. No Defaults. No Event of Default shall have occurred and be continuing or will result from the making of the Advance, and no event shall have occurred and be continuing that with notice or lapse of time or both would, if unremedied, be an Event of Default. SECTION 2.3. Interest. Interest on the Advances shall accrue at an annual rate equal to the Prime Rate and shall be payable quarterly in arrears, on the first day of each calendar quarter and on the date on which any repayment of the outstanding principal amount of an Advance is made pursuant to this Agreement. Payment of interest shall be subordinated and subject in right of payment to the prior payment in full of the Preferred -5- Return payable through the end of the period in respect of which such interest is being paid. Computations of interest hereunder shall be made on the basis of a year of 365 or 366 days, as the case may be, for the actual number of days (including the first day but excluding the last day) elapsed. SECTION 2.4. The Note. The obligation of Borrower to repay the Advances shall be evidenced by the promissory note of Borrower (the "Note"), dated the date of this Agreement, substantially in the form of Exhibit 2.4 attached hereto. SECTION 2.5. Repayment of Certain Advances. Subject to the provisions of Section 2.8, the outstanding amount of any and all Advances other than the Preferred Return Advances made under the Loan, together with any accrued but unpaid interest thereon, shall become due and payable on the earliest to occur of the following (the "Maturity Date"): (a) The completion of a Qualified Offering; (b) A Refinancing which generates sufficient funds for repayment of such Advances with interest and of the Horsham 6 Tenant Improvement Loan with interest; (c) A Liquidation; (d) July 31, 1999, if at such time the Operating Partnership has sufficient funds for repayment; or (e) December 31, 2001. SECTION 2.6. Repayment of Preferred Return Advances. Subject to the provisions of Section 2.8, the outstanding amount of any and all Preferred Return Advances made under the Loan, together with any accrued but unpaid interest thereon, shall become due and payable on the earliest to occur of (i) the satisfaction in full of the GECC Loan, (ii) a Liquidation, (iii) December 31, 2001, or (iv) the completion of a Qualified Offering. SECTION 2.7. Payments. Borrower shall make all payments of principal and interest on the Loan to Lender by check at its offices at 103 Springer Building, 3411 Silverside Road, Wilmington, Delaware 19803, or at Lender's option by wire transfer of funds immediately available to Lender to Lender's account No. 5795135074 with PNC Bank Delaware, ABA No. 031 110 089, Attention: Michael W. Miles, Assistant Treasurer. Whenever any payment to be made hereunder shall be stated to be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of payment of interest hereunder or under the Note. SECTION 2.8. Subordination to Preferred Equity Position In Liquidation. Upon any Liquidation, the then outstanding amount of the Preferred Equity Position plus any -6- then unpaid accrued Preferred Return thereon shall first be made or provided for in full before any repayment is made on account of the Loan pursuant to Sections 2.5 or 2.6. Repayment of the outstanding balance of the Loan pursuant to Sections 2.5 or 2.6 is not otherwise subordinate in right of payment to the Preferred Equity Position. SECTION 2.9. Maintenance of Letters of Credit. Safeguard shall cause the GECC Letter of Credit and the Meetinghouse Letter of Credit, as the same may be replaced, renewed, or substituted for from time to time, to remain outstanding for the period and in such amounts as and to the extent required by the governing loan documents as in effect on the date hereof, with such changes thereto as may be approved by Safeguard, until the earlier of the Maturity Date or the repayment of the loan secured by such letter of credit. SECTION 2.10. Required Prepayment. If prior to a Qualified Offering, the Partnership shall realize any Net Sales Proceeds or Net Refinancing Proceeds from the sale or refinancing of a Portfolio A Property, Portfolio B Property, Portfolio C Property or an Option Property, the Partnership shall use such Net Sales Proceeds or Net Refinancing Proceeds to pay such outstanding indebtedness of the Partnership to Lender hereunder and/or under the Horsham 6 Tenant Improvement Loan, all as Lender shall designate. ARTICLE III COLLATERAL SECTION 3.1. Security. (a) BRT and TNC each hereby grant to Lender, as security for the performance and payment of all of Borrower's liabilities hereunder and under the Note, a security interest under the Uniform Commercial Code (i) in all of the Class A Units and Class B Units of Limited Partnership Interest of the Borrower now owned or hereafter acquired by it, (ii) in the respective general intangibles consisting of their rights to distributions under the Operating Partnership Agreement (excluding as collateral under both clauses (i) and (ii) BRT's rights to receive its Preferred Return and returns of its Preferred Equity Position and BRT's rights to receive distributions in respect of its Class C Units of Limited Partnership Interest issued to it under the Operating Partnership Agreement), and (iii) in all replacements, proceeds and products of the foregoing (collectively, the "Collateral"). (b) If the Class A Units and the Class B Units of the Borrower owned by BRT and TNC are or become evidenced by certificates, BRT and TNC shall, at Lender's request in order to further perfect the security interest granted in the Class A Units and Class B Units hereunder, deliver such certificates to Lender, or an agent for Lender reasonably satisfactory to BRT and TNC, duly endorsed in blank for transfer, to be held by Lender or its agent as Collateral hereunder. -7- (c) The Borrower consents to the foregoing grants of security interests in the Collateral by BRT and TNC, agrees to mark its books and records to reflect such security interests, acknowledges the Lender's rights in the Collateral, and agrees to be bound by all provisions hereof relating to the Collateral. SECTION 3.2. Further Assurances. Each of BRT, TNC, and the Borrower agree that from time to time, at its expense, it shall promptly execute and deliver all further instruments and documents, and take all further action, that may be necessary or desirable, or that Lender may request, in order to perfect and protect any security interest granted or purported to be granted hereby or to enable Lender to exercise and enforce its rights and remedies hereunder with respect to any Collateral. Without limiting the generality of the foregoing, each of BRT, TNC, and the Borrower shall execute and file such financing or continuation statements, or amendments thereto, and such other instruments, notices, and acknowledgements as may be necessary or desirable, or as Lender may request, in order to perfect and preserve the security interests granted or purported to be granted hereby. SECTION 3.3. Financing Statements. Each of BRT and TNC hereby authorizes Lender to file one or more financing or continuation statements, and amendments thereto, relative to all or any part of the Collateral without the signature of BRT or TNC where permitted by law. A carbon, photographic, or other reproduction of this Agreement or any part thereof shall be sufficient as a financing statement where permitted by law. ARTICLE IV DEFAULT SECTION 4.1. Events of Default. Each of the following shall be an event of default (an "Event of Default"): (a) If Borrower shall fail to pay any principal or interest on the Loan within ten days of its due date; or (b) If Borrower shall be in default in any material respect under any Transaction Document, and shall have failed to cure such default within 30 days' after Lender has notified Borrower of such default in writing. SECTION 4.2. Remedies. If any Event of Default shall occur and be continuing, Lender may, without notice to Borrower except as specified below, and in addition to other rights and remedies available to Lender, whether available at law, in equity, under the other Transaction Documents or otherwise, (a) terminate its obligations to make, and Borrower's ability to receive, further Advances (except Letter of Credit Advances which are deemed made); (b) declare the entire unpaid principal amount of all Advances actually made, and all interest accrued and unpaid to be forthwith due and payable, without presentment, demand, protest or further action or notice of any kind, all of which are hereby -8- expressly waived by Borrower; (c) exercise all of the rights and remedies of a secured party under the Uniform Commercial Code or any other applicable laws or agreements with respect to all of the Collateral; provided, that, Borrower shall use reasonable efforts to foreclose upon the Collateral in such manner that any repayment of Loans with the proceeds of the Collateral is pro rated between BRT and TNC, in accordance with the percentages that the Class A or Class B Units issued to each such person under the Operating Partnership Agreement on the date hereof bears to the total number of Class A and Class B Units issued to them under the Operating Partnership Agreement on the date hereof, and provided further that, the aggregate dollar amount of loans that Lender shall be entitled to have repaid with the proceeds of the Collateral shall be equal to that amount obtained by multiplying (x) the sum of the outstanding principal balance of the Loan, plus all accrued, unpaid interest thereon and all expenses for which Lender is entitled to be reimbursed hereunder by (y) a fraction, the numerator of which is the number of Class A Units and Class B Units of Limited Partnership Interests issued under the Operating Partnership Agreement on the date hereof to all persons other than Safeguard and its wholly-owned subsidiaries, and the denominator of which is the total number of Class A Units and Class B Units of Limited Partnership Interests issued to all persons under the Operating Partnership Agreement on the date hereof; and (d) sell the Collateral or any part thereof in one or more parcels at public or private sale, for cash, on credit, or for future delivery, and upon such other terms as Lender may deem commercially reasonable, in connection with which each of BRT, TNC and Borrower agrees that, to the extent notice of sale shall be required by law, at least five business days' notice to Borrower of the time and place of any public sale or the time after which any private sale is to be made shall constitute reasonably notification. Lender shall not be obligated to make any sale of the Collateral regardless of notice of sale having been given. Lender may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned. SECTION 4.3. Application of Proceeds. All cash proceeds received by Lender in respect of any sale of, collection from, or other realization upon all or any part of the Collateral may, in the discretion of Lender, be held by Lender (without interest) as collateral for, and/or then or at any time thereafter applied (after payment of any amounts payable to Lender pursuant to Section 4.4) in whole or in part by Lender against, all or any part of the Loan in such order as Lender shall elect. Any surplus of such cash or cash proceeds held by Lender and remaining after payment in full of all the Loan shall be paid over to whosoever may be lawfully entitled to receive such surplus. ARTICLE V MISCELLANEOUS SECTION 5.1. No Waiver; Cumulative Remedies. No failure or delay on the part of Lender in exercising any right, power or remedy hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any such right, power or remedy preclude -9- any other or further exercise thereof or the exercise of any other right, power or remedy hereunder. The rights, powers and remedies herein provided are cumulative and not exclusive of any rights powers or remedies provided by law or in equity. No waiver of any provision hereof, nor consent to any departure therefrom, shall be effective unless the same shall be in writing and signed by Lender, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which it was given. SECTION 5.2. Notices. Unless this Agreement specifically provides otherwise, all notices and other communications that this Agreement requires or permits either party to give to the other shall be in writing and shall be given to such party at its address or facsimile number specified on the signature pages of this Agreement or at such other address or facsimile number as shall be designated by such party in a notice to the other party complying with the terms of this Section 5.2. Unless this Agreement specifically provides otherwise, all notices and other communications shall be effective (a) if given by mail, when received, (b) if given by facsimile, when such facsimile is transmitted to the appropriate facsimile number and the sender receives confirmation of transmission during normal business hours, or (c) if given by any other means, when delivered at the appropriate address. SECTION 5.3. Binding Effect. This Agreement shall become effective when it shall have been executed by Borrower and Lender and thereafter shall be binding upon and inure to the benefit of the parties and their respective successors and permitted assigns, except that Borrower shall not have the right to delegate its duties hereunder without the prior written consent of Lender. SECTION 5.4. Entire Agreement. This Agreement and the Note represent the entire understanding and agreement of the parties with respect to the subject matter hereof, and supersede any and all prior agreements and understandings or representations, whether oral or written, by or between the parties with respect to the subject matter hereof. SECTION 5.5. Titles and Captions. All article and section titles and captions contained in this Agreement are for convenience of reference only and are not deemed a part of the context hereof. SECTION 5.6. Interpretation. Except as otherwise indicated, all agreements defined herein refer to the same as from time to time amended or supplemented or the terms thereof waived or modified in accordance herewith and therewith. In this Agreement, in the computation of a period of time from a specified date to a later specified date, the word "from" means "from and including" and the words "to" and "until" each means "to but excluding." SECTION 5.7. Governing Law. This Agreement and the Note shall be governed in all respects by the law of the Commonwealth of Pennsylvania. -10- SECTION 5.8. Indemnity and Expenses. Borrower agrees to indemnify Lender from and against any and all claims, losses, and liabilities growing out of or resulting from this Agreement (including, without limitation, enforcement of this Agreement), except claims, losses, or liabilities resulting from Lender's gross negligence or willful misconduct. Borrower shall upon demand pay to Lender the amount of any and all reasonable expenses, including the reasonable fees and disbursements of its counsel and of any experts and agents, which Lender may incur in connection with (i) the custody, preservation, or the sale of, collection from, or other realization upon, any of the Collateral, (ii) the exercise or enforcement of any of the rights of Lender, or (iii) the failure by Borrower, BRT or TNC to perform or observe any of the provisions hereof. SECTION 5.9. Counterparts. This Agreement may be executed in one or more counterparts, all of which taken together shall constitute one and the same agreement. -11- IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written. BRANDYWINE OPERATING Address: PARTNERSHIP, L.P. -------- Two Greentree Center, Ste.100 By: BRANDYWINE REALTY Marlton, New Jersey 08053 TRUST, its general partner Facsimile No.: 609-797-0425 Attention: Gerard H. Sweeney By: /s/ Gerard H. Sweeney --------------------------------- Name: Gerard H. Sweeney Title: President SAFEGUARD SCIENTIFICS Address: (DELAWARE), INC. -------- 103 Springer Building 3411 Silverside Road By: /s/ Donald R. Caldwell Wilmington, Delaware 19803 ---------------------------- Facsimile No.: 302-478-3667 Name: Donald R. Caldwell Attention: Michael W. Miles, Title: President Assistant Treasurer Each of the undersigned have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written, for the sole purpose of being bound by the provisions of Article III and Article IV; provided, however, that no recourse shall be had against the undersigned, or any of their respective shareholders, trustees, directors, officers or employees, with respect to any obligation hereunder other than with respect to the Collateral. BRANDYWINE REALTY TRUST Address: -------- Two Greentree Center, Suite 100 By: /s/ Gerard H. Sweeney Marlton, NJ 08953 -------------------------- Facsimile No.: 609-792-0925 Name: Gerard H. Sweeney Attention: Gerard H. Sweeney Title: President THE NICHOLS COMPANY Address: -------- 16 Campus Boulevard, Suite 150 Newtown Square, PA 19073 By: /s/ Anthony A. Nichols Facsimile No.: 610-325-5622 -------------------------- Attention: John P. Gallagher Name: Anthony A. Nichols Title: President -12- The undersigned has executed this Agreement solely for the purpose of being bound by the provisions of Section 2.9 hereof. SAFEGUARD SCIENTIFICS, INC. Address -------- 800 The Safeguard Building By: /s/ Glenn T. Reiger 435 Devon Park Drive --------------------------- Wayne, PA 19087 Name: Glenn T. Reiger Attention: Glenn Rieger Title: Vice President -13- EXHIBIT 2.2 FORM OF ADVANCE REQUEST [DATE] Safeguard Scientifics, Inc. 800 The Safeguard Building 435 Devon Park Drive Wayne, PA 19087 Attention: Ladies and Gentlemen: We hereby request that you advance to us pursuant to Section 2.1 of that certain Loan Agreement to which we are parties dated as of _____________, 1996 (the "Agreement") the amount of $________. The undersigned hereby certifies as follows: 1. The amounts and uses of the proposed Advance are more specifically described on Exhibit A attached hereto. [2. If the Advance is to be a Working Capital Advance, an appraisal of the relevant Property has been delivered to you as required by Section 2.2.1 of the Agreement.] All capitalized terms used herein and not otherwise defined shall have the meanings set forth in the Agreement. Very truly yours, BRANDYWINE OPERATING PARTNERSHIP, L.P. By: Brandywine Realty Trust, its general partner By:_____________________________, Authorized Officer -14- EXHIBIT A BREAKDOWN OF PROPOSED ADVANCE Description Amount - ----------- ------ A. Working Capital Advances [Describe working capital advances needed in excess of cash flow and available reserves] $__________ B. Closing Cost Advances [Identify transfer tax or other closing cost] $__________ C. Preferred Return Advances [Cash Shortfall for quarter ending ___________] $__________ -15- EXHIBIT 2.4 FORM OF NOTE $_______ ______________, 199_ On or before _____________, the undersigned promises to pay to the order of _____________________________ ("Lender") the principal sum of ___________________________ Dollars ($_______), in the installments, at the times, and with interest at the rates provided by a Loan Agreement between the undersigned and Lender dated of even date herewith, to which this Note is subject. BRANDYWINE OPERATING PARTNERSHIP, L.P. By: Brandywine Realty Trust, its general partner By:_____________________________, Authorized Officer -16- EX-10.3 6 EXHIBIT 10.3 AGREEMENT THIS AGREEMENT is made as of the 22nd day of August, 1996 by and among Brandywine Realty Trust, a Maryland real estate investment trust (the "Trust"), Safeguard Scientifics, Inc., a Pennsylvania corporation ("SSI"), and Safeguard Scientifics (Delaware), Inc. ("Sub"), a Delaware corporation and a wholly-owned subsidiary of SSI (SSI and Sub are collectively referred to herein as the "Holder"). WHEREAS, as of the date hereof, Sub is acquiring 775,000 common shares of beneficial interest, par value $.01 per share ("Common Shares"), of the Trust, warrants exercisable for an additional 775,000 Common Shares and additional securities convertible under certain circumstances into Common 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. Nomination of Designees to the Board. During the term hereof, but only for so long as Richard M. Osborne ("RMO") and the Richard M. Osborne Trust ("RMO Trust") are collectively the beneficial owners of at least ten percent (10%) of the outstanding Common Shares, the Holder agrees to vote its Common Shares for the election of either RMO or, in the discretion of RMO, any person designated by RMO and who is reasonably acceptable to a majority of the Board of Trustees of the Trust to the Board of Trustees at each annual meeting of shareholders of the Trust at which elections to the Board of Trustees are to be held, provided that such agreement of the Holder shall terminate in the event (i) of the occurrence of any matter relating to RMO or such designee that would require disclosure by the Trust in any filing to be made by it with the Securities and Exchange Commission of any of the events enumerated in Item 401(f) of Regulation S-K, as now in effect or as amended from time to time (an "Item 401(f) Occurrence") or (ii) RMO or such designee takes any action which could reasonably be expected to have a material adverse effect on the Trust. For purposes of this Agreement, beneficial ownership shall be determined in the manner prescribed by Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). During the term hereof, but only for so long as the Holder is the beneficial owner of at least ten percent (10%) of the outstanding Common Shares, the Company will cause three individuals designated by the Holder to be nominated for election to the Board of Trustees provided that (i) no Item 401(f) Occurrence has occurred with respect to any such individual, (ii) no such individual has taken any action which could reasonably be expected to have a material adverse effect on the Trust, and (iii) each such individual is reasonably acceptable to a majority of the Board of Trustees. The initial designees of the Holder are Warren V. Musser, Anthony A. Nichols, Sr. and Walter D'Allessio. 2. Proxy Solicitations. During the term hereof, without the consent of a majority of the independent members of 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 change in the Declaration of Trust of the Trust or (iv) assist any attempt by any other person or entity to do any of the foregoing. During the term hereof, if the Holder learns of any efforts by any third party to (i) make or participate in, directly or indirectly, any solicitation of proxies or become a participant in any election contest with respect to the Trust, (ii) encourage any third person to vote Common Shares in opposition to the recommendation of a majority of the Board of Trustees, (iii) propose any change in the Declaration of Trust or (iv) assist any person or entity to do any of the foregoing, the Holder will promptly inform the Board of Trustees. 3. Voting of Common Shares. During the term hereof, and except as otherwise required by Section 1 hereof, the Holder agrees to vote all Common 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 and (ii) any amendment to the Declaration of Trust of the Trust which, in the reasonable judgment of a majority of the Board of Trustees, adversely affects the rights of shareholders. In any event, during the term hereof, the Holder agrees to vote all Common Shares beneficially owned by it in favor of any financing for which shareholder approval is sought, including without limitation, any financing having the terms referenced in clause (ii) of the first sentence of Section 7(a), provided that the financing is recommended by a majority of the Board of Trustees. 4. Restrictions on Dispositions. During the term hereof, the Holder shall not, directly or indirectly, sell, assign, transfer or otherwise dispose of any Common 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; (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; or (iv) in a merger or -2- statutory share exchange pursuant to which ownership of the Trust is acquired by a third party. Notwithstanding the foregoing, during the term hereof, Holder may transfer up to 52,000 Common Shares to Anthony A. Nichols, Sr. (subject to adjustment for stock splits, stock dividends and reverse stock splits) so long as Mr. Nichols holds such Common Shares subject to the same restrictions applicable to them while they were owned by 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 described in Section 7a(ii) by the Trust, provided that (i) the duration thereof does not extend for more than 365 days following the effective date of the applicable registration statement and (ii) all other holders of in excess of ten percent (10%) of the Common Shares and all Trustees and executive officers of the Trust execute a substantially similar letter. 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. 6. Legend. During the term hereof, the Trust may cause any certificates evidencing Common Shares beneficially owned by the Holder to bear a legend indicating the existence of this Agreement. 7. Term. a. The term of this Agreement shall be for a period ending on the earlier of the (i) third anniversary of the date of this Agreement or (ii) completion by the Trust of a public or private equity offering yielding (a) at least $35.0 million of net proceeds to the Trust at a price per share at least equal to the per share book value of the Common Shares as of the end of the most recently preceding quarter or (b) at least $25.0 million of net proceeds, but less than $35.0 million of net proceeds, at a price per share of at least $5.50. b. Upon expiration or termination of the term, all rights and obligations of the parties hereto shall terminate, except for any rights arising out of the breach by a party hereto of its obligations hereunder. 8. 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 -3- 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. 9. Expenses. All fees and expenses incurred by any party hereto shall be borne by the party incurring them; provided 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. 10. 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. 11. 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. 12. 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, if to: The Trust --------- Two Greentree Centre Suite 100 Marlton, NJ 08053 Telecopier No. (609) 797-0425 The Holder ---------- 800 The Safeguard Building 435 Devon Park Drive Wayne, PA 19087 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. 13. Choice of Law. This Agreement shall be governed by, and construed and enforced in accordance with, the laws of -4- the State of Maryland, without reference to the conflict of laws principles thereof. 14. 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. 15. 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. 16. 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 to be the agreement or obligation of the applicable party hereto to the full extent permitted by law. 17. Restriction on Certain Amendments. During the term hereof, the Trust agrees that it will not make any amendment to that certain Agreement dated as of March 20, 1996 among the Trust, RMO and the RMO Trust (the "RMO Agreement") without either making a corresponding amendment to this Agreement or obtaining the consent of the Holder and the Trust will not make any amendment to this Agreement without either making a corresponding amendment to the RMO Agreement or obtaining the consent of RMO. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. BRANDYWINE REALTY TRUST By:__________________________ President SAFEGUARD SCIENTIFICS, INC. By:__________________________ Vice President [EXECUTIONS CONTINUED] -5- SAFEGUARD SCIENTIFICS (DELAWARE), INC. By:__________________________ Vice President The undersigned hereby acknowledges the provisions of Section 17 hereof. THE RMO TRUST By:_________________________ Title: Trustee -6- EX-10.4 7 REGISTRATION RIGHTS AGREEMENT Exhibit 10.4 REGISTRATION RIGHTS AGREEMENT REGISTRATION RIGHTS AGREEMENT (the "Agreement") made and entered into as of this 22nd day of August, 1996 by and among BRANDYWINE REALTY TRUST, a Maryland real estate investment trust (the "Company"), SAFEGUARD SCIENTIFICS (DELAWARE), INC., a Delaware corporation ("SSI"), THE NICHOLS COMPANY, a Pennsylvania corporation ("TNC"), and the TURKEY VENTURE FUND XIII, LTD., an Ohio limited liability company of which Richard M. Osborne is the manager ("TVF XIII"). BACKGROUND Pursuant to a Stock and Warrant Purchase Agreement, dated as of July 31, 1996 (the "SSI Agreement"), by and between the Company and Safeguard Scientifics, Inc., a Pennsylvania corporation, the Company has issued to SSI 775,000 (the "SSI Shares") of the Company's common shares of beneficial interest (the "Common Stock") and a Warrant to purchase an additional 775,000 shares of Common Stock (the "SSI Warrant"). Pursuant to a Loan and Securities Purchase Agreement, dated June 21, 1996, by and between the Company and TVF XIII (a) the Company has issued to TVF XIII 59,949 shares (the "Initial TVF XIII Shares") of the Company's Common Stock and a warrant to purchase an additional 59,949 shares of Common Stock (the "Initial TVF XIII Warrant") and (b) TVF XIII has made a loan to the Company that in accordance with the terms of said agreement may be repaid with additional shares of the Company's Common Stock (the "Additional TVF XIII Shares" and together with the Initial TVF XIII Shares, the "TVF XIII Shares") and additional warrants to purchase additional shares of the Company's Common Stock (the "Additional TVF XIII Warrant" and, together with the Initial TVF XIII Warrant, the "TVF XIII Warrants") (the TVF XIII Warrants, together with the SSI Warrant, the "Warrants"). In connection with the SSI Agreement, the Company has acquired, either directly or indirectly, a general partnership interest in Brandywine Operating Partnership, L.P., a Delaware limited partnership (the "Partnership"), and SSI, TNC and certain other persons listed on Schedule A hereto (the "Other Purchasers") have received units of Class A Limited Partnership Interest in the Partnership in exchange for certain interests in real property and other assets contributed by them to the Partnership. These units are redeemable, on a one-for-one basis, subject to adjustment, for shares of Common Stock upon the satisfaction of certain conditions, as provided in the Agreement of Limited Partnership of even date herewith creating the Partnership (the "Partnership Agreement"). To induce SSI, TNC, the Other Purchasers and TVF XIII to enter into the foregoing transactions, the Company has agreed to provide them 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: "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 New York Stock Exchange ("NYSE") is open for trading. "Closing Date" means August 22, 1996. "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 SSI, TNC, TVF XIII and the Other Purchasers listed on Schedule A hereto, for so long as (and to the extent that) each owns any Registrable Securities, and each of their respective successors, assigns, and direct and indirect transferees who become registered owners of Registrable Securities or securities exercisable, exchangeable or convertible into Registrable Securities. -2- "Outstanding" means with respect to any securities as of any date, all such securities theretofore issued, except any such securities theretofore converted, exercised or 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. "Registrable Security(ies)" means (i) the SSI Shares, (ii) the TVF XIII Shares, (iii) all or any portion of any shares of Common Stock of the Company that may be issued upon the exercise of, or in exchange for, the Warrants, (iv) any shares of Common Stock or other equity securities of the Company that may be issued in redemption of any Units under the Partnership Agreement, and (v) 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; 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 and to the extent such securities are permitted to be publicly sold without limitation as to amount pursuant to Rule 144(k) (or any successor provision to such Rule) under the Securities Act or are otherwise freely transferrable to the public without further registration under the Securities Act; or (iii) when such securities shall have ceased to be issued and outstanding; or (iv) on the tenth anniversary of the date such securities were issued. In the case of clause (ii) of the foregoing sentence, the Company shall, if requested by the Holder or Holders thereof, have delivered to such Holder or Holders the written opinion of independent counsel to the Company to such effect. 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 Units and the Warrant and any other securities exercisable or exchangeable for, or convertible into, Registrable Securities. The term Registrable Securities shall not include the Units or the Warrants. "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. "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), -3- 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 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 Section 11), (y) any underwriting discounts or commissions attributable to Registrable Securities, or (z) any SEC registration or filing fees attributable to Registrable Securities or 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. -4- "Unit" means any unit of Class A Limited Partnership Interest in the Partnership and any securities which may be issued in respect thereof or exchange therefor in connection with any combination, consolidation, merger, recapitalization, or other similar transaction. 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 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 without the written consent of SSI and TVF XIII at any time when SSI or TVF XIII would be prohibited from selling Registrable Securities pursuant to an effective registration statement under the Securities Act by the terms of the Agreement, dated August 22, 1996, between the Company and SSI, or the Agreement, dated March 20, 1996, among the Company, the Richard M. Osborne Trust and Richard M. Osborne, as the case may be. 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 of Registrable Securities and afford them the opportunity of including in the requested registration statement such of their Registrable Securities 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 requesting registration of (A) the aggregate number of Registrable Securities proposed to be registered by all Holders, (B) the proposed filing date of the registration statement, and (C) such other information concerning the offering as any 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 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 may give written notice to the Company and the managing underwriter specifying either that (A) Registrable Securities of such 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 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 request for registration. -5- (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 reasonably 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 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 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), except as and to the extent provided by Section 7(b), 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 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 may interfere with an orderly sale and distribution of or may materially adversely affect the price of such offering, the aggregate number of Registrable Securities included by the 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 able to be included in such offering by each Holder shall be reduced pro rata (in accordance with such Holder's proportionate share of the Fair Market Value of all Registrable 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), 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. 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 of Registrable Securities and afford them the opportunity of including in the requested Shelf Registration Statement such of their Registrable Securities 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 -6- registration statement to be declared effective within sixty (60) days after its filing; 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) 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 of Registrable Securities until all securities included in such Shelf Registration Statement have ceased to be Registrable Securities (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 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 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. (e) Neither the Company nor any Person other than a 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, 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 -7- 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 of its intention to do so, and upon the written request of any 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 intended to be disposed of by such 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 which the Company has been so requested to register by 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 requesting registration and thereupon the Company shall be relieved of its obligation to register such Registrable 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 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 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, that if an offering of some but not all of the Registrable Securities requested to be registered by the Holders and all other Persons having rights to include securities held by them in such registration 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 Registrable Securities and the aggregate number of Registrable Securities to be included in such offering by each Holder shall be allocated pro rata among the Holders requesting such registration on the basis of the percentage of the Registrable Securities held by such Holders which have requested that such Registrable Securities be included; and -8- (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 ten (10) day period prior to, and 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 of the Company and all other Persons having securities included in such registration) beginning on the closing date of each underwritten offering made pursuant to 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; (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 -9- 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) or Article 7 hereto. (b) Prepare and file with the SEC such amendments, post-effective amendments and supplements to such registration statement and the prospectus used in connection therewith as may be 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) or Article 7 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. -10- (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 is then listed, if the listing of such Registrable Securities are 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 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 -11- 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 can not 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. 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. -12- (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. INFORMATION BLACKOUT. (a) At any time when a registration statement effected pursuant to Sections 2(a), 2(b) or 3 relating to Registrable Securities is effective, upon written notice from the Company to the Holders that the Company has determined in good faith that sale of Registrable Securities pursuant to the registration statement would require disclosure of non-public material information not otherwise required to be disclosed under applicable law having a material adverse effect on the Company (an "Information Blackout"), all Holders shall suspend sales of Registrable Securities pursuant to such registration statement until the earlier of: (i) forty-five (45) days after the Company makes such good faith determination, and (ii) such time as the Company notifies the Holders that such material information has been disclosed to the public or has ceased to be material or that sales pursuant to such registration statement may otherwise be resumed (the number of days from such suspension of sales by the Holders until the day when such sale may be resumed hereunder is hereinafter called a "Sales Blackout Period"). (b) Any delivery by the Company of notice of an Information Blackout during the forty-five (45) days immediately following effectiveness of any registration statement effected pursuant to Section 2(a) hereof shall give the Holders of a majority in aggregate amount of Registrable Securities being sold the right, by written notice to the Company within twenty (20) Business Days after the end of such Sales Blackout Period, to cancel such registration, in which event the Holders shall have one additional registration right under the Section pursuant to which such registration was filed in such fiscal year (a "Blackout Termination Right"). (c) If there is an Information Blackout and the cancellation right, if any, pursuant to (b) above, is not available or exercised, the time period set forth in clause (ii) of Section 5(a) shall be extended for a number of days equal to the number of days in the Sales Blackout Period. (d) Notwithstanding the foregoing, there shall be no more than two (2) Information Blackouts during the term of this Agreement and no Sales Blackout Period shall continue for more than forty-five (45) consecutive days. -13- 8. 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. 9. 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 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. 10. 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 -14- 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 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 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 10, such Person (the "indemnified party") shall promptly notify the Person against whom -15- such indemnity may be sought (the "indemnifying party") in writing. No indemnification provided for in Section 10(a) or (b) shall be available to any person who shall fail to give notice as provided in this Section 10(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 10(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 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 10(a) and by the Company in the case of parties indemnified pursuant to Section 10(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 10 is unavailable to or insufficient to hold harmless an indemnified party under Section 10(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 10(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 -16- 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 10(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 10(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. (e) The indemnity provided for hereunder shall not inure to the benefit of any indemnified party to the extent that such indemnified party failed to comply with the applicable prospectus delivery requirements of the Securities Act as then applicable to the person asserting the loss, claim, damage or liability for which indemnity is sought. 11. 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. 12. 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 Section 12, which address initially is, with respect to: (i) SSI, the address set forth in the SSI Agreement, (ii) TNC, the address set forth in the Agreement of Limited Partnership for the Partnership, (iii) TVF XIII, 7001 Center Street, Mentor, Ohio 44060, facsimile number (216) 255-8645, (iv) all other holders, the address set forth in the register for the applicable security; and (b) if to the Company, initially at the address set forth in the SSI Agreement and thereafter at such other address, notice of which is given in accordance with the -17- provisions of this Section 12. 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. 13. 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 affected Holder; provided further that any waiver must be signed by the party entitled to the benefit of the term or matter being waived. 14. PARAGRAPH HEADINGS. The paragraph 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. 15. 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. 16. 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. -18- 17. 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. 18. 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. 19. 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. 20. THIRD PARTY BENEFICIARIES; SUCCESSORS AND ASSIGNS. The Other Purchasers shall be third party beneficiaries of this Agreement. This Agreement shall inure to the benefit of and be binding upon the successors, assigns and transferees of each of the parties hereto and of each of the Other Purchasers, including, without limitation and without the need for an express assignment, subsequent Holders; 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 SSI Agreement, the Warrant, the Units, the Agreement of Limited Partnership of the Partnership 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. -19- 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. IN WITNESS WHEREOF, this Agreement has been executed and delivered as of the date first above written. BRANDYWINE REALTY TRUST By: /s/ Gerard H. Sweeney ----------------------------------- Title: President SAFEGUARD SCIENTIFICS (DELAWARE), INC. By: /s/ ----------------------------------- Title: Assistant Treasurer THE NICHOLS COMPANY By: /s/ Anthony A. Nichols ----------------------------------- Title: President TURKEY VULTURE FUND XIII, LTD. By: /s/ Richard M. Osborne ----------------------------------- Richard M. Osborne, Manager -20- Schedule A OTHER PURCHASERS Brian F. Belcher Jack R. Loew Craig C. Hough RDC Institute, Inc. Gary C. Bender Lotz Designers Engineers and Constructors, Inc. Werner A. Fricker C/N Oaklands III, Inc.** Iron Run V, Inc.** C/N Iron Run III, Inc.** C/N Leedom II, Inc.* - ------------------------ * Wholly-owned subsidiary of Safeguard Scientifics, Inc. ** Wholly-owned subsidiary of The Nichols Company. -21- EX-10.5 8 EXHIBIT 10.5 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 August 22, 2002. BRANDYWINE REALTY TRUST Warrant Agreement for the Purchase of Shares of Common Stock No. 1 775,000 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 Safeguard Scientifics (Delaware), Inc. 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 August 22, 2002 (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 or Section 8 hereof) of Six Dollars and 50/100 Cents ($6.50) (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- 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 the 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. 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 for shares of Common Stock issuable upon exercise of the Conversion Right shall be delivered to the Holder within fifteen (15) 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 shares of capital stock 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 -2- 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 or blue sky 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 the original Warrant. Any such new Warrant executed and delivered shall constitute an -3- 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 Capital Stock. If at any time after August 22, 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 capital stock other than Common Stock; or (v) issues by reclassification of its Common Stock any shares of its capital stock; 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 capital stock 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 a dividend or distribution, and immediately after the effective date in the case of a subdivision, combination or reclassification. -4- (b) Adjustment for Other Distributions. If at any time after August 22, 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 Exercise Price immediately prior to the adjustment. M = the current market price (as defined in Section 11 above) 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. 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) Adjustment for Common Stock Issue. (i) If at any time after August 22, 1996, the Company issues shares of Common Stock for a consideration per share that is less than the current market price per share (determined as provided in Section 11 above) on the date the Company fixes the offering price of such additional shares, the Exercise Price shall be adjusted in accordance with the following formula: -5- E' = Y x [O + (P / E)] ----------- A where: E' = the adjusted Exercise Price. Y = the then current Exercise Price immediately prior to the adjustment. O = the number of shares outstanding immediately prior to the issuance of such additional shares. P = the aggregate consideration received for the issuance of such additional shares. E = the current market price (determined as provided in Section 11 above) immediately prior to the adjustment. A = the number of shares outstanding immediately after the issuance of such additional shares. The adjustment shall be made successively whenever any such issuance is made, and shall become effective immediately after such issuance. (ii) This subsection 6(c) does not apply to (A) any of the transactions described in subsections (a), (b) and (d) of this Section 6, (B) Common Stock issued pursuant to options and warrants outstanding on August 22, 1996, (C) Common Stock issued to officers, trustees, directors or employees of, or consultants to, the Company 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 Company's Board of Trustees or an appropriate committee of the Company's Board of Trustees, and (y) have an exercise price not less than 85% of the current market price of the Company's Common Stock at the time of issuance of such warrant, right or option, (D) Common Stock issued on redemption of Class A units of limited partnership interest in Brandywine Operating Partnership, L.P. issued or issuable to the Holder and The Nichols Company ("TNC") and certain other persons, or their respective affiliates, in connection with the transactions contemplated by the Contribution Agreement, by and among the Company, the Holder and TNC, (E) shares of Common Stock issuable to Messrs. Belcher, Gallagher, Nichols and Sweeney upon exercise of warrants issued to them on the date hereof pursuant to their employment agreements with Brandywine Realty Services Company, Inc., (F) up to 236,200 shares of Common Stock reserved for issuance to Richard M. Osborne, Sr. or to a trust controlled by him ("Osborne") upon the repayment of unsecured debt issued to or held by Osborne and up to 236,200 shares of Common Stock 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, and (G) any securities sold to the public in connection with an underwritten public offering of the Company's securities. (d) Adjustment for Convertible Securities Issue. If at any time after August 22, 1996, the Company issues for consideration any securities convertible into or -6- exchangeable or exercisable for Common Stock for consideration per share of Common Stock initially deliverable upon conversion, exchange or exercise of such securities, together with the consideration paid upon issuance of such securities, less than the current market price per share (determined as provided in Section 11 above) on the date of issuance of such securities, the Exercise Price shall be adjusted in accordance with this formula: E' = Y x [O + (P / E)] ------------ O + D where: E' = the adjusted Exercise Price. Y = the then current Exercise Price immediately prior to the adjustment. O = the number of shares outstanding immediately prior to the issuance of such securities. P = the aggregate consideration received and receivable for the issuance of such securities. E = the current market price (determined as provided in Section 11 above). D = the maximum number of shares deliverable upon conversion, exchange or exercise of such securities at the initial conversion, exchange or exercise rate. The adjustment shall be made successively whenever any such issuance is made, and shall become effective immediately after such issuance. If all of the Common Stock deliverable upon conversion, exchange or exercise of such securities has not been issued when such securities are no longer outstanding, then the Exercise Price shall promptly be readjusted to the Exercise Price which would then be in effect had the adjustment upon the issuance of such securities been made on the basis of the actual number of shares of Common Stock issued upon conversion, exchange or exercise of such securities. This subsection does not apply to any of the transactions described in subsections (a), (b) and (c)(ii)(B), (C), (D), (E), (F) and (G) above. (e) Adjustment to Number of Warrant Shares. Upon each adjustment to the Exercise Price pursuant to Section 6(c) or (d), the number of Warrant Shares purchasable hereunder at that Exercise Price shall be adjusted, to the nearest one hundredth of a whole share, to the product obtained by multiplying such number of shares purchasable immediately prior to such adjustment in the Exercise Price by a fraction, the numerator of which shall be the Exercise -7- Price immediately prior to such adjustment and the denominator of which shall be the Exercise Price immediately thereafter. (f) 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 capital stock of the Company, if any, issuable upon such exercise over and above the shares of Common Stock or other capital stock 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. (g) When No Adjustment Required. No adjustment need be made for a change in the par value or no par value of the Common Stock. (h) 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 capital stock 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 of 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 of 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 -8- (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. (i) 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. (j) 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. (k) 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. -9- 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 stock and other securities and property (including cash) receivable upon such reclassification, 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 stock 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 and any warrants issued upon repayment of unsecured debt issued to or held by Osborne (collectively, the "Osborne Warrant"), 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 Osborne Warrant 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. -10- 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 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 among the Holder, the Company, TNC, Osborne and certain other holders of the Company's Shares. 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 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 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 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 -11- Warrant, determined in such reasonable manner as may be prescribed in good faith by the Board of Trustees of the Company. Section 12. Classification of the Company for Tax Purposes. In the event that the issuance of shares of Common Stock upon the exercise of this Warrant would result in the Company being "closely held" within the meaning of Section 856(h) of the Internal Revenue Code of 1986, as amended (the "IRC"), or would bring the number of shares of Common Stock beneficially held by the Holder in excess of the Ownership Limit (as such term is defined in Section 6.6 of the Declaration of Trust of the Company) applicable to the Holder, the Company, notwithstanding anything herein to the contrary, shall have no obligation to issue such shares and instead the Company shall pay to the Holder, on account of each share of Common Stock as to which exercise would cause such a classification, an amount in cash equal to the excess, if any, of the "current market price" (as defined in Section 11 hereof) of a share of Common Stock over the Exercise Price. Moreover, if the U.S. Internal Revenue Service asserts, in an appropriate proceeding, that the issuance of this Warrant would, but for this provision, result in the Company being "closely held" within the meaning of Section 856(h) of the IRC, the Company shall have the right to terminate this Warrant and replace it with a stock appreciation right pursuant to which the Company would have the option, upon the exercise thereof, either: (i) to deliver cash in an amount equal to the Spread (as defined below), or (ii) to deliver shares of Common Stock having an aggregate current market price (as defined in Section 11 hereof) equal to the Spread. As used herein, the term "Spread" shall mean, as of a given date, the current market price (as defined in Section 11 hereof) of a share of Common Stock on such date over the Exercise Price. The stock appreciation right issued in replacement of this Warrant shall cover the same number of shares of Common Stock covered by this Warrant immediately prior to its termination and have the same term as this Warrant. Section 13. 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 hereof. Section 14. Notices. Any notice, request or other document required or permitted to be given or delivered to the holder hereof 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 15. 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 accordance with, and the rights of the parties shall be governed by, the laws of the State of Maryland. Section 16. 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 -12- 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 17. 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 August 22, 1996. BRANDYWINE REALTY TRUST By: /s/ Gerard H. Sweeney ----------------------------------- -13- 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________________________ -14- 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_____________________ -15- EX-10.6 9 EXHIBIT 10.6 THIRD AMENDMENT TO GENERAL PARTNERSHIP AGREEMENT OF BRANDYWINE REALTY PARTNERS (formerly Linpro Income Fund I Partnership) Effective as of August 22, 1996 This Third Amendment (this "Amendment") to the General Partnership Agreement of Brandywine Realty Partnership, a Pennsylvania general partnership (the "Partnership"), is made and entered into effective as of August 22, 1996, by and between Brandywine Realty Trust, a Maryland real estate investment trust ("BRT"), and Brandywine Operating Partnership, L.P., a Delaware limited partnership ("BOP"). RECITALS WHEREAS, the Partnership was formed pursuant to that General Partnership Agreement, dated as of April 2, 1986, as the same was amended as of July 27, 1993, to change the name of the Partnership, and as further amended by the Second Amendment to the General Partnership Agreement effective as of January 1, 1994 (the "Partnership Agreement"). Capitalized terms used but not otherwise defined in this Amendment shall have the meanings ascribed to them in the Partnership Agreement; and WHEREAS, on the Admission Date, as defined herein, BRT desires to transfer to BOP a portion of its interest in the Partnership, and, on the Withdrawal Date, as defined herein, to transfer the balance of its interest in the Partnership in accordance with this Amendment and thereupon to withdraw from the Partnership. WHEREAS, pursuant to Section 22.3 of the Partnership Agreement the Class A Partner has the power to amend any provision of the Partnership Agreement without obtaining the consent of the Class B Partner, provided the amendment neither has the effect of requiring any capital contributions by the Class B Partner not otherwise required prior to such amendment nor affects any of the rights of the Class B Partner to receive cash or property distributions or allocations of taxable income, gain, or loss under the Partnership Agreement; WHEREAS, BRT has determined that the amendments contained herein will not have the affect of requiring any capital contributions by the Class B Partner, not otherwise required, nor will it affect the rights to receive cash or property distributions, or allocations of taxable income, gain, or loss of the Class B Partner, and, therefore, pursuant to Section 22.3 of the Partnership Agreement, such amendments do not require the consent of the Class B Partner; WHEREAS, BRT, pursuant to its authority under Section 22.3 of the Partnership Agreement, is executing this Amendment for the purposes of amending the Partnership Agreement as hereinafter provided, and BRT and BOP are, in addition, executing this Amendment to effectuate the transfers of BRT's interests in the Partnership as set forth herein: NOW, THEREFORE, it is hereby agreed as follows: 1. On the Admission Date, BRT transfers (the "First Transfer") a portion of its Percentage Interest in the Partnership to BOP, such portion consisting of a forty-nine percent (49%) Percentage Interest in the Partnership and a 97% interest in Net Cash Flow of the Partnership. 2. BRT agrees to transfer to BOP on the Withdrawal Date the remaining portion of its Percentage Interest in the Partnership ("Second Transfer" and together with the First Transfer, the "Transfers") such that as a result of the Transfers and as of the Withdrawal Date, BOP will own all of BRT's Interest in the Partnership and BRT will own no Interest in the Partnership. 3. On the Withdrawal Date, BRT agrees to withdraw from the Partnership. 4. By execution of this Amendment and pursuant to the Transfers, BOP becomes a Partner in the Partnership entitled to all of the rights and powers set forth in the Partnership Agreement, as amended by this Amendment, and subject to the duties and obligations therein. 5. The Partnership Agreement is hereby amended as follows: a. Section 6.15 of the Partnership Agreement is hereby amended to read in its entirety as follows: For the period commencing on the Admission Date and ending on the Withdrawal Date, the relative interest of the Partners in the Partnership, expressed as a percentage of the whole, shall be as follows: Class B Partner 30% Class A Partner 70% The interest of the Class A Partner set forth in this Section 6.15 shall be allocated twenty-one percent (21%) to BRT and forty-nine percent (49%) to BOP. -2- After the Withdrawal Date, the relative interest of the Partners in the Partnership, expressed as a percentage of the whole, shall be as follows: Class B Partner 30% Class A Partner 70% b. The second sentence of Section 7.1(a) of the Partnership Agreement is hereby deleted and replaced with the following sentence: BRT shall be the Administrative Partner until the Withdrawal Date. On the Withdrawal Date, BOP, as the sole Class A Partner, shall be the Administrative Partner. c. Section 9.1(a)(iii) of the Partnership Agreement is amended by: (i) substituting the term "Class A Partner" for the term "Class A Limited Partner" and by (ii) adding the following sentence at the end of Section 9.1(a)(iii): For the period commencing on the Admission Date and ending on the Withdrawal Date, the ninety-eight percent (98%) interest of the Class A Partner in Net Cash Flow of the Partnership shall be allocated one percent (1%) to BRT and ninety-seven percent (97%) to BOP. On and after the Withdrawal Date, the ninety eight percent (98%) interest of the Class A Partner in Net Cash Flow shall be allocated to the Class A Partner. d. Section 13.3 of the Partnership Agreement is amended as follows to add the following new Subsection 13.3(iii): (iii) The Transfer by BRT to BOP of: 1) a forty-nine (49%) Percentage Interest in the Partnership and a ninety-seven (97%) interest in Net Cash Flow, on the Admission Date, and 2) a twenty-one (21%) Percentage Interest in the Partnership and a one (1%) interest in Net Cash Flow, which constitutes BRT's remaining interest in the Partnership and in Net Cash Flow, on the Withdrawal Date. e. The first paragraph of Section 13.5 of the Partnership Agreement is amended to read in its entirety as follows: 13.5 Substitute Partners. Except as provided in Section 6.2(d), and except in the case of the transfers described in Section 13.3(iii) of this Amendment (in which case the transferee thereunder shall be a Substitute Partner without satisfying the conditions hereunder), no transferee of all or part of the -3- Partnership interest of any Partner shall have the right to become a Substitute Partner, unless all of the following conditions are satisfied: f. The following definitions are hereby substituted in Section XXI of the Partnership Agreement: "Administrative Partner" shall mean and refer to BRT, until the Withdrawal Date, at which date "Administrative Partner" shall mean and refer to BOP. "Class A Partner": shall mean and refer, commencing on the Admission Date and ending on the Withdrawal Date, to BRT and BOP to the extent of their respective Percentage Interests in the Partnership and in Net Cash Flow as set forth in Sections 6.15 and 9.1(a)(iii) of the Partnership Agreement. After the Withdrawal Date, "Class A Partner" shall mean and refer solely to BOP. "Percentage Interest of the Partners" shall mean the interest of the Partners in the capital of the Partnership expressed as a percentage of the whole, as set forth in Section 6.15 hereof, and "Percentage Interest" shall mean the Percentage Interest of the Partners of a particular Partner. g. The following definitions are added in the appropriate place in Section XXI of the Partnership Agreement: "Admission Date" shall mean the effective date of this Third Amendment. "Interest" with respect to a Partner shall mean a Partner's interest in the Partnership, including without limitation its Percentage Interest, its rights, powers, duties and obligations, and its rights to allocations and distributions of Net Cash Flow, all as set forth herein. "Withdrawal Date" shall mean the date which is twelve months and one day after the Admission Date. h. The following definition is amended in the appropriate place in Section XXI of the Partnership Agreement: The definition of "Unrecovered Capital of the Class A Partner" is amended to add the following sentence at the end of the definition: -4- During the period that there is more than one Class A Partner, the Unrecovered Capital of the Class A Partner shall be determined in accordance with the Class A Partner's Percentage Interest. -5- IN WITNESS WHEREOF, the parties have executed this Third Amendment effective as of the day and year first written above. Brandywine Realty Trust, a Maryland real estate investment trust, by By:______________________________ Title:___________________________ Brandywine Operating Partnership, L.P., a Delaware limited partnership, by By:______________________________ Title:___________________________ Brandywine Realty Trust, a Maryland real estate investment trust, as General Partner By:______________________________ Title:___________________________ -6- EX-10.7 10 EXHIBIT 10.7 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 August 22, 2002. BRANDYWINE REALTY TRUST Warrant Agreement for the Purchase of Shares of Common Stock No. ___ _______ Shares FOR VALUE RECEIVED, BRANDYWINE REALTY TRUST, a Maryland real estate investment trust (the "Company"), with its principal office at Two Greentree Centre, Suite 100, Marlton, New Jersey 08053, hereby certifies that ____________________ or his 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 August 22, 2002 (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 or Section 8 hereof) of Six Dollars and 50/100 Cents ($6.50) (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." 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 the 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. 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 for shares of Common Stock issuable upon exercise of the Conversion Right shall be delivered to the Holder within fifteen (15) 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 shares of capital stock 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 -2- 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 his 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 or blue sky 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 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. -3- 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 Capital Stock. If at any time after August 22, 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 capital stock other than Common Stock; or (v) issues by reclassification of its Common Stock any shares of its capital stock; 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 capital stock 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 a dividend or distribution, and immediately after the effective date in the case of a subdivision, combination or reclassification. -4- (b) Adjustment for Other Distributions. If at any time after August 22, 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 Exercise Price immediately prior to the adjustment. M = the current market price (as defined in Section 11 above) 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. 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) Adjustment for Common Stock Issue. (i) If at any time after August 22, 1996, the Company issues shares of Common Stock for a consideration per share that is less than the current market price per share (determined as provided in Section 11 above) on the date the Company fixes the offering price of such additional shares, the Exercise Price shall be adjusted in accordance with the following formula: -5- E' = Y x [O + (P / E)] ------------ A where: E' = the adjusted Exercise Price. Y = the then current Exercise Price immediately prior to the adjustment. O = the number of shares outstanding immediately prior to the issuance of such additional shares. P = the aggregate consideration received for the issuance of such additional shares. E = the current market price (determined as provided in Section 11 above) immediately prior to the adjustment. A = the number of shares outstanding immediately after the issuance of such additional shares. The adjustment shall be made successively whenever any such issuance is made, and shall become effective immediately after such issuance. (ii) This subsection 6(c) does not apply to (A) any of the transactions described in subsections (a), (b) and (d) of this Section 6, (B) Common Stock issued pursuant to options and warrants outstanding on August 22, 1996, (C) Common Stock issued to officers, trustees, directors or employees of, or consultants to, the Company 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 Company's Board of Trustees or an appropriate committee of the Company's Board of Trustees, and (y) have an exercise price not less than 85% of the current market price of the Company's Common Stock at the time of issuance of such warrant, right or option, (D) Common Stock issued on redemption of Class A units of limited partnership interest in Brandywine Operating Partnership, L.P. issued or issuable to Safeguard Scientifics (Delaware), Inc. ("SSI") and The Nichols Company ("TNC") and certain other persons, or their respective affiliates, in connection with the transactions contemplated by the Contribution Agreement, by and among the Company, SSI and TNC, (E) shares of Common Stock issuable to Messrs. Belcher, Gallagher, Nichols and Sweeney upon exercise of warrants issued to them on the date hereof pursuant to their employment agreements with Brandywine Realty Services Company, Inc., (F) up to 236,200 shares of Common Stock reserved for issuance to Richard M. Osborne, Sr. or to a trust controlled by him ("Osborne") upon the repayment of unsecured debt issued to or held by Osborne and up to 236,200 shares of Common Stock 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, and (G) any securities sold to the public in connection with an underwritten public offering of the Company's securities. (d) Adjustment for Convertible Securities Issue. If at any time after August 22, 1996, the Company issues for consideration any securities convertible into or -6- exchangeable or exercisable for Common Stock for consideration per share of Common Stock initially deliverable upon conversion, exchange or exercise of such securities, together with the consideration paid upon issuance of such securities, less than the current market price per share (determined as provided in Section 11 above) on the date of issuance of such securities, the Exercise Price shall be adjusted in accordance with this formula: E' = Y x [O + (P / E)] ------------ O + D where: E' = the adjusted Exercise Price. Y = the then current Exercise Price immediately prior to the adjustment. O = the number of shares outstanding immediately prior to the issuance of such securities. P = the aggregate consideration received and receivable for the issuance of such securities. E = the current market price (determined as provided in Section 11 above). D = the maximum number of shares deliverable upon conversion, exchange or exercise of such securities at the initial conversion, exchange or exercise rate. The adjustment shall be made successively whenever any such issuance is made, and shall become effective immediately after such issuance. If all of the Common Stock deliverable upon conversion, exchange or exercise of such securities has not been issued when such securities are no longer outstanding, then the Exercise Price shall promptly be readjusted to the Exercise Price which would then be in effect had the adjustment upon the issuance of such securities been made on the basis of the actual number of shares of Common Stock issued upon conversion, exchange or exercise of such securities. This subsection does not apply to any of the transactions described in subsections (a), (b) and (c)(ii)(B), (C), (D), (E), (F) and (G) above. (e) Adjustment to Number of Warrant Shares. Upon each adjustment to the Exercise Price pursuant to Section 6(c) or (d), the number of Warrant Shares purchasable hereunder at that Exercise Price shall be adjusted, to the nearest one hundredth of a whole share, to the product obtained by multiplying such number of shares purchasable immediately prior to such adjustment in the Exercise Price by a fraction, the numerator of which shall be the Exercise -7- Price immediately prior to such adjustment and the denominator of which shall be the Exercise Price immediately thereafter. (f) 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 capital stock of the Company, if any, issuable upon such exercise over and above the shares of Common Stock or other capital stock 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. (g) When No Adjustment Required. No adjustment need be made for a change in the par value or no par value of the Common Stock. (h) 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 capital stock 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 of 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 of 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 -8- (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. (i) 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. (j) 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. (k) 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. -9- 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 stock and other securities and property (including cash) receivable upon such reclassification, 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 stock 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 and any warrants issued upon repayment of unsecured debt issued to or held by Osborne (collectively, the "Osborne Warrant"), 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, the Warrant held by SSI and the Osborne Warrant 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. -10- 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 under the Act or may be freely sold to the public pursuant to Rule 144 (or any successor rule thereto) or otherwise. (b) The Company shall cause, within 60 days after the date this Warrant is originally issued, the Warrant Shares to be registered under the Act on a Form S-8 (which shall include an S-3 reoffer prospectus if appropriate) or such other form as is required by the rules and regulations of the Securities and Exchange Commission to effect such registration and to permit the Holder to sell such registered Warrant Shares publicly without regard to the volume and other limitations of Rule 144. 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 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 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 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 -11- 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. Classification of the Company for Tax Purposes. In the event that the issuance of shares of Common Stock upon the exercise of this Warrant would result in the Company being "closely held" within the meaning of Section 856(h) of the Internal Revenue Code of 1986, as amended (the "IRC"), or would bring the number of shares of Common Stock beneficially held by the Holder in excess of the Ownership Limit (as such term is defined in Section 6.6 of the Declaration of Trust of the Company) applicable to the Holder, the Company, notwithstanding anything herein to the contrary, shall have no obligation to issue such shares and instead the Company shall pay to the Holder, on account of each share of Common Stock as to which exercise would cause such a classification, an amount in cash equal to the excess, if any, of the "current market price" (as defined in Section 11 hereof) of a share of Common Stock over the Exercise Price. Moreover, if the U.S. Internal Revenue Service asserts, in an appropriate proceeding, that the issuance of this Warrant would, but for this provision, result in the Company being "closely held" within the meaning of Section 856(h) of the IRC, the Company shall have the right to terminate this Warrant and replace it with a stock appreciation right pursuant to which the Company would have the option, upon the exercise thereof, either: (i) to deliver cash in an amount equal to the Spread (as defined below), or (ii) to deliver shares of Common Stock having an aggregate current market price (as defined in Section 11 hereof) equal to the Spread. As used herein, the term "Spread" shall mean, as of a given date, the current market price (as defined in Section 11 hereof) of a share of Common Stock on such date over the Exercise Price. The stock appreciation right issued in replacement of this Warrant shall cover the same number of shares of Common Stock covered by this Warrant immediately prior to its termination and have the same term as this Warrant. Section 13. 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 hereof. Section 14. Notices. Any notice, request or other document required or permitted to be given or delivered to the holder hereof or the Company shall be delivered or shall be sent by certified mail, postage prepaid, or by overnight courier to each such holder at his 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 15. 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 accordance with, and the rights of the parties shall be governed by, the laws of the State of Maryland. -12- Section 16. 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 17. 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 August 22, 1996. BRANDYWINE REALTY TRUST By: /s/ Gerard H. Sweeney ----------------------------------- -13- 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________________________ -14- ASSIGNMENT FORM Dated:__________________ FOR VALUE RECEIVED,__________________hereby sells, assigns and transfers unto_______________________________________________(the "Assignee"), (please type or print in block letters) ______________________________________________________________________________ (insert address) his 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___________________________ -15- EX-10.8 11 EXHIBIT 10.8 ENVIRONMENTAL INDEMNITY AGREEMENT THIS AGREEMENT is made this 22nd day of August, 1996, by and between BRANDYWINE OPERATING PARTNERSHIP, L.P., a Delaware limited partnership ("BOP"), and SAFEGUARD SCIENTIFICS, INC., a Pennsylvania corporation ("SSI") (collectively the "Parties"). WITNESSETH: A. WHEREAS, this Environmental Indemnity Agreement (the "Agreement") is being executed as part of a larger transaction involving, inter alia, BOP and SSI, the terms and conditions of which are set forth in a Contribution Agreement dated July 31 1996, to which this Agreement is attached as an Exhibit. B. WHEREAS, as part of that larger transaction, SSI is contributing to BOP certain properties specified in the Contribution Agreement, including certain office and industrial properties owned by SSI which are listed on Exhibit "B" to the Contribution Agreement, and which are referred to therein as the "B Properties." C. WHEREAS, one of the "B Properties" to be contributed by SSI to BOP is real property known as 110 Summit Drive, which is located in the Whiteland Business Park, West Whiteland Township, Chester County, Pennsylvania, and upon which is constructed a commercial office building of approximately 43,622 sq. ft. (the "Summit Drive Property"). The Summit Drive Property is further described on Exhibit "B" to the Contribution Agreement. D. WHEREAS, SSI has provided to BOP a Phase I Environmental Site Assessment relating to the Summit Drive Property dated June 10, 1996, which was prepared by Pennoni Associates Inc. in conformance with the ASTM E 1527 Standard Practice for Environmental Site Assessments (the "Phase I Report"). E. WHEREAS, the Parties desire to set forth separately certain agreements with respect to environmental matters relating to the Summit Drive Property. TERMS AND CONDITIONS NOW, THEREFORE, in consideration of the promises and the mutual representations, warranties, covenants and agreements contained herein, and other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the Parties hereto, intending to be legally bound, agree as follows: Section I - DEFINITIONS 1.1 For purposes of this Agreement, the following terms shall have the following meanings: "Known Environmental Conditions" means (1) the waste disposal area identified in the Phase I Report which is present on the Summit Drive Property immediately adjacent to the north side of the office building, together with any soil and groundwater contamination directly related to the waste disposal area (the "Disposal Area Conditions"); and (2) the presence of methane gas in the office building and in the area surrounding the office building on the Summit Drive Property, together with all existing systems, equipment and procedures for monitoring, collecting and venting that gas, including, without limitation, the vapor collection trench, the monitoring well vents and all associated vent pipes and equipment (the "Methane Gas Conditions"). "Unknown Environmental Conditions" means all other environmental conditions related to the Summit Drive Property which are not "Disposal Area Conditions" or "Methane Gas Conditions." "Environmental Claim" means any written or oral demand, order, claim, suit, lien, action, cost, expense, cause of action, investigation or notice asserted by any person or entity against BOP alleging actual or potential liability under Environmental Laws (including, without limitation, potential or actual liability for investigatory costs, cleanup costs, governmental response costs, natural resources damages, property damages, personal injuries, or penalties). "Environmental Law" means any common law, or any federal, state, or local statute, regulation, or ordinance relating to pollution or protection of human health or the environment (including, without limitation, ambient air, surface water, groundwater, land surface, or subsurface strata). Section 2 - INDEMNIFICATION 2.1 Except as limited in Section 3 below, SSI hereby agrees to defend, indemnify, save, and hold harmless BOP from and against any and all Environmental Claims asserted against BOP arising out of or relating to Disposal Area Conditions. Section 3 - LIMITATIONS 3.1 Voluntary Acts. Prior to the Termination Date set forth in the following Section 3.2, BOP agrees that it will not voluntarily initiate any removal, remedial or other cleanup actions at the Summit Drive Property relating to Disposal Area Conditions. Should BOP voluntarily initiate any removal, remedial or other cleanup actions at the Summit Drive Property relating to Disposal Area Conditions prior to the Termination Date, SSI shall not be required to defend, indemnify, save, and hold harmless BOP from and against any and all Environmental Claims asserted against BOP arising out of or relating to Disposal Area Conditions. 3.2 Time Period. SSI's indemnification obligation under Section 2.1 of this Agreement shall terminate five (5) years after the "Closing Date" as defined in Section 6.1 of the Contribution Agreement ("Termination Date"). Any Environmental Claim received by BOP prior to the Termination Date, and for which notice is provided in conformance with Section 4.1 of this Agreement, shall remain subject to and covered by this Agreement, and SSI's defense and indemnification obligations to BOP with respect thereto shall continue unimpaired. 3.3 Monetary Cap. The total liability of SSI under Section 2.1 of this Agreement shall be Two Million Eighteen Thousand Dollars ($2,018,000.00). 3.4 Excluded Matters. The indemnity contained in Section 2.1 of this Agreement does not extend to any Environmental Claim unrelated to the Disposal Area Conditions, including but not limited to, Environmental Claims arising out of or relating to Methane Gas Conditions. 3.5 Third-Party Recoveries. All amounts for which BOP seeks indemnification under Section 2.1 of this Agreement shall be computed net of: A. Any insurance coverage proceeds received by BOP with respect thereto; and B. Any amounts recovered by BOP from any third parties based on claims BOP may have against such third parties which reduce the costs or damages that would otherwise be sustained; and C. The Parties hereto agree to use their best efforts to pursue any claims or rights they may have against any insurance company or third party which would reduce the amount of damages otherwise incurred. BOP may satisfy the "best efforts" obligation of the preceding sentence by assigning its rights under insurance policies or claims against other parties, if any, to SSI. 3.6 Sole Remedy. BOP hereby acknowledges and agrees that its sole remedy against SSI for any and all Environmental Claims arising out of or relating to Disposal Area Conditions shall be under Section 2.1 of this Agreement, as limited by Sections 3.1 through 3.6 of this Agreement, and BOP expressly waives all other rights and causes of action, at law, by statute or in equity that it had, now has or may have in the future against SSI arising out of or relating to Disposal Area Conditions. BOP further expressly waives all rights and causes of action, at law, by statute or in equity that it had, now has or may have in the future against SSI arising out of or relating to Methane Gas Conditions. Nothing in this Agreement is intended or shall be construed to waive, limit or otherwise affect any statutory, legal, equitable or other rights, claims or defenses that the Parties may have with respect to Unknown Environmental Conditions, all such rights, claims and defenses being hereby specifically reserved. Section 4 - PROCEDURES 4.1 Notices. Within thirty (30) days after receiving written notice or information that an Environmental Claim or proceeding has been or may be commenced or initiated against BOP which may give rise to any liability on the part of SSI under Section 2.1 of this Agreement, BOP shall provide written notice to SSI. BOP's failure to provide such notice within thirty (30) days shall not relieve SSI of its obligations under this Agreement unless SSI was materially prejudiced by the failure to provide such notice within such period. The notice shall contain all information reasonably available to BOP, including but not limited to, copies of all notices, orders or other communications received by BOP from any governmental agency, the caption or other identification of the claim or proceeding, the nature of the claim or proceeding, the date such claim or proceeding was commenced or filed and the parties to the claim or proceeding. SSI shall assume BOP's defense within ten (10) calendar days after receipt of notice under this section of an Environmental Claim or proceeding that has been or may be commenced or initiated against BOP which may give rise to any liability on the part of SSI under Section 2.1 of this Agreement ("Assumption Date"). During the time period between the date notice is received by SSI under this section and the Assumption Date, the Parties agree to use their best efforts to provide cooperation, assistance, and consultation to each other. 4.2 Control. SSI shall have the right to control, manage and direct all discussions, proceedings, remediations and other activities regarding the satisfaction or discharge of any Environmental Claim which is assumed by it under this Agreement or any liability or obligation that such a claim seeks to impose on SSI under this Agreement, except that no such discussions, proceedings, remediations or activities shall unreasonably interfere with BOP's lawful and reasonable use of the Summit Drive Property. SSI shall have the right to select legal counsel, consultants, and contractors related to the foregoing, subject to BOP's prior approval, which approval shall not be unreasonably withheld. 4.3 Cleanup Standards. If any Environmental Law requires BOP to take action with respect to the Disposal Area Conditions, and such actions are within the scope of the SSI indemnification contained in Section 2.1 of this Agreement, SSI shall have the sole right to select the cleanup approach and standards applicable to any such action under Pennsylvania's Act 2 legislation, Act of May 19, 1995, P.L. (currently uncodified). BOP agrees that SSI shall be entitled to select any cleanup approach or standards available under Act 2 that are consistent with the current use of the Summit Drive Property as a commercial office building, including, without limitation, the use of non-residential risk assessment methods and cleanup standards; the use of background, statewide health or site- specific cleanup standards; and the use of reasonable deed notices and restrictions; all of the foregoing at SSI's sole discretion; provided, however, that SSI shall not take any action that is not acceptable to and approved by the Pennsylvania Department of Environmental Protection. If BOP desires a more protective cleanup approach or more protective cleanup standards than those selected by SSI, BOP shall be solely responsible for all additional costs related to attaining the more protective approach or standards. 4.4 Access and Cooperation. In order to assist the Parties in fulfilling their respective obligations under this Agreement, BOP will afford SSI, its employees, agents and contractors, upon reasonable notice to BOP, reasonable access to the Summit Drive Property (including, but not limited to, the right to enter upon, photograph, investigate, drill wells, take soil borings, excavate, monitor, test, cap and use available land for the testing and implementation of remedial technologies), employees and all relevant documents and records regarding any matter as to which an Environmental Claim is asserted; provided that such access may be conditioned or restricted as may be reasonably necessary to protect the normal course the business operations at the Summit Drive Property and to protect confidential or privileged information. To effectuate the intent of this Agreement, and consistent with the terms hereof, the Parties agree to provide all other cooperation, assistance and consultation to each other that is reasonably requested with respect to matters covered by this Agreement. Section 5 - MISCELLANEOUS PROVISIONS 5.1 Confidentiality. The Parties acknowledge and agree that the terms and conditions of this Agreement shall remain confidential and shall not be disclosed to any person or firm except as may be required by law or upon the express prior written approval of all other Parties. Such approval shall not be unreasonably withheld or delayed. 5.2 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 BOP, to: Brandywine Operating Partnership, L.P. Suite 100, Two Greentree Center Marlton, NJ 08053 Attention: Gerard H. Sweeney With a required copy to: Pepper, Hamilton & Scheetz 3000 Two Logan Square 18th & Arch Streets Philadelphia, PA 19103-2799 Attention: Michael H. Friedman, Esquire If to SSI, to: Safeguard Scientifics, Inc. 800 Safeguard Building 435 Devon Park Drive Wayne, PA 19087 Attention: James A. Ounsworth, Esquire With a required copy to: Drinker Biddle & Reath Suite 300, 1000 Westlakes Drive Berwyn, PA 19312 Attention: Robert H. Strouse, Esquire 5.3 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. 5.4 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. 5.5 Amendment, Modifications and Waiver. The Parties may amend or modify this Agreement in any respect. Any such amendment or modification must be in writing, executed by the Parties. 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. 5.6 Severability. If any provision or part of this Agreement shall be held by any court of competent jurisdiction to be illegal or unenforceable, such provision shall be of no force and effect, but the illegality or unenforceability of such provision shall not affect the other provisions or parts hereof, and this Agreement shall be construed in all respects as if such illegal or unenforceable provisions or parts were omitted. 5.7 Non-Admission. This Agreement is for the sole benefit of the Parties only and nothing contained in this Agreement shall be construed as an admission by any of the Parties on any issue of law, fact or liability, including, without limitation, any admission of law, fact or liability by any of the Parties pertaining to Known or Unknown Environmental Conditions relating to the Summit Drive Property. 5.8 Assignment. Neither Party shall assign or transfer this Agreement or any rights or obligations hereunder without the prior written consent of the other Party, provided that in the event that BOP sells the Summit Drive Property, or any interest therein, prior to the Termination Date, SSI's defense and indemnification obligations to BOP under this Agreement shall continue unimpaired. IN WITNESS WHEREOF, each of the Parties hereto has executed this Agreement, all as of the date first written above. SAFEGUARD SCIENTIFICS, INC. By:__________________________ Title:_______________________ BRANDYWINE OPERATING PARTNERSHIP, L.P. By:__________________________ Title:_______________________ EX-10.9 12 EXHIBIT 10.9 Exhibit 10.9 OPTION AGREEMENT THIS OPTION AGREEMENT (the "Agreement") is made as of this 22nd day of August, 1996, by and between C/N HORSHAM TOWNE LIMITED PARTNERSHIP, a Pennsylvania limited partnership, having an address c/o The Nichols Company, 16 Campus Boulevard, Newtown Square, PA 19073 (hereinafter called "Optionor"), and BRANDYWINE OPERATING PARTNERSHIP, L.P., a Delaware limited partnership, having an address c/o Brandywine Realty Trust, Suite 100, Two Greentree Center, Marlton, NJ 08053 (hereinafter called "Optionee"). Background A. Optionor is the owner of all those certain tracts or parcels of ground, and all improvements thereon, located at 255, 355, 455 and 555 Business Center Drive, Horsham, Pennsylvania, as more fully described on Exhibit "A" (collectively, the "Property"). B. Pursuant to a Contribution Agreement dated as of July 30, 1996 (the "Contribution Agreement") by and among Safeguard Scientifics, Inc. ("SSI"), The Nichols Company ("TNC") and Brandywine Realty Trust ("BRT"), SSI, TNC and BRT have today conveyed certain properties to Optionee in exchange for the issuance of units of Class A limited partnership interests in Optionee (the "LP Units"). Optionor is an affiliate of TNC. Optionor desires to grant to Optionee and Optionee desires to receive an option to acquire the Property from Optionor upon the terms and conditions contained herein. Agreement The parties hereto, in consideration of the sum of Ten Dollars ($10.00), the receipt and sufficiency of which are hereby acknowledged, and the mutual covenants and agreements contained herein and intending to be legally bound hereby, agree as follows: 1. Grant of Option. Optionor does hereby grant to Optionee the right and option (the "Option") to acquire the Property in exchange for issuance of LP Units based on the Exchange Price (as defined below) and otherwise upon the terms and conditions set forth herein. The Optionee may exercise the Option by delivering written notice to the Optionor and New England Mutual Life Insurance Company (the "Lender") in accordance with Section 16 of this Agreement at any time during the Option Period (as defined below) or during any extension thereof. 2. Term of Option. The Option may be exercised by Optionee at any time during the term commencing on the date hereof and continuing thereafter for a period of twenty-four (24) months (the "Option Period"). If the Option is not exercised by Optionee within the Option Period, or is exercised by Optionee and Optionee thereafter fails to close title in accordance with the terms of this Agreement, then, except as hereinafter otherwise provided, the Option shall terminate without liability to Optionee. The Optionor and Optionee understand and agree that the price of the Option is Ten Dollars ($10.00), which sum, together with the execution of the Contribution Agreement and all related documentation, constitute adequate consideration for the Option. 3. Extension of Option Period. Optionee may extend the Option Period for two (2) additional periods of twelve (12) months each. Optionee may extend the Option Period by delivering to Optionor written notice to that effect prior to, as applicable, the expiration of the Option Period or the first extension thereof in accordance with Section 16 hereof. Except as forth in this Section, Optionee shall have no right to extend the Option Period. 4. Exchange Price and Issuance of Units. (a) Determination of the Exchange Price. The Exchange Price for the Property (the "Exchange Price") shall equal (i) the Net Operating Income of the Property divided by .11; less (ii) all sums due and owing under the note, mortgage and any other loan document evidencing or securing the loan encumbering the Property at the time the Option is exercised. The Exchange Price shall be determined at the time of the exercise of the Option. For purposes of such determination, "Net Operating Income" shall be determined in the same manner as net operating income was determined for each of the properties contributed by SSI and TNC to Optionee pursuant to the Contribution Agreement for purposes of determining the number of LP Units in Optionee issued to Optionor with respect to such properties. In the event the Exchange Price is a negative number, Optionee's exercise of its option to purchase the Property shall be deemed withdrawn, but this Agreement, including, but not limited to, Sections 2 and 3 above, shall remain in full force and effect. (b) Issuance of Units. The Exchange Price shall be payable to Optionor in the form of LP Units. Optionee shall issue that number of LP Units to Optionor equal to the quotient obtained by dividing the Exchange Price by $5.50. The $5.50 divisor in the preceding formula shall be proportionately adjusted in the event there is a split or reverse split of BRT's stock or a dividend payable in BRT stock after the date hereof and prior to the Closing. -2- 5. Exclusive Option. Except (i) in the event of a foreclosure or the tender of a deed-in-lieu of foreclosure or (ii) the lease of space in the ordinary course of business, at no time during the term of the Option shall Optionor convey, transfer, sell, lease, option or otherwise dispose of the Property or any part thereof. No such sale, transfer or other disposition shall be effective unless the Option shall have first expired or been terminated. 6. Condition to Exercise of Option. The Option granted by this Agreement and Optionor's obligations hereunder are specifically conditioned upon either (a) Optionor obtaining the consent of the holder of the mortgage on the Property for conveyance of the Property to Optionee under and subject to the mortgage encumbering the Property or (b) Optionee paying to the holder of the mortgage, at Closing, such sums as are necessary to pay off and satisfy such mortgage. In the event Optionor is unable to satisfy the conditions set forth in this Section 6, Optionee's exercise of its option to purchase the Property shall be deemed withdrawn, but this Agreement, including, but not limited to, Sections 2 and 3 above, shall remain in full force and effect. 7. Title. Optionor shall convey title to the Property to Optionee at Closing by Special Warranty Deed (the "Deed"), free and clear of (a) all liens, restrictions, easements and other encumbrances, except for those set forth on the attached Exhibit "B", and (b) any additional liens, restrictions, easements or other encumbrances created after the date hereof with Optionee's prior consent (the "Permitted Encumbrances"). At Closing (as defined below), the title conveyed by Optionor shall be good and marketable and insurable as such by any reputable title insurance company selected by the Optionee, at such company's regular rates, pursuant to a standard ALTA owner's form of policy, free of all exceptions, other than the Permitted Encumbrances. 8. Closing. The closing of the transaction contemplated herein ("Closing") shall take place at 10:00 a.m. on the thirtieth (30th) day following the date Optionee gives notice of its exercise of the Option, or sooner by mutual agreement of the parties hereto (the "Closing Date"). If said thirtieth (30th) day shall not be a business day, then the Closing shall occur on the first business day thereafter. In the event of a casualty loss on the Property, Optionor may, but is not obligated to, extend the Closing Date, by written notice to Optionee, for up to ninety (90) days to permit the repair of the damage caused by such casualty. For purposes hereof, a "business day" shall mean any day other than a day on which commercial banks in the Commonwealth of Pennsylvania are required or permitted by law to close. The Closing shall occur at the offices of Drinker Biddle & Reath, The Philadelphia National Bank Building, 1345 Chestnut -3- Street, Philadelphia, PA 19107-3496, or at such other location as the parties may mutually agree. 9. Transfer Taxes. All Commonwealth and county, township or municipal real property transfer taxes shall be apportioned equally between the Optionor and the Optionee. 10. Adjustments. Closing adjustments shall be made in accordance with Section 7 of the Contribution Agreement. 11. Representations and Warranties of Optionor. Optionor makes the representations and warranties as of the date of this Agreement as set forth on the attached Exhibit "C." As a condition precedent to Closing, Optionor shall deliver to Optionee a certification stating that all of Optionor's representations and warranties as set forth on the attached Exhibit "C" are true and correct in all material respects as of the Closing Date. In the event that Optionor's representations and warranties as set forth on the attached Exhibit "C" are not true and correct in all material respects as of the Closing Date, Optionee may withdraw Optionee's exercise of the Option, in which event Optionee's right to acquire the Property shall continue in accordance with the terms of this Agreement. 12. Representations of Optionee. Optionee represents and warrants as of the date of this Agreement as follows: (a) Optionee has full power and authority to enter into this Agreement and to perform all obligations hereunder. (b) The performance by Optionee of Optionee's obligations under this Agreement will not violate any law, result in any breach, constitute a default under, or require any consent pursuant to any contract or other agreement, lease, license or permit to which Optionee is a party, or require Optionee to obtain the consent of any person, entity or governmental authority. 13. Representations Limited. All representations and warranties made by the parties in this Agreement shall survive the execution of this Agreement and the consummation of the transactions contemplated hereunder for a period of two (2) years from the Closing Date, and claims made prior to the expiration of such two (2) year period shall survive if not resolved within such two (2) year period. Any claim made after Closing alleging misrepresentation or breach of any of such representations and warranties shall be made solely pursuant to the indemnification provisions provided in the Agreement of Limited Partnership dated as of August 22, 1996 by and among Optionor, TNC and BRT. -4- 14. Condition of Premises. Optionee shall be afforded the opportunity to inspect the Property and Optionee, if it exercises the Option, shall automatically and without further action, be deemed to have released Optionor from all responsibility and liability regarding the condition or utility of the Property and any personal property located thereon. OPTIONEE SHALL PURCHASE THE PROPERTY IN "AS IS - WHERE IS" CONDITION, SUBJECT TO REASONABLE USE, WEAR AND TEAR AND NORMAL DEPRECIATION BETWEEN THE DATE HEREOF AND CLOSING. Optionor shall not be obligated to make any alterations, repairs or improvements to the Property or any personal property located thereon and shall not be obligated to remove any items of personal property from the Property on the Closing Date. 15. Brokers. Optionor and Optionee each represent and affirm to the other that neither Optionor nor Optionee has made any agreement or taken any action which may cause any broker or finder to become entitled to a commission as a result of the transaction contemplated by this Agreement. Each of the parties hereto agrees to indemnify, defend and hold the other harmless against any claims, demands, suits, judgments or liabilities which arise by reason of a breach of the foregoing representation. The provisions of this Section shall survive the Closing or other termination of this Agreement. 16. Notices. All notices, requests and other communications under this Agreement, to be effective, shall be in writing and shall be sent by certified mail, return receipt requested or by overnight delivery by recognized courier, addressed as follows: If to Optionor: Anthony A. Nichols, Sr. The Nichols Company 16 Campus Boulevard, Suite 150 Newtown Square, PA 19073 With a copy to: John W. Fischer, Esq. Drinker Biddle & Reath 1000 Westlakes Drive Suite 300 Berwyn, PA 19312 -5- If to Optionee: Gerard Sweeney President Brandywine Realty Trust Suite 100 Two Greentree Center Marlton, NJ 08053 With a copy to: Michael H. Friedman, Esq. Pepper, Hamilton & Scheetz 3000 Two Logan Square 18th & Arch Streets Philadelphia, PA 19103-2799 If to Lender: New England Mutual Life Insurance Company 501 Boylston Street Boston, MA 02116-3700 Attention: Law Department Mortgage Group With a copy to: or such other person or address which Optionor or Optionee shall have given notice as herein provided. 17. Loans for Capital Improvements. During the term of this Agreement, Optionor shall have the right to fund the costs incurred by Optionor with respect to new leases for space in the Property (including but not limited to costs of tenant improvements, brokerage commissions and legal fees) through loans made by Optionor or an affiliate for such purpose ("Capital Improvement Loans"). All such Capital Improvement Loans shall bear interest at the prime rate and shall be payable out of cash flow from the Property remaining after payments of third party debt. Upon exercise by Optionee of the Option, Optionor shall advise Optionee if any Capital Improvement Loans will remain outstanding at Closing hereunder. Any Capital Improvement Loans (included accrued but unpaid interest) that are outstanding at Closing shall (i) reduce the Exchange Price on a dollar for dollar basis and (ii) shall be payable by Optionee on a pari-passu basis with any loans made by Optionor to Optionee pursuant -6- to that certain Distribution Support and Loan Agreement of even date herewith between Optionor and Optionee. Optionee shall assume all obligations under any such Capital Improvement Loan outstanding at Closing and shall indemnify and hold Optionor harmless from any obligations accruing under any such Loan after the date of Closing. Anything herein to the contrary notwithstanding, from and after this date, Optionor shall not assume or incur additional indebtedness for capital improvements to the Property without the prior written consent of Optionee, which consent shall not be unreasonably withheld, conditioned or delayed. 18. Recording. At the request of either party this Agreement or a memorandum thereof may be recorded in the Office of the Recorder of Deeds for the county in which the Property is located. 19. Miscellaneous. (a) Entire Agreement; Merger. This Agreement together with the Exhibits attached hereto embodies and constitutes the entire understanding between the parties with respect to the transactions contemplated herein, and all prior or contemporaneous agreements, understandings, representations and statements, oral or written, are merged into this Agreement. Neither this Agreement nor any provision hereof may be waived, modified, amended, discharged or terminated except by an instrument in writing signed by the party against which the enforcement of such waiver, modification, amendment, discharge or termination is sought, and then only to the extent set forth in such instrument. (b) Time of the Essence. Time is of the essence as to the performance of all terms and conditions of this Agreement. (c) Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania. (d) Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective heirs, executors, administrators, legal representatives, successors and assigns. (e) Headings. All headings are for convenience only, and shall not be used in construing any of the provisions of this Agreement. (f) Counterparts. This Agreement may be executed in multiple counterparts, each of which shall be deemed an original. -7- (g) Non-Recourse. No recourse shall be had for any obligation of Optionee hereunder, or for any claim based thereon or otherwise in respect thereof, against any past, present or future trustee, shareholder, officer or employee of Optionee, 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 Optionor. In the event Optionee exercises its option to purchase the Property and thereafter fails to complete Closing by reason of the default of Optionee hereunder, Optionor shall have the right to terminate this Agreement, in which event Optionee's right to acquire the Property shall lapse. In the event Optionee exercises its option to purchase the Property and thereafter fails to complete Closing for a cause other than the default of Optionee hereunder, including but not limited to a title defect or casualty loss, Optionee may withdraw Optionee's exercise of the Option, in which event Optionee's right to acquire the Property shall continue in accordance with the terms of this Agreement. IN WITNESS WHEREOF, the parties hereto have executed,sealed and delivered this Agreement the day and year first above written. OPTIONOR: C/N HORSHAM TOWNE LIMITED PARTNERSHIP, acting by and through its general partner, C/N HORSHAM TOWNE, INC. By: /s/ Anthony A. Nichols ---------------------------------- Name: Title: [Corporate Seal] OPTIONEE: BRANDYWINE OPERATING PARTNERSHIP, L.P. By: BRANDYWINE REALTY TRUST, its general partner By: /s/ Gerard H. Sweeney ---------------------------------- Name: Gerard H. Sweeney Title: President [Corporate Seal] -8- The address of the above named Optionee is: c/o Brandywine Realty Trust Suite 100 Two Greentree Center Marlton, New Jersey 08053 By: /s/ Gerard H. Sweeney ---------------------------------- On behalf of the Optionee -9- EX-10.10 13 EXHIBIT 10.10 ARTICLES OF INCORPORATION OF BRANDYWINE REALTY SERVICES CORPORATION (as amended and restated on August 19, 1996) In compliance with the requirements of Section 1306 of the Pennsylvania Business Corporation Law of 1988, as amended, (15 Pa. C.S.A. ss.1306), the undersigned, desiring to be incorporated as a business corporation, hereby certifies that: Article I The name of the corporation (which is hereinafter referred to as the "Corporation") shall be Brandywine Realty Services Corporation. Article II The address of the Corporation's initial registered office in the Commonwealth of Pennsylvania is 16 Campus Boulevard, Newtown Square, PA 19073. Article III The Corporation is incorporated under the Pennsylvania Business Corporation Law of 1988, as amended (the "BCL"), and shall have unlimited power to engage in all lawful business for which corporations may be incorporated under the BCL. Article IV A. Number of Shares. The aggregate number of shares that the Corporation shall have authority to issue is Ten Thousand (10,000), Five Hundred Twenty Seven (527) shares of which shall be Common Stock, par value $.01 per share ("Common Stock") and Nine Thousand Four Hundred Seventy Three (9,473) shares of which shall be Non-Voting Preferred Stock, stated value $.01 per share ("Preferred Stock"). B. Voting Rights. Except as may be provided in these Articles of Incorporation, the holders of shares of Common Stock shall have the exclusive right to vote on all matters at all meetings of the shareholders of the Corporation, and shall be entitled to one vote for each share of Common Stock entitled to vote at such meeting. Except as may be provided in these Articles of Incorporation, and as may be provided by applicable law, the shares of Preferred Stock shall not be entitled to vote. C. Dividends. The holders of shares of the Preferred Stock and Common Stock shall be entitled to receive dividends out of funds legally available therefor, at such times and in such amounts as may be determined by the Board of Directors, provided that the amount per share payable on the Common Stock shall be equal to the amount per share payable on the Preferred Stock and the amount per share payable on the Preferred Stock shall be equal to the amount per share payable on the Common Stock. Article V No director of the Corporation shall be personally liable, as such, for monetary damages for any action taken, or any failure to take any action, except to the extent that by law a director's liability for monetary damages may not be limited. Article VI In lieu of any statutory standard of care that would otherwise be applicable in the absence of the provisions of this article, each officer of the Corporation shall perform his duties as an officer in good faith, in a manner he reasonably believes to be in the best interests of the Corporation and with such care, including reasonable inquiry, skill and diligence, as a person of ordinary prudence would use under similar circumstances, except that notwithstanding the foregoing no officer shall be personally liable for monetary damages (other than under criminal statutes and under federal, state and local laws imposing liability on officers for the payment of taxes) unless his conduct constitutes self-dealing, willful misconduct or recklessness. In performing his duties, each officer shall be entitled to rely on others, to consider all factors deemed by him to be pertinent, and to be presumed to be acting in the best interests of the Corporation, in each case to the same extent as directors of the Corporation are so entitled under the BCL. Article VII Without the affirmative approval (at a meeting of shareholders duly called in accordance with the BCL) of the holder(s) of a majority of the issued and outstanding shares of Preferred Stock, the Corporation shall not (a) change, alter or amend any provision of these Articles of Incorporation, (b) reclassify, combine, or split any shares of its capital stock, -2- (c) issue or authorize for issuance any shares of its capital stock, or (d) directly or indirectly, retire, redeem, purchase or otherwise acquire any shares of Preferred Stock. Article VIII The name and post office address of the incorporator is as follows: NAME ADDRESS ---- ------- Jacqueline Y. Eastridge Pepper, Hamilton & Scheetz 3000 Two Logan Square 18th and Arch Streets Philadelphia, PA 19103 IN TESTIMONY WHEREOF, the sole incorporator has signed these Articles of Incorporation this 19th day of August, 1996. ------------------------------ Jacqueline Y. Eastridge Sole Incorporator -3- EX-23.1 14 EXHIBIT 23.1 ARTHUR ANDERSEN LLP CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation by reference in this Form 8-K of our report dated March 4, 1996 included in Brandywine Realty Trust's Form 10-K/A for the year ended December 31, 1995 and to all references to our firm included in this Form 8-K. /s/ Arthur Andersen LLP ----------------------------------- Arthur Andersen LLP Philadelphia, Pa., September 4, 1996 -----END PRIVACY-ENHANCED MESSAGE-----