-----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, Sc0mQ8cPn7WnXnTQ1kB6zLE1kYuYGWW7aqmKJNrQ7mcGC/q0HFeinPB4NDqZEpdW Z4b8LFxZrKpxGfn5tULNBA== 0000950116-98-001592.txt : 19980803 0000950116-98-001592.hdr.sgml : 19980803 ACCESSION NUMBER: 0000950116-98-001592 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19980605 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19980730 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: SEC FILE NUMBER: 001-09106 FILM NUMBER: 98674371 BUSINESS ADDRESS: STREET 1: 16 CAMPUS BLVD STREET 2: STE 100 CITY: NEWTOWN SQUARE STATE: PA ZIP: 19073 BUSINESS PHONE: 6103255600 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) June 10, 1998 BRANDYWINE REALTY TRUST ----------------------- (Exact name of registrant as specified in its charter) MARYLAND 1-9106 23-2413352 (State or Other Jurisdiction (Commission (I.R.S. Employer of Incorporation) file number) Identification Number) 16 Campus Boulevard, Newtown Square, Pennsylvania 19073 (Address of principal executive offices) (610) 325-5600 (Registrant's telephone number, including area code) Item 5. Other Events (i) Axinn Transaction. On July 11, 1998, Brandywine Realty Trust (the "Trust") and Brandywine Operating Partnership, L.P. (the "Operating Partnership" and, collectively with the Trust, the "Company") entered into an agreement (the "Acquisition Agreement") with Donald E. Axinn ("Axinn") and certain entities controlled by Axinn (the "Axinn Entities") to acquire a portfolio of nine office properties and 20 industrial facilities located in Long Island, New York and Northern New Jersey that contain an aggregate of approximately 1.3 million net rentable square feet (the "Axinn Transaction"). The aggregate purchase price for the properties is approximately $103.5 million. The properties to be acquired include seven office properties and 19 industrial facilities that contain an aggregate of approximately 1.1 million net rentable square feet which are expected to be acquired at the initial closing (collectively, the "Axinn Properties"). The remaining two office properties and one industrial facility containing an aggregate of approximately 222,250 square feet (collectively, the "Additional Axinn Properties") are expected to be acquired by the Company after the initial closing as discussed in the footnotes to the table below. Approximately $83.4 million of the aggregate purchase price is payable at closing for the Axinn Properties, and the balance of the price would be payable when each of the Additional Axinn Properties to which such balance is allocable is acquired by the Company. Of the $83.4 million aggregate purchase price payable at closing for the Axinn Properties, the Company expects to (i) satisfy approximately $19.3 million through the assumption of mortgage debt secured by six of the Axinn Properties; (ii) defer approximately $10.4 million of the payment until the fourth quarter of 1998; and (iii) satisfy the balance of the initial purchase price through a combination of cash and Class A units of limited partner interest ("Units") in the Operating Partnership. Axinn and the partners in the Axinn Entities (collectively, the "Axinn Partners") have the right to elect the mix of cash and Units, except that a minimum of approximately $24 million of the purchase price is payable in Units. For purposes of the Acquisition Agreement, potential Unit holders have agreed to value each Unit at $24.00. In the event Axinn elects to receive more than 75% of his net equity position (computed as gross purchase price net of mortgage debt assumed or discharged) in Units, each recipient of Units will be entitled to receive a number of additional Units equal to 3.5% of the number of Units such person would otherwise have received. Each Unit will be redeemable, at the option of the holder, on and after the first anniversary of the closing date for either an amount of cash equal to the trading price of one Common Share at the time of the redemption or, at the option of the Company, for one Common Share. The Units will also be subject to earlier redemption upon a change in control of the Company or the death of the applicable holder. As of July 1, 1998, the Axinn Properties were approximately 86.0% leased to 68 tenants. No tenant individually occupied more than 10% of the aggregate net rentable square feet of the Axinn Properties. The following table identifies the locations and net rentable square feet of the Axinn Properties and the Additional Axinn Properties.
PROPERTY NET RENTABLE IDENTIFICATION LOCATION SQUARE FEET AXINN PROPERTIES LONG ISLAND INDUSTRIAL 1. 111 Ames Court Plainview, NY 18,000 2. 55 Ames Court Plainview, NY 90,000 3. 10 Skyline Drive Plainview, NY 22,200 4. 11 Commercial Street Plainview, NY 17,548 5. 80 Skyline - Express Plainview, NY 28,822 6. 120 Express Street Plainview, NY 27,729 7. 163-167 S. Service Road Plainview, NY 27,423 8. 336 S. Service Road Melville, NY 43,600 9. 180 Central Ave. / 2 Engineers Lane Farmingdale, NY 23,715 10. 8 Engineers Lane Farmingdale, NY 15,000 11. 19 Engineers Lane Farmingdale, NY 10,000 12. 91 N. Industry Court Deer Park, NY 71,000 13. 100 Voice Road Carle Place, NY 25,000 14. 110 Voice Road Carle Place, NY 25,920 15. 1000 Axinn Avenue Garden City, NY 59,000 16. 645 Stewart Avenue Garden City, NY 35,552 ------ Subtotal Long Island Industrial 540,509 ------- LONG ISLAND OFFICE 17. 125 Jericho Turnpike Jericho, NY 75,308 18. 131 Jericho Turnpike Jericho, NY 26,626 19. 245 Old Country Road Melville, NY 82,308 ------ Subtotal Long Island Office 184,242 ------- NEW JERSEY INDUSTRIAL 20. 44 National Road Edison, NJ 50,000 21. 835 New Durham Road Edison, NJ 58,095 22. 837 Durham Road Edison, NJ 48,200 ------ Subtotal New Jersey Industrial 156,295 ------- NEW JERSEY OFFICE 23. 102 Chestnut Ridge Road Montvale, NJ 49,671 24. 25 Phillips Parkway Montvale, NJ 51,155 25. 3 Paragon Drive (1) Montvale, NJ 96,000 26. 1255 Broad Street Bloomfield, NJ 37,478 ------ Subtotal New Jersey Office 234,304 ------- TOTAL AXINN PROPERTIES 1,115,350 =========
-3- ADDITIONAL AXINN PROPERTIES LONG ISLAND INDUSTRIAL 1. 31 Commercial Street (2) Plainview, NY 18,026 LONG ISLAND OFFICE 2. 263 Old Country Road (3) Melville, NY 62,500 NEW JERSEY OFFICE 3. 101 Paragon Drive (4) Montvale, NY 141,724 ------ TOTAL ADDITIONAL AXINN PROPERTIES 222,250 =======
- --------------------------------------- (1) As provided in Section 14 of the Acquistion Agreement, this property will be acquired by the Company on or before December 28, 1998. (2) As provided in Section 14 of the Acquisition Agreement, this property will be acquired only after certain environmental conditions affecting this property have been satisfied, including a determination by the New York State Department of Environmental Conservation that no further ground water monitoring or other action under a consent order relating to this property is required and the property is de-listed under the applicable New York State environmental laws. If the environmental conditions are not satisfied within two years from the closing date, then either the Company or Axinn may terminate its obligation to purchase or sell, as applicable, this property. (3) As provided in Section 4 of the Acquisition Agreement, this property is currently under construction and is expected to be acquired upon completion of construction and the issuance of a certificate of occupancy. The Company currently expects construction to be completed during the first quarter of 1999. (4) As provided in and subject to the condition contained in Section 14 of the Acquisition Agreement, this property is subject to acquisition by the Company in September 2005. The table set forth below shows scheduled lease expirations for leases in place at July 1, 1998, for the Axinn Properties and the Additional Axinn Properties for each of the next ten years beginning July 1, 1998, assuming none of the tenants exercise renewal options or termination rights, if any, at or prior to scheduled expirations: -4-
Final Annualized Percentage of Total Base Final Annualized Rent From Base Rent From Year of Number of Leases Net Rentable Square Properties Under Properties Under Lease Expiring Within Footage Subject to Expiring Expiring Cumulative Expiration the Year Expiring Leases Leases(1) Leases % 1998 12 83,200 $ 662,733 5.8% 5.8% 1999 9 38,672 410,845 3.6% 9.4% 2000 11 101,139 683,405 6.0% 15.3% 2001 9 301,066 2,765,729 24.1% 39.4% 2002 11 193,037 2,133,193 18.6% 58.0% 2003 8 77,587 819,938 7.1% 65.2% 2004 2 11,425 188,911 1.6% 66.8% 2005 6 213,147 1,823,163 16.0% 82.7% 2006 2 77,954 1,596,685 14.0% 96.7% 2007 - - - 0.0% 96.7% 2008 and thereafter 2 20,291 383,078 3.0% 100.0% - ------ ------- ---- ------ Total 72 1,117,518 $ 11,467,680 100.0% == ========= ============= ======
- --------------------- (1) "Final Annualized Base Rent" for each lease scheduled to expire represents the cash rental rate of base rents, excluding tenant reimbursements, in the final month prior to expiration multiplied by twelve. Tenant reimbursements generally include payments on account of real estate taxes, operating expense escalations and common area utility charges. The Company views the Long Island office and industrial acquisitions as value added opportunities and anticipates establishing an ongoing program to generally upgrade the properties and, in some cases undertake significant renovations. To establish this program, the Company expects to invest approximately $1 million shortly after the acquisition. The Acquisition Agreement also provides that the Company may acquire a property known as 885 Waverly Avenue, an industrial property containing approximately 50,025 net rentable square feet, for a purchase price of approximately $1.1 million. In the event the existing tenant of 885 Waverly Avenue, which exercised its right to purchase the property, defaults in its purchase, the Company would expect to acquire the property. Due to the tenant's exercise of its option, the Company does not anticipate that it will acquire the property. The Acquisition Agreement provides that at closing, Donald E. Axinn, Chairman and founder of the Axinn Company, will become a member of the Company's Board of Trustees. In addition, Mark Hamer, President and Chief Operating Officer of the Axinn Company, will become a Vice President of the Company. Upon closing, Mr. Axinn and Mr. Hamer will each be awarded 100,000 10-year options. Each option will be -5- exercisable for one Common Share and will have a per share exercise price of $24.00 in respect of 50,000 shares and $26.40 in respect of 50,000 shares. In the Acquisition Agreement, the Company agreed not to take certain actions, such as certain types of sales of Axinn Properties or Additional Axinn Properties within either a five or 10-year period, or failing to maintain approximately $42.5 million in debt allocable to the Axinn Partners. In the event the Company were to take any such actions, the Company has agreed to pay certain tax liabilities that might be incurred by the Axinn Partners. The Units and the Common Shares issuable upon redemption of the Units have not been registered under the Securities Act of 1933 or any state securities laws and may not be offered and sold in the United States absent registration or an applicable exemption from registration. The Company has agreed to file a registration statement registering the resale of Common Shares issuable upon redemption of Units. The Axinn Partners are unaffiliated with the Company. The Company based its determination of the purchase price of the Axinn Properties and the Additional Axinn Properties on the expected cash flow, physical condition, location, existing tenancies and opportunities to retain and attract additional tenants. The purchase price was determined by arm's-length negotiation between the Company and Axinn. Consummation of the Axinn Transaction is subject to customary closing conditions, including receipt of third party consents and approval of the Axinn Partners. As indicated above, the Company's obligation to acquire certain of the Axinn Properties is subject to additional conditions not generally applicable to the entire portfolio. Accordingly, no assurance can be given that all or part of the Axinn Transaction will be consummated or that, if consummated, it would follow all of the terms set forth in the Acquisition Agreement. -6- (ii) 925 Harvest Drive. On June 24, 1998, the Operating Partnership acquired a two-story office property known as 925 Harvest Drive. This property contains approximately 63,000 net rentable square feet and is located in Blue Bell, Montgomery County, Pennsylvania, and was purchased for approximately $8.1 million. The purchase price was funded from borrowings under the Company's revolving credit facility. As of July 1, 1998, 925 Harvest Drive was approximately 98.3% leased to 13 tenants. The seller of 925 Harvest Drive, E.B. Realty, Inc. (the "Seller") is a party unaffiliated with the Company. The Company based its determination of the purchase price on the expected cash flow, physical condition, location, competitive advantages, existing tenancies and opportunities to retain and attract additional tenants. The purchase price was determined by arm's-length negotiation between the Company and the Seller. (iii) Sale of Kings Mill. On June 10, 1998, the Operating Partnership sold a property known as Kings Mill. This property contains approximately 156,175 net rentable square feet and is located in Cincinnati, Ohio, and was sold for approximately $14.9 million. The buyer of Kings Mill, Hub Properties Trust (the "Purchaser") is a party unaffiliated with the Company. (iv) Financial Statements. Included under Item 7 of this Current Report on Form 8-K are financial statements for the Axinn Properties and pro forma financial information for the Company. After reasonable inquiry, the Company is not aware of any material factors relating to the Axinn Properties that would cause the reported financial information relating to such properties not to be necessarily indicative of future operating results. -7- Item 7. Financial Statements, Pro Forma Financial Information and Exhibits. (a) Financial Statements. The audited combined statement of revenue and certain operating expenses of the Axinn Properties for the year ended December 31, 1997 and the unaudited combined statement of revenue and certain operating expenses of the Axinn Properties for the three months ended March 31, 1998 are included on pages F-12 to F-15. (b) Pro Forma Financial Information. Pro forma financial information which gives effect to the Company's pending acquisition of the Axinn Properties as of and for the year ended December 31, 1997 and for the three months ended March 31, 1998 are included on pages F-1 to F-11. (c) Exhibits. 10.1 Acquisition Agreement 10.2 Form of Axinn Options 10.3 Form of Hamer Options 10.4 Form of Registration Rights Agreement 10.5 Form of Pledge Agreement 10.6 Form of Fourth Amendment to the Agreement of Limited Partnership of the Operating Partnership 23.1 Consent of Arthur Andersen LLP -8- 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: July 30, 1998 By: /s/ Gerard H. Sweeney ---------------------- Title: President and Chief Executive Officer -9- BRANDYWINE REALTY TRUST INDEX TO FINANCIAL STATEMENTS I. UNAUDITED PRO FORMA CONDENSED CONSOLIDATING FINANCIAL INFORMATION o Pro Forma Condensed Consolidating Balance Sheet as of March 31, 1998...............................F - 3 o Pro Forma Condensed Consolidating Statement of Operations for the Year Ended December 31, 1997.........................................................................F - 4 o Pro Forma Condensed Consolidating Statements of Operations for the Three Months Ended March 31, 1998....................................................................F - 5 o Notes and Management's Assumptions to Unaudited Pro Forma Condensed Consolidating Financial Information..................................................................F - 6 II. AXINN PROPERTIES o Report of Independent Public Accountants...........................................................F - 12 o Combined Statements of Revenue and Certain Expenses for the Three Months Ended March 31, 1998 (unaudited) and the Year Ended December 31, 1997 (audited) .....................F - 13 o Notes to Combined Statements of Revenue and Certain Expenses.......................................F - 14
F-1 BRANDYWINE REALTY TRUST PRO FORMA CONDENSED CONSOLIDATING FINANCIAL INFORMATION The following sets forth the pro forma condensed consolidating balance sheet of Brandywine Realty Trust ("the Company") as of March 31, 1998 and the pro forma condensed consolidating statements of operations for the three months ended March 31, 1998 and the year ended December 31, 1997. The pro forma condensed consolidating financial information should be read in conjunction with the historical financial statements of the Company and those acquisitions deemed significant pursuant to the rules and regulations of the Securities and Exchange Commission. The unaudited pro forma condensed consolidating financial information is presented as if the following events occurred on March 31, 1998 for balance sheet purposes, and on January 1, 1997 for purposes of the statements of operations: - - The Company acquired the properties described in Note 1 to these pro forma financial statements. - - The Company issued 2,375,500 Common Shares at $20.625 per share, of which 175,500 shares related to the underwriter's exercise of the over-allotment option (the "March 1997 Offering"). The net proceeds from the March 1997 Offering were contributed to Brandywine Operating Partnership, L.P. (the "Operating Partnership") in exchange for 2,375,500 units of general partnership interest ("GP Units") in the Operating Partnership. - - The Company issued 11,500,000 Common Shares at $20.75 per share, of which 1,500,000 shares related to the underwriter's exercise of the over-allotment option (the "July 1997 Offering"). The net proceeds from the July 1997 Offering were contributed to the Operating Partnership in exchange for 11,500,000 GP Units. - - The Company issued 786,840 Common Shares at $22.31 per share (the "September 1997 Offering"). The net proceeds from the September 1997 Offering were contributed to the Operating Partnership in exchange for 786,840 GP Units. - - The Company issued 751,269 Common Shares at $24.63 per share (the "December 1997 Offering"). The net proceeds from the December 1997 Offering were contributed to the Operating Partnership in exchange for 751,269 GP Units. - - The Company issued 11,000,000 Common Shares at $24.00 per share, of which 1,000,000 shares related to the underwriter's exercise of the over-allotment option (the "January 1998 Offering"). The net proceeds from the January 1998 Offering were contributed to the Operating Partnership in exchange for 11,000,000 GP Units. - - The Company issued an aggregate of 1,012,820 Common Shares at $24.06 per share (the "February 18, 1998 Offering"). The net proceeds from the February 18, 1998 Offering were contributed to the Operating Partnership in exchange for 1,012,820 GP Units. - - The Company issued an aggregate of 629,921 Common Shares at $23.81 per share (the "February 27, 1998 Offering"). The net proceeds from the February 27, 1998 Offering were contributed to the Operating Partnership in exchange for 629,921 GP Units. - - The Company issued an aggregate of 625,000 Common Shares at $24.00 per share (the "April 1998 Offering"). The net proceeds from the April 1998 Offering were contributed to the Operating Partnership in exchange for 625,000 GP Units. The pro forma condensed consolidating financial information is unaudited and is not necessarily indicative of what the actual financial position would have been at March 31, 1998, nor does it purport to represent the future financial position and the results of operations of the Company. F-2 BRANDYWINE REALTY TRUST PRO FORMA CONDENSED CONSOLIDATING BALANCE SHEET AS OF MARCH 31, 1998 (Notes 1 and 2) (Unaudited) (In thousands)
SHARE OFFERINGS BRANDYWINE -------------------------- REALTY TRUST USE OF PROPERTY HISTORICAL PROCEEDS PROCEEDS ACQUISITIONS PRO FORMA CONSOLIDATED (A) (B) (C) CONSOLIDATED ------------ ----------- ----------- ----------- ------------ ASSETS: Real estate investments, net $ 1,045,154 $ -- $ -- $ 168,411 $ 1,213,565 Cash and cash equivalents 38,042 14,175 (14,175) -- 38,042 Escrowed cash 1,241 -- -- -- 1,241 Accounts receivable 4,877 -- -- -- 4,877 Due from affiliates 348 -- -- -- 348 Investment in management company 109 -- -- -- 109 Investment in unconsolidated real estate ventures 7,276 -- -- -- 7,276 Deposits 100 -- -- -- 100 Deferred costs and other assets 9,197 -- -- -- 9,197 ----------- ----------- ----------- ----------- ----------- Total assets 1,106,344 14,175 (14,175) 168,411 1,274,755 =========== =========== =========== =========== =========== LIABILITIES: Mortgages and notes payable 347,470 -- (14,175) 133,853 467,148 Accrued interest 1,164 -- -- -- 1,164 Accounts payable and accrued expenses 6,875 -- -- -- 6,875 Distributions payable 14,091 -- -- -- 14,091 Tenant security deposits and deferred rents 8,899 -- -- -- 8,899 ----------- ----------- ----------- ----------- ----------- Total liabilities 378,499 -- (14,175) 133,853 498,177 ----------- ----------- ----------- ----------- ----------- MINORITY INTEREST 14,074 -- -- 34,558 48,632 ----------- ----------- ----------- ----------- ----------- BENEFICIARIES' EQUITY: Common shares of beneficial interest 370 6 -- -- 376 Additional paid-in capital 740,071 14,169 -- -- 754,240 Share warrants 962 -- -- -- 962 Cumulative earnings 19,698 -- -- -- 19,698 Cumulative distributions (47,330) -- -- -- (47,330) ----------- ----------- ----------- ----------- ----------- Total beneficiaries' equity 713,771 14,175 -- -- 727,946 ----------- ----------- ----------- ----------- ----------- Total liabilities and beneficiaries' equity $ 1,106,344 $ 14,175 $ (14,175) $ 168,411 $ 1,274,755 =========== =========== =========== =========== =========== The accompanying condensed notes are an integral part of these consolidated financial statements
F-3 BRANDYWINE REALTY TRUST PROFORMA CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1997 (Notes 1 and 3) (Unaudited) (In thousands, except share and per share amounts)
BRANDYWINE 1997 EVENTS REALTY --------------------------- TRUST HISTORICAL PRO FORMA HISTORICAL OPERATIONS ADJUST- CONSOLIDATED (A) MENTS (B) ------------ ------------ ------------ REVENUE Base rents $ 49,928 $ 28,640 $ 918 Tenant reimbursements 9,396 3,954 -- Other 1,736 284 -- ------------ ------------ ------------ Total Revenue 61,060 32,878 918 ------------ ------------ ------------ OPERATING EXPENSE: Interest 7,079 -- 4,303 Depreciation and amortization 15,589 -- 7,093 Property operating expenses 22,445 12,413 -- Administrative expenses 659 -- -- ------------ ------------ ------------ Total operating expenses 45,772 12,413 11,396 ------------ ------------ ------------ Income (loss) before equity in income of management company and minority interest 15,288 20,465 (10,478) Equity in income (loss) of management company 89 -- 422 (C) ------------ ------------ ------------ Income (loss) before minority interest 15,377 20,465 (10,056) Minority interest in (income) loss (376) -- (374)(D) ------------ ------------ ------------ Net income (loss) 15,001 20,465 (10,430) Income allocated to Preferred Shares (499) -- -- ------------ ------------ ------------ Income (loss) allocated to Common Shares $ 14,502 $ 20,465 $ (10,430) ============ ============ ============ Diluted earnings (loss) per Common Share $ 0.95 ============ Diluted weighted average number of shares outstanding 15,793,329 ============
[RESTUBBED FROM TABLE ABOVE]
1998 PROPERTY ACQUISITIONS 1998 --------------------------- SHARE HISTORICAL PRO FORMA TOTAL OFFERINGS OPERATIONS ADJUST- PRO FORMA SUBTOTAL (E) (F) MENTS (G) CONSOLIDATED ------------ ------------ ------------ ------------ ------------ REVENUE Base rents $ 79,486 $ -- $ 71,475 $ -- $ 150,961 Tenant reimbursements 13,350 -- 11,790 -- 25,140 Other 2,020 -- 997 -- 3,017 ------------ ------------ ------------ ------------ ------------ Total Revenue 94,856 -- 84,262 -- 179,118 ------------ ------------ ------------ ------------ ------------ OPERATING EXPENSES Interest 11,382 (22,607) -- 46,006 34,781 Depreciation and amortization 22,682 -- -- 21,290 43,972 Property operating expenses 34,858 -- 31,241 -- 66,099 Administrative expenses 659 -- -- -- 659 ------------ ------------ ------------ ------------ ------------ Total operating expenses 69,581 (22,607) 31,241 67,296 145,511 ------------ ------------ ------------ ------------ ------------ Income (loss) before equity in income of management company and minority interest 25,275 22,607 53,021 (67,296) 33,607 Equity in income (loss) of management company 511 -- -- 1,470 (C) 1,981 ------------ ------------ ------------ ------------ ----------- Income (loss) before minority interest 25,786 22,607 53,021 (65,826) 35,588 Minority interest in (income) loss (750) (1,013)(D) -- (260)(D) (2,023) ------------ ------------ ------------ ------------ ----------- Net income (loss) 25,036 21,594 53,021 (66,086) 33,565 Income allocated to Preferred Shares (499) -- -- -- (499) ------------ ------------ ------------ ------------ ------------ Income (loss) allocated to Common Shares $ 24,537 $ 21,594 $ 53,021 $ (66,086) $ 33,066 ============ ============ ============ ============ ============ Diluted earnings (loss) per Common Share $ 0.91 ============ Diluted weighted average number of shares outstanding 36,721,485 ============ The accompanying condensed notes are an integral part of these consolidated financial statements
F-4 BRANDYWINE REALTY TRUST PRO FORMA CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1998 (Notes 1 and 3) (Unaudited) (In thousands, except share and per share amounts)
1998 PROPERTY BRANDYWINE ACQUISITIONS REALTY 1998 ---------------------------- TRUST SHARE HISTORICAL PRO FORMA TOTAL HISTORICAL OFFERINGS OPERATIONS ADJUST- PRO FORMA CONSOLIDATED (E) (H) MENTS (I) CONSOLIDATED ------------ ------------ ------------ ------------ ------------ REVENUE Base rents $ 28,495 $ -- $ 10,532 $ -- $ 39,027 Tenant reimbursements 3,823 -- 2,364 -- 6,187 Other 784 -- 204 -- 988 ------------ ------------ ------------ ------------ ------------ Total Revenue 33,102 -- 13,100 -- 46,202 ------------ ------------ ------------ ------------ ------------ OPERATING EXPENSES: 4,387 (2,462) -- 6,722 8,674 Interest 7,713 -- -- 3,186 10,899 Depreciation and amortization 10,773 -- 4,623 -- 15,396 Property operating expenses 1,331 -- -- -- 1,331 ------------ ------------ ------------ ------------ ------------ Total operating expenses 24,204 (2,462) 4,623 9,908 36,273 ------------ ------------ ------------ ------------ ------------ Income (loss) before equity in income of management company and minority interest 8,898 2,462 8,477 (9,908) 9,929 Equity in income (loss) of management company 35 -- -- 213 (C) 248 ------------ ------------ ------------ ------------ ------------ Income (loss) before minority interest 8,933 2,462 8,477 (9,695) 10,177 Minority interest in (income) loss (130) (133)(D) -- (G) (244)(D) (507) ------------ ------------ ------------ ------------ ------------ Net income (loss) 8,803 2,329 8,477 (9,939) 9,670 Income allocated to Preferred Shares (858) -- -- -- (858) ------------ ------------ ------------ ------------ ------------ Income (loss) allocated to Common Shares $ 7,945 $ 2,329 $ 8,477 $ (9,939) $ 8,812 ============ ============ ============ ============ ============ Diluted earnings (loss) per Common Share $ 0.25 $ 0.23 ============ ============ Diluted weighted average number of shares outstanding 31,540,412 37,726,775 ============ ============ The accompanying condensed notes are an integral part of these consolidated financial statements
F-5 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 "Company") is a Maryland real estate investment trust. As of July 20, 1998, the Company owned 179 properties. The Company's interest in all of the Properties is held through Brandywine Operating Partnership, L.P. (the "Operating Partnership"). The Company is the sole general partner of the Operating Partnership and as of July 20, 1998, the Company held an approximately 97.6% interest in the Operating Partnership. These pro forma financial statements should be read in conjunction with the historical financial statements and notes thereto of the Company, the Columbia Acquisition Properties, the Main Street Acquisition Properties, the TA Properties, the Emmes Properties, the Greentree Executive Campus Acquisition Properties, 748 & 855 Springdale Drive, the Green Hills Properties, the Berwyn Park Properties, 500 & 501 Office Center Drive, Metropolitan Industrial Center, Atrium 1, Bala Pointe Office Centre, the Scarborough Properties, the GMH Properties, the RREEF Properties, Three Christina Centre, the DKM Properties, the First Commercial Properties, One Christina Centre and the Axinn Properties. In management's opinion, all adjustments necessary to reflect the effects of the March 1997 Offering, the July 1997 Offering, the September 1997 Offering, the December 1997 Offering, the January 1998 Offering, the February 18, 1998 Offering, the February 27, 1998 Offering, the April 1998 Offering, the acquisitions of the Columbia Acquisition Properties, the Main Street Acquisition Properties, 1336 Enterprise Drive, the Greentree Executive Campus Acquisition Properties, Five Eves Drive, Kings Manor, the TA Properties, the Emmes Properties, 748 & 855 Springdale Drive, 1974 Sproul Road, the Green Hills Properties, the Berwyn Park Properties, 500 & 501 Office Center Drive, Christiana Corporate Center, Metropolitan Industrial Center, Atrium 1, 5 & 6 Cherry Hill Executive Campus, 220 Commerce Drive, Provident Place, the PECO Building, Bala Pointe Office Centre, the Scarborough Properties, the GMH Properties, the RREEF Properties, Three Christina Centre, 920 Harvest Drive, Norriton Business Center, the DKM Properties, the First Commercial Properties, One Christina Centre and 925 Harvest Drive, and the probable acquisition of the Axinn Properties by the Company have been made. F-6 2. ADJUSTMENTS TO PRO FORMA CONDENSED CONSOLIDATING BALANCE SHEET: (A) Reflects the proceeds received from the Company's recent public share offerings, as summarized below: Net Common Additional Proceeds Shares Paid In to Company At Par Capital ---------- ------- ------- April 1998 Offering $14,175 $ 6 $14,169 ------- ------- ------- Total $14,175 $ 6 $14,169 ======= ======= ======= (B) Reflects the use of the proceeds received from the Company's recent public share offerings, as detailed in footnote (A) above, to repay indebtedness, as summarized below: Use of Debt Cash Repayments -------- -------- April 1998 Offering $(14,175) $(14,175) -------- -------- Total $(14,175) $(14,175) ======== ======== (C) Reflects the Company's recent property acquisitions and probable property acquisition as follows:
Cost Consideration -------------------------------------------- ----------------------------------------------- Mortgage Operating Credit Facility Debt Partnership Acquisition Purchase Price Closing Costs Total Borrowings Assumption Units ----------- -------------- ------------- ----- ----------------------------------------------- First Commercial Properties 48,500 227 48,727 38,169 - 10,558 One Christina Centre 41,625 740 42,365 42,365 - - 925 Harvest Drive 8,050 349 8,399 8,399 - - Sale of Kings Mill (15,177) 228 (14,949) - (14,949) - Axinn Properties (i) 83,444 425 83,869 40,530 19,339 24,000 -------------------------------------------- ---------------------------------------------- Total $ 166,442 $ 1,969 $ 168,411 $ 129,463 $ 4,390 $ 34,558 ============================================ ==============================================
(i) This acquisition has not been consumated by the Company at the date of this filing; however, the Company has determined the likelihood of the transaction being completed as probable. F-7 3. ADJUSTMENTS TO PRO FORMA CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS: (A) Reflects the historical statements of operations of the Columbia Acquisition Properties, the Main Street Acquisition Properties, 1336 Enterprise Drive, Kings Manor, Greentree Executive Campus, Five Eves Drive, the TA Properties, the Emmes Properties, 748 & 855 Springdale Drive, 1974 Sproul Road, the Berwyn Park Properties, the Green Hills Properties, 500/501 Office Center Drive, Christiana Corporate Center, Metropolitan Industrial Center, Atrium 1, 5 & 6 Cherry Hill Executive Campus, 220 Commerce Drive, Provident Place, Bala Pointe Office Centre and the Scarborough Properties. The historical statements reflected below include the operating results for the period January 1, 1997 through the earlier of the respective acquisition dates or December 31, 1997. Operating results from those dates forward are included in the historical results of the Company.
Tenant Property reimburse- operating Acquisition / Offering Rents ments Other expenses - ---------------------------------------- ---------------------------------------------------------- Columbia Acquisition Properties $ 338 $ 24 $ 25 $ 130 Main Street Acquisition Properties 542 60 - 379 1336 Enterprise Drive 78 13 - 19 Kings Manor 105 27 - 43 Greentree Executive Campus 602 17 - 272 Five Eves Drive 103 12 - 45 TA Properties 2,053 299 6 698 Emmes Properties 2,570 1,130 2 1,332 748 & 755 Springdale Drive 414 - - 99 1974 Sproul Road 354 54 - 225 Berwyn Park Properties 2,492 376 36 1,073 Green Hills Properties 4,567 - - 1,393 500/501 Office Center Drive 1,106 919 48 971 Christiana Corporate Center 615 22 45 218 Metropolitan Industrial Center 1,395 306 33 472 Atrium 1 994 34 26 573 5 & 6 Cherry Hill Executive Campus 127 - - 140 220 Commerce Drive 594 - - 186 Provident Place 644 90 7 283 Bala Pointe Office Centre 3,523 34 35 1,544 Scarborough Properties 5,424 537 21 2,318 -------------------------------------------------- Total $ 28,640 $ 3,954 $ 284 $ 12,413 ==================================================
(B) Reflects the Company's pro forma adjustments relative to the acquisitions of the Columbia Acquisition Properties, the Main Street Acquisition Properties, 1336 Enterprise Drive, Kings Manor, Greentree Executive Campus, Five Eves Drive, the TA Properties, the Emmes Properties, 748 & 855 Springdale Drive, 1974 Sproul Road, the Berwyn Park Properties, the Green Hills Properties, 500/501 Office Center Drive, Christiana Corporate Center, Metropolitan Industrial Center, Atrium 1, 5 & 6 Cherry Hill Executive Campus, 220 Commerce Drive, Provident Place, the PECO Building, Bala Pointe Office Centre and the Scarborough Properties for the year ended December 31, 1997 and pro forma adjustments to reflect the March 1997 Offering, the July 1997 Offering, the September 1997 Offering and the December 1997 Offering for the year ended December 31, 1997. The pro forma adjustments below reflect the period January 1, 1997 through the earlier of the respective acquisition dates or December 31, 1997. Operating results from those dates forward are included in the historical results of the Company. F-8
Depreciation and amortization Acquisition / Offering Rents Interest (i) (ii) - ----------------------------------- -------------------------------------------- Columbia Acquisition Properties $ - $ 110 $ 66 Main Street Acquisition Properties - - 109 1336 Enterprise Drive - - 21 Kings Manor - - 29 Greentree Executive Campus - 249 106 Five Eves Drive - 75 32 TA Properties - 1,241 530 Emmes Properties - 2,049 874 748 & 755 Springdale Drive - 171 73 1974 Sproul Road - - 61 Berwyn Park Properties - - 700 Green Hills Properties - 690 745 500/501 Office Center Drive - 700 340 Christiana Corporate Center - 308 132 Metropolitan Industrial Center - 926 395 Atrium 1 - 597 255 5 & 6 Cherry Hill Executive Campus - 218 93 220 Commerce Drive - 345 147 Provident Place - 411 175 PECO Building (iii) 918 652 278 Bala Pointe Office Centre - 1,891 807 Scarborough Properties - 1,957 1,125 March 1997 Offering - (91) - July 1997 Offering - (6,905) - September 1997 Offering - - - December 1997 Offering - (1,291) - -------------------------------------------- Total $ 918 $ 4,303 $ 7,093 ============================================
(i) Pro forma interest expense is presented assuming an effective rate of 7.5% on borrowings under the Company's revolving credit facility. The adjustment for the Columbia Acquisition Properties also reflects an effective interest rate of 9.5% on assumed debt. (ii) Pro forma depreciation expense is presented assuming an 80% building and 20% land allocation of the purchase price and capitalized closing costs and assumes a useful life of 25 years. (iii)Pro forma base rents for the Peco Building are based on the lease in place as of November 25, 1997 as historically the property was owner occupied and was not an operating property. All property expenses are paid directly by the tenant. (C) Pro forma equity in income of management company is based on management fees less incremental costs estimated to be incurred. (D) Pro forma minority interest in income represents the incremental pro forma earnings allocable to minority partners. (E) Represents interest expense savings from debt repayments upon the application of the net proceeds from the January 1998 Offering, the February 18, 1998 Offering, the February 27, 1998 Offering, and the April 1998 Offering. F-9 Interest savings Interest savings For the Year Ended For the Three Months 12/31/97 Ended 3/31/98 Offering (i) (i) ---------------------------------------------------------------------- January 1998 Offering $(18,748) $ (1,798) February 18, 1998 Offering (1,729) (232) February 28, 1998 Offering (1,067) (170) April 1998 Offering (1,063) (262) -------- -------- Total $(22,607) $ (2,462) ======== ======== (i) Pro forma interest expense is presented assuming an effective rate of 7.5% on borrowings under the Company's revolving credit facility. (F) Reflects the historical operations of the GMH Portfolio, the RREEF Portfolio, Three Christina Centre, 920 Harvest Drive, Norriton Business Center, the DKM Portfolio, the First Commercial Properties, One Christina Centre, 925 Harvest Drive, Kings Mill and the Axinn Properties for the year ended December 31, 1997.
Tenant Property reimburse- operating Acquisition Rents ments Other expenses - ------------------------------ ----------------------------------------------------------------- GMH Portfolio $ 25,049 $ 1,937 $ 174 $ 10,935 RREEF Portfolio 4,160 705 - 1,252 Three Christina Centre 4,635 2,427 22 2,830 920 Harvest Drive 1,658 63 - 724 Norriton Business Center 1,161 - - 276 DKM Portfolio 15,182 4,135 24 7,164 First Commercial Properties 6,235 719 116 2,307 One Christina Centre 4,789 519 569 2,241 925 Harvest Drive 946 - 92 329 Sale of Kings Mill (2,675) - - (683) Axinn Properties 10,335 1,285 - 3,866 ----------------------------------------------------------- Total $ 71,475 $ 11,790 $ 997 $ 31,241 ===========================================================
(G) Reflects the Company's pro forma adjustments relative to the acquisitions of the GMH Portfolio, the RREEF Portfolio, Three Christina Centre, 920 Harvest Drive, Norriton Business Center, the DKM Portfolio, the First Commercial Properties, One Christina Centre, 925 Harvest Drive and the Axinn Properties and the sale of Kings Mill for the year ended December 31, 1997. Depreciation and Acquisition Interest (i) amortization (ii) - ------------------------------ -------------------------------------- GMH Portfolio $ 16,391 $ 7,382 RREEF Portfolio 4,212 1,797 Three Christina Centre 3,875 1,653 920 Harvest Drive 912 389 Norriton Business Center 658 257 DKM Portfolio 10,016 4,422 First Commercial Properties 2,863 1,559 One Christina Centre 3,177 1,356 925 Harvest Drive 630 269 Sale of Kings Mill (1,121) (478) Axinn Properties 4,393 2,684 -------------------------------------- Total $ 46,006 $ 21,290 ====================================== (i) Pro forma interest expense is presented assuming an effective rate of 7.5% on borrowings under the Company's revolving credit facility, and an effective rate of 7% to 8.5% on assumed mortgage indebtedness. F-10 (ii)Pro forma depreciation expense is presented assuming an 80% building and 20% land allocation of the purchase price and capitalized closing costs and assumes a useful life of 25 years. (H) Reflects the historical operations of the GMH Portfolio, the RREEF Portfolio, Three Christina Centre, 920 Harvest Drive, Norriton Business Center, the DKM Portfolio, the First Commercial Properties, One Christina Centre, 925 Harvest Drive and the Axinn Properties through the earlier of the respective acquisition dates or March 31, 1998. Operating results from those dates forward are included in the historical results of the Company. Also reflects the exclusion of the historical operations of Kings Mill which was sold by the Company.
Tenant Property reimburse- operating Acquisition Rents ments Other expenses - ------------------------------ ------------------------------------------------------------ GMH Portfolio $ 343 $ 27 $ 2 $ 150 RREEF Portfolio 570 97 - 172 Three Christina Centre 800 419 4 488 920 Harvest Drive 341 13 - 149 Norriton Business Center 251 - - 60 DKM Portfolio 3,744 1,020 6 1,766 First Commercial Properties 1,537 177 29 569 One Christina Centre 1,181 128 140 553 925 Harvest Drive 233 - 23 81 Sale of Kings Mill (660) - - (168) Axinn Properties 2,192 483 - 803 ----------------------------------------------------------- Total $ 10,532 $ 2,364 $ 204 $ 4,623 ===========================================================
(I) Reflects the Company's pro forma adjustments relative to the acquisitions of the GMH Portfolio, the RREEF Portfolio, Three Christina Centre, 920 Harvest Drive, Norriton Business Center, the DKM Portfolio, the First Commercial Properties, One Christina Centre, 925 Harvest Drive and the Axinn Properties for the three months ended March 31, 1998. Also reflects the exclusion of the historical operations of Kings Mill which was sold by the Company. Depreciation and Acquisition Interest (i) amortization (ii) - ------------------------------ ---------------------------------- GMH Portfolio $ 225 $ 101 RREEF Portfolio 577 246 Three Christina Centre 669 285 920 Harvest Drive 187 80 Norriton Business Center 143 56 DKM Portfolio 2,470 1,090 First Commercial Properties 706 384 One Christina Centre 783 334 925 Harvest Drive 155 66 Sale of Kings Mill (276) (118) Axinn Properties 1,083 662 -------------------------------- Total $ 6,722 $ 3,186 ================================ (i) Pro forma interest expense is presented assuming an effective rate of 7.5% on borrowings under the Company's revolving credit facility, and an effective rate of 7% to 8.5% on assumed mortgage indebtedness. (ii)Pro forma depreciation expense is presented assuming an 80% building and 20% land allocation of the purchase price and capitalized closing costs and assumes a useful life of 25 years. F-11 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To Brandywine Realty Trust: We have audited the combined statement of revenue and certain expenses of Axinn Properties, described in Note 1, for the year ended December 31, 1997. This financial statement is the responsibility of management. Our responsibility is to express an opinion on this financial statement based on our audit. We conducted our audit 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 audit provides a reasonable basis for our opinion. The combined statement of revenue and certain expenses was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission for inclusion in the Current Report on Form 8-K of Brandywine Realty Trust as described in Note 1 and is not intended to be a complete presentation of Axinn Properties' revenue and expenses. In our opinion, the financial statement referred to above presents fairly, in all material respects, the revenue and certain expenses of Axinn Properties for the year ended December 31, 1997, in conformity with generally accepted accounting principles. ARTHUR ANDERSEN LLP Philadelphia, Pa., May 15, 1998 F-12 AXINN PROPERTIES COMBINED STATEMENT OF REVENUE AND CERTAIN EXPENSES (NOTE 1) For the For the Three Year Ended Months Ended December 31, March 31, 1997 1998 ----------- ------------- (unaudited) REVENUE: Base rents (Note 2) $10,335,000 $ 2,192,000 Tenant reimbursements 1,285,000 483,000 ----------- ----------- Total revenue 11,620,000 2,675,000 ----------- ----------- CERTAIN EXPENSES: Maintenance and other operating expenses 1,203,000 186,000 Utilities 487,000 73,000 Real estate taxes 2,176,000 544,000 ----------- ----------- Total certain expenses 3,866,000 803,000 ----------- ----------- REVENUE IN EXCESS OF CERTAIN EXPENSES $ 7,754,000 $ 1,872,000 =========== =========== The accompanying notes are an integral part of these financial statements. F-13 AXINN PROPERTIES NOTES TO COMBINED STATEMENT OF REVENUE AND CERTAIN EXPENSES DECEMBER 31, 1997 1. BASIS OF PRESENTATION: The accompanying combined statement of revenue and certain expenses reflects the operations of nineteen industrial buildings and seven office buildings (the "Axinn Properties") owned by Donald E. Axinn ("Axinn") and certain entities controlled by Axinn located in New Jersey and New York. Brandywine Realty Trust ("BRT") and Brandywine Operating Partnership, L.P. (the "Operating Partnership") entered into an agreement (the "Acquisition Agreement) on July 11, 1998 with Axinn and certain entities controlled by Axinn to acquire the above mentioned properties for an aggregate purchase price of approximately $83.4 million. The Axinn Properties have an aggregate net rentable area of approximately 1,115,000 square feet and were 90% leased as of December 31, 1997. In addition to the above properties, the Acquisition Agreement includes provisions to acquire three other properties subject to certain terms and contingencies. Such properties are excluded from the accompanying financial statements. These properties are as follows: 31 Commercial Street This property will be acquired only after certain environmental conditions affecting the property have been satisfied. If the environment conditions are not satisfied within two years from the closing date, then either the Operating Partnership or Axinn may terminate its obligations to buy or sell, as applicable, this property. 263 Old Country Road This property will be acquired once construction is completed and a certificate of occupancy is issued which is expected to occur in 1999. 101 Paragon Drive The Operating Partnership will pay $500,000 to Axinn at the initial closing and, subject to certain terms and conditions, will be required to acquire this property in the year 2005 for $11,000,000. The Operating Partnership will be entitled to receive $50,000 each year through the year 2005 subject to certain terms and conditions. The tenant has a priority option to acquire the property for $11,000,000 which is exercisable through the year 2005. This combined statement of revenue and certain expenses is to be included in the Company's Current Report on Form 8-K, pursuant to the rules and regulations of the Securities and Exchange Commission. The accompanying financial statements have been prepared in accordance with generally accepted accounting principles and exclude certain expenses such as interest, depreciation and amortization, and other costs not directly related to the future operations of the Axinn Properties. The combined statement of revenue and certain expenses for the three months ended March 31, 1998 is unaudited. In the opinion of management, all adjustments (consisting solely of normal recurring adjustments) necessary to present fairly the revenue and certain expenses of Axinn for the three months ended March 31, 1998 have been included. The combined revenue and certain expenses for such interim period are not necessarily indicative of the results for the full year. 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 during the reporting period. The ultimate results could differ from those estimates. F-14 2. OPERATING LEASES: Base rents for the year ended December 31, 1997, and for the three months ended March 31, 1998, include straight-line adjustments for rental revenue decreases in accordance with generally accepted accounting principles. The aggregate rental revenue decreases resulting from the straight-line adjustments for the year ended December 31, 1997, and for the three months ended March 31, 1998 were approximately ($36,000) and ($16,000), (unaudited), respectively. Sony Corporation's and Volvo Corporation's minimum rental payments were $1,405,000 and $1,189,000, respectively, and represented greater than 10% of the total base rents in 1997. Sony's lease expired at the end of 1997 and was not renewed, and the space has not been leased as of March 31, 1998. The Axinn Properties are leased to tenants under operating leases with expiration dates extending to the year 2013. Future minimum rentals under noncancelable operating leases, excluding tenant reimbursements of operating expenses as of December 31, 1997, are as follows: 1998 $ 8,452,000 1999 8,009,000 2000 7,798,000 2001 5,290,000 2002 3,432,000 Thereafter 9,770,000 --------------------- Total $ 42,751,000 ===================== Certain leases also include provisions requiring tenants to reimburse Axinn for management costs and other operating expenses up to stipulated amounts. 3. RELATED PARTY TRANSACTIONS: Axinn Properties have an agreement with an affiliate, which provides Axinn Properties with certain property management and related services. The aggregate costs incurred for these services and included in maintenance and other operating expenses for the year ended December 31, 1997, and for the three months ended March 31, 1998 were approximately $529,000 and $93,000, (unaudited), respectively. 4. GROUND LEASES: One of the Properties is subject to a ground lease which expires on November 30, 2026. Obligations under the ground lease are as follows: 1998 $ 22,000 1999 23,000 2000 23,000 2001 23,000 2002 23,000 Thereafter 777,000 --------------------- Total $ 891,000 ===================== F-15 EX-10 2 EXHIBIT 10.1 CONTRIBUTION AGREEMENT AMONG BRANDYWINE OPERATING PARTNERSHIP, L.P., BRANDYWINE REALTY TRUST, AND DONALD E. AXINN AND THE OTHER CONTRIBUTORS NAMED HEREIN Dated as of July 10, 1998 CONTRIBUTION AGREEMENT ---------------------- THIS CONTRIBUTION AGREEMENT (this "Agreement") is made and entered into as of the 10th day of July, 1998 by and among BRANDYWINE OPERATING PARTNERSHIP, L.P., a Delaware limited partnership, having an address at Newtown Square Corporate Campus, 16 Campus Boulevard, Suite 150, Newtown Square, Pennsylvania 19073 (the "Partnership"), BRANDYWINE REALTY TRUST, a Maryland real estate investment trust, having an address at Newtown Square Corporate Campus, 16 Campus Boulevard, Suite 150, Newtown Square, Pennsylvania 19073 (the "Trust"), DONALD E. AXINN, having an address c/o Donald E. Axinn Companies, 131 Jericho Turnpike, Jericho, New York 11743 ("Axinn"), and the other Contributors (the "Other Contributors" and, together with Axinn, the "Contributors") set forth on Schedule 1 attached hereto. RECITALS -------- A. Each property, commonly identified by the street address set forth on Schedule 1 hereto, together with the building and improvements thereon, as more fully described on "Exhibit A" attached hereto (each, a "Parcel"), is owned by the corporation, limited partnership, limited liability company, general partnership or individual listed opposite the name of such Parcel on Schedule 1 under the caption "Contributor (Record Owner)"; B. The shareholders, partners or members of each Contributor that is not an individual, and any other person having a contractual entitlement to share in any of the Consideration (as defined below) are set forth opposite the name of such Contributor on Schedule 1 under the caption "Participants" (collectively, the "Participants"); and C. Each Contributor desires and hereby agrees to sell or contribute, and the Partnership desires and hereby agrees to acquire or accept, all of each such Contributor's right, title and interest in and to the applicable Property (as hereinafter defined) or (as specified below) all of the applicable Participants' right, title and interest in and to the Entity Interests (as hereinafter defined), subject to and on the terms and conditions hereinafter set forth. NOW THEREFORE, in consideration of these premises, the mutual promises and agreements hereinafter set forth and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties, intending to be legally bound, agree as follows: 1. Definitions Of Certain Terms. For all purposes of this Agreement, the following terms shall have the respective meanings set forth below: "3 Paragon Drive Property" shall mean the Property specifically relating to the Parcel located at 3 Paragon Drive, Montvale, New Jersey. 2 "31 Commercial Street Property" shall mean the Property specifically relating to the Parcel located at 31 Commercial Street, Plainview, New York. "101 Paragon Drive Property" shall mean the Property specifically relating to the Parcel located at 101 Paragon Drive, Montvale, New Jersey. "263 Old Country Road Property" shall mean the Property specifically relating to the Parcel located at 263 Old Country Road, Melville, New York. "Accredited Investor" shall have the meaning given to that term under Rule 501(a) of Regulation D under the Securities Act of 1933, as amended. "ADI Lease" shall mean the lease dated August 8, 1997 between Ademco Distribution, Inc. ("ADI") and Axinn, as assigned to AML by assignment dated November 17, 1997, relating to the 263 Old Country Road Property. "Affiliate" shall mean, as to any Person, any Person or entity controlling, controlled by or under common control with such Person. "Agreement" shall mean this document entitled "Agreement," all exhibits and Schedules attached hereto or made a part hereof and all amendments to this Agreement which are agreed to in writing and signed by all of the parties hereto. "AML" shall mean Axinn Melville, LLC, the current owner of the 263 Old Country Road Property. "Assignments" shall have the meaning specified in Paragraph 5(g) hereof. "Assumed Debt Differential" shall mean in respect of an Assumed Mortgage Loan the lesser of: (a) the spread between the interest costs of the Assumed Mortgage Loan and a rate of 7% on the principal amount of such Assumed Mortgage Loan discounted at a rate of 10% over the remaining term of the Assumed Mortgage Loan from the Applicable Closing Date to the sooner of (i) the Assumed Mortgage Loan's earliest prepayment date on which no prepayment premium or penalty shall be due or (ii) the Maturity Date for the Assumed Mortgage Loan; or (b) the prepayment penalty on such Assumed Mortgage Loan (computed as of the Closing Date) . There shall be no Assumed Debt Differential for any Assumed Mortgage Loan that bears interest at a per annum rate equal to or below 7%. The Assumed Debt Differential as of June 30, 1998 for each Assumed Mortgage Loan is as set forth in Schedule "5" annexed hereto and made a part hereof. "Assumed Mortgage Loan" shall mean an outstanding mortgage loan that the Partnership assumes and agrees to be liable for at any of the Closings denominated as an Assumed Mortgage Loan on Schedule 5. 3 "Axinn Participants" shall mean Donald E. Axinn and members of his immediate family who share the same household as Mr. Axinn. The Axinn Participants consist of Mr. Axinn and Joan Axinn. "Axinn Participant Percentage" shall mean the amount, expressed as a percentage, set forth under such caption on Schedule 1 hereto. The Axinn Participant Percentage is, in respect of each Property and Entity Interest, the ratio of the amount of the Purchase Price allocated touch Property and Entity Interest paid to Axinn Participants divided by the Purchase Price for each such Property and Entity Interest. "Closing" shall mean any of the Initial Closing, the 31 Commercial Street Closing, the 101 Paragon Drive Closing or the Old Country Road Closing. "Closing Date" shall mean, as applicable, any of the Initial Closing Date, the 31 Commercial Street Closing Date, the 101 Paragon Drive Closing Date or the Old Country Road Closing Date. "Common Shares" shall mean the common shares of beneficial interest, par value $.01 per share, of the Trust. "Consideration" shall have the meaning given to it in Paragraph 3(b) hereof. "Contracts" shall mean all contracts and agreements with respect to the management (excluding property management agreements), operation, supply, maintenance, repair or construction affecting any of the Real Property, to the extent assignable by each Contributor to the Partnership and approved by the Partnership, all as described on "Exhibit B" attached hereto. "Deposit" shall mean the deposits to be delivered by the Partnership to the Escrow Agent pursuant to Paragraph 3(a) hereof, together with all interest earned thereon, if any. "Due Diligence Termination Date" shall mean 5:00 p.m. E.S.T. on July 10, 1998. "Effective Date" shall mean the date on which this Agreement has been fully executed and delivered by all parties hereto to each other. "Entity Interests" shall mean all of the outstanding equity interests in and to the respective partnerships and limited liability companies that own one or more of the New Jersey Property as set forth in Schedule 1. "Escrow Terms" shall mean the terms and conditions of the escrow agreement to be entered into of even date herewith between the Escrow Agent, each Contributor and the Partnership. 4 "Escrow Agent" shall mean Commonwealth Land Title Insurance Company, 1700 Market Street, Philadelphia, Pennsylvania 19103. "Improvements" shall mean those certain buildings and other improvements constructed and located on the each Parcel, as described on "Exhibit A" attached hereto. "Initial Closing" shall have the meaning ascribed to that term in Paragraph 4(a) hereof. The date upon which the Initial Closing actually occurs shall be the "Initial Closing Date." "Leases" shall mean those certain leases (and guarantees thereof, if any) listed on "Exhibit C" attached hereto (with reference to each applicable Parcel), or hereafter entered into by the applicable Contributor, as landlord, in accordance with the terms of this Agreement, for any space within any of the Improvements located on any Parcel. The term "Leases" includes any leases that have been executed for space at the 263 Old Country Road Property. "Licenses" shall mean the licenses, permits, approvals and agreements affecting any of the Real Property of such Contributor listed on "Exhibit C-1" attached hereto. "New Jersey Property" means the Property described on "Exhibit A" located in the State of New Jersey. "New York Property" means the Property described on "Exhibit A" located in the State of New York. "NYSE" means the New York Stock Exchange, Inc. "Old Country Road Closing" shall have the meaning specified in Paragraph 4(b) hereof. The date upon which the Old Country Road Closing occurs shall be the "Old Country Road Closing Date." "31 Commercial Street Closing" shall have the meaning specified in Paragraph 4(c) hereof. The date upon which the 31 Commercial Street Closing occurs shall be the "31 Commercial Street Closing Date." "101 Paragon Drive Closing" shall have the meaning specified in 4(d) hereof. The date upon which the 101 Paragon Drive Closing occurs shall be the "101 Paragon Drive Closing Date." "Partnership Agreement" means the Amended and Restated Agreement of Limited Partnership, as amended, of the Partnership. "Permitted Exceptions" shall mean, with respect to any of the Real Property: (i) liens of real estate taxes, water rent and sewer charges that are not due and payable on the Closing Date with respect to such Real Property, (ii) the printed exclusions, conditions and 5 stipulations contained in the Commitment (as hereinafter defined), (iii) additional exceptions to title set forth in "Exhibit D" attached hereto, (iv) special assessments which become a lien on any of the Real Property on or after the Closing Date with respect to such Real Property, (v) such other title matters existing on the Closing Date with respect to such Real Property which are accepted or deemed accepted by the Partnership pursuant to Paragraph 5 hereof (vii) the rights of Tenants of any of the Real Property set forth in the Leases for all or any portion of any of the Real Property; and (viii) the mortgage liens with respect to each Assumed Mortgage Loan. "Person" means any natural person, corporation, limited partnership, limited liability company, limited liability partnership, general partnership, joint stock company, joint venture, real estate investment trust, association, company, trust, bank, trust company, land trust, vehicle trust, business trust or other organization irrespective of whether it is a legal entity, or any government or agency or political subdivision thereof. "Personal Property" shall (except as specifically excluded on "Exhibit E-1" attached hereto) mean, as to each Contributor, such Contributor's right, title and interest in and to the tangible personal property including, without limitation, artwork, furniture, furnishings, equipment, machinery and fixed and movable fixtures, together with all component and replacement parts, owned by such Contributor, situated on any of the Real Property on the date hereof or on the Closing Date, all as set forth on "Exhibit E" attached hereto; and all artwork, renderings, flags, awnings and trade dress; and all architects', engineers', surveyors' and other real estate professionals' plans, specifications, certifications, reports, data or other technical descriptions (including, without limitation, all environmental, structural and mechanical inspection reports) to the extent the same are in such Contributor's possession and are not proprietary in nature, and all building names and such Contributor's rights, if any, to the names "Long Island Office Park" (125-131 Jericho Turnpike), "Chestnut Ridge Plaza" (102 Chestnut Ridge Road), "Montvale II" (101 Paragon Drive), "Montvale III" (3 Paragon Drive), "Montvale IV" (25 Phillips Parkway) and "Brookdale Plaza" (1255 Broad Street). "Property" shall mean the Real Property, Contracts, Leases, Licenses, Personal Property and any other rights, titles and interests which pertain to the Real Property and are to be contributed, conveyed, sold or otherwise transferred to the Partnership (or its designee) by the applicable Contributor pursuant to this Agreement. "Purchase Price" shall mean the dollar amount set forth under the caption "Purchase Price" on Schedule 2. "Real Property" shall mean the Parcel and the Improvements. "Registration Rights Agreement" shall mean the Registration Rights Agreement in substantially the form of "Exhibit J" attached hereto between the Trust and the Contributors and Participants that will be receiving, at the Initial Closing, all or a portion of the Consideration hereunder payable in Units. 6 "Rent Commencement Date" shall mean the date on which ADI first commences to pay rent under the ADI Lease. "Securities Act" shall mean the Securities Act of 1933, as amended. "Tenants" shall mean the tenants under the Leases. "Total Axinn Equity" shall mean the aggregate quantities obtained by multiplying: (a) the Consideration for each Parcel (whether to be transferred by Deed or Entity Interest Contribution) by (b) the Axinn Participant Percentage for each such Parcel. "Underlying Shares" shall mean the Common Shares issuable upon redemption of Units that are issued hereunder. "Units" shall mean Class A units of limited partner interest of the Partnership. 2. Contribution of the Property and Entity Interests. (a) On the Initial Closing Date, and subject to the terms and conditions set forth in this Agreement, the respective Contributors shall sell or contribute, assign, transfer and convey to the Partnership (or its designee) (provided, however, that if the Partnership requests that any Property or Entity Interests be transferred to a designee the transfer will be treated as a contribution by the Contributors and/or the Participants to the Partnership followed by a subsequent transfer by the Partnership to any such designee and any reference in this Agreement to a transfer to a designee of the Partnership shall so be treated) and the Partnership shall purchase or accept, as the case may be, from the respective Contributors the following: (i) All right, title and interest of the Contributors in and to the New York Property of such Contributors other than the 263 Old Country Road Property and the 31 Commercial Street Property; (ii) All right, title and interest of the Contributors, if any, in any land lying in the bed of any street, road, avenue or alley, open or closed, in front of or adjoining any Parcel comprising the New York Property which is owned by such Contributor, other than any Parcel of such Contributors constituting part of the 263 Old Country Road Property and the 31 Commercial Street Property, to the center line thereof; (iii) All right, title and interest of the Contributors, if any, in any easements, covenants, rights of way, privileges, hereditaments and other rights appurtenant to any of the New York Property which is owned by such Contributors, other than the 263 Old Country Road Property and the 31 Commercial Street Property. (b) On the Initial Closing Date, and subject to the terms and conditions set forth in this Agreement, each Participant partner or member of the Contributor which owns New Jersey Property (other than the 101 Paragon Drive Property) shall sell or contribute, assign, 7 transfer and convey to the Partnership (or its designee) and the Partnership shall purchase or accept, as the case may be, from each Participant partner or member of the Contributor which owns New Jersey Property (other than the 101 Paragon Drive Property) such Participant's Entity Interest in and to the Contributor so that one hundred percent (100%) of the Entity Interests in and to such Contributor shall be contributed, assigned, transferred and conveyed to the Partnership. In each case, such Entity Interests shall be contributed, assigned, transferred and conveyed to the Partnership free and clear of any claim, lien, pledge, security interest or encumbrances (collectively, "EI Encumbrances"). (c) On the Old Country Road Closing Date, and subject to the terms and conditions set forth in this Agreement, the applicable Contributor shall sell or contribute, assign, transfer and convey to the Partnership (or its designee) and the Partnership shall purchase or accept, as the case may be, from the applicable Contributor the following: (i) All right, title and interest of the applicable Contributor in and to that certain ground lease which is to be entered into (prior to the Old Country Road Closing but after the Effective Date) between the Suffolk County Industrial Development Agency (which shall be subject to the reasonable approval of the Partnership) and such Contributor with respect to the 263 Old Country Road Property; (d) On the 31 Commercial Street Closing Date, and subject to the terms and conditions set forth in this Agreement, the applicable Contributor shall sell or contribute, assign, transfer and convey to the Partnership (or its designee) and the Partnership shall purchase or accept, as the case may be, from the respective applicable Contributor the following: (i) All right, title and interest of the applicable Contributor in and to the Property of such Contributor in the 31 Commercial Street Property; (ii) All right, title and interest of the Contributor, if any, in any land lying in the bed of any street, road, avenue or alley, open or closed, in front of or adjoining any Parcel of such Contributor constituting part of the 31 Commercial Street Property, to the center line thereof; (iii) All right, title and interest of the Contributor, if any, in any easements, covenants, rights of way, privileges, hereditaments and other rights appurtenant to any of the Real Property of such Contributor constituting part of the 31 Commercial Street Property 8 3. Consideration and Time of Payment. (a) On the Effective Date, the Partnership shall deposit in immediately available funds the amount of Two Million Dollars ($2,000,000) to the Escrow Agent, which funds shall be held and disbursed pursuant to the Escrow Terms. The Deposit shall be allocated to and among the Contributors and Participants, pro rata, in accordance with the relative Purchase Price payable by the Partnership to the respective Contributors and Participants for each of the Properties and Entity Interests as set forth on Schedule "2" annexed hereto. At the applicable Closing, the Escrow Agent shall release to each Contributor and Participant the portion of the Deposit allocable to such Contributor and Participant at each Closing in partial satisfaction of the cash Consideration such Contributor and Participants are to receive at such Closing pursuant to subparagraph (c) below; provided that if a Contributor or Participant is not to receive any cash Consideration at such Closing, such portion of the Deposit shall be released to the Partnership following receipt by each Contributor and Participant of Units pursuant to subparagraph (c) below. (b) On the Closing Date, the Partnership shall pay, as consideration (the "Consideration") for the Property and Entity Interests, as the case may be, relating to each Parcel contributed on such date, the amount set forth under the heading "Purchase Price" on Schedule 2 hereto opposite the address of such Parcel less the sum of (i) the aggregate principal amount of the Assumed Mortgage Loans as of the applicable Closing Date, if any, in respect of such Parcel, plus accrued interest thereon through the applicable Closing Date, (ii) the Assumed Debt Differential, if any, in respect of such Assumed Mortgage Loan, and (iii) the aggregate principal amount of the Subject-to Mortgage Loans (as hereinafter defined) as of the applicable Closing Date, plus accrued interest thereon through the applicable Closing Date. The amount of the Consideration payable for each Property and Entity Interests shall be subject to adjustment as provided in Paragraph 7. The Consideration shall be paid to each Contributor and Participant in the form of cash via wire transfer of immediately available funds and/or Units as provided herein, subject to the provisions of this Agreement. Each Unit so issued shall be deemed to have a value equal to $24.00. (c) The percentage of the Consideration payable in cash and Units to Axinn in respect of a Property and Entity Interest is specified opposite Axinn's name on Schedule 4. Each of the Contributors agrees that a Contributor and Participant may only receive Units as all or a portion of the Consideration if such Contributor and all Participants of such Contributor that are to receive a distribution of such Units are Accredited Investors and such Contributor and all Participants of such Contributor are able to make (and make) the representations and warranties set forth either in Section 10(b) hereof or in the Consent and Acknowledgment of Participant substantially in the form annexed hereto as "Exhibit AA" and made a part hereof. The parties agree that in all cases in which the Contributor and Participants are required or elect to receive cash and not Units in respect of a New York Property, such Contributor and Participants shall contribute, assign, transfer and convey to the Partnership (or its designee) and the Partnership shall accept from each Participant partner or member of the Contributor which owns such New York Property or, all of such Participant's Entity Interest in and to such Contributor (i.e., the transaction shall be a transfer of Entity Interests). 9 (d) The contribution, purchase and sale of all of the Property and, as applicable, Entity Interests hereunder is conditioned upon the contribution, purchase and sale of all Property listed on the critical property list annexed hereto as Schedule "7" and made a part hereof (collectively, the "Critical Property") and (as applicable) all Entity Interests in the Contributors which own the Critical Property, so that no Critical Property and Entity Interests in the Contributors which own the Critical Property may be excluded from the transaction contemplated hereunder without all of the Property and Entity Interests being so excluded, unless expressly agreed to in writing by the Partnership, the Applicable Contributor and the Participants, as the case may be. In the event that the parties determine to exclude any Property (including any of the Critical Property) or Entity Interests (including any Entity Interests in the Contributors which own the Critical Property), the Escrow Agent shall release to the Partnership at the Initial Closing the portion of the Deposit allocable to the Contributor of such Property (including any of the Critical Property) and to such Participants. (e) Schedule 5 attached hereto lists (i) all of the mortgage debt (collectively, the "Mortgage Loans") secured by the respective Properties, (ii) the principal balance of the Mortgage Loans as of June 30, 1998, (iii) the interest rate borne by the Mortgage Loans, (iv) the maturity date of the Mortgage Loans, (v) the earliest date that each such Mortgage Loan may be prepaid without premium or penalty, (vi) any lender participations applicable to such Mortgage Loans, (vii) the Property securing the Mortgage Loans and (viii) the name of the lenders of such Mortgage Loans. All of the Assumed Mortgage Loans will be assumed by the Partnership at the Closing of the applicable Property, as indicated on Schedule 5. The Partnership agrees to use commercially reasonable efforts to release at the applicable Closing each Contributor and Participant that has personal liability on any Assumed Mortgage Loan from continuing personal liability on such Assumed Mortgage Loan; provided that the use of commercially reasonable efforts shall not require expenditure of funds by the Partnership. Schedule 5 identifies in respect of each Assumed Mortgage Loan the Contributor and Participants, if any, who have personal liability on such Assumed Mortgage Loan. The Partnership will provide each Contributor with reasonable assistance in its lender negotiations. Each Contributor will be responsible for any prepayment costs associated with the Mortgage Loan payoffs and debt transfer costs for each Assumed Mortgage Loan. At the applicable Closing, the applicable Contributor shall receive a credit for any amounts held in deposit or in escrow accounts by each of the lenders of the Assumed Mortgage Loans if and to the extent such amounts held in deposit or in escrow accounts will thereafter be held for the benefit of the Partnership, free of any claims of the Contributor. As to any Mortgage Loan that is not as Assumed Mortgage Loan, but which is to be repaid by the Partnership at the applicable Closing, as set forth on Schedule 5-1 (each a "Subject-to Mortgage Loan"), the Partnership (or its designee) shall take title to the mortgaged Parcel subject to the mortgage securing such Subject-to Mortgage Loan and shall discharge a stated amount of principal and accrued interest on the Subject-to Mortgage Loan at the Closing (based on a pay-off letter from the applicable lender), so long as the amount required to discharge such Subject-to Mortgage Loans affecting such mortgaged Parcel, together with all other credits against the Consideration applicable to such mortgaged Parcel hereunder, does not exceed the cash portion of the consideration applicable to such mortgaged Parcel; and provided further that the Partnership shall not be required to assume, 10 and shall not be deemed to have assumed, any debt, obligation or liability under or in connection with any Subject-to Mortgage Loan other than the liability to pay the above-referenced stated amount of principal and accrued interest. At the applicable Closing, the Partnership and the applicable Contributor shall enter into an agreement, in form and substance reasonably acceptable to both the Partnership and the Applicable Contributor, with respect to each Subject-to Mortgage Loan (the "Subject-to Mortgage Loan Agreement"). (f) If the aggregate Consideration that has been paid in the form of Units (with each Unit valued at $24.00) to the Axinn Participants exceeds 75% of the dollar amount of the Total Axinn Equity, then each Contributor and Participant which has agreed to receive Units as Consideration hereunder shall receive, as additional Consideration, a number of additional Units equal to the product of the number of Units such Contributor and Participant agreed to receive multiplied by 0.035. The Partnership shall have no obligation to issue fractional Units under this Agreement and, in lieu of issuing fractional Units, shall round the fraction up or down to the next closest whole number in accordance with customary rounding conventions. (g) Notwithstanding anything contained in this Agreement to the contrary, the parties hereto agree that the Purchase Price for the 31 Commercial Street Property shall be $778,845.00 if the 31 Commercial Street Closing occurs on or before April 1, 1999 and shall be $811,170.00 if the 31 Commercial Street Closing occurs subsequent to April 1, 1999. 4. Closings. (a) Subject to satisfaction of the conditions set forth in this Agreement, the initial closing of the transactions contemplated by this Agreement (the "Initial Closing"), other than those transactions specified in subparagraphs (b), (c) and (d) below, shall be held on or before the date that is twenty (20) calendar days following the Due Diligence Termination Date, on a mutually agreed date determined by the Contributors and the Partnership, at the offices of Pepper Hamilton LLP, 3000 Two Logan Square, Philadelphia, Pennsylvania, commencing at 10:00 a.m., time being of the essence. (b) Subject to satisfaction of the conditions set forth in this Agreement and the consummation of the Initial Closing, the closing of the transactions contemplated by this Agreement with respect to the 263 Old Country Road Property (the "Old Country Road Closing") shall be held on the Rent Commencement Date, at the offices of the Partnership, 16 Campus Boulevard, Newtown Square, Pennsylvania, commencing at 10:00 a.m., time being of the essence. The applicable Contributor shall provide the Partnership with no less than ten (10) days prior written notice of the date for the Old Country Road Closing. (c) Subject to satisfaction of the conditions set forth in this Agreement and the consummation of the Initial Closing, the closing of the transactions contemplated by this Agreement with respect to the 31 Commercial Street Property (the "31 Commercial Street Closing") shall be held on a date specified by the Partnership at the offices of the Partnership, 16 Campus Boulevard, Newtown Square, Pennsylvania, commencing at 10:00 a.m., time being of the essence; provided, that the obligation of the Partnership to consummate the 31 Commercial Street Closing is further conditioned upon the satisfaction of the 31 Commercial 11 Environmental Condition (as set forth in Paragraph 14(d) below). The Partnership shall provide the Applicable Contributor with no less than ten (10) days prior written notice of the date for the 31 Commercial Street Closing. 5. Title and Conveyance of the Property. (a) At each Closing, title to each Parcel of Real Property to be conveyed to the Partnership in accordance with Paragraph 2 hereof and title to each Parcel comprising New Jersey Property (each, a "Subject Property" for purposes of this Paragraph) shall be insurable at regular rates by Commonwealth Land Title Insurance Company (the "Title Insurer"), free and clear of all liens, encumbrances and restrictions other than the Permitted Exceptions; provided, however, that if title to any Subject Property is not insurable as aforesaid, the Partnership's sole right and remedy shall be as set forth in Paragraph 5(b) below. (b) (i) The Partnership has applied for a title insurance commitment with respect to each Subject Property (1992 ALTA Form with Creditor's Rights Exclusion Deleted) to be issued by the Title Insurer (each, a "Commitment"), providing for the issue to the Partnership, upon recording of the Deeds (as hereinafter defined) for each Subject Property and upon transfer of the Entity Interests, an owner's policy of title insurance as above specified ("Title Policy"). Said Commitments shall provide a commitment to insure the proposed title of the Partnership to each Subject Property subject only to the Permitted Exceptions and such other title exceptions as the Partnership has agreed to accept or is deemed to have accepted pursuant to this Paragraph. If any of the Commitments discloses any title exceptions in addition to the Permitted Exceptions and the Partnership objects to such additional title exceptions (the "Title Defects"), the Partnership shall notify Axinn and the Contributor of such Subject Property (for purposes of this Paragraph, the "Applicable Contributor") of such Title Defects with sufficient specificity to enable Axinn and the Applicable Contributor to respond. All notices to be given by the Partnership to the Applicable Contributor under the terms of this Paragraph 5 shall be addressed to Axinn, at Donald E. Axinn Companies, 131 Jericho Turnpike, Jericho, New York 11753, with copies given to the additional parties as required under Paragraph 22 hereof. The Partnership's notice of any Title Defects shall be given in writing to Axinn and the Applicable Contributor no later than the date which is five (5) business days prior to the Due Diligence Termination Date, together with the Commitments and copies of all matters of record raised therein as exceptions thereto, after which the Partnership shall be deemed to have waived any and all Title Defects not so raised, except for Title Defects which are disclosed to the Partnership in continuations of title issued subsequent to the issuance of the Commitments, unless the Partnership fails to object to same in writing (or fails to deliver such continuations of title together with copies of all matters raised therein as exceptions thereto) within five (5) business days after the Partnership's receipt of the continuation of title in which the same is disclosed, in which case the Partnership will be deemed to have waived such additional Title Defects. Axinn and the Applicable Contributor shall have the right, but not the obligation (except as otherwise specifically provided), to cure such Title Defects and, if Axinn and the Applicable Contributor elect to attempt to cure the Title Defects but have not cured the same on 12 or before the Closing Date for the Subject Property (for purposes of this Paragraph, the "Applicable Closing Date"), then the Applicable Closing Date may be extended by Axinn and the Applicable Contributor, for a period not to exceed forty-five (45) days, to enable Axinn and the Applicable Contributor to effect such cure. Notwithstanding anything contained in this Paragraph 5 to the contrary, the Partnership shall not be obligated to close the transfer of title to any Property, unless and until all Title Defects relating to the Critical Property are cured by either Axinn or the Applicable Contributor or waived in writing by the Partnership. (ii) In the event that either (a) the Applicable Contributor is unable to convey title in accordance with the terms of this Agreement free of Title Defects, (b) Axinn and the Applicable Contributor elect not to cure or cause the removal of any exception to title, except as required in subparagraph (iii) below, or (c) if Axinn and the Applicable Contributor are unable to satisfy any other conditions to the Partnership's obligations under this Agreement, then (except as otherwise specifically provided in subparagraph (iii) below) the sole liability of Axinn and the Applicable Contributor shall be to cause the Escrow Agent to return the applicable portion of the Deposit to the Partnership, and to pay the Partnership the amounts, if any, required pursuant to Paragraph 17(b) hereof and upon such payments being made, this Agreement shall be deemed canceled with respect to the Subject Property (and if the Subject Property is a Critical Property, then this Agreement shall be deemed canceled with respect to all Property and Entity Interests) and the parties hereto shall be released of all obligations and liabilities hereunder, except as to any provisions which expressly survive a termination of this Agreement; and the Partnership shall have no rights of action against Axinn and the Applicable Contributor in law or in equity, for damages, except for the purpose of enforcing Axinn's and the Applicable Contributor's contractual obligations under subparagraph (iii) below for specific performance. Notwithstanding the foregoing, the Partnership shall have the right, upon written notice to Axinn and the Applicable Contributor, to waive any conditions to the Partnership's obligations hereunder, in which event Axinn and the Applicable Contributor shall make the deliveries provided for herein to the Partnership to the extent that Axinn and the Applicable Contributor are able so to do, and there shall be no reduction in the Consideration in such event. (iii) Notwithstanding the provisions of the foregoing paragraph, if the condition of title to the Subject Property at the Applicable Closing is other than that which the Partnership is required or agrees to accept hereunder solely by reason of any mortgages (other than Assumed Mortgage Loans) or other monetary liens (hereinafter referred to as "Liens") which can be satisfied or remedied by the payment of a liquidated amount of money not to exceed 10% of the Consideration to be received for the Subject Property, Axinn and the Applicable Contributor shall not have the right to cancel this Agreement and Axinn and the Applicable Contributor shall either (aa) discharge, satisfy, or bond the same or (bb) deliver the applicable portion of the Consideration to be held in escrow as and to the extent required by the Title Company, in either event so that the Title Company shall affirmatively insure the full and complete discharge of the foregoing and shall agree to omit the same as an exception to its title insurance policy. (iv) Notwithstanding anything to the contrary contained in this Agreement, no Contributor (including Axinn) shall have any duty nor be required to take any 13 action, to institute any proceedings or to incur any expense (other than as may be required in subparagraph (iii) above) in order to remedy or remove any objections to title or otherwise to render title in accordance with the terms called for in this Agreement. Nothing contained in this Agreement shall be construed as a representation of the state of title to any of the Real Property. Any attempt by Axinn or an Applicable Contributor to cure Title Defects shall not be construed as an admission by either Axinn or such Applicable Contributor that such Title Defects are valid title objections under this Agreement. (c) Any failure by the Partnership to notify Axinn and a Contributor of Real Property in writing of any Title Defects relating to such Real Property on or before the Due Diligence Termination Date shall for all purposes be deemed to be an acceptance by the Partnership of such Title Defects as if they were one or more of the Permitted Exceptions, except with respect to continuations of title as specifically provided in Paragraph 5(b)(i). (d) At each Closing for the New York Property (as provided in Section 3(c)), either (i) each Contributor of Real Property will convey fee simple title to such Real Property by a Bargain and Sale Deed with Covenant Against Grantor's Acts (collectively, the "Deeds") to the Partnership (or its designee), subject in all cases to the Permitted Exceptions and free of all Title Defects other than Title Defects expressly waived or deemed to have been waived under clause (b)(i), in the forms attached hereto and made a part hereof as "Exhibit"F" or (ii) each Participant partner or member shall assign to the Partnership (and/or its designee) all of its Entity Interests in such Contributor by an Assignment of Entity Interest (the "Entity Assignments") in the forms attached hereto and made a part hereof as "Exhibit F-1" so that one hundred percent (100%) of the Entity Interests in and to such Contributor shall be contributed, assigned, transferred and conveyed to the Partnership. In each case, such Entity Interests shall be contributed, assigned, transferred and conveyed to the Partnership free and clear of EI Encumbrances. The title to the New York Property shall be subject in all cases to the Permitted Exceptions and free of all Title Defects other than Title Defects expressly waived under clause (b)(i). (e) At each Closing for the New Jersey Property, each Participant partner or member shall assign to the Partnership (and/or its designee) all of its Entity Interests in such Contributor by an Entity Assignment so that one hundred percent (100%) of the Entity Interests in and to such Contributor shall be contributed, assigned, transferred and conveyed to the Partnership (and/or its designee). In each case, such Entity Interests shall be contributed, assigned, transferred and conveyed to the Partnership free and clear of EI Encumbrances. The title to the New Jersey Property shall be subject in all cases to the Permitted Exceptions and free of all Title Defects other than Title Defects expressly waived under clause (b)(i). (f) At each Closing, each Contributor of Personal Property will transfer all of its right, title and interest in and to its Personal Property to the Partnership by executing a Bill of Sale (the "Bills of Sale") in the form attached hereto and made a part hereof as "Exhibit G". 14 (g) At each Closing, each Contributor will assign to the Partnership all of such Contributor's right, title, and interest in, to and under the Leases, Licenses and the Contracts relating to such Property, and the Partnership shall assume all obligations accruing from and after the Closing Date under such Leases, Licenses and Contracts, by executing an Assignment and Assumption Agreement in the form attached hereto and made a part hereof as "Exhibit H" (the "Assignments"). (h) At the Old Country Road Closing, as a condition to the Partnership's obligation to close in respect of the 263 Old Country Road Property, the Contributor of such Property shall deliver to the Partnership (i) "as built" plans sealed by the architect or contractor relating to the construction of the approximately 62,500 square foot office building currently under construction thereon, (ii) a temporary certificate of occupancy relating to such building and (iii) an estoppel certificate from ADI certifying that it has taken possession of space at such property and has accepted such space under its lease, subject to the terms thereof with respect to any punchlist items. The Contributor and Axinn shall also provide the Partnership, at the Old Country Road Closing, with an agreement pursuant to which they shall each be jointly and severally obligated to obtain, at the Contributor's and Axinn's sole cost (without regard to any limitations set forth in Paragraph 11 hereto), a permanent certificate of occupancy and to complete the punchlist items in accordance with the provisions of the ADI Lease. Notwithstanding the foregoing, at the Old Country Road Closing, the Partnership shall assume all of the obligations of AML, including, without limitation, AML's obligations under Article 7(c)(iii) of the ADI Lease, and AML shall assign to the Partnership all of its right, title and interest in and to all warranties and guaranties relating to such construction at the 263 Old Country Road Property. AML shall also certify to the Partnership that, to AML's knowledge, as of the Closing Date for the Old Country Road Closing, there are no defaults by AML, as landlord, under the terms of the ADI Lease. (i) At the Initial Closing, Axinn shall execute and deliver to the Partnership an income guaranty pursuant to which Axinn shall guaranty the net operating income (which net operating income shall be determined using the same calculations used to determine the Purchase Price for the Chestnut Property (as hereinafter defined)) at the 102 Chestnut Ridge Road Montvale, New Jersey Property (the "Chestnut Property"), subject to the terms and conditions set forth herein and subject to such other terms as the parties shall mutually agree upon prior to the Initial Closing (the "Chestnut Guaranty"). The Chestnut Guaranty shall provide that Axinn shall only be liable thereunder in the event Geotek Communications, Inc. ("Geotek"), the tenant at the Chestnut Property, rejects its lease with Axinn for the Chestnut Property (the "Geotek Lease") in connection with its current Chapter 11 bankruptcy proceeding within two (2) years after the Initial Closing and such rejection occurs prior to the assumption of the lease by Geotek. In the event of such a rejection, Axinn shall only be liable for actual damages incurred by the Partnership up to $500,000. Axinn shall be fully released from his obligations thereunder (and the Chestnut Guaranty shall be promptly returned to Axinn) in the event Geotek assumes the Geotek Lease in connection with its current Chapter 11 bankruptcy proceeding. For purposes of computing the Partnership's actual damages, the parties shall take into account any monies which the Partnership will receive as a result of (a) the Partnership exercising its rights with respect to the $817,000 letter of credit security held pursuant to the 15 terms of the Geotek Lease, which letter of credit will be assigned by Axinn to the Partnership at the Initial Closing, (b) the Partnership retaining all or a portion of the Grubb & Ellis Commission (as hereinafter defined) as a result of the termination of the Geotek Lease, whether in connection with Geotek's rejection of the same in the Chapter 11 bankruptcy proceeding or otherwise, and (c) the Partnership recovering any net damages, after costs including reasonable attorneys fees, awarded to it by the bankruptcy court from Geotek. At the Initial Closing, the Partnership shall receive a credit in the amount of $250,000, representing the remaining amount of the brokerage commission due Grubb & Ellis (the "Grubb & Ellis Commission") under its brokerage agreement for the Geotek Lease (the "Grubb & Ellis Agreement") and, in consideration thereof, the Partnership shall assume all of the obligations of Axinn under the Grubb & Ellis Agreement. 6. Closing Documents. (a) At each Closing, as a condition of the Partnership's obligation to close hereunder, the Contributor of the Property to be conveyed at such Closing or the Participants of such Contributor shall deliver or cause to be delivered the following: (i) The Deeds, executed by each Contributor of the New York Property, covering such New York Property or the Entity Assignments, executed by each Participant covering all Entity Interests in the Contributors which own such New York Property, except in the case of the 263 Old Country Road Property (and separate quitclaim deeds to such Real Property utilizing new ALTA survey descriptions, if requested), and, in the case of the 263 Old Country Road Property, the 263 Assignment and Assumption (as hereinafter defined), executed by the Contributor of the 263 Old Country Road Property; (ii) The Entity Assignments, executed by each Participant covering all Entity Interests in the Contributors which own New Jersey Property. With respect to the 3 Paragon Drive Property and the 25 Phillips Parkway, Montvale, New Jersey Property (the "25 Phillips Property") the Contributor which owns the 3 Paragon Property shall also deliver or cause to be delivered, a correcting deed from Axinn to 80-20 Associates for the 3 Paragon Drive Property (the "3 Paragon Correcting Deed") and the Contributor which owns the 25 Phillips Property shall also deliver or cause to be delivered a correcting deed from Axinn to Montvale IV for the 25 Phillips Parkway Property (the "25 Phillips Correcting Deed"); (iii) The Bills of Sale executed by each Contributor of Personal Property, covering such Personal Property. The applicable Contributor shall also deliver to the Partnership the original title certificates for the three (3) automobiles listed on Exhibit "E", together with any and all documentation which is necessary to effectuate the transfer of ownership of the same to the Partnership; (iv) The Assignments, executed by each Contributor of Property; 16 (v) The originals (or copies where the originals are not available) of the Contracts, Leases, Licenses, and other items covered by the Assignments as are in the possession or control of any Contributor or Participant; (vi) All machinery and/or equipment operating manuals, technical data and other documentation relating to the building systems and equipment, and all machinery, equipment and other building warranties and guarantees, if any, but only to the extent that any of the same are in the possession or control of any Contributor or Participant; (vii) All master and duplicate keys, combinations and codes to all locks and security devices for the Improvements which are in the possession or control of any Contributor or Participant; (viii) All Tenant security deposits in possession of such Contributor or such Contributor's managing agent; (ix) Written notice from each Contributor of Real Property or such Contributor's managing agent to each Tenant in form annexed hereto as "Exhibit BB" stating that such Real Property has been sold to the Partnership and that Tenant security deposits (if any) in such Contributor's (or such managing agent's) possession have been transferred to the Partnership and directing the Tenants to make future rental payments to the Partnership at the address designated by the Partnership ( the "Tenant Notice Letter"); (x) Non-foreign person certifications executed by each Contributor in the form attached hereto as "Exhibit I"; (xi) All building records and Tenant lease files in with respect to all Real Property to be conveyed at such Closing that are in the possession of any Contributor or Participant; (xii) All bills for current real estate taxes, sewer charges and assessments, water charges and other utilities with respect to all Real Property to be conveyed at such Closing , and to the extent in any Contributor's or Participant's possession or control, bills for each of the same for the last two (2) years, together with proof of payment thereof (to the extent same have been paid); (xiii) All plans, specifications, as-built drawings, surveys, site plans, and final, written reports of architects, engineers and surveyors, and any other Personal Property constituting part of the Property or any portion thereof, but only to the extent that the same exist and are in the possession of any Contributor or Participant or any property manager controlled by any Contributor or Participant; (xiv) An affidavit or affidavits of title in favor of the Title Insurer on the form customarily used by such Title Insurer in the state in which the Subject Property is located, and in form reasonably acceptable to each Contributor of Real Property, to enable the 17 Title Insurer to issue the Commitments described in Paragraph 5(b)(i). The Partnership shall require affirmative endorsements against mechanic's liens, consistent with each such Contributor's obligations under Paragraph 5(b)(iii), above; (xv) A letter, from the New Jersey Department of Environmental Protection or its successor ("NJDEP") stating that the provisions of the Industrial Site Recovery Act, N.J.S.A. 13:1K-6 et seq., the regulations promulgated thereunder and any successor legislation and regulations are inapplicable to Real Property located in New Jersey to be conveyed at the Closing (the "Non-Applicability Letter"); (xvi) Subject to the provisions of Paragraph 13(c), below, Estoppel Certificates, if any, received from Tenants of the Real Property to be conveyed at the Closing; (xvii) Updated rent rolls for the Real Property to be conveyed at the Closing, which shall be certified as correct and complete as of the Closing Date by such Contributors; (xviii) Proof as to the due authorization and execution by any Contributor and Participant of the documents executed and delivered by such Contributor or Participant; (xix) At the Initial Closing, a certificate of continued occupancy for the 1255 Broad Street, Bloomfield, New Jersey Property; (xx) A counterpart to the Partnership Agreement and Power of Attorney in the form contained therein executed by each Contributor receiving Units as Consideration in accordance with Paragraph 3 and executed by each Participant of any Contributor that will be receiving, at the Closing, a distribution of any such Units from the Contributor; (xxi) A Consent and Acknowledgment of Participant executed by each Participant; (xxii) INTENTIONALLY DELETED. (xxiii) INTENTIONALLY DELETED (xxiv) An Assumption, Modification and Release Agreement in substantially the same form as annexed hereto as "Exhibit CC" and made a part hereof (the "Loan Assumption Agreement") executed by the lender of each Assumed Mortgage Loan that is secured by Property that will be transferred at such Closing; 18 (xxv) A New York State Combined Real Estate Transfer Tax Return and Credit Line Mortgage Certificate (form TP 584) for each Parcel of Real Property located in New York (the "TP 584"); (xxvi) A Real Property Transfer Tax Report, State of New York State Board of Real Property Services for each Parcel of Real Property located in New York (the "Transfer Report"); (xxvii) A certificate from the Applicable Contributors to the Partnership and the Trust certifying (i) that the representations and warranties of the Contributors contained in this Agreement are true and correct in all material respects as of the Applicable Closing Date as if made on the Applicable Closing Date, except to the extent that they expressly relate to an earlier date, (ii) that each of the Applicable Contributors has performed or complied in all material respects with all of its agreements herein contained and required to be performed or complied with by it hereunder, and (iii) that none of the Participants have revoked their consent to the transaction contemplated hereby as set forth in the Consent and Acknowledgment of Participants and, to the knowledge of the Applicable Contributor and Axinn, none of the Participants have threatened to revoke such consent as of the Applicable Closing Date; (xxviii) A certificate of each Contributor the Entity Interests in which will be assigned to the Partnership duly executed by an authorized officer of each such Contributors in such capacity, certifying that annexed thereto (i) is a true and correct copy of (x) the Contributor's partnership or operating agreement, as the case may be, and any and all amendments thereto, and (y) the certificate of limited partnership or articles of organization for the Contributor and all amendments thereto, if any, as filed in the state of formation for the Contributor; and the same have not been otherwise modified or amended, and are in full force and effect; (ii) are duly adopted resolutions authorizing the consummation of the transactions contemplated by this Agreement; and (iii) are good standing certificates dated as of the most recent practicable date for each of the Contributors in their respective state of formation; (xxix) Incumbency certificates of each Contributor the Entity Interests in which will be assigned to the Partnership certifying the authority of the officers of such entity Contributor to execute and deliver this Agreement and all applicable transaction documents; (xxx) Resignations from all directors and officers of the Contributors the Entity Interests in which will be assigned to the Partnership pursuant to the terms hereof; (xxxi) An opinion letter from the law firm of Dollinger & Dollinger regarding the transfer of Entity Interests in the form annexed hereto as "Exhibit EE" (the "Dollinger Opinion Letter"); 19 (xxxii) The Subject-to Mortgage Loan Agreement executed by the Applicable Contributor and a payoff letter from each lender stating the amount of principal and accrued interest that must be paid in order for the lender to release its mortgage. (xxxiii) Each Contributor and Axinn shall deliver such other certificates, documents, instruments and agreements as the Trust and the Partnership shall deem necessary in their reasonable discretion in order to effectuate the transactions contemplated herein in form and substance reasonably satisfactory to the Trust and the Partnership. For the purposes of this Paragraph 6(a), except for the actual documents which each Contributor is required to execute and deliver at each Closing as set forth above, each Contributor shall be deemed to have fully satisfied its obligations to deliver or cause to be delivered such Closing Documents at each Closing, if: (a) each such Contributor actually delivers the same at each Closing; or (b) such documentation continues to be located at the offices of Donald E. Axinn Companies ("DEAC"), 131 Jericho Turnpike, Jericho, New York at the time of each Closing. (b) (i) At the Initial Closing, as a condition of each Contributor's and each Participant's obligations hereunder, Donald E. Axinn shall be elected as a member of the Board of Trustees of the Trust (and the Partnership shall provide evidence of the same to Donald E. Axinn in the form of a Board Resolution of Trust's Board of Trustees certified by the Secretary or Assistant Secretary of the Trust) and Axinn shall file a Form 3 with the SEC, and the Partnership shall deliver or cause to be delivered the following documents: (1) Option Agreements, in substantially the forms attached hereto as "Exhibit N" and "Exhibit O", respectively, executed by the Trust, providing for the grant to each of Donald E. Axinn and Mark Hamer of options to purchase 100,000 Common Shares. (2) An Employment Agreement with Mark Hamer, in substantially the form attached hereto as "Exhibit P", executed by the Trust. (ii) At each Closing (including, without limitation, the Initial Closing) as a condition of each Contributor's and each Participant's obligations hereunder, the Partnership shall deliver or cause to be delivered the following: (1) The Consideration (in immediately available funds or Units in accordance with Paragraph 3) for the Property and Entity Interests conveyed to the Partnership at such Closing; (2) The applicable Assignments, executed by the Partnership; (3) The applicable Entity Assignments, executed by the Partnership; 20 (4) INTENTIONALLY DELETED (5) At the Initial Closing, a Registration Rights Agreement in substantially the form attached hereto as "Exhibit J", executed by the Trust. Because this Agreement contemplates the issuance of Units after the Initial Closing (the "Additional Units"), the Trust will execute, in connection with closings held more than 175 days after the Initial Closing and at which Additional Units are issued, an additional Registration Rights Agreement in substantially the form attached hereto as Exhibit J covering the resale of Common Shares issuable upon redemption of such Additional Units. The timing of the Trust's obligations under such additional Registration Rights Agreement will be established in a manner intended to provide the holder(s) of such Additional Units with the ability to resell the Common Shares issuable upon redemption of such Units under a Form S-3 Registration Statement within six months following the date of issuance of such Additional Units. (6) The applicable Tenant Notice Letters, executed by the Partnership. (7) The applicable Loan Assumption Agreement, executed by the Partnership. (8) The applicable TP 584, executed by the Partnership. (9) The applicable Transfer Report, executed by the Partnership. (10) Certificates duly executed and issued in the names of the respective Participants evidencing the issuance of the Units, together with the duly adopted amendment to the Partnership Agreement described in subparagraph (11) below. (11) A certificate of the Trust duly executed by an authorized officer of the Trust in such capacity, on the Trust's behalf and in its capacity as general partner of the Partnership, as the case may be, certifying that annexed thereto (i) is a true and correct copy of (x) the Amendment to the Amended and Restated Agreement of Limited Partnership of the Partnership dated as of November 18, 1997, a copy of which is annexed hereto as Exhibit II (the "Amendment"), and any and all amendments thereto, and (y) the certificate of limited partnership of the Partnership and all amendments thereto, if any, as filed in the State of Delaware; and the same have not been otherwise modified or amended, and are in full force and effect; (ii) are duly adopted resolutions authorizing the consummation of the transactions contemplated by this Agreement; (iii) is a true and correct copy of the Trust's declaration of trust and by-laws and all amendments thereto and that the same have not been otherwise modified or amended, and are in full force and effect; and (iv) good standing certificates dated as of a date within fifteen (15) days of the applicable Closing for each of the Trust and the Partnership for Maryland and Delaware, respectively. (12) INTENTIONALLY DELETED 21 (13) A certificate from the Trust and the Partnership to the Contributors and the Participants certifying (i) that the representations and warranties of the Trust and the Partnership contained in this Agreement are true and correct in all material respects as of the Applicable Closing Date as if made on the Applicable Closing Date, except to the extent that they expressly relate to an earlier date, and (ii) that each of the Trust and the Partnership has performed or complied in all material respects with all of its agreements herein contained and required to be performed or complied with by it hereunder. (14) A certificate of the Partnership, certifying that each Participant to be admitted at such Closing has been admitted as a limited partner of the Partnership in respect to the applicable Units, effective on the Applicable Closing Date, and that the Partnership's books and records will, as of the Applicable Closing Date, indicate that each Participant is the holder of the number of Units which is called for pursuant to Paragraph 3. (15) An incumbency certificate of the Trust certifying the authority of the officers of the Trust, on its own behalf and as general partner of the Partnership, to execute and deliver this Agreement and all applicable transaction documents. (16) The Subject-to Mortgage Loan Agreement, executed by the Partnership. (17) The Trust and the Partnership shall deliver such other certificates, documents, instruments and agreements as the Contributors and Participants shall deem necessary in their reasonable discretion in order to effectuate the transactions contemplated herein in form and substance reasonably satisfactory to the Contributors and the Participants. 7. Prorations and Closing Costs. All matters involving prorations or adjustments to be made to the Consideration for the Property relating to each Parcel (each, a "Subject Property") and not specifically provided for in any other provision of this Agreement shall be adjusted as provided below. Except as otherwise set forth herein, all items to be prorated pursuant to this Paragraph shall be prorated for each Subject Property as of the Closing Date for such Subject Property (for purposes of this Paragraph, the "Applicable Closing Date"), with the Partnership to be treated as the owner of the Subject Property, for purposes of prorations of income and expenses, on and after the Applicable Closing Date. (a) Real estate taxes and all other ad valorem taxes, if any, with respect to the Real Property constituting part of the Subject Property (the "Subject Real Property") for the applicable fiscal or calendar year in which the Applicable Closing Date with respect to the Subject Real Property occurs shall be prorated in accordance with the provisions of this Paragraph 7. If the amount of such taxes is not known on the Applicable Closing Date for the Subject Real Property, taxes will be prorated on the basis of the most recently ascertainable tax bill and such proration shall be adjusted by the Applicable Contributor and the Partnership upon written evidence that the actual taxes for the year in which the Applicable Closing Date occurs differ from the amounts used for adjustments at the applicable Closing in accordance with Paragraph 7(i) below. There shall be no proration of insurance premiums or assignment of 22 insurance policies relating to the Applicable Real Property and the Contributor of the Subject Real Property (for purposes of this Paragraph, the "Applicable Contributor") shall be entitled to cancel all of its existing policies relating to the Applicable Real Property as of such Closing Date. The Partnership shall be obligated (at its own election) to obtain any replacement policies. The amounts of all telephone, electric, sewer, water and other utility bills, trash removal bills, janitorial and maintenance service bills relating to the Subject Real Property and allocable to the period prior to the Applicable Closing Date shall be determined and paid by the Applicable Contributor before the Applicable Closing Date, if possible, or shall be paid promptly thereafter by the Applicable Contributor, or shall be adjusted between the Partnership and the Applicable Contributor at the applicable Closing based upon the last meter readings, or adjusted between the Partnership and the Applicable Contributor immediately after the same have been determined. The Partnership and the Applicable Contributor shall, to the extent necessary, enter into an agreement to such effect as of the Applicable Closing Date. The Applicable Contributor shall attempt to have all utility meters read as of the Applicable Closing Date. The Applicable Contributor shall further attempt to obtain from the provider of same all other service statements and bills of account adjusted as of the Applicable Closing Date. The Applicable Contributor shall be entitled to refunds of all deposits, if any, paid by the Applicable Contributor or the Applicable Contributor's predecessor-in-interest prior to the Applicable Closing Date and held by entities providing such service, or, at the Applicable Contributor's option, the Applicable Contributor shall transfer all of its right, title and interest in and to such deposits to the Partnership on the Applicable Closing Date and shall receive a credit for the amount of such deposits. All Contracts and other obligations in connection with the Subject Property, to the extent the same are intended to be assumed hereunder, shall be prorated as of the Applicable Closing Date. (b) Special assessments which have been filed as a lien against the Subject Real Property on or before the Effective Date and are not payable in installments shall be paid by the Applicable Contributor. Special assessments which have been filed as a lien against the Subject Real Property, but which are payable in installments shall be adjusted based upon the installment payment for the fiscal or calendar year in which Applicable Closing Date takes place and the remaining unpaid assessments shall be assumed by the Partnership. Special assessments which are or may be pending, but which have not become a lien on the Subject Real Property as of the Applicable Closing Date, and special assessments which are filed as a lien after the Applicable Closing Date, shall be assumed and paid by the Partnership. (c) The Partnership and each Applicable Contributor shall each pay one half of any state or county documentary stamps or transfer taxes imposed in connection with the transfer of each Subject Real Property. The Partnership and each Applicable Contributor shall also each pay one-half of the costs charged by the Title Insurer in connection with its issuance of non-imputation endorsements to the Title Policy and one-half of costs charged by Dollinger & Dollinger in connection with its issuance of the Dollinger Opinion Letter. The Partnership shall pay the expense of recording the Deeds for the Subject Real Property, the title searches, title premiums and any other title insurance costs on the owner's title insurance policies and the cost of obtaining any surveys, if desired by the Partnership. The Partnership agrees to pay the expense of the legal fees of its own counsel, and the Contributors and Participants shall 23 pay the expense of the legal fees of their own counsel. The cost of all of the Partnership's Due Diligence Activities (as defined below) shall be borne solely by the Partnership. (d) Any base, minimum or similar rents (including, without limitation, estimated pass through payments, payments for common area maintenance and all additional charges payable by tenants) under the Leases (in each case, collectively, the "Rents") relating to the Subject Real Property (the "Subject Leases") which are in arrears as of the Applicable Closing Date shall not be apportioned at the applicable Closing, but instead the right to collect the same shall be assigned to the Partnership. All such Rents received by the Partnership or the Applicable Contributor within the first ninety (90) days after the Applicable Closing Date (other than "true up" payments received from Tenants attributable to a year-end reconciliation of actual and budgeted pass-through payments which shall be apportioned between the Partnership and the Applicable Contributor pro rata in accordance with their respective period of ownership as provided in Paragraph 7(i) below) shall be applied in the following order of priority: (a) to the Partnership, so long as such Tenant is in arrears for current or prior rent arising after the Applicable Closing Date, then (b) to the Applicable Contributor for all rent in arrears prior to the Applicable Closing Date; and then (c) to the Partnership with no further claim by the Applicable Contributor thereto. The Applicable Contributor shall have no claim to Rents collected ninety (90) days after the Applicable Closing Date. Any Rents which are delinquent or otherwise not paid on the Applicable Closing Date, and collected by the Partnership or the Applicable Contributor after the Applicable Closing Date shall be apportioned as aforesaid and the portion to which the Applicable Contributor is entitled shall be promptly remitted by the Partnership to the Applicable Contributor and the portion to which the Partnership is entitled shall be promptly remitted by the Applicable Contributor to the Partnership. The Applicable Contributor retains the right to pursue its remedies against Tenants after the Applicable Closing Date for any delinquent Rents or other amounts owed to the Applicable Contributor (other than proceedings to evict Tenant or terminate the Subject Lease). The Partnership shall not enter into any agreement pursuant to which any sums owed to the Applicable Contributor in respect of the Subject Lease for periods prior to the Applicable Closing Date are reduced, modified or waived. The Partnership's obligations to collect rent arrearages shall be limited to commercially reasonable efforts and the Partnership shall not be obligated to spend any money without adequate assurance of reimbursement from the Applicable Contributor, and the Partnership shall under no circumstance be required to commence litigation against any Tenant to collect the same. Any cash security deposits held by the Applicable Contributor for any Subject Lease, together with the interest due thereon, if any and if required under the terms of the Subject Lease or as required by applicable law, shall either be credited or transferred to the Partnership on the Applicable Closing Date at the Applicable Contributor's option. If any security deposits are in the form of a letter of credit, the Applicable Contributor shall assign its interest in the letter of credit to the Partnership (to the extent assignable) and deliver the original letter of credit to the Partnership at the applicable Closing. (e) All leasing and brokerage commissions for the Subject Lease(s) set forth on "Exhibit V" annexed hereto and made a part hereof (and designated thereon as the responsibility of the Applicable Contributor) shall be paid by the Applicable Contributor without contribution by, or reimbursement from, the Partnership. The Partnership shall expressly assume 24 and be solely obligated for the leasing and brokerage commissions for which the Partnership is the responsible party as set forth on "Exhibit V", for all the leasing and brokerage commissions arising in connection with expansions and extensions exercised by a tenant after the Effective Date and all the leasing and brokerage commissions which are not set forth on said "Exhibit V" (provided any such commissions that are the Partnership's responsibility as provided herein are in connection with expansions and renewals exercised by tenants listed on the rent roll annexed hereto as "Exhibit C" after the Effective Date and are at rates which brokers are customarily receiving in the area in which the Subject Property is located), subject only to the Partnership's right to approve any new Subject Lease or amendments, discretionary renewals or modifications of any Subject Lease which are not otherwise permitted pursuant to Paragraph 18(e), below. Any other leasing or brokerage commissions which are not set forth on Exhibit "V" or are the responsibility of the Partnership as set forth in the preceding sentence shall remain the responsibility of the Applicable Contributor. The Applicable Contributor shall be responsible for the costs of, and shall pay or perform prior to the Applicable Closing Date, the capital improvements, tenant improvements and allowances for work performed or required to be performed (or paid, as applicable) prior to March 23, 1998 by or on behalf of the Applicable Contributor for all Subject Leases as set forth in "Exhibit V" annexed hereto and made a part hereof (collectively, the "Contributors Tenant Work"). The Partnership shall assume, pay or reimburse (as applicable) the Applicable Contributor on the Applicable Closing Date for the costs of all other capital improvements, tenant improvements and allowances for work (other than Contributors Tenant Work) pursuant to the Subject Leases (including all amendments, renewals and modifications thereof) incurred by or on behalf of the Applicable Contributor in connection with any Subject Lease (including all amendments, renewals and modifications thereof) entered into after March 23, 1998 with respect to any of the Subject Real Property, provided that such costs are explicitly noted on "Exhibit C" hereto or are approved by the Partnership after the date hereof in accordance with Paragraph 18(e) below. (f) Amounts paid or payable as fees or expenses under any of the Licenses relating to the Subject Property (the "Subject Licenses") assigned on the Applicable Closing Date shall be prorated as of the Applicable Closing Date but all amounts refundable under unassigned and unassignable Subject Licenses shall belong to the Contributor of each such Subject License. (g) The Applicable Contributor shall be solely responsible for the payment of any "roll back taxes" assessed or imposed upon any of the Subject Real Property under the "Farmland Assessment Act of 1964," Chapter 58, Laws of 1964, N.J.S.A. 54:4 23-1 et seq., as amended, or otherwise, which relate to any period prior to the Applicable Closing Date, and the Applicable Contributor agrees to indemnify, defend and save the Partnership harmless (including attorneys' fees) from and against any claim for such taxes without regard to the limits set forth in Paragraph 11. (h) Miscellaneous income relating to the Subject Leases, including, without limitation, telephone and vending machine income, if any, shall be prorated as of the Applicable Closing Date, to the extent that such income has been actually received by the Applicable Contributor. 25 (i) At the Initial Closing, the Partnership shall receive a credit against the Purchase Price in the amount of $400,000 in full satisfaction of the obligations of each Contributor and Participants with respect to the physical condition of the Properties (the "IC Credit"). Prior to the Initial Closing, Axinn shall advise the Partnership, in writing, as to how the IC Credit shall be allocated to and among the Contributors and Participants. The Applicable Contributor shall remain responsible for all payments due under repair contracts for those repair items which are such Applicable Contributor's responsibility as specifically set forth on Schedule V. The Partnership shall be responsible for all payments due under all other repair contracts, provided the Applicable Contributor obtains the prior written approval of the Partnership for such repair contracts. The Partnership shall respond to the Applicable Contributor's request for a consent in all cases under this subparagraph (i) within three (3) business days of receiving such request. Failure by the Partnership to respond within such three (3) business day period, shall be deemed the consent of the Partnership to such repair contract. Except as specifically set forth herein, the Contributors and Participants shall have no other obligations to the Partnership or to the Trust with respect to the physical condition of the Properties. (j) At the Initial Closing, the Contributors and the Participants set forth on Schedule 13 shall deposit up to $34,000.00 in the aggregate in escrow so that funds will be available to the Partnership to complete the environmental condition items at the Properties set forth on Schedule 13 annexed hereto. The Contributors and the Partnership shall agree upon the actual amount to be held in escrow prior to the Initial Closing. Such Contributors, Participants and the Partnership shall, at the Initial Closing, enter into an agreement, in form and substance reasonably acceptable to all parties, to reflect such an escrow arrangement. Except as specifically set forth herein and except for the obligations of the Contributor of the 31 Commercial Street Property set forth in Paragraphs 11(b) and 14(d) below, the Contributors and the Participants shall have no other obligations to the Partnership or to the Trust with respect to the environmental condition of the Properties. (k) At the Initial Closing, the Contributor of the 80 Skyline-Express Plainview, New York Property shall receive a credit in the amount of $12,400.00 with respect to such Contributor's funding of the cost of "tenant extras" pursuant to the terms of such Contributor's lease with Olsten Health Services. (l) All prorations shall be made on the basis of the actual number of days of the month which shall have elapsed as of the day of the applicable Closing and based upon the actual number of days in the month and a three hundred and sixty five (365) day year. The amount of such prorations shall be initially performed at the applicable Closing but shall be subject to adjustment after the applicable Closing as and when complete and accurate information becomes available, if such information is not available as of the Applicable Closing Date. The Partnership and each Applicable Contributor agree to cooperate and use their best efforts to make such adjustment no later than one hundred and twenty (120) days after the applicable Closing (or as soon thereafter as may be practicable, with respect to common area maintenance and other additional rent charges including pass-throughs for real estate taxes and special assessments, if any, payable by tenants under the Subject Leases). Except as set forth in 26 this Paragraph 7, all items of income and expense which accrue for the period prior to each applicable Closing will be for the account of each Applicable Contributor and all items of income and expense which accrue for the period after the applicable Closing will be for the account of the Partnership. The provisions of this subparagraph 7(i) shall specifically survive each applicable Closing. (m) All of the provisions of this Paragraph 7 and each Contributor's and the Partnership's respective rights and obligations hereunder shall survive the Closings contemplated by this Agreement and Axinn shall be obligated to cause each Contributor to comply with all of such Contributor's obligations hereunder. 8. Possession of Property. (a) Each Contributor or Participant shall deliver possession to the Real Property conveyed by it to the Partnership either directly or through the conveyance of Entity Interests on each Closing Date and shall also deliver possession to the Real Property owned by Contributors whose Participants have conveyed Entity Interests to the Partnership on each Closing Date, subject only to the Permitted Exceptions. (b) The Partnership shall assume, by execution of the Assignments on each Closing Date, all of each Contributor's obligations in, to and under the Licenses and Leases assigned on such Closing Date if such obligations are set forth in writing in such Licenses and Leases and such Licenses and Leases are listed on Exhibits annexed hereto. The Applicable Contributor and Axinn shall remain responsible for all other obligations in, to and under the Licenses and the Leases which the Partnership does not assume pursuant to the terms hereof. Notwithstanding the foregoing, the Partnership shall not assume management agreements, leasing or brokerage agreements; provided, however, that the Partnership shall remain liable for all leasing and brokerage commissions as and to the extent set forth in Paragraph 7(e) above. (c) All of the provisions of this Paragraph 8 and each Contributor's and the Partnership's respective rights and obligations hereunder shall survive each Closing contemplated hereunder. 9. Employees. The Property of each Contributor does not include any employees of such Contributor. The Partnership, through an affiliate or related person, intends, however, to offer to hire or retain (but shall not be obligated to offer to hire or retain) those individuals currently employed by DEAC and identified on "Exhibit Q" (the "Transferred Employees") at salary levels and with benefits consistent with those currently paid by DEAC, which salary levels and benefits are also set forth on "Exhibit Q". It is anticipated that the responsibilities currently borne by the Transferred Employees will be subject to modification to insure consistency with the Partnership's existing Asset Management/Tenant Services Program. The Partnership and its affiliates and related persons shall have no obligation or liability whatsoever with respect to employees of DEAC, or of any Contributor, Participant or their respective affiliates, it being such Contributor's, Participant's or affiliate's sole responsibility and obligation to provide severance arrangements, if any, for all such employees and to pay all 27 liabilities to such employees that accrued or relate to periods of time prior to the Closing. Closing of the transactions under this Agreement shall not be conditioned upon any or all of the Transferred Employees accepting employment with the Partnership or any affiliate or related person of the Partnership. 10. Representations and Warranties. (a) Each Contributor (excluding Axinn), severally and not jointly, hereby represents and warrants, solely as to himself, itself and each Property owned by it or him, as the case may be, and Axinn, severally and jointly, hereby represents and warrants as to himself and each Property owned by each Contributor and as to each Contributor, as follows, all of which shall be true and correct on, and as of the Effective Date and each applicable Closing Date: (1) Unless the Contributor is an individual, the Contributor is duly organized or formed and validly existing under the laws of its state of organization or formation, and is in good standing in such state. With respect to Contributors who are not individuals, the Contributor is not in default under, or in violation of, any provision of its organizational documents. (2) The Contributor has all necessary power and authority to enter into this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby, without the consent or authorization of, or notice to, any third party, except those third parties to whom such consents or authorizations have been or will be obtained, or to whom notices have been or will be given, as necessary on or prior to each Closing Date. A list of such required consents or authorizations is contained on "Exhibit R" attached hereto. A list of such required notices is contained on "Exhibit R-1". This Agreement constitutes, and the other documents and instruments to be delivered by the Contributor pursuant hereto when delivered will constitute, valid and binding obligations of the Contributor, enforceable against the Contributor in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar rights of creditors generally and by general principals of equity. (3) Except as set forth in "Exhibit S" attached hereto and made a part hereof, there is no litigation, proceeding, action or investigation pending or, to the best of the Contributor's knowledge, threatened against or relating to the Contributor or its Property, nor is there any judgment, decree, injunction, or order of any court, governmental department, commission, agency, instrumentality or arbitrator, which could reasonably be expected to materially and adversely affect the Contributor or its Property or which would invalidate this Agreement or any action taken or to be taken by the Contributor pursuant hereto. (4) Except as set forth in "Exhibit R" and in "Exhibit "R-1", neither the execution of this Agreement nor the consummation of the transactions contemplated hereby will (i) constitute a violation or be in conflict with or constitute a default under any term or provision of the Contributor's constituting or organizational documents; (ii) result in a violation or breach of, or constitute (with or without due notice or lapse of time or 28 both) a default (or give rise to any right of termination, cancellation or acceleration) under, any of the terms, conditions or provisions of any indenture, license, contract, agreement or other instrument or obligation to which a Contributor is a party or by which its respective properties or assets may be bound; or (iii) violate any order, writ, injunction, decree, statute, rule or regulation applicable to the Contributor, or any of its properties or assets. (5) True, correct and complete copies of all of the following, together with any modifications or amendments thereof, but only if and to the extent the same are in Contributor's possession or control, have been made available as of April 22, 1998, to the Partnership: (i) Leases and rent rolls; (ii) Contracts; (iii) leases of equipment, vehicles and other tangible personal property used by Contributor in connection with the ownership and operation of the Property listed on "Exhibit C-2" (the "Personal Property Leases"); (iv) Licenses; (v) surveys; (vi) title reports; (vii) engineering reports; and (viii) environmental reports. (6) (i) all of the Leases, Contracts, Personal Property Leases and Licenses are in full force and effect, (ii) to the best of its knowledge, there has been no action or failure to act by the Contributor or any other party to any Lease, Contract, Personal Property Lease or License which, with the giving of notice or the passage of time or both, would constitute a default in any material respect of such document or otherwise entitle any other party thereto to damages or a right to terminate; and (iii) the Contributor has not received from any other party written notice with respect to a material deficiency in the condition of the Property or the use or repair of the same or of any alleged default by Contributor under any such Lease, Contract, Personal Property Lease or License which is reasonably likely to cost more than $5,000 to cure or remediate individually (or more than $25,000 in the aggregate for each property), as the case may be. Except as set forth on "Exhibit T", each of the Contracts is terminable at will without penalty or cancellation fee upon no more than thirty (30) days prior written notice but, except as hereinafter expressly provided, unless otherwise directed by the Partnership, the Contracts shall not be terminated by the Contributor. Except as set forth on "Exhibit T", to the best of its knowledge, the Contributor is not a party to any existing management agreement or brokerage or leasing arrangement. (7) There is set forth or identified in "Exhibit U" all of the plans, funds, policies, programs, arrangements or understandings sponsored or maintained by the Contributor, or DEAC or any DEAC affiliates (collectively, the "Axinn Affiliates"), and administered by the Contributor or any of the Axinn Affiliates, which provide any current employee of the Contributor or any of the Axinn Affiliates (an "Employee") (or any dependent or beneficiary of any such Employee) with (a) retirement benefits; (b) severance or separation from service benefits; (c) incentive, performance, stock, share appreciation or bonus awards; (d) health care benefits; (e) disability income or wage continuation benefits; (f) supplemental unemployment benefits; (g) life insurance, death or survivor's benefits; (h) accrued sick pay or vacation pay; or (i) any other type of material benefit offered under any arrangement subject to characterization as an "employee benefit plan" within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA") and not excepted by Section 4 of ERISA are collectively called "Employee Benefit Plans". Except as set forth on 29 "Exhibit U", none of such Employee Benefit Plans is an "employee benefit pension plan" or a "pension plan" as defined in Section 3(2) of ERISA which is subject to Title IV of ERISA. As to any Employee Benefit Plan identified in "Exhibit U", each of the following is true: (i) all amounts due from the Contributor or other person responsible for sponsoring, maintaining or administering such Employee Benefit Plan (the "Responsible Person") as contributions to the date hereof have been paid or accrued on their books; (ii) the Responsible Person and any Affiliated Company (as hereinafter defined) have performed or satisfied all material obligations required to be performed or satisfied by them under, and are not in default under or in violation of, any Employee Benefit Plan and no other party is in default thereunder or in violation thereof; (iii) the Responsible Person and any Affiliated Company are in compliance in all material respects with the requirements (including reporting and disclosure requirements applicable to them) prescribed by all statutes, orders or governmental rules or regulations applicable to the Employee Benefit Plans, including, but not limited to, ERISA and the Internal Revenue Code of 1986, as amended (the "Code"); (iv) neither the Responsible Person nor any Affiliated Company or any other "disqualified person" or "party in interest" (as defined in Section 4975 of the Code and Section 3(14) of ERISA, respectively) has engaged in any "prohibited transaction," as such term is defined in Section 4975 of the Code or Section 406 of ERISA, which could subject any Employee Benefit Plan (or its related trust), the Contributor, the Responsible Person or any Affiliated Company, the Partnership, the Trust, any shareholder, officer, director, trustee, partner or employee of the Contributor, any Affiliated Company, the Partnership or the Trust or any trustee, administrator or other fiduciary of any Employee Benefit Plan to the tax or penalty imposed under Section 4975 of the Code or Section 502(i) of ERISA; and (v) there are no material actions, suits or claims pending (other than routine claims for benefits) or threatened, against any Employee Benefit Plan or against the assets of any Employee Benefit Plan. For purposes of this subparagraph 10(a)(7), "Affiliated Company" shall mean any member (whether or not incorporated) of a group which is part of a controlled group of corporations or under common control (within the meaning of the regulations promulgated under Section 414 of the Code) and of which the Contributor, the Axinn Affiliates or the Responsible Person is a member. Neither the Seller nor the Responsible Person maintains or participates in, and has never maintained or participated in, any "multiemployer plans" as defined in Section 3(37) of ERISA. There are no liens against the Real Property arising under ERISA, nor any other compensation or employment related lien or liability that could become the responsibility of the Partnership. There are no existing collective bargaining or other employment agreements in effect with respect to the Real Property or the employees of the Contributor or the Axinn Affiliates. The Contributors and the Axinn Affiliates shall offer health care continuation coverage pursuant to the Consolidated Omnibus Reconciliation Act ("COBRA"), if any, for persons employed by the Contributor or Axinn Affiliates and have complied and shall otherwise comply in all material respects with all applicable laws (including laws prohibiting employment discrimination) relating to persons employed by such Contributors and the Axinn Affiliates. (8) Except for public improvements which are to be made in connection with the construction of the 263 Old Country Road Property, to the Contributor's knowledge, there are no public improvements in the nature of off-site improvements or otherwise, which have been ordered to be made and/or which have not 30 heretofore been assessed and, to the Contributor's knowledge, there are no special or general assessments currently affecting or pending against the Real Property or any portion thereof. (9) Except as set forth in "Exhibit S-1", the Contributor has not been served with written notice that it has been named as a party in any litigation, administrative proceeding or investigation naming Contributor as a responsible party or potentially responsible party for any liability for clean-up costs, natural resource damages or other damages or liability for prior disposal or release of Hazardous Substances, Hazardous Wastes or other environmental pollutants or contaminants. For purposes of this Agreement, "Hazardous Substances" means those elements and compounds which are designated as such in Section 101(14) of the Comprehensive Response, Compensation and Liability Act (CERCLA), 42 U.S.C. Section 9601 (14), as amended, all petroleum products and by-products, and any other hazardous substances as that term may be further defined in any and all such federal, state and local laws (including, in New Jersey, the New Jersey Industrial Site Recovery Act (ISRA) and "Hazardous Wastes" means any hazardous waste, residential or household waste, solid waste, or other waste as defined in such federal, state and local laws. Except as set forth in "Exhibit S-1", the Contributor has not received any summons, citation, directive, letter or other written communication from any governmental or quasi-governmental authority concerning any intentional or unintentional action or omission on the Contributor's part which either (a) resulted in the releasing, spilling, leaking, pumping, pouring, emitting, emptying or dumping of Hazardous Substances or Hazardous Wastes, or (b) related in any way to the generation, storage, transport, treatment or disposal of Hazardous Substances or Hazardous Wastes. (10) To the Contributor's knowledge, except (a) in amounts customarily found in office uses and in other uses for which the Property is suited and used and (b) in compliance with applicable law, no Hazardous Substances and no Hazardous Wastes are present on the Property including, without limitation, asbestos, flammable substances, explosives, radioactive materials, hazardous wastes, toxic substances, pollutants, pollution, contaminant, polychlorinated biphenyls ("PCBs"), urea formaldehyde foam insulation, radon, corrosive, irritant, biologically infectious materials, petroleum product, garbage, refuse, sludge, hazardous or waste materials, except as has been disclosed in the environmental site assessment reports prepared for the Partnership for each Property by Dames & Moore, and there has been no use of the Property that shall, under any federal, state or local environmental statute, ordinance or regulation, require, at any time, any closure or cessation of the use or occupancy of the Property and/or impose, at any time, upon the owner of the Property any clean-up or other monetary obligation. To the Contributor's knowledge, none of the Properties nor any portion thereof, have been identified on the federal CERLIS, the National Priorities List (40 C.F.R. Part 300, App. B) or any state or local list of potential hazardous waste disposal sites or as an industrial establishment. Notwithstanding the representations and warranties set forth in this subparagraph and subparagraph (9) above, the acts, if any, of any Applicable Contributor's past or current tenants shall not be imputed to such Applicable Contributor unless such Applicable Contributor shall have actual knowledge thereof. 31 (11) True and correct copies of the income and expense statements for each Property owned by the Contributor for the calendar year 1997 certified by the Contributor, have been delivered to the Partnership upon execution of this Agreement. (12) The Contributor has received no written notice of any material violation of any of the licenses, permits, consents, authorizations, approvals, and certificates of any regulatory, administrative or other governmental agency or body, if any, issued to or held by the Contributor and related to the ownership or operation of each Property owned by the Contributor (collectively, the "Permits"), and there is no pending or, to the knowledge of the Contributor, threatened proceeding which could result in the revocation or cancellation of, or inability of the Contributor to renew, any Permit. (13) Except as set forth in "Exhibit V" attached hereto and except for the obligations which the Partnership has specifically agreed to assume pursuant to the provisions of Paragraph 7(e) above, to the best of the Contributor's knowledge, all management fees, leasing commissions and tenant improvement allowances relating to the Property are fully paid, there are no brokerage commissions owing by the Contributor with respect to any of the Leases or otherwise related to the Properties owned by the Contributor which have not been paid, and there are no ongoing commission or leasing fee obligations. (14) The Contributor has received no written notice from any insurance company which has issued a policy with respect to any of the Property or by any board of fire underwriters (or other body exercising similar functions) claiming any material defects or deficiencies or requesting the performance of any material repairs, alterations or other work, and the Contributor will promptly notify the Partnership of any such notice or requirement if such notice is received prior to any Closing. (15) The Contributor is not a "foreign person" within the meaning of the Internal Revenue Code of 1986, as amended. (16) The Contributor has not received written notice in the last two (2) years from any governmental agency or authority of outstanding material violations issued by governmental authorities having jurisdiction over the Property owned by it. (17) Except as set forth in "Exhibit R-1", there are no options, rights of first refusal, rights of first offer or conditional sales agreements regarding the purchase and sale of the Property. (18) There are no oral or written leases or rights of occupancy or grants or claims of right, title or interest in any portion of the Property other than the Leases and the Licenses. No Tenant has advised the Contributor in the last two (2) years, that the Contributor is in default under any of the Leases, or asserted, in the last two (2) years, any claim or basis for any claim for free or reduced rent or right of set off against the landlord or the rent under the Leases, and the Contributor has no knowledge of any default or any event which has taken place which, with the passage of time, or the delivery of notice, or both, could become 32 an event of default. The Contributor has the sole right to collect rents under the Leases, and neither such right nor any of the Leases has been assigned, pledged, hypothecated or otherwise encumbered by the Contributor except as additional collateral for any existing mortgage upon the Real Property to which any such Lease relates, which shall be satisfied or assumed at or before Closing at which such Real Property shall be conveyed by the Contributor. No holder of any such collateral assignment has asserted or exercised any of its right to collect such rents. Each of the Leases is valid and subsisting and in full force and effect, the Tenant is in actual possession in the normal course, and the rents set forth in "Exhibit C" are the actual rents, income and charges currently being collected by the Contributor under the Leases. Except as set forth on "Exhibit V", all material obligations of the Contributor that it is required to complete pursuant to any Lease as of the date hereof has been completed as of this date or shall be completed as of the Closing at which the Real Property as to which any such Lease relates shall be conveyed, and all costs therefore have been or shall be paid by the Contributor, and all of the Contributor's work has or shall have been accepted by the Tenant without exception on or before such Closing, other than routine punch list items, which items shall remain the responsibility of the Contributor following such Closing (without regard to the limitations set forth in Paragraph11), and which obligation shall expressly survive Closing. The amount of each security deposit contains, where required by law or otherwise, such interest which has accrued in accordance with law. No Tenant of the Property under any of the Leases has, and shall not at Closing at which such Property shall be conveyed have, prepaid any rent under any of the Leases for more than one (1) month. Except as explicitly noted in "Exhibit C", no security deposits by Tenants have heretofore been returned or applied to charges against the Tenants. (19) Schedule 5 is a true and correct list of matters regarding the Mortgage Loans covered by Paragraph 3(e) above. No holder of an Assumed Mortgage Loan is entitled to receipt of a participation interest (whether of profits, sale or refinancing proceeds) in any of the Consideration to be received by the Applicable Contributor hereunder, nor is the holder of an Assumed Mortgage Loan entitled to receipt of a participation interest under any other circumstances. (20) To the Contributor's knowledge, all adequate utilities, useable public sanitary and storm sewers, public water facilities, electric facilities and gas facilities (collectively, the "Utilities"), are installed in, and are duly connected to, the Property; the sanitary sewer system has been dedicated to and accepted by the Municipal Utilities Authority and can be used without charge, except for normal and usual metered utility charges and water and sewer charges. All utilities required for the operation of the Property, either enter the Property through adjoining public streets or, if they pass through adjoining public land, do so in accordance with valid public easements or private easements which will inure to the benefit of the Partnership at no cost to the Partnership. All of said Utilities are installed and operating and all installation, connection and "tap-in" charges have been paid in full. (21) No work has been performed or is in progress at, and no materials have been furnished to the Contributor with respect to the Property which, though not presently the subject of, might give rise to construction, mechanic's, materialmen's, municipal or other liens against the Property or any portion thereof, except that for which full and 33 complete releases have been obtained and except for the work currently being performed in connection with the 263 Old Country Road Property. If any lien for any such work is filed before or after Closing with respect to the Property (including the 263 Old Country Road Property), the applicable Contributor covenants that it shall promptly discharge the same. (22) To the Contributor's knowledge, none of the artwork being a part of the Personal Property was prepared on a "work for hire" basis and none of the artwork was commissioned after 1991. (23) All charges, fees and assessments (including condominium fees) and any and all other sums due under declarations, cross-easements and like agreements to which the Property or any portion thereof may be subject, have been paid, and no special assessments thereunder are pending, there is no constituted board of directors or board of trustees for the Property (or the development in which the Property is situated) and all consents and approvals required to be obtained under any such declarations, cross-easements and like agreements have been obtained pursuant to the requirements of such documentation. (24) To the Contributor's knowledge, all debts, liabilities, and obligations of the Contributor arising out of the construction, ownership, and operation of the Property owned by it, including, but not limited to, construction costs, salaries, taxes, accounts payable and the like, have been paid consistent with the Contributor's prior practices and shall continue to be so paid from the date hereof until the Closing Date with respect to the Property. (25) Except as set forth on "Exhibit DD", there are no existing tax reduction proceedings in effect with respect to the Property. (26) Schedule 1 attached hereto correctly reflects all existing Participants of the Contributor as shown on the books of the Contributor, the percentage ownership interest of each Participant of the Contributor, the percentage ownership of the Axinn Participants of the Contributor, and either the state of residence for each individual Participant and Contributor or the state of formation for each such entity Participant and Contributor. (27) Each of the Contributors has conducted its business only in the ordinary course of such business and there has not been any change, circumstance or event since January 1, 1998 that has resulted in a material adverse effect on the business, properties, results of operations or financial condition of each of the Contributors, taken as a whole. (28) Axinn and the Contributors have not provided management, maintenance or other services other than in a de minimis manner to persons or entities who are not then tenants or customers of the Property owned by them. The employees listed on "Exhibit Q" only provide services to Property owned by Axinn or DEAC in whole or in part. 34 (29) None of the Contributors have made a general assignment for the benefit of creditors, filed any voluntary petition in bankruptcy or suffered the filing of any involuntary petition by the creditors of any such entity, suffered the appointment of a receiver to take possession of all, or substantially all, of the assets of such Contributor, or any of their respective direct or indirect subsidiaries, suffered the attachment or other judicial seizure of all, or substantially all, of the assets of any such entity, admitted in writing its inability to pay its debts as they come due or made an offer of settlement, extension or composition to its creditors generally. (b) Each Contributor hereby represents and warrants as follows, all of which shall be true and correct on and as of the Effective Date and each Closing Date: (1) That it has received a copy of the Trust's Annual Report on Form 10-K for the fiscal year ended December 31, 1997, and all Current Reports on Form 8-K filed by the Trust between January 1, 1998 and the date hereof, the Trust's proxy statement for its annual meeting of shareholders to be held on May 15, 1998, the Trust's Prospectus dated November 13, 1997 (relating to Preferred Shares, Common Shares, Depositary Shares and Warrants), the Trust's Form 10-Q for the quarter ended March 31, 1998 and a copy of the Partnership Agreement; (2) That the Units and the Underlying Shares (collectively, the "Securities") are being acquired for its own account and not with a view to public distribution or resale and that it has no contract, undertaking, agreement or arrangement to sell or otherwise transfer or dispose of any Securities or any portion thereof to any other person; (3) That it is an Accredited Investor; (4) That it is not relying on, and did not become aware of, the offering of the Securities through or as a result of any form of general solicitation or general advertising including, without limitation, any article, notice, advertisement or other communication published in any newspaper, magazine or similar media or broadcast over television or radio, in connection with the offering and sale of the Securities; (5) That it understands that the Securities have not been registered under the Securities Act or the securities laws of any state, and, as a result thereof, the Securities are "restricted securities" as defined in Rule 144 under the Securities Act and are subject to substantial restrictions on transfer; (6) That it understands that the certificates evidencing the Securities shall bear a legend indicating that such Securities have not been registered under the Securities Act or any such state securities laws and the transferability thereof is subject to compliance with the Securities Act and such state securities laws; (7) That it will not sell or otherwise transfer or dispose of any Securities or any portion thereof unless the Securities are registered under the Securities 35 Act and any applicable state securities laws, or unless the Securities may be sold in reliance on an exemption from such registration requirements; (8) That it understands that, except as and to the extent set forth in the Registration Rights Agreement, neither the Partnership nor the Trust has any obligation or intention to register the Securities for resale under any federal or state securities laws and it therefore may be precluded from selling or otherwise transferring or disposing of any Securities or any portion thereof for an indefinite period of time or at any particular time; (9) That in determining to acquire the Securities, it has relied solely upon its independent investigation, including the advice of its legal counsel and accountants or other financial and tax advisers, and has, during the course of discussions concerning the acquisition of the Securities, been offered the opportunity to ask such questions and inspect such documents concerning the Partnership and the Trust and their respective businesses and affairs as it has requested so as to more fully understand the nature of the investment and to verify the accuracy of the information supplied; (10) That it has been apprised by Axinn of the terms of the options to be issued to Axinn and Mark Hamer and the employment agreement to be entered into by Mark Hamer. That it has reviewed with Axinn the financial condition of the Contributor in which it has an economic interest and has reviewed with Axinn the reasons for the transactions contemplated by this Agreement and alternatives to the transactions contemplated hereby; (11) That it acknowledges that, except for the information contained in the public filings made by the Trust with the Securities and Exchange Commission and specifically identified herein, the undersigned has not relied upon any information furnished by the Trust or the Partnership in determining to consent to the transactions contemplated by this Agreement. (12) THAT IT UNDERSTANDS THAT THE ACQUISITION OF THE SECURITIES INVOLVES CERTAIN RISKS, including those risks identified in the Trust's Prospectus dated November 13, 1997 referred to above, and that it can bear the economic risk of the acquisition of the Securities, including the total loss of its investment; (13) That (i) it has adequate means of providing for its current needs and financial contingencies, (ii) it has no need for liquidity in this investment, (iii) it has no debts or other obligations, and cannot reasonably foresee any other circumstances that are likely in the future to require it to dispose of the Securities, and (iv) all its investments in and commitments to non-liquid investments are, and after its acquisition of the Securities will be, reasonable in relation to its net worth and current needs; (14) That it understands that no federal or state agency has approved or disapproved the Securities, passed upon or endorsed the merits of the offering of 36 the Securities hereunder, or made any finding or determination as to the fairness of the Securities for investment; (15) That it understands that the Securities are being offered and distributed in reliance on specific exemptions from the registration requirements of federal and state securities laws and that each of the Partnership and the Trust is relying upon the truth and accuracy of the representations, warranties, agreements, acknowledgments and understandings set forth herein in order to determine the applicability of such exemptions and the suitability of the Contributors and Participants to acquire the Securities. In this regard, it understands that Common Shares will only be issued upon the redemption of the Units if an exemption from the registration requirements of the Securities Act is then available for such issuance; and (16) That it does not beneficially own five (5%) percent or more of the outstanding Common Shares. (c) The Trust and the Partnership, jointly and severally, hereby represent and warrant to each of the Contributors as follows, all of which shall be true and correct on and as of the Effective Date and each Closing Date: (1) The Partnership is a limited partnership duly formed and validly existing under the laws of the State of Delaware, and is in good standing with the State of Delaware. The Trust is a real estate investment trust duly formed and validly existing under and by virtue of the laws of the State of Maryland, and is in good standing with the State Department of Assessments and Taxation of Maryland. Each of the Trust and the Partnership has the trust and limited partnership power and authority, as the case may be, to own its properties and is duly registered, qualified, authorized and licensed to do business and is in good standing in each jurisdiction in which the conduct of its business or the nature of its properties requires such registration, qualification, authorization or license, except where the failure to be so registered, qualified, authorized or licensed would not have a material adverse effect on the Trust and its subsidiaries taken as a whole. (2) Subject to subparagraph (c)(5), below, each of the Trust and the Partnership has all necessary trust and limited partnership power and authority, as the case may be, to enter into this Agreement, to execute and deliver this Agreement and to perform its obligations hereunder, and to consummate the transactions contemplated hereby, without the consent or authorization of, or notice to, any third party, except those third parties to whom such consents or authorizations have been or will be obtained, or to whom notices have been or will be given, in each case, prior to each Closing. This Agreement has been duly and validly executed and delivered by each of the Trust and the Partnership and constitutes, and the other documents and instruments to be delivered by the Partnership and the Trust pursuant hereto when delivered will constitute, the legal, valid and binding obligations of the Partnership and the Trust, as applicable, enforceable against the Partnership and the Trust, as applicable, in accordance with their respective terms. 37 (3) Neither the execution and delivery of this Agreement by the Trust or the Partnership nor the consummation by any of them of the transactions contemplated hereby nor compliance by each of them with any of the provisions hereof will (i) conflict with or result in any breach of any provision of the organizational documents of the Trust or the Partnership; (ii) result in a violation or breach of, or constitute (with or without due notice or lapse of time or both) a default (or give rise to any right of termination, cancellation or acceleration) under, any of the terms, conditions or provisions of any indenture, license, contract, agreement or other instrument or obligation to which the Trust or the Partnership is a party or by which any of them or any of their respective properties or assets may be bound; or (iii) violate any order, writ, injunction, decree, statute, rule or regulation applicable to the Trust or the Partnership, or any of their properties or assets. (4) There is no litigation, proceeding or action pending, or, to the Partnership's knowledge, threatened against or relating to the Partnership or the Trust which might materially and adversely affect the ability of the Partnership or the Trust to consummate the transactions contemplated hereby or which would invalidate this Agreement or any action taken or to be taken by the Partnership or the Trust pursuant hereto. (5) Except in connection with the filing by the Trust of a supplemental listing application with the NYSE to list the Common Shares issuable upon redemption of the Units issuable hereunder and the registration of the Underlying Shares pursuant to the Registration Rights Agreement and as required by any federal and state securities or "blue sky" laws, no permit, consent, approval or authorization of, or declaration, filing or registration with, any governmental agency is required in connection with the execution, delivery and performance of this Agreement or the consummation of the transactions contemplated hereunder by the Trust or the Partnership. (6) The Units to be issued hereunder are duly authorized and, when issued by the Partnership, will be fully paid and non-assessable, free and clear of any mortgage, pledge, lien, encumbrance, security interest, claim or rights of interest of any third party. The Common Shares that may be issued upon redemption of the Units are duly authorized, and, upon such issuance, will be fully paid and non-assessable, free and clear of any mortgage, pledge, lien, encumbrance, security interest, claim or rights of interest of any third party. As of the date hereof, if the Unitholders were to redeem a Unit pursuant to the Partnership Agreement and the Trust were to satisfy such redemption with Common Shares, such Unitholder, as applicable, would receive one Common Share in exchange therefor. As of the date on which the last dividend on the Common Shares was paid, the amount of the dividend payable with respect to one Common Share into which a Unit may be redeemed was equivalent to the distribution payable on one Unit that had been outstanding for the last full quarter. (7) Since January 1, 1998, the Trust has filed all reports, schedules, forms, statements and other documents (collectively, the "SEC Documents") required to be filed by it with the Securities and Exchange Commission ("SEC"). The Trust furthermore has caused to be delivered to the Contributors copies of the SEC Documents (without exhibits) and will cause to be delivered to the Contributors copies of such additional 38 documents as may be filed by the Trust pursuant to the 1933 Act or the 1934 Act on or prior to the Closing Date if the Trust believes such documents contain such information that would be material to a Participant or Contributor. The SEC Documents were, and those additional documents filed between the date hereof and the Closing will be, prepared and filed in material compliance with the 1933 Act and the 1934 Act and the rules and regulations promulgated by the SEC, and do not and will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein in order to make the statements contained therein, in light of the circumstances under which they were made or will be made, not misleading. The consolidated financial statements included in the SEC Documents (i) complied as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto, (ii) have been prepared in accordance with GAAP and applied on a consistent basis during the period involved (except as may be indicated in the notes thereto or, in the case of the unaudited statements, as permitted by Form 10-Q) and (iii) present fairly (subject, in the case of the unaudited statements, to normal, recurring year-end audit adjustments) the consolidated financial position of the Trust and its subsidiaries at the dates thereof and the consolidated results of operations and cash flows for the periods then ended. (8) Except as disclosed in the SEC Documents filed with the SEC prior to the date hereof , since March 31, 1998, each of the Trust and the Partnership and each of their subsidiaries has conducted its business only in the ordinary course of such business and there has not been any change, circumstance or event that has resulted in a material adverse effect on the business, properties, results of operations or financial condition of the Trust, the Partnership and their respective subsidiaries, taken as a whole. (9) Neither the Trust nor the Partnership, nor any of their respective direct or indirect subsidiaries is at the date of this Agreement, or will be at the Closing, required to be registered with the SEC as an investment company under the Investment Company Act of 1940, as amended. (10) Neither the Trust nor the Partnership is in default under, or in violation of, any provision of its organizational documents. (11) Neither the Trust nor the Partnership, nor any of their respective direct or indirect subsidiaries has made a general assignment for the benefit of creditors, filed any voluntary petition in bankruptcy or suffered the filing of any involuntary petition by the creditors of any such entity, suffered the appointment of a receiver to take possession of all, or substantially all, of the assets of the Trust, the Partnership, or any of their respective direct or indirect subsidiaries, suffered the attachment or other judicial seizure of all, or substantially all, of the assets of any such entity, admitted in writing its inability to pay its debts as they come due or made an offer of settlement, extension or composition to its creditors generally. (12) To the knowledge of the Trust and the Partnership, except as disclosed in the SEC Documents, none of the Trust, the Partnership, or any of their respective direct or indirect subsidiaries has violated or failed to comply with any statute, law, 39 ordinance, regulation, rule, judgment, decree or order of any governmental authority applicable to its business, properties, or operations, except for any violations and failures to comply that would not, in the aggregate, reasonably be expected to have a material adverse effect on the Trust, the Partnership and their respective subsidiaries, taken as a whole. (13) The Trust, beginning with its taxable year ended December 31, 1986 and through December 31, 1997 (i) has been subject to taxation as a Real Estate Investment Trust (a "REIT Entity") within the meaning of the Code and has complied with all requirements contained in the Code to qualify as a REIT Entity for such years, (ii) has operated, and currently intends to continue to operate, in such a manner as to qualify as a REIT Entity for the tax year ending December 31, 1998 and thereafter and (iii) has not taken or omitted to take any action which could reasonably be expected to result in a successful challenge to its status as a REIT Entity, and no such challenge is pending or, to the knowledge of the Trust, threatened. Neither the Trust nor any of its Subsidiaries holds any asset that is subject to a consent filed pursuant to Section 341(f) of the Code and the regulations thereunder. (14) The Trust and the majority-owned subsidiaries of the Trust (the "Subsidiaries") have (A) timely filed with the appropriate taxing authority all Tax Returns required to be filed by them (after giving effect to any filing extension granted by the appropriate taxing authority) and such Tax Returns were true, complete and accurate in all respects and (B) have paid all Taxes shown as owed by any of them on any Tax Return. Neither the Trust nor any of the Subsidiaries has executed or filed with the Internal Revenue Service or any other taxing authority any agreement now in effect extending the period for assessment or collection of any Tax. To the Trust's knowledge, neither the Trust nor any of the Subsidiaries is a party to any material pending action or proceedings by any taxing authority for assessment or collection of any Tax, and no material claim for assessment or collection of any Tax has been asserted against any of them. No claim has been made by an authority in a jurisdiction where the Trust or any of the Subsidiaries, as applicable, does not file Tax Returns that such entity is or may be subject to taxation by the jurisdiction. There is no material dispute or claim concerning any Tax liability of the Trust or any of the Subsidiaries claimed or raised by any taxing authority and neither the Trust nor any of the Subsidiaries has entered into or intends to enter into any agreements with any taxing authority, including but not limited to closing agreements. True, complete and accurate copies of all income or franchise tax returns that have been filed by the Trust or any of the Subsidiaries for 1993, 1994, 1995 and 1996 and all written communications with a taxing authority relating thereto which could affect the tax status of the Trust have been delivered to the Contributors. (15) Neither the Trust nor any of the Subsidiaries has incurred (i) any material liability for Taxes under Sections 856(b), 860(c) or 4981 of the Code, or (ii) a liability for Taxes other than Taxes incurred in connection with the ordinary course of business. Except for the risks identified in the Trust's Prospectus dated November 13, 1997 referenced in Section 10(b)(i) above, no event has occurred, and to the Trust's knowledge, no condition or circumstances exists, which presents a material risk that any material Tax described in the preceding sentence will be imposed upon the Trust or any of the Subsidiaries. 40 (16) The Partnership was not and is not a publicly traded partnership within the meaning of Section 7704 of the Code and the regulations promulgated thereunder. In addition, no Subsidiaries have taken the position, for federal income tax purposes, that it is a publicly traded partnership within the meaning of Section 7704 of the Code and the regulations promulgated thereunder and (ii) (A) the Subsidiaries organized as a partnership or a limited liability company including, without limitation, the Partnership (and any other Subsidiaries that file tax returns as partnership for income tax purposes) were and continue to be classified as partnerships for income tax purposes (other than wholly owned, "100% pass through" subsidiary partnerships and limited liability companies which are not classified as a partnerships for income tax purposes); and (B) each corporation or other entity which is taxable as a corporation for income tax purposes and in which the Trust has a direct or indirect interest is either (x) a "qualified REIT Entity subsidiary", within the meaning of Section 856(i) of the Code, or (y) an entity of which less than ten (10%) percent of the voting securities is owned directly or indirectly by the Trust and of which the total value of the securities of such entity owned directly or indirectly by the Trust represent less than five (5%) percent of the value of the assets of the Trust within the meaning of Section 856(c)(5) of the Code. (17) The Trust is a "domestically- controlled" REIT Entity within the meaning of Section 897(h)(4)(B). (18) To the Trust's knowledge, no person or entity owns or would be considered to own (taking into account the ownership attribution rules under Section 544 of the Code, as modified by Section 856(h) of the Code) in excess of 9.8% of the value of the outstanding equity interests in the Trust, except as set forth in public filings on either Schedule 13D or 13G filed with the Securities and Exchange Commission. (19) Neither the Trust nor the Partnership is an entity whose assets are deemed to be "plan assets" within the meaning of the Department of Labor Regulation Section 2510.3-101. (d) As to any representation or warranty made in this Agreement which is qualified as being to the "knowledge" of any party, the following shall apply: a Contributor will be deemed to have knowledge of a particular matter if the facts and circumstances thereof are actually known, without any implied, imputed or constructive knowledge, without any independent investigation having been made or any implied duty to investigate by Donald Axinn and Mark Hamer, and with respect to the Property located at 55 Ames Court, Plainview, New York, if the facts and circumstances thereof are actually known, without any implied, imputed or constructive knowledge, without any independent investigation having been made or any implied duty to investigate by Morris Greene only. The Partnership will be deemed to have knowledge of a particular matter if the facts and circumstances thereof are actually known, without implied, imputed or constructive knowledge, without independent investigation having been made or any implied duty to investigate by Gerard H. Sweeney, Brad A. Molotsky, Esq. and Andrew Hicks. 41 (e) All of the representations and warranties set forth in this Paragraph 10 shall be deemed renewed by Axinn, each Contributor, the Trust and the Partnership on each Closing Date and shall, as a conditions to each party's obligation to close hereunder, be recertified by each party as being true and correct in all material respects as of such Closing Date as if made at such time (it being understood that specific, numbered representations and warranties that speak as of a specified date shall only continue to speak as of the date so specified). (f) If, to the Trust's or the Partnership's knowledge, as evidenced by written information furnished to them, any of the Contributor's or Axinn's representations or warranties in this Agreement are not true as of the Closing and the Trust and the Partnership elect nonetheless to close, the Trust and the Partnership shall be deemed to have waived any claim for breach of such representation or warranty. This limitation shall be in addition to, and not in substitution for, any other limitations of the Trust's and the Partnership's remedies or damages set forth in this Agreement. (g) If, to Axinn's or the Contributors' knowledge, as evidenced by written information furnished to them, any of the Trust's or the Partnership's representations or warranties in this Agreement are not true as of the Closing and the Contributors elect nonetheless to close, the Contributors shall be deemed to have waived any claim for breach of such representation or warranty. This limitation shall be in addition to, and not in substitution for, any other limitations of the Contributors' or Axinn's remedies or damages set forth in this Agreement. (h) Any event, fact or circumstance described in any section of the Disclosure Schedules shall be deemed a disclosure for all purposes of all other portions of the Disclosure Schedules, provided the relevance of the disclosure to such other portions can be reasonably discerned from the applicable section of the Disclosure Schedules. 11. Survival; Indemnification. (a) The Partnership hereby acknowledges and agrees that the representations and warranties contained in Paragraphs 10 (a) (3), (7) (with respect to representations and warranties made by Axinn and each Contributor regarding compliance with ERISA only), (17) and 10(b) shall survive for a period of three (3) years from the Applicable Closing Date for such Subject Property. With respect to all other representations and warranties set forth in Paragraph 10, the representations and warranties made with respect to a Subject Property in Paragraph 10 shall survive for a period of nine (9) months from the Applicable Closing Date for such Subject Property. The representations and warranties of the Trust and the Partnership shall survive for nine (9) months from the Applicable Closing Date. In addition, in the event that an Applicable Contributor delivers to the Partnership a tenant estoppel certificate for a tenant (whether prior to, at or subsequent to any Applicable Closing), then the Applicable Contributor shall thereafter be released from all liability relating to such tenant's Lease which the Applicable Contributor may have as a result of its representations, warranties and certificates under Paragraphs 10(a)(6), 10(a)(18) and Paragraph 20(i) below to the extent such representations and warranties relate to matters covered by the tenant estoppel certificate 42 (provided such tenant estoppel contains no information which is materially and adversely contradictory or inconsistent with the information previously provided by the Applicable Contributor to the Partnership with respect to such tenant). Any claim that the Trust or the Partnership may have at any time against Axinn or any other Contributor or that any Contributor or Participant may have against the Trust or the Partnership for a breach of any such representation or warranty, whether known or unknown, which is not asserted by written notice from the Partnership and the Trust to Axinn or the Applicable Contributor or by the Contributor and Participants against the Trust and the Partnership within such three (3) year period or nine (9) month period, as the case may be, will not be valid or effective, and Axinn and such Applicable Contributor, the Trust and the Partnership will have no liability with respect thereto. Nor shall the Contributors and Axinn have an aggregate liability to the Partnership or the Trust for a breach of any representation or warranty exceeding $7,500,000.00 (the "R&W Cap"). If the Partnership or the Trust is successful in an action regarding a breach of a representation or warranty, the Applicable Contributor and Axinn shall have the right, at the option of such Applicable Contributor and Axinn, to redeem Units (at the market price for one Common Share for each Unit at the time such action is completed) or pay such amounts in cash. (b) Without limitation of any other indemnity obligations of the Contributors or Axinn set forth herein, from and after the Initial Closing Date, each Contributor and Axinn shall be obligated to indemnify, defend and save and hold harmless the Partnership and the Trust, and their respective partners, trustees, officers and employees, of, from and against any and all loss, cost, expense, damage, claim, and liability, including reasonable attorney's fees and court costs, including, without limitation, attorney's fees and costs associated with the enforcement of such Contributor's or Participant's indemnification obligations (hereinafter collectively, the "P&T Losses") which the Partnership or the Trust may suffer or incur, resulting from, relating to, or arising in whole or in part, from or out of (i) any misrepresentation or a breach of a representation or warranty by such Contributor or Participant contained in this Agreement, subject, however, to the time limitations set forth in Paragraph 11(a) above; (ii) all litigation identified on "Exhibit S" to which such Contributor or Participant has ever been a party; (iii) all "non-Property claims and liabilities" (as hereinafter defined) arising out of the Contributor, the Entity Interests in which will be assigned to the Partnership; (iv) a claim, demand, cost or judgment in favor of a third party, including, without limitation, any governmental authority, arising from the deposit, storage, disposal, burial, dumping, injecting, spilling, leaking, or other placement or release of Hazardous Substances or Hazardous Wastes in or on any Property conveyed by such Contributor to the Partnership during Contributor's period of ownership, but only if such Contributor had actual knowledge of the such Hazardous Wastes or Hazardous Substances condition and failed to disclose same to the Partnership (except in the case of those environmental remediation conditions which are specifically the subject of the environmental escrow arrangement described in Paragraph 7(j) above, in which case such Contributor shall be obligated to indemnify and hold the Partnership and the Trust harmless from and against the matters set forth in this subparagraph (iv) with respect to those environmental remediation conditions which are the subject of the environmental escrow arrangement and any additional environmental remediation which may arise as a result thereof, regardless of whether such Contributor had actual knowledge of the same); (v) any and all actions, suits, investigations, proceedings, demands, assessments, audits, judgments; and/or claims arising out 43 of or relating to any of the foregoing. This obligation shall survive all Closings contemplated hereby. For purposes of this Agreement, the term "non-Property claims and liabilities" means claims and liabilities which would not have been incurred by the Trust or Partnership had the Trust or Partnership acquired the applicable Property owned by the Applicable Contributor, rather than the Entity Interests, on the terms and conditions, and subject to the representations and warranties, contained herein applicable to Property being acquired in fee. (c) Without limitation of any other indemnity obligations of the Trusts or Partnership set forth herein, from and after the Initial Closing Date, each of the Trust and the Partnership shall be obligated to indemnify, defend and save and hold harmless the Contributors and the Participants, and their respective partners, officers and employees, of, from and against any and all loss, cost, expense, damage, claim, and liability, including reasonable attorney's fees and court costs, including, without limitation, attorney's fees and costs associated with the enforcement of such Trust's or Partnership's indemnification obligations (hereinafter collectively, the "C&P Losses") which each Contributor and Participant may suffer or incur, resulting from, relating to, or arising in whole or in part, from or out of (i) any misrepresentation or a breach of a representation or warranty by the Trust or the Partnership contained in this Agreement; and (ii) any and all actions, suits, investigations, proceedings, demands, assessments, audits, judgments; and/or claims arising out of or relating to any of the foregoing. This obligation shall survive all Closings contemplated hereby. (d) Promptly after receipt by the Partnership or the Trust of written notice of the commencement of any suit, audit, demand, judgment, action, investigation or proceeding (a "P&T Third Party Action") or promptly after the Partnership or the Trust incurs any P&T Losses or has knowledge of the existence of any P&T Losses, the Partnership or the Trust, as the case may be, will, if a claim with respect thereto is to be made against any Contributor or Axinn (the "P&T Indemnitor") due to such P&T Indemnitor's obligation to provide indemnification hereunder, give such P&T Indemnitor written notice within forty-five (45) days of such P&T Losses or within forty-five (45) days of the Partnership's or the Trust's receipt of notice of the commencement of any P&T Third Party Action. Promptly after receiving such notice, the P&T Indemnitor will, upon notice to the Partnership or the Trust, as the case may be, have the right to assume and control the defense and settlement of any such P&T Third Party Action at its own cost and expense; provided, however, that it shall be a condition precedent to the exercise of such right by the P&T Indemnitor that the P&T Indemnitor shall agree in writing that the P&T Losses, or the P&T Third Party Action, as the case may be, is properly within the scope of the indemnification obligation and that as between the parties, the P&T Indemnitor shall be responsible to satisfy and discharge such P&T Third Party Action. No P&T Indemnitor shall enter into any resolution or other compromise of a P&T Third Party Action without obtaining the complete release of the Partnership or the Trust, as appropriate, for any liability to all claimants under or pursuant to such P&T Third Party Action. The Partnership or the Trust, as the case may be, shall have the right to participate in any such defense, contest or other protective action at its own cost and expense. (e) Notwithstanding the foregoing, the Partnership or the Trust, as the case may be, shall have the right to assume and control the defense and settlement of a P&T 44 Third Party Action if (a) such action includes claims for equitable relief which, if determined adversely to the Partnership or the Trust, as the case may be, could reasonably be expected to interfere with its intended business operations or damage its business reputation or (b) the P&T Indemnitor fails to do so in a timely manner. In any circumstances in which the Partnership or the Trust, as the case may be, undertakes to control the P&T Third Party Action as provided in this paragraph, it shall (i) not enter into any resolution or other compromise involving monetary damages without obtaining the prior written consent of the P&T Indemnitor provided that such written consent may not be withheld if it would materially interfere with the Partnership's or the Trust's, as the case may be, business operation and (ii) keep the P&T Indemnitor informed on an ongoing basis of the status of such P&T Third Party Action and shall deliver to the P&T Indemnitor copies of all documents related to the P&T Third Party Action reasonably requested by the P&T Indemnitor. The Partnership or the Trust, as the case may be, shall act to assure that all attorneys' fees and expenses incurred in connection therewith are reasonable. (f) Promptly after receipt by a Contributor, Axinn or a Participant of written notice of the commencement of any suit, audit, demand, judgment, action, investigation or proceeding (a "C&P Third Party Action") or promptly after such Contributor, Axinn or a Participant incurs any Losses or has knowledge of the existence of any C&P Losses, such Contributor, Axinn or a Participant will, if a claim with respect thereto is to be made against the Trust or the Partnership (the "C&P Indemnitor") due to such C&P Indemnitor's obligation to provide indemnification hereunder, give such C&P Indemnitor written notice within forty-five (45) days of such C&P Losses or within forty-five (45) days of such C&P's receipt of notice of the commencement of any C&P Third Party Action. Promptly after receiving such notice, the C&P Indemnitor will, upon notice to the Contributor and the Participant have the right to assume and control the defense and settlement of any such C&P Third Party Action at its own cost and expense; provided, however, that it shall be a condition precedent to the exercise of such right by the C&P Indemnitor that the C&P Indemnitor shall agree in writing that the C&P Losses, or the C&P Third Party Action, as the case may be, is properly within the scope of the indemnification obligation and that as between the parties, the C&P Indemnitor shall be responsible to satisfy and discharge such C&P Third Party Action. No C&P Indemnitor shall enter into any resolution or other compromise of a C&P Third Party Action without obtaining the complete release of the Contributor, Axinn or the Participant, as appropriate, for any liability to all claimants under or pursuant to such C&P Third Party Action. The Contributor, Axinn and the Participant shall have the right to participate in any such defense, contest or other protective action at its own cost and expense. (g) Notwithstanding the foregoing, the Contributor, Axinn and the Participant shall have the right to assume and control the defense and settlement of a C&P Third Party Action if (a) such action includes claims for equitable relief which, if determined adversely to the Contributor, Axinn and the Participant could reasonably be expected to interfere with its intended business operations or damage its business reputation or (b) the C&P Indemnitor fails to do so in a timely manner. In any circumstances in which the Contributor, Axinn and the Participant undertakes to control the C&P Third Party Action as provided in this paragraph, it shall (i) not enter into any resolution or other compromise involving monetary damages without obtaining the prior written consent of the C&P Indemnitor provided that such written consent 45 may not be withheld if it would materially interfere with the Contributor's, Axinn's and the Participant's business operation and (ii) keep the C&P Indemnitor informed on an ongoing basis of the status of such C&P Third Party Action and shall deliver to the C&P Indemnitor copies of all documents related to the C&P Third Party Action reasonably requested by the C&P Indemnitor. The Contributor. Axinn and the Participant shall act to assure that all attorneys' fees and expenses incurred in connection therewith are reasonable. (h) Except as specifically set forth in this subparagraph (h), from and after the Initial Closing Date, the Trust and the Partnership on the one hand and the Contributors and Axinn on the other hand shall indemnify, defend, save and hold harmless the other group and their respective partners, trustees, officers and employees of, from and against one-half of any and all loss, cost, expense, damage and liability, including reasonable attorneys' fees, arising with respect to any state or county documentary or transfer taxes (including any interest and late charges with respect thereto) imposed subsequent to each Closing in connection with the New Jersey Property. Notwithstanding the foregoing, Axinn and the Contributor of the 3 Paragon Drive Property shall indemnify, jointly and severally, save and hold harmless the Trust and the Partnership and their respective partners, trustees, officers and employees of, from and against any and all loss, cost, expense, damage and liability, including reasonable attorneys' fees, arising with respect to any state or county documentary or transfer taxes (including any interest and late charges with respect thereto) imposed subsequent to the Initial Closing in connection with such Contributor's recordation of the 3 Paragon Correcting Deed and Axinn and the Contributor of the 25 Phillips Property shall indemnify, jointly and severally, save and hold harmless the Trust and the Partnership and their respective partners, trustees, officers and employees of, from and against any and all loss, cost, expense, damage and liability, including reasonable attorneys' fees, arising with respect to any state or county documentary or transfer taxes (including any interest and late charges with respect thereto) imposed subsequent to the Initial Closing in connection with such Contributor's recordation of the 25 Phillips Correcting Deed, in each case without regard to the limitations in Paragraph 11. (i) The indemnifying party and the indemnified party under subparagraphs (d) through (h) above shall cooperate fully in all aspects of any investigation, defense, pretrial activities, trial, compromise, settlement or discharge of any claim in respect of which indemnity is sought pursuant to this Paragraph 11, including, but not limited to, by providing the other party with reasonable access to employees and officers (including as witnesses) and other information. (j) IN NO EVENT SHALL ANY PARTY HERETO, OR ANY DIRECT OR INDIRECT PARTNER, MEMBER, SHAREHOLDER, BENEFICIARY, OWNER OR AFFILIATE THEREOF, OR ANY OFFICER, DIRECTOR, EMPLOYEE, TRUSTEE, OR AGENT OF ANY OF THE FOREGOING OR ANY AFFILIATE OR CONTROLLING PERSON THEREOF, BE LIABLE TO ANY INDEMNIFIED PARTY IN CONTRACT, TORT OR OTHERWISE WITH RESPECT TO ANY INDIRECT, CONSEQUENTIAL, OR EXEMPLARY DAMAGES ARISING FROM OR RELATING TO THIS AGREEMENT OR ANY CLOSING DOCUMENT OR TRANSACTION DOCUMENT. 46 (k) IN NO EVENT SHALL THE CONTRIBUTORS OR AXINN BE LIABLE TO THE TRUST OR THE PARTNERSHIP HEREUNDER UNLESS AND UNTIL THE AGGREGATE AMOUNT OF DAMAGES FOR WHICH THE CONTRIBUTORS OR AXINN ARE OBLIGATED TO INDEMNIFY THE TRUST AND THE PARTNERSHIP EXCEEDS $150,000, AFTER WHICH THE TRUST AND THE PARTNERSHIP MAY BRING ONE OR MORE CLAIMS AGAINST THE CONTRIBUTORS OR AXINN FOR THE ENTIRE AMOUNT OF THEIR AGGREGATE DAMAGES, SUBJECT TO THE FURTHER LIMITATIONS SET FORTH IN THIS PARAGRAPH 11. (l) IN NO EVENT SHALL THE TRUST OR THE PARTNERSHIP BE LIABLE TO THE CONTRIBUTORS, AXINN OR THE PARTICIPANTS HEREUNDER UNLESS AND UNTIL THE AGGREGATE AMOUNT OF DAMAGES FOR WHICH THE TRUST OR THE PARTNERSHIP ARE OBLIGATED TO INDEMNIFY THE CONTRIBUTORS, AXINN OR THE PARTICIPANTS EXCEEDS $150,000, AFTER WHICH THE CONTRIBUTORS, AXINN AND THE PARTICIPANTS MAY BRING ONE OR MORE CLAIMS AGAINST THE TRUST OR THE PARTNERSHIP FOR THE ENTIRE AMOUNT OF THEIR AGGREGATE DAMAGES SUBJECT TO THE FURTHER LIMITATIONS SET FORTH IN THIS PARAGRAPH 11. (m) IF THE CLOSING OCCURS, THE TRUST AND THE PARTNERSHIP ON THE ONE HAND, AND THE CONTRIBUTORS, AXINN AND PARTICIPANTS, ON THE OTHER HAND, SHALL NOT HAVE THE RIGHT TO BRING A CLAIM AGAINST ANY MEMBER OF THE OTHER GROUP BY VIRTUE OF ANY OF THE REPRESENTATIONS OR WARRANTIES CONTAINED HEREIN OR IN ANY TRANSACTION DOCUMENT BEING FALSE OR MISLEADING UNLESS (I) SUCH CLAIM IS BROUGHT ON OR PRIOR TO THE DATE ON WHICH A CLAIM BASED ON SUCH REPRESENTATION OR WARRANTY MAY NO LONGER BE BROUGHT AND (II) NOTICE OF THE FALSE OR MISLEADING REPRESENTATION OR WARRANTY HAS BEEN GIVEN TO THE MEMBERS OF THE APPLICABLE GROUP AND THE MEMBERS OF SUCH GROUP HAVE HAD THIRTY (30) DAYS TO CURE SAME, PROVIDED SAME IS SUSCEPTIBLE TO CURE WITHIN SAID THIRTY (30) DAY PERIOD. (n) Notwithstanding anything contained in this Paragraph 11 to the contrary, the R&W Cap and the provisions of subparagraphs 11(k) and 11(l) hereof shall not apply with respect to the indemnifications by the Contributors and Axinn set forth in subparagraph 11(b)(ii) through (b)(v) hereof and with respect to the indemnifications of all parties set forth in subparagraph 11(h) hereof. (o) As collateral security for Axinn's indemnification obligations under this Paragraph 11, at the Initial Closing, Axinn shall enter into a pledge agreement, in the form annexed hereto as "Exhibit FF" (the "Axinn Pledge Agreement"), pursuant to which Axinn shall pledge and grant to the Partnership a security interest in the 312,500 Units which Axinn is to receive at the Initial Closing. 47 (p) With respect to the indemnity obligations of Morris Greene under this Paragraph 11, it is understood and agreed by the Partnership and the Trust that such indemnity obligations shall only relate to the 55 Ames Court, Plainview, New York Property. 12. Access to the Property. (a) The Partnership and its agents, employees and representatives, during normal business hours and after reasonable advance notice to any Contributor, may enter upon any of the Real Property of such Contributor from time to time prior to the Closing Date with respect to such Real Property, accompanied by an agent of the Contributor, for purposes of conducting such inspections, investigations and/or studies as the Partnership deems necessary, including, without limitation, financial reviews, physical inspections, lease reviews and environmental reviews and testing, which activities may include test borings and soil samplings (the "Partnership Inspections"). The Partnership's access to the Real Property shall be subject to the rights of the Tenants of any of the Real Property, who shall not be unreasonably disturbed during any such inspection by the Partnership. The Partnership shall not engage in any activity in or about the Real Property which directly or indirectly violates the terms of any governmental or quasi-governmental statute, rule, regulation, order or practice. The Partnership shall not make any physical changes to any of the Real Property, except for test borings and soil samplings which shall be performed only by licensed engineers reasonably acceptable to the Contributor and only after three (3) business days' prior notice to the Contributor. The Partnership may contact any governmental or quasi-governmental authorities concerning the Property without the prior written approval of the Contributor. The Partnership shall give the Contributor at least five (5) days notice prior to the Partnership contacting any such governmental or quasi-governmental authorities. The Contributor shall have the opportunity to observe any and all action taken by the Partnership or its representatives, consultants, agents, etc. pursuant to this Paragraph 12. All information set forth in any document which the Contributor has granted to the Partnership the express right to review, if any, shall be held in confidence until the Closing Date hereunder to which such information relates. The Partnership shall promptly repair any damage to the Real Property resulting from the Partnership Inspections and replace, refill and regrade any holes made in, or excavations of, any portion of the Real Property used for such Partnership Inspections so that the Real Property shall be in the same condition that it existed prior to such Partnership Investigations. In conducting any inspections, investigations or tests of the Real Property, the Trust and the Partnership and their agents and representatives shall: (i) not disturb or interfere in any material respect with the Tenants' use of the Real Property pursuant to their respective Leases; (ii) not interfere in any material respect with the operation and maintenance of the Real Property; (iii) not damage in any material respect any part of the Real Property or any personal property owned or held by Tenant or any other Person; (iv) not injure or otherwise cause bodily harm to any Contributor, or its agents, guests, invitees, contractors and employees or any Tenant or any other Person; (v) promptly pay when due the costs of all tests, investigations, and examinations performed by or on behalf of the Trust or the Partnership with regard to the Real Property; and (vi) comply with all statutes, laws, ordinances, rules and regulations applicable to any such inspections, investigations or tests. The Partnership hereby agrees to indemnify, defend and hold harmless Contributor from and against all (a) physical damage to any of the Real Property and Personal Property, personal injury and/or any other claims or liability which may 48 occur as a result of the Partnership's (or the Partnership's agents, employees, or representatives) entry or activities upon any of the Real Property, as specified in this Paragraph and (b) any liens or encumbrances filed or recorded against any of the Real Property as a consequence of the Partnership or the Partnership's representatives entry thereon. The provisions of this Paragraph 12(a) shall survive Closing or other termination of this Agreement. (b) The Partnership, or any of the Partnership's consultants performing physical tests on the Real Property, shall maintain public liability insurance policies (naming each Contributor as additional named insured with respect to any liability occurring on the Real Property of such Contributor), with combined single limit coverage of at least $1,000,000, insuring against claims arising as a result of the inspections of the Partnership, its agents, employees or such contractors at any of the Real Property. A certificate of insurance evidencing the foregoing coverage shall be delivered to Contributor prior to the Partnership's or any of the Partnership's consultants' entry on to any of the Real Property. Notwithstanding anything to the contrary in Paragraph 12(a), the Partnership shall have no obligation to indemnify any contributor to the extent that any liability is covered by the insurance obtained by the Partnership pursuant to this Paragraph 12(b). (c) In the event Closing does not occur with respect to one or more Parcels of Real Property, the Partnership shall promptly return to Contributor any documents obtained from Contributor or Contributor's agents and deliver to Contributor, without charge, copies of all written test results, studies, reports and similar materials obtained by or on behalf of the Partnership relating to such Real Property. 13. Due Diligence Period; Additional Provisions. (a) During the period commencing on the Effective Date and ending at 5:00 p.m. E.S.T. on the Due Diligence Termination Date, the Partnership may review all plans and specifications, conditions of title, agreements relating to and the availability of utilities, environmental conditions, the physical condition of the existing improvements, compliance by the Properties with zoning, licensing and all other governmental requirements, Leases for any of the Real Property, operating statements pertaining to the Properties and all other aspects and conditions of the Properties which the Partnership may decide to review (collectively with the Partnership's Inspections, "the Partnership's Due Diligence Activities"), all as the Partnership shall deem appropriate. In connection with the Partnership's Due Diligence Activities, each Contributor has delivered or will deliver to the Partnership various documents, reports and materials (collectively, the "Contributor Due Diligence Materials"). The Partnership understands and hereby acknowledges and agrees that the Contributor Due Diligence Materials are being delivered to the Partnership without any representation or warranty whatsoever by any Contributor or by the preparer of such Contributor Due Diligence Materials, with the sole exception of any representation or warranty as to the correctness, accuracy or completeness thereof which is expressly set forth in this Agreement. The Partnership and the Trust hereby acknowledge and agree that the Due Diligence Termination Date has, as of the date hereof, expired and the right of the Partnership and the Trust to conduct the Partnership's Due Diligence Activities and to terminate this Agreement as a result thereof has also expired. 49 (b) INTENTIONALLY DELETED. (c) Each Contributor shall prepare certificates (the "Estoppel Certificates") for execution by the Tenants of such Contributor's Real Property, which shall either (i) be in such form or contain such information as the Tenant from whom request is made is obligated under its Lease to execute and deliver for execution by the Tenants (the "Required Form"), or (ii) be in the form annexed hereto as "Exhibit W". Each Contributor agrees to deliver the Estoppel Certificates to the Tenants of its Real Property promptly after the Due Diligence Termination Date and to use all reasonable and diligent efforts to obtain executed copies of same from such Tenants prior to the Closing with respect to such Real Property. (d) Axinn shall recommend to all of the Participants that they each consent to the transactions contemplated by this Agreement and shall use good faith efforts to obtain the consents of each of the Participants, if the organizational documents of each Contributor require that such consents be obtained in order to effectuate the same. In soliciting the consents of the Participants, Axinn shall also provide each Participant with information regarding the transactions contemplated hereby which is sufficient to comply with the partnership or limited liability company law of the applicable state. 14. Additional Provision Relating to the 3 Paragon Drive Property, the 101 Paragon Drive Property and the 263 Old Country Road Property. (a) The 3 Paragon Drive Property. (i) Axinn holds fee title to the 3 Paragon Drive Property as nominee for a New York general partnership known as 80-20 Associates (the "3 Paragon Drive Partnership"). Axinn and Lennard Axinn are the sole partners in the 3 Paragon Drive Partnership. (ii) Axinn is the borrower under a loan (the "NY Life Loan") with New York Life Insurance Company ("NY Life"). Axinn has entered into a Forbearance Agreement dated June 10, 1998 (the "Forbearance Agreement") with NY Life. (iii) The costs incurred and anticipated to be incurred by the 3 Paragon Drive Partnership in connection with the 3 Paragon Drive Partnership's operation of the 3 Paragon Drive Property from March 24, 1998 through the remainder of 1998 are set forth on Schedule 12 annexed hereto (the "3 Paragon Operating Costs"). (iv) At the Initial Closing, the Partnership agrees to pay the 3 Paragon Drive Partnership the sum of (1) $500,000 plus (ii) an amount equal to the 3 Paragon Operating Costs actually incurred through the Initial Closing. In exchange for the payments made by the Partnership pursuant to the preceding sentence, the 3 Paragon Drive Partnership grants the Partnership an option (the "Option") to make a loan (the "Loan") in the amount of $10,000,000 to 3 Paragon Drive Partnership on the terms set forth below. Upon exercise by the Partnership of the Option, Axinn shall cause the proceeds of the Loan, together with the other funds, to be used to repay in full the Discounted Amount (as defined in the Forbearance 50 Agreement) and shall cause all of the partnership interests in the 3 Paragon Drive Partnership to be contributed to the Partnership or, as directed by the Partnership, one or more subsidiaries of the Partnership. Upon such contribution, neither Axinn nor Lennard Axinn shall have any liability to repay any portion of the Loan, which shall thereupon be treated as a capital contribution by the Partnership to the 3 Paragon Drive Partnership. (v) The Partnership agrees to pay to the 3 Paragon Drive Partnership $500,000, of which $100,000 shall be paid at the Initial Closing and $100,000 shall be paid on each of the following dates: November 1, 1998, February 1, 1999, May 1, 1999 and August 1, 1999; provided that any such payments made by the Partnership after the date the Partnership makes the Loan shall be paid directly to Axinn. (vi) On or before 5:00 p.m. on December 28, 1998, the Partnership may exercise the Option by loaning $10,000,000 to the 3 Paragon Drive Partnership, which shall thereupon be required to use such funds to enable Axinn to satisfy in full his obligations to NY Life under Section 4 of the Forbearance Agreement. In the event that the Partnership has not exercised the Option by 12:00 p.m. on December 28, 1998, it shall exercise such Option by 4:00 p.m. on December 29, 1998, subject only to the condition that Axinn has not then defaulted in his obligations under the Forbearance Agreement and hence that NY Life will accept the Discounted Amount (as defined in the Forbearance Agreement) and take the actions specified in the third and fourth sentences of Section 4 of the Forbearance Agreement. (vii) Upon exercise by the Partnership of the Option and payment by Axinn of the Discounted Amount to NY Life in accordance with the Forbearance Agreement, Axinn will file a corrective deed for the 3 Paragon Drive Property (the "3 Paragon Corrective Deed") reflecting record ownership of the 3 Paragon Drive Property by the 3 Paragon Drive Partnership (which will then be owned by the Partnership and one or more subsidiaries of the Partnership), free and clear of all liens and encumbrances other than any Permitted Exceptions. (viii) Axinn represents and warrants that upon exercise by the Partnership of the Option, all sums owning by the 3 Paragon Drive Partnership to any and all third parties, including NY Life, will have bee paid in full (except to the extent of 3 Paragon Drive Operating Expenses incurred subsequent to the Initial Closing). (ix) In the event that 3 Paragon Drive is leased prior to exercise by the Partnership of the Option and revenues are received from the tenant under a lease, such revenues shall be applied as an offset against the 3 Paragon Operating Expenses that the Partnership will otherwise be required to fund. (x) The Partnership acknowledges that the transactions contemplated by the New York Life Forbearance Agreement are intended to be consummated in a manner which will allow Axinn and Lennard Axinn to defer the recognition of certain gain for federal and state income tax purposes. Consequently, to the extent that the NY Life Loan is satisfied at less than its face amount, the cancellation of indebtedness income realized by the 3 51 Paragon Drive Partnership will be allocated to Axinn and Lennard Axinn, as the current partners in the 3 Paragon Drive Partnership, and not to the Partnership. In addition, if any of the cancellation of indebtedness income is determined to be "qualified real property business indebtedness" under Section 108(a)(3) of the Code and applicable regulations thereunder, and Axinn and Lennard Axinn elect to exclude the cancellation of indebtedness income under Section 108(a)(1)(D) of the Code, it is anticipated that the 3 Paragon Drive Partnership will reduce its tax basis under Section 1017 of the Code in the 3 Paragon Drive Property in the amount of the excluded cancellation of indebtedness income to the extent of the 3 Paragon Drive Partnership's tax basis in the 3 Paragon Drive Property, and to the extent of any cancellation of indebtedness income that exceeds the 3 Paragon Drive Partnership's tax basis in the 3 Paragon Drive Property, the Partnership will agree to permit Axinn and Lennard Axinn to elect to reduce their basis in any Units that they own. The proportionate share of the basis of the 3 Paragon Drive Property and the Units of Axinn and Lennard Axinn is equal to the sum of: (1) the partners' basis adjustment under section 743(b) of the Code to items of Partnership depreciable real property for the 3 Paragon Drive Property and the Units and (2) the common basis depreciation deductions that, under the terms of the 3 Paragon Drive Partnership Agreement and the Partnership Agreement of the Partnership, are reasonably expected to be allocated to Axinn and Lennard Axinn over the remaining useful life of the 3 Paragon Drive Property. The amount of the reduction to the basis of the 3 Paragon Drive Property and the property underlying the Units constitutes an adjustment to the basis of Partnership property with respect to Axinn and Lennard Axinn and not to the Partnership, and such adjustment will be recovered in the manner described in Treas. Reg. Section 1.743-1. Consequently, no adjustment will be made to the common basis of Partnership property. For purposes of income, deduction, gain and loss, Axinn and Lennard Axinn will have a special basis for the Partnership properties whose basis are adjusted under Section 1017 of the Code. (b) The 101 Paragon Drive Property. (i) Axinn represents and warrants to the Trust and the Partnership that: (A) He has furnished the Trust and the Partnership with true and correct copies of the documents listed on Schedule 14 (the "Documents"). (B) The Documents provide that Axinn, as nominee for Axinn Montvale II Associates("AMA"), a New Jersey general partnership having the partners identified on Schedule I attached hereto, owns 101 Paragon Drive, free of all liens and encumbrances other than (i) the First Mortgage (the "First Mortgage") from Axinn, as nominee for AMA, as mortgagor, and NJRE Corp., as mortgagee, that secures a loan in the original principal amount of $12,992,607 (the "First Mortgage Loan"); (ii) the Second Mortgage (the "Second Mortgage" from Axinn, as nominee for AMA, as mortgagor, and NJRE Corp., as mortgagee, that secures a loan in the original principal amount of $6,197,393 (the "Second Mortgage Loan" and, together with the First Mortgage Loan, the "NJRE Loans"), (iii) the Purchase Option (as defined below) and (iv) Permitted Exceptions. 52 (C) Axinn, on behalf of AMA, has the right to purchase, and thereupon discharge in their entirety, the NJRE Loans (including all accrued interest thereon) for $11,000,000.00 on September 15, 2005 (the "Loan Purchase Date"). Assuming that the purchase option (the "Purchase Option") held by Medco Containment Services, Inc., Paid Prescriptions, Inc. ("Medco") is not exercised by Medco prior to the Loan Purchase Date then, upon purchase by Axinn of the NJRE Loans, Axinn, as nominee for AMA, will own 101 Paragon Drive, free of all liens and encumbrances other than Permitted Exceptions. The Purchase Option may only be exercised by Medco on or before _____________ and, if not exercised by Medco on or before such date, expires. The minimum price that Medco must pay to acquire 101 Paragon upon exercise of the Purchase Option is $11,000,000.00. (D) Under a lease (the "Lease") between Axinn, as landlord, and Medco, as tenant, Axinn is presently entitled to receive annual lease payments that aggregate not less than $50,000 per year (the "Annual Excess Amount") in excess of Axinn's payment obligations under the NJRE Loans. (ii) At the Initial Closing, and in reliance on the foregoing representations and warranties, the Partnership (or, at the option of the Partnership, one or more subsidiaries of the Partnership) shall pay to AMA $500,000 in cash or in the form of Units, with each Units valued at $24. (iii) In consideration of the payment by the Partnership or one or more subsidiaries of the Partnership of $500,000 to AMA pursuant to paragraph (ii) above, Axinn, on behalf of himself and AMA, agrees to the following: (A) to pay the Partnership, in cash and to the extent collected by Axinn or AMA (which Axinn shall use best efforts to collect), an amount equal to the Annual Excess Amount on each of the following: September 1, 1999; September 1, 2000; September 1, 2001; September 1, 2002; September 1, 2003; September 1, 2004; and September 1, 2005; provided that such payment obligation shall cease upon the earlier to occur of (i) the exercise by Medco of the Purchase Option; and (ii) the purchase by Axinn, AMA or the Partnership of the NJRE Loans. (B) unless and until the Purchase Option has previously been exercised by Medco, to give all notices and take all actions so as to purchase the NJRE Loans for $11,000,000.00 on the Loan Purchase Date, subject to receipt by Axinn or AMA of $11,000,000.00 on the Loan Purchase Date from the Partnership or its subsidiaries; (C) in the event the Purchase Option is exercised and the purchase price exceeds $11,000,000.00, to pay over, or cause to be paid over, the amount in excess of $11,000,000.00 to the Partnership; (D) unless the deed to 101 Paragon Drive has previously been transferred to AMA, to transfer the deed to 101 Paragon Drive to AMA concurrently with the purchase and discharge of the NJRE Loans, free of liens and encumbrances except Permitted Exceptions. 53 (E) to cause the partnership agreement of AMA (the "AMA Partnership Agreement") to be amended and restated to include the following provisions and to have such provisions remain in the AMA Partnership Agreement unless the Partnership consents to the amendment of any such provisions: (1) AMA will elect to close its books pursuant to Section 706(d) of the Code immediately prior to the admission of the Partnership as a partner of AMA. (2) In the event that the Partnership is admitted as a partner of AMA, if the NJRE Loans are satisfied at less than their face amounts, the cancellation of indebtedness income realized by AMA shall be allocated as follows: (i) if the NJRE Loans are satisfied for less than $11,000,000, the income up to $8,000,000 will be allocated to Axinn and other partners of AMA, not including the Partnership, and the balance will be allocated to the Partnership, and (ii) if the NJRE Loans are satisfied for $11,000,000 or more, the income will be allocated among Axinn and the other partners of AMA in accordance with their percentage interests in AMA, not including the Partnership. (F) to permit the Partnership to review the federal income tax return of AMA in the year that any cancellation of indebtedness income is reported as a result of the payment of the NJRE Loans. (iv) The Partnership agrees to loan AMA up to $11,000,000.00 (the "Partnership Loan") on the Loan Purchase Date in order to provide AMA (or Axinn acting on behalf of AMA) with funds necessary to purchase and thereupon discharge the NJRE Loans such that, upon such purchase and discharge, AMA will hold fee title to 101 Paragon Drive free of liens and encumbrances other than Permitted Exceptions; provided that the Partnership's agreement to make the Partnership Loan shall terminate if (A) the Purchase Option has then been exercised; (B) the NJRE Loans have previously been purchased (a possibility contemplated by subparagraph (vi) below); (C) any of Axinn's representations and warranties in subparagraph (i) above are incorrect in any material respect; or (D) Medco has actually terminated or threatened to terminate the Lease; provided that this clause (D) shall only be a condition to the Partnership's obligation to make the Partnership Loan in the event that AMA or the Partnership suffers or can reasonably be expected to suffer economic loss as a result of any actual Lease termination; or (E) the partners of AMA do not unconditionally agree to transfer to the Partnership or, as directed by the Partnership, one or more subsidiaries of the Partnership, all of their right, title and interest in AMA, free and clear of liens, encumbrances and liabilities (other than the Partnership Loan), immediately following the making of the Partnership Loan. (v) Axinn, on behalf of himself and the other partners of AMA, agrees that immediately following the making of the Partnership Loan and the concurrent purchase and discharge by AMA of the NJRE Loans, Axinn and such other partners will contribute all of their right, title and interest in AMA to the Partnership or, as directed by the Partnership, to subsidiaries of the Partnership, free and clear of liens, encumbrances and liabilities (other than the Partnership Loan), in exchange for an aggregate of 12 Class A Units (to be allocated among themselves as they may agree). 54 (vi) Without limiting the provisions to be included in the AMA Partnership Agreement in accordance with paragraph (iii)(E) above, Axinn, on behalf of himself and the partners of AMA, and the Partnership agree that in the event that the NJRE Loans are purchased prior to the Loan Purchase Date, any cancellation of indebtedness income arising from the purchase shall be allocated under Section 704b) of the Code and the applicable regulations thereunder to Axinn and the other partners in AMA, not including the Partnership. In addition, if any of the cancellation of indebtedness income is determined to be "qualified real property business indebtedness" under Section 108(a)(3) of the Code and applicable regulations thereunder, and Axinn and the other partners of AMA elect to exclude the cancellation of indebtedness income under Section 108(a)(1)(D) of the Code, it is anticipated that AMA will reduce its tax basis under Section 1017 of the Code in 101 Paragon Drive in the amount of the excluded cancellation of indebtedness income to the extent of AMA's tax basis in 101 Paragon Drive, and to the extent of any cancellation of indebtedness income that exceeds AMA's tax basis in 101 Paragon Drive, the Partnership will agree to permit Axinn and the other Partners of AMA to elect to reduce their basis in any Units that they own. The proportionate share of the basis of 101 Paragon and the Units of Axinn and the other partners of AMA is equal to the sum of: (1) the partners' basis adjustment under section 743(b) of the Code to items of partnership depreciable real property for 101 Paragon Drive and the Units and (2) the common basis depreciation deductions that, under the terms of the AMA Partnership Agreement and the Partnership Agreement of the Partnership, are reasonably expected to be allocated to Axinn and the other partners of AMA over the remaining useful life of the property. The amount of the reduction to the basis of 101 Paragon Drive and the property underlying the Units constitutes an adjustment to the basis of partnership property with respect to Axinn and the other partners of AMA and not to the Partnership, and such adjustment will be recovered in the manner described in Treas. Reg. Section 1.743-1. Consequently, no adjustment will be made to the common basis of Partnership property. For purposes of income, deduction, gain and loss, Axinn and the AMA Partners will have a special basis for the partnership properties whose bases are adjusted under Section 1017 of the Code. (vii) In the event that the Loan Purchase Date is accelerated by NJRE Corp. to a date earlier than September 15, 2005, then the Partnership shall have the option to (A) terminate the arrangements provided for this Section and receive from Axinn or AMA payment of $500,000 minus the aggregate of the sums previously paid to it under paragraph iii(A) above or (B) lieu of making the Partnership Loan, to loan AMA the funds necessary to enable AMA to purchase and thereupon discharge the NJRE Loans and concurrently obtain fee title to 101 Paragon Drive free of liens and encumbrances other than Permitted Exceptions (in which case Axinn and the other partners of AMA will thereupon contribute their partnership interests in AMA to the Partnership in the manner and for the consideration contemplated by paragraph (v) above). (viii) Axinn agrees to defend the Trust and the Partnership, and to hold the Trust and the Partnership harmless from and against, any lawsuits or actions instituted by Medco, NJRE Corp. or their affiliates that name the Trust or the Partnership alleging that the arrangements set forth herein breach any of Axinn's agreements with Medco and NJRE Corp. This indemnity shall not be subject to the limitations contained in Paragraph 11 of this Agreement. Neither Axinn nor the Trust or Partnership, by including this provision, shall be deemed to have 55 acknowledged that the arrangements provided for herein breach any obligation Axinn or his affiliates have with Medco, NJRE Corp. or their affiliates, and it is not the intention of the parties to breach any such obligations. (ix) In recognition of the intent of this paragraph to vest in the Partnership the ultimate right to acquire ownership of 101 Paragon Drive (through the Partnership's acquisition, directly or through subsidiaries, of AMA) concurrently with the purchase of the NJRE Loans and the discharge of the related First Mortgage and Second Mortgage, free of all liens and encumbrances other than Permitted Exceptions, and to afford the Partnership any benefits that might arise from subsequent negotiations with Medco relating to a modification of the contractual arrangements in effect between Medco, NJRE Corp., Axinn and their respective affiliates, Axinn agrees: (i) not to modify any contracts he or any affiliate has with Medco or NJRE Corp. without the Partnership's written consent; (ii) to seek to modify any such contracts as and to the extent requested by the Partnership; and (iii) to allow the Partnership to realize the economic benefits of any such contractual modifications. For example, if Medco is willing to sell the NJRE Loans prior to the Loan Purchase Date at less than $11,000,000.00 and the Partnership wishes to have the NJRE Loans acquired on such earlier date for such lower amount, then Axinn will cooperate in effecting such earlier purchase, with funds provided by the Partnership, thereby allowing AMA to acquire fee title to 101 Paragon Drive for less than $11,000,000.00 followed immediately by a contribution of the partnership interests in AMA to the Partnership in exchange for the Units specified in Paragraph (v) above; provided, however, that in such event, any cancellation of indebtedness income attributable to the purchase and discharge of the NJRE Loans for less than $11,000,000 shall be allocated to the Partnership and, in order to effect such allocation, the $500,000 payment made by the Partnership pursuant to Section (ii) above shall be treated as a capital contribution to AMA as of the time immediately prior to the purchase of the NJRE Loans for less than $11,000,000. (x) In the event of an inconsistency between this Section and the AMA Partnership Agreement, this Section shall prevail. (c) The 263 Old Country Road Property. The Partnership and the Contributor of the 263 Old Country Road shall, at the 263 Old Country Road Closing, enter into an assignment and assumption agreement (the "263 Assignment and Assumption") pursuant to which such Contributor shall represent and warrant that it has not defaulted under, and shall assign all of its right, title and interest in and to the ground lease with the Suffolk County Industrial Development Agency for the 263 Old Country Road Property (the "IDA Ground Lease") and the Partnership shall assume all of the obligations of such Contributor under the IDA Ground Lease. The Partnership and the Trust hereby also acknowledge that they have been advised by the Contributor of the 263 Old Country Road Property that : (i) the Contributor and/or its affiliate intends on entering into an agreement with ADI with respect to an affiliate of the Contributor performing certain interior tenant improvement work for ADI at the 263 Old Country Road Property (the "ADI Agreement"), and (ii) in connection therewith, ADI shall execute and deliver to the Contributor, and/or its affiliate, a promissory note in the amount of the cost of such work to ensure the repayment of the same by ADI to the Contributor and/or its affiliate. The Partnership and the Trust hereby consent to all of the foregoing transactions between ADI and the 56 Contributor and/or its affiliate; provided the promissory note does not give ADI or any affiliate of ADI a right to set-off rents under the ADI Lease. (d) The 31 Commercial Street Property. The Partnership and the Trust hereby acknowledge that the 31 Commercial Street Property is the subject of a consent order dated April, 1995 (the "Commercial Street Consent Order") between the Contributor of the 31 Commercial Street Property and the New York State Department of Environmental Conservation (the "DEC"). The parties agree that the Partnership shall purchase the 31 Commercial Street Property upon, and subject to, the satisfaction of the 31 Commercial Environmental Condition. For purposes hereof, the 31 Commercial Environmental Condition shall mean that the 31 Commercial Street Property has been delisted by the DEC as a hazardous waste disposal site under the DEC's Registry of Inactive Hazardous Waste Disposal Sites (which delisting shall include a determination by the DEC that no further ground water monitoring or other action under the Commercial Street Consent Order is required). Upon the Contributor's satisfaction of the 31 Commercial Environmental Condition and the transfer of title to the 31 Commercial Street Property from the Contributor to the Partnership, all of the Contributor's obligations to the Partnership with respect to environmental matters at the 31 Commercial Street Property including, without limitation, any environmental indemnity obligations set forth in Paragraph 11 hereof, shall be deemed fully and completely satisfied. In the event that remediation activities are required at the 31 Commercial Property in connection with the delisting activities, the costs of such remediation shall remain the responsibility of Axinn, who shall hold the Trust and Partnership harmless from any such costs, regardless of the limitations in Section 11. Notwithstanding anything contained in this Agreement to the contrary, in the event the 31 Commercial Environment Condition is not satisfied by two (2) years from the Initial Closing, either the Contributor of the 31 Commercial Street Property or the Partnership shall have the right to terminate this Agreement by providing the other party with written notice thereof, whereupon this Agreement shall terminate with respect to the 31 Commercial Street Property. (e) 885 Waverly Avenue, Holtsville, New York. The Partnership hereby agrees that, in the event United States Profile Wrapping Co., Inc. ("USPW") does not close its purchase of the 885 Waverly Avenue, Holtsville, New York Property (the "Waverly Property") pursuant to the terms of USPW's purchase option set forth in Article 63 of its lease with the Contributor of the Waverly Property (the "USPW Lease"), the Partnership shall purchase the Waverly Property in accordance with the terms hereof. The applicable Contributor shall provide the Partnership with written notice that USPW has either failed to close its purchase of the Waverly Property in accordance with the terms of Article 63 of the USPW Lease or has waived its option under the same (the "Waverly Closing Condition"). The applicable Contributor shall also provide the Partnership with no less than ten (10) day prior written notice of the date of the Closing for the Waverly Property. Notwithstanding the foregoing, in the event the Waverly Closing Condition is not satisfied by six (6) months from the Initial Closing, either the Contributor of the Waverly Property or the Partnership shall have the right to terminate this Agreement by providing the other party with written notice thereof, whereupon this Agreement shall terminate with respect to the Waverly Property. 57 15. Condemnation. Each Contributor represents and warrants that such Contributor has not received any written notice of any condemnation proceeding or other proceeding in the nature of eminent domain in connection with any Real Property of such Contributor, and has no actual knowledge of any threatened condemnation. As used herein, a "material taking" shall mean a taking of either an entire Parcel of Real Property (for purposes of this Paragraph, the "Subject Property"), more than twenty percent (20%) of the Improvements constituting a part of the Subject Property or more than 10% of the parking area of the Subject Property. If, prior to the Closing with respect to the Subject Property (for purposes of this Paragraph, the "Applicable Closing"), any such proceeding affecting a material portion of any of the Subject Property is commenced, the Contributor of the Subject Property (for purposes of this Paragraph, the "Applicable Contributor") agrees promptly to notify the Partnership thereof. In the event of a material taking or commencement of proceedings in connection with such a material taking, the Partnership may, at its sole option, exercised by delivery of written notice thereof within ten (10) days after receipt of such written notice thereof, (x) proceed with the Applicable Closing as provided in this Paragraph 15 without an abatement of the Consideration for the Subject Property and, at the Applicable Closing, the Applicable Contributor of the Subject Property shall assign to the Partnership, without recourse, all condemnation proceeds paid or payable with respect thereto; or (y) terminate this Agreement with respect to the Subject Property as to which a material taking has occurred, whereupon this Agreement shall terminate with respect to the Subject Property but shall continue in full force and effect with respect to all of the remaining Properties and, at the Applicable Closing, the Partnership shall pay to each Contributor the aggregate of the Consideration for the remaining Properties. Provided the Partnership shall have waived its right to terminate this Agreement with respect to the Subject Property so taken, as provided above, the Applicable Contributor shall not, from and after the Due Diligence Termination Date, settle or adjust any claims relating to a condemnation without the Partnership's prior approval, which shall not be unreasonably withheld or delayed. The parties hereby waive the provisions of Section 5-1311 of the General Obligation Law of the State of New York, and agree that the provisions of this Paragraph shall serve in lieu thereof. 16. Damage by Fire or Other Casualty. (a) Each Contributor shall promptly notify the Partnership of damage to the Improvements constituting part of the Real Property of such Contributor (for purposes of this Paragraph, the "Applicable Contributor") occurring by reason of casualty during the period between the Effective Date and the Closing Date with respect to such Real Property (for purposes of this Paragraph 16, the "Applicable Closing Date"). The Applicable Contributor shall timely notify any insurance companies with respect to any damage and shall promptly submit claims for such damage. Provided the Partnership shall have waived its right to terminate this Agreement with respect to the Real Property so damaged (for purposes of this Paragraph, the "Subject Property"), as provided below, Contributor shall not, from and after the Due Diligence Termination Date, settle or adjust any claims relating to a casualty without the Partnership's prior approval, which shall not be unreasonably withheld or delayed. (b) If (i) any portion of the Improvements is damaged by fire or casualty after the Effective Date and the Improvements so damaged are not repaired or restored 58 on or before the Applicable Closing Date to substantially the condition existing prior to the damage, and (ii) on the Applicable Closing Date, the estimated cost of repairs by reason of such fire or casualty to the Improvements, as determined by an independent adjuster is an amount equal to or less than ten percent (10%) of the Consideration for the Subject Property, there shall be no abatement or adjustment in the Consideration and, provided the loss or damage is a covered loss under the Applicable Contributor's insurance policy, the Partnership shall be required to purchase the Subject Property in accordance with the terms of this Agreement and, on the Applicable Closing Date, the Contributor shall assign to the Partnership, without recourse, all insurance claims and proceeds with respect thereto (less sums theretofore expended, if any, by the Applicable Contributor for emergency repairs or barricades) and the Applicable Contributor shall credit the Partnership on the Applicable Closing Date with the amount of any such deductible. The Applicable Contributor shall have no liability or obligation with respect to the condition of any of the Subject Property as a result of any such fire or casualty. If the repair to, or the restoration of, the Improvements so damaged has not been completed as aforesaid and, at the time of the Applicable Closing Date, the estimated cost of such repair or restoration, as determined by such independent adjuster, is an amount which is greater than ten percent (10%) of the Consideration for the Subject Property, the Partnership may, at its sole option, (x) proceed to Closing with respect to the Subject Property as provided in this Paragraph 16(b) without an abatement of the Consideration and, on the Applicable Closing Date, the Applicable Contributor shall assign to the Partnership, without recourse, all insurance claims and proceeds with respect thereto (less sums theretofore expended, if any, by the Applicable Contributor for emergency repairs or barricades) and the Applicable Contributor shall credit the Partnership on the Applicable Closing Date with the amount of any such deductible; or (y) terminate this Agreement with respect to the Subject Property which has suffered damage to the Improvements by fire or other casualty in an amount which exceeds ten percent (10%) of its Consideration, whereupon this Agreement shall terminate with respect to the Subject Property but shall continue in full force and effect with respect to all of the remaining Property and, at each Closing, the Partnership shall pay to the Contributor's thereof the aggregate of the Consideration for the remaining Property. The Partnership shall assign all of its right, title and interest in and to any and all insurance policies and insurance proceeds relating to the Subject Property for which this Agreement has been terminated. (c) The parties hereby waive the provisions of Section 5-1311 of the General Obligation Law of the State of New York, and agree that the provisions of this Paragraph shall serve in lieu thereof. 17. Default. (a) If the Partnership shall default in its obligations to pay the Consideration and complete the Initial Closing in accordance with the terms of this Agreement, then, as each Contributor's and Participant's sole and exclusive remedy therefor, such Contributor and Participant shall be entitled to retain its allocable portion of the Deposit as liquidated and agreed upon damages for the losses and injuries which such Contributor and Participant shall have sustained and suffered as a result of the Partnership's default, and thereupon this Agreement and the Partnership's obligations hereunder shall be terminated except 59 as expressly provided in this Agreement. It is agreed that the provisions of this Paragraph 17(a) for liquidated and agreed upon damages are a bona fide provision for such and are not a penalty, the parties understanding that by reason of the withdrawal of the Property from sale to the general public at a time when other parties would be interested in purchasing such Property, that each Contributor and Participant shall have sustained damages which will be substantial, but will not be capable of determination with mathematical precision. Therefore, this provision for liquidated and agreed upon damages has been incorporated as part of this Agreement as a provision beneficial to both parties. (b) If, at any Closing (each, an "Applicable Closing" for purposes of this Paragraph), any Contributor shall default in its obligation to deliver any of the Deeds or other items described in Paragraph 6 hereof or any Participant shall default in its obligation to deliver any of the Entity Assignments or other items described in Paragraph 6 above, upon the Partnership's (i) tender of the full aggregate Consideration for the Property to be conveyed or the Entity Interests to be transferred at the Applicable Closing and (ii) compliance with all of the terms and conditions of this Agreement relative to the Applicable Closing, the Partnership shall have the sole option of terminating this Agreement and receiving the return of the Deposit (less any amount of such Deposit applied in satisfaction of the Purchase Price at any prior or concurrent Closing), together with payment by the Contributors of the Partnership's actual, documented out-of-pocket costs and expenses incurred in connection with the Partnership's Due Diligence Activities, not to exceed $12,500 with respect to any one Property or (Y) to seek specific performance of the applicable Contributor's and Participant's obligation to convey the Property to be conveyed or the Entity Interest to be transferred, as the case may be, at the Applicable Closing in accordance with this Agreement. If the Partnership elects to terminate this Agreement, upon payment of the sums described above, the applicable Contributor and Participant shall be released and relieved of any further liability. Except as expressly set forth above, the Partnership hereby waives any right which the Partnership may have to any lis pendens or other lien or encumbrance against any of the Property or Entity Interests, equitable relief, consequential or punitive damages, loss of profits, costs related to in-house or other overhead allocations, and damages. The remedies set forth herein shall be the Partnership's sole remedies pursuant to this Agreement, or otherwise at law or in equity, with respect to each Closing and such remedies shall become null and void with respect to each Closing as each Closing occurs (except as to obligations hereunder which by their terms expressly survive such Closings), and shall not apply to a defect in title, the remedies for which are set forth in Paragraph 5(b) hereof, or to any inability on the part of any Contributor or Participant to perform its obligations under this Agreement. 18. Operations Prior To Closing. (a) Each Contributor agrees to operate its Property between the Effective Date and the Closing Date with respect to such Property in the same general manner as such Contributor has operated the Property during the immediately preceding six (6) month period, paying all costs and expenses as they come due, and in any event prior to the Closing with respect to such Property, and maintaining all insurance coverage currently in force. 60 (b) Each Contributor shall comply with all of the obligations of landlord under its Leases and all other agreements and contractual arrangements affecting its Real Property by which such Contributor is bound or to which such Contributor's Real Property, is subject, and which will be binding upon the Partnership or a lien upon such Real Property, after the Closing with respect to such Real Property. (c) Each Contributor shall notify the Partnership promptly of such Contributor's receipt of any written notice from any party alleging that such Contributor is in default of its obligations under any of the Leases or any Permit or agreement affecting its Real Property, or any portion or portions thereof. (d) No contract for or on behalf of or affecting the Real Property of any Contributor shall be negotiated or entered into which cannot be terminated by such Contributor upon the Closing with respect to such Real Property without the payment of a specific charge, cost, penalty or premium for such termination. On or before ten (10) days prior to each Applicable Closing Date, the Partnership shall send written notice to the Applicable Contributor informing the Applicable Contributor of which of the Contracts listed on "Exhibit T" attached hereto the Partnership is willing to accept assignment (the "Accepted Contracts"). At the Closing, the Partnership shall be obligated to accept assignment of, and assume the Applicable Contributor's obligations (arising on or after the date of Closing) under, the Accepted Contracts. The Applicable Contributor and Axinn shall remain responsible for all other obligations in, to and under the Contracts (other than the Accepted Contracts) which the Partnership does not accept and assume pursuant to the terms hereof. Anything herein to the contrary notwithstanding, neither the Trust nor the Partnership is assuming the Contracts (or any other obligation arising under the Contracts) identified on Exhibit B with American Transfer Company, Inc. and Unique Sanitation Co., Inc. Axinn, on behalf of himself and the Axinn affiliate that has entered into these agreements, shall remain responsible for performance under these agreements. However, in recognition of the benefits to be realized by the Partnership from the waste removal services that will be provided under such agreements, from and after the date the Partnership acquired title to the Properties that are subject to these two agreements, the Partnership agrees to make payments on behalf of Axinn when such payments are due under these agreements in accordance with the terms thereof as currently in effect. Axinn agrees not to renew or modify either of these agreements without the prior written consent of the Partnership. (e) Except with the prior written consent of the Partnership, which the Partnership agrees it shall not unreasonably withhold, condition or delay, no Contributor shall enter into any new leases for any portion of its Real Property after the Effective Date. Any new lease entered into after the Effective Date shall be on the Partnership's customary form (which may vary to reflect customary negotiated revisions thereto), or such other form which is reasonably acceptable to the Partnership. Further, except with the prior written consent of the Partnership, which the Partnership agrees it shall not unreasonably withhold, condition or delay, or as set forth above, no Contributor shall, after the Effective Date, amend, extend (except where required under the terms of the Lease in question), terminate (except by reason of a Tenant's default), accept surrender of, or permit any assignments or subleases of, any of its Leases (except as may be required under such Lease), nor accept any rental more than one (1) month in advance 61 (exclusive of any security deposit). The Partnership shall respond to the Contributor's written request for a consent in all cases under this subparagraph (e) within three (3) business days of receiving such request. Failure by the Partnership to respond within such three (3) business day period, shall be deemed the consent of the Partnership to the proposed leasing transaction. (f) No Contributor shall make or permit to be made any capital improvements or additions to its Real Property, or any portion thereof, without the prior written consent of the Partnership, except those made by a Contributor pursuant to the express requirements of this Agreement, those capital improvements or additions described on "Exhibit V", those made by Tenants pursuant to the right to do so under their Leases, or by a Contributor if required by such law or ordinance, or as required under any Lease. (g) Each Contributor shall timely bill all Tenants for all rent billable under its Leases, and use commercially reasonable efforts to collect any rent in arrears. (h) Each Contributor shall notify the Partnership of any tax assessment disputes (pending or threatened) prior to any Closing with respect to the Property at issue, and, from and after the Due Diligence Termination Date, no Contributor shall agree to any changes in the real estate tax assessment, nor settle, withdraw or otherwise compromise any pending claims with respect to tax assessments relating to the current or any subsequent year, without the Partnership's prior written consent, which shall not be unreasonably withheld, delayed or conditioned. If any proceedings shall result in any reduction of assessment and/or tax for the tax year in which the Closing with respect to such Contributor's Property occurs, it is agreed that the amount of tax savings or refund for such tax year, less the reasonable fees and disbursements in connection with such proceedings, shall be apportioned between such Contributor and the Partnership as of the date real estate taxes are apportioned under this Agreement. All refunds relating to any tax year prior to the Closing with respect to its Property shall be the sole property of Contributor, and all refunds relating to any year subsequent to the year in which such Closing occurs shall be the sole property of the Partnership. Each Contributor and the Partnership agrees to promptly remit to the other any refund received by it which is the property of the other. (i) Each Contributor shall notify the Partnership promptly of the occurrence of any of the following: (i) Receipt of notice from any governmental or quasi- governmental agency or authority or insurance underwriter relating to the condition, use or occupancy of its Real Property, or any portion thereof; (ii) Receipt of any notice of any default from any Tenant or from the holder of any lien or security interest in or encumbering its Real Property, or any portion thereof; (iii) Notice of any actual or threatened litigation against such Contributor or affecting or relating to its Real Property, or any portion thereof which may 62 materially and adversely affect such Real Property or such Contributor's ability to consummate the transactions contemplated by this Agreement; or (iv) Vacancy of any demised Property by a Tenant, other than in accordance with a scheduled lease termination. (j) Subject to the terms of this Agreement, Axinn and each Contributor shall use all commercially reasonable efforts to take and cause to be taken, all actions, and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations, to cause the condition to the Partnership's and the Trust's obligation to close specified in Paragraph 20 below to be satisfied and otherwise to consummate and make effective the transactions contemplated by this Agreement. 19. PROPERTY CONVEYED "AS-IS, WHERE IS". IT IS UNDERSTOOD AND AGREED THAT, EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED IN THIS AGREEMENT, NO CONTRIBUTOR IS MAKING AND EACH CONTRIBUTOR SPECIFICALLY DISCLAIMS, ANY WARRANTIES OR REPRESENTATIONS OF ANY KIND OR CHARACTER, EXPRESS OR IMPLIED, WITH RESPECT TO THE ECONOMICAL, FUNCTIONAL, ENVIRONMENTAL OR PHYSICAL CONDITION OF ALL OF THE PROPERTY, INCLUDING, BUT NOT LIMITED TO, WARRANTIES OR REPRESENTATIONS AS TO MATTERS OF TITLE, ZONING, TAX CONSEQUENCES, PHYSICAL OR ENVIRONMENTAL CONDITIONS, AVAILABILITY OF ACCESS, INGRESS OR EGRESS, OPERATING HISTORY OR PROJECTIONS, VALUATION, GOVERNMENTAL APPROVALS, GOVERNMENTAL REGULATIONS OR ANY OTHER MATTER OR THING RELATING TO OR AFFECTING THE ECONOMICAL, FUNCTIONAL, ENVIRONMENTAL OR PHYSICAL CONDITION OF THE PROPERTY OF SUCH CONTRIBUTOR, INCLUDING, WITHOUT LIMITATION: (I) THE VALUE, CONDITION, MERCHANTABILITY, MARKETABILITY, PROFITABILITY, SUITABILITY OR FITNESS FOR A PARTICULAR USE OR PURPOSE OF ANY OF SUCH PROPERTY, (II) THE MANNER OR QUALITY OF THE CONSTRUCTION OR MATERIALS INCORPORATED INTO ANY OF SUCH PROPERTY AND (III) THE MANNER, QUALITY, STATE OF REPAIR OR LACK OF REPAIR OF ANY OF SUCH PROPERTY. THE PARTNERSHIP AGREES THAT WITH RESPECT TO THE PROPERTY IN THE AGGREGATE, THE PARTNERSHIP HAS NOT RELIED UPON AND WILL NOT RELY UPON, EITHER DIRECTLY OR INDIRECTLY, ANY REPRESENTATION OR WARRANTY OF CONTRIBUTOR OR ANY AGENT OF CONTRIBUTOR NOT EXPRESSLY SET FORTH IN THIS AGREEMENT. THE PARTNERSHIP REPRESENTS THAT IT IS KNOWLEDGEABLE OF REAL ESTATE AND THAT IT IS RELYING SOLELY ON ITS OWN EXPERTISE, THAT OF THE PARTNERSHIP'S CONSULTANTS, AND THE REPRESENTATIONS AND WARRANTIES OF EACH CONTRIBUTOR CONTAINED IN THIS AGREEMENT, SUBJECT, HOWEVER, TO THE LIMITATIONS CONTAINED HEREIN UPON SUCH REPRESENTATIONS AND WARRANTIES, AND THAT EACH CONTRIBUTOR HAS OR SHALL HAVE AFFORDED THE PARTNERSHIP WITH A FULL AND COMPLETE OPPORTUNITY TO MAKE ITS OWN INDEPENDENT INVESTIGATION OF THE PROPERTY AND ALL MATTERS PERTAINING THERETO 63 DURING THE DUE DILIGENCE PERIOD INCLUDING, BUT NOT LIMITED TO, THE PHYSICAL AND ENVIRONMENTAL CONDITIONS THEREOF AND, UPON CLOSING, SHALL ASSUME THE RISK THAT ADVERSE MATTERS, INCLUDING, BUT NOT LIMITED TO, ADVERSE PHYSICAL AND ENVIRONMENTAL CONDITIONS, MAY NOT HAVE BEEN REVEALED BY THE PARTNERSHIP'S INSPECTIONS AND INVESTIGATIONS. THE PARTNERSHIP ACKNOWLEDGES AND AGREES THAT, UPON CLOSING, EACH CONTRIBUTOR SHALL SELL AND CONVEY TO THE PARTNERSHIP AND THE PARTNERSHIP SHALL ACCEPT THE PROPERTY "AS IS, WHERE IS," WITH ALL FAULTS, AND THERE ARE NO ORAL AGREEMENTS, WARRANTIES OR REPRESENTATIONS (EXCEPT AS HEREIN SPECIFICALLY PROVIDED), COLLATERAL TO OR AFFECTING ANY OF THE PROPERTY BY ANY CONTRIBUTOR, ANY AGENT OF ANY CONTRIBUTOR OR ANY THIRD PARTY. THE PARTNERSHIP EXPRESSLY AGREES THAT THE TERMS AND CONDITIONS OF THIS PARAGRAPH 19 SHALL EXPRESSLY SURVIVE THE CLOSING AND NOT MERGE THEREIN AND EACH CONTRIBUTOR IS NOT LIABLE OR BOUND IN ANY MANNER BY ANY VERBAL OR WRITTEN STATEMENTS, REPRESENTATIONS, OR INFORMATION PERTAINING TO ANY OF THE PROPERTY FURNISHED BY ANY REAL ESTATE BROKER, AGENT, EMPLOYEE, SERVANT OR OTHER PERSON, UNLESS THE SAME ARE SPECIFICALLY SET FORTH OR REFERRED TO IN THIS AGREEMENT. 20. Conditions Precedent to Obligations of the Partnership and the Contributors. (a) The obligations of the Partnership hereunder are subject to the fulfillment of the following conditions prior to or on each Closing Date (for purposes of this Paragraph, the "Applicable Closing Date"), any one of which may be waived in whole or in part by the Partnership on or prior to such Applicable Closing Date, and in the event any of the conditions are not complied with, the Partnership may terminate this Agreement with respect to a Closing that has not then been consummated by notifying the Contributor and Escrow Agent and thereupon the remaining balance of the Deposit shall be returned to the Partnership and thereafter this Agreement shall be null and void, except for provisions which expressly survive each applicable Closing: (i) Correctness of Representations and Warranties and Consent of Participants. The representations and warranties made by Axinn and each Contributor in this Agreement and each Participant made in the Consent and Acknowledge of each Participant shall be true and correct in all material respects on the Closing Date as though such representations and warranties were made on the Applicable Closing Date, except to the extent that they expressly relate to an earlier date. For purposes of this subsection, the truth and correctness of any representation or warranty shall be determined on an absolute basis, meaning apart from any qualification of "knowledge" set forth in said representation or warranty. No Participant shall have revoked its consent to the Applicable Closing. (ii) Compliance with Terms and Conditions. Each Contributor and each Participant shall have performed and complied with all of the material terms and 64 conditions required by this Agreement, including, without limitation, the delivery of all required documents pursuant to Paragraph 6(a), to be performed and complied with by it prior to or on the Applicable Closing Date. (iii) The Partnership's Satisfaction with Inspection. INTENTIONALLY DELETED. (iv) Exchange Approval. On or prior to Applicable Closing Date, the Underlying Shares and shares issuable upon exercise of the options granted to Axinn and Mark Hamer shall have been approved for listing with the NYSE, upon official notice of issuance. (v) Issuance of Units. The issuance of Units shall be (i) exempt from registration requirements of the Securities Act and (ii) either exempt from, registered pursuant to, or qualified under any applicable securities or "blue sky" requirements. (vi) Termination of Agreements. The existing management agreements and brokerage or leasing agreements identified on "Exhibit T" shall be terminated as of the Closing with respect to the Property to which they relate unless the Partnership shall specify otherwise or assume the obligations of the Applicable Contributor under the terms thereof as provided herein. (vii) Estoppel Certificates. Estoppel Certificates shall have been obtained from at least 75% of the Tenants at each Parcel of Real Property and from all Tenants identified on "Exhibit X" annexed hereto and made a part hereof (the "Identified Tenants"), but only if the initial request made of such Tenant was for an Estoppel Certificate in the Required Form; provided, however, if an Estoppel Certificate in the Required Form is not obtained from an Identified Tenant, each Contributor may, in lieu thereof, deliver its certificate containing the information set forth on the Required Form, which certificate shall serve as Contributor's representation as to the facts stated therein, which representation shall survive for a period of nine (9) months following the Closing, except as set forth in Paragraph 11(a) above. (viii) No Injunction or Restraints. No statute, rule, regulation, temporary restraining order, preliminary or permanent injunction or other order issued by any court of competent jurisdiction or other legal restraint or prohibition preventing the consummation of the transactions contemplated by this Agreement shall be in effect, provided, however, that Axinn and the Applicable Contributor shall use commercially reasonable efforts to have any such temporary restraining order, injunction, order, restraint or prohibition vacated. (ix) HSR Act. Any waiting period applicable to the consummation of the transactions contemplated hereby under the HSR Act shall have expired or been terminated, and no action shall have been instituted by the United States Department of Justice or the United States Federal Trade Commission challenging or seeking to enjoin the consummation of the transactions contemplated hereby, which action shall not have been withdrawn or terminated, or the Trust and the Partnership and the Contributors and the 65 Participants shall have reasonably mutually concluded that no filing under the HSR Act is required with respect to the transactions contemplated hereby. (x) Each Participant that is to contribute an Entity Interest expressly agrees that the applicable Contributor the Entity Interest in which is being contributed shall not be dissolved or terminated by virtue of such contribution but shall continue. (b) Conditions to the Contributors', Axinn's and Participant's Obligations to Close. The obligation of the Contributors, Axinn and Participants to consummate the transactions contemplated hereby at the Closing is further subject to satisfaction or waiver by the Contributors, Axinn and the Participants of the following conditions on or before the Applicable Closing Date: (i) Representations and Warranties. The representations and warranties of the Trust and the Partnership contained herein shall be true and correct in all material respects as of the Closing Date as if remade on the Closing Date, except to the extent that they expressly relate to an earlier date. For purposes of this subsection, the truth and correctness of any representation or warranty shall be determined on an absolute basis, meaning apart from any qualification of "knowledge" set forth in said representation or warranty. (ii) Full Performance. Each of the Trust and the Partnership shall have performed and complied in all material respects with all agreements, covenants, obligations and conditions required by this Agreement to be performed or complied with by it on or prior to the Closing. (iii) Closing Documents. The Trust and the Partnership, as applicable, shall have executed and delivered to the Contributors and the Participants all Closing documents required to be delivered by the members of them hereunder. (iv) Employment Agreement. The Employment Agreement shall have been executed and delivered as of the Closing. (v) Option Agreements. The Option Agreements shall have been executed and delivered as of the Closing. (vi) Issuance of Units. The Partnership shall have issued the Units to the Participants. (vii) REIT Election. The Trust shall not have revoked its prior election pursuant to Section 856(c)(1) of the Code to be taxed as a REIT, and shall be in compliance with all applicable federal income tax laws, rules and regulations, including the Code, necessary to permit it to be taxed as a REIT. The Trust shall not have taken any action or have failed to take any action which would reasonably be expected to, alone or in conjunction with any other factors, result in the loss of its status as a REIT for federal income tax purposes. 66 (viii) Amendment to Partnership Agreement. The Partnership Agreement shall have been amended by an instrument in substantially the form of the Amendment, a copy of which shall be delivered at Closing, to reflect the admission of the Participants as limited partners therein. (ix) Absence of Litigation. No action, suit, or legal, administrative or arbitral proceedings shall have been instituted before or by any court or governmental authority or arbitration panel seeking to enjoin or challenging the transactions contemplated by this Agreement. (x) Approval of Transaction. The consummation of the transactions contemplated hereby and the delivery of the consideration to the Contributors and Participants shall have been duly and validly authorized and approved by the board of the Trust, on its own behalf and in its capacity as the general partner of the Partnership. (xi) No Injunction or Restraints. No statute, rule, regulation, temporary restraining order, preliminary or permanent injunction or other order issued by any court of competent jurisdiction or other legal restraint or prohibition preventing the consummation of the transactions contemplated by this Agreement shall be in effect, provided, however, that the Trust and the Partnership shall use commercially reasonable efforts to have any such temporary restraining order, injunction, order, restraint or prohibition vacated. (xii) HSR Act. Any waiting period applicable to the consummation of the transactions contemplated hereby under the HSR Act shall have expired or been terminated, and no action shall have been instituted by the United States Department of Justice or the United States Federal Trade Commission challenging or seeking to enjoin the consummation of the transactions contemplated hereby, which action shall not have been withdrawn or terminated, or the Trust and the Partnership and the Contributors and the Participants shall have reasonably mutually concluded that no filing under the HSR Act is required with respect to the transactions contemplated hereby. (xiii) Mortgage Loan Assumption. At each Closing, the Partnership shall have assumed the Assumed Mortgage Loan for the Subject Property in accordance with the terms of this Agreement and shall have entered into an agreement with respect to the Subject-to Mortgage Loans to pay off the dollar amount specified in the applicable debt pay off letters. (c) In the event the Contributors, the Participants and Axinn have failed to comply with or are unable to fulfill the conditions to Closing relative to such parties set forth in Paragraph 20(a) by November 10, 1998, the Partnership and the Trust may terminate this Agreement by notifying the Contributors, the Participants, Axinn and the Escrow Agent in writing, proceed under Section 17(b) hereof and thereafter this Agreement shall be null and void, except as to obligations hereunder which by their terms expressly survive such termination. In the event the Partnership and the Trust have failed to comply with or are unable to fulfill the conditions to Closing relative to such parties set forth in Paragraph 20(b) by November 10, 1998, 67 the Contributors, the Participants and Axinn may terminate this Agreement by notifying the Partnership, the Trust and the Escrow Agent in writing, whereupon the Deposit shall be returned to the Partnership and this Agreement shall be null and void, except as to obligations hereunder which by their terms expressly survive such termination. 21. Brokers. (a) Each Contributor and Axinn jointly and severally represents to the Partnership that neither Axinn nor any Contributor has dealt with any real estate broker, dealer or salesman in connection with the transactions contemplated hereby other than Realty Capital International, Inc., all of the fees, expenses and commissions of which shall be paid by the Contributors and Axinn. (b) The Partnership and the Trust jointly and severally represent to each Contributor and Participant that neither the Partnership nor the Trust has dealt with any real estate broker, dealer or salesman in connection with the transactions contemplated hereby other than Legg Mason Wood Walker, Incorporated, all of the fees, expenses and commissions of which shall be paid by the Partnership and the Trust. (c) Each of the Contributors and Axinn, on the one hand, and the Partnership and the Trust, on the other, hereby agree to indemnify, defend, and hold harmless the other from and against any loss, damage or claim resulting from a breach of the representations set forth in subparagraphs (a) and (b) above. The provisions of this Paragraph shall survive Closing hereunder and any termination of this Agreement and shall not be subject to the limitations set forth in Paragraph 11. 22. Notices. All notices, requests and other communications required or permitted to be given under this Agreement shall be in writing and shall be delivered (i) in person, or (ii) by certified mail, return receipt requested, or (iii) by recognized overnight delivery service providing positive tracking of items (for example, Federal Express), or (iv) by confirmed telecopier, in each case addressed as follows (or at such other address of which Contributor or the Partnership shall have given notice as herein provided): 68 If to the Partnership, addressed to: ------------------------------------ Brandywine Operating Partnership, L.P. Newtown Square Corporate Campus 16 Campus Boulevard Suite 150 Newtown Square, PA 19073 Attn: Gerard H. Sweeney, President and Chief Executive Officer with a copy in each instance to: -------------------------------- Brad A. Molotsky, General Counsel Brandywine Operating Partnership, L.P. Newtown Square Corporate Campus 16 Campus Boulevard Suite 150 Newtown Square, PA 19073 If to any Contributor (including Axinn) or Participant, to it at the address set forth opposite such party's name on the signature pages hereto.: with a copy in each instance to: -------------------------------- Mark Hamer President and Chief Operating Officer Donald E. Axinn Companies 131 Jericho Turnpike Jericho, New York 11753 with a copy in each instance to: -------------------------------- Steven B. Aptheker, Esquire Lazer, Aptheker, Feldman, Rosella & Yedid, LLP Melville Law Center 225 Old Country Road Melville, NY 11747-2712 Luke P. Iovine, III, Esq. Battle Fowler LLP Park Avenue Tower 75 East 55th Street New York, NY 10022 69 If to Escrow Agent, addressed to: --------------------------------- M. Gordon Daniels, Esquire Commonwealth Land Title Insurance Company 1700 Market Street Philadelphia, Pennsylvania 19103 or to such other address or addresses and to the attention of such other person or persons as any of the parties may notify the other in accordance with the provisions of this Agreement. All such notices, requests and other communications shall be deemed to have been sufficiently given for all purposes hereof only if given pursuant to the foregoing requirements as to both manner and address, and only upon receipt (or refusal to accept delivery) by the party to whom such notice is sent. Notices by the parties may be given on their behalf by their respective attorneys. 23. Successors and Assigns. The Trust and the Partnership may not assign this Agreement or any rights herein or any portion hereof without the prior written consent of each Contributor, which may be withheld for any reason or for no reason; provided that neither the foregoing nor any other provision in this Agreement will restrict the ability of the Trust or Partnership to merge with another entity or sell all or substantially all of its assets or otherwise engage in a business combination so long as any successor to the Trust or the Partnership by merger, asset acquisition, or other business combination succeeds to and assumes the rights and obligations of the Trust and the Partnership hereunder. This Agreement shall apply to, inure to the benefit of and be binding upon and enforceable against the parties hereto and their respective permitted successors and assigns, to the same extent as if specified at length throughout this Agreement. 24. Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed an original and all of which counterparts together shall constitute one and the same Agreement. 25. Time of the Essence. Time is of the essence of each and every provision in this Agreement. If any time period or date ends on a day or time which is a weekend, legal holiday or bank holiday, such period shall be extended to the same time on the next business day. 26. Judicial Interpretation. Should any provision of this Agreement require judicial interpretation, it is agreed that the court interpreting or construing the same shall not apply a presumption that the terms hereof shall be more strictly construed against one party by reason of the rule of construction that a document is to be construed more strictly against the party who itself or through its agent prepared the same, it being agreed that the agents of all parties have participated in the preparation of this Agreement. 27. Captions and Recitals. The captions contained herein are not a part of this Agreement and are included solely for the convenience of the parties. 70 28. Entire Agreement. This Agreement and the Exhibits and Schedules attached hereto contains the entire agreement between the parties relating to the acquisition of the Properties in the aggregate, all prior negotiations between the parties are merged by this Agreement and there are no promises, agreements, conditions, undertakings, warranties or representations, oral or written, express or implied, between them other than as herein set forth. No change or modification of this Agreement shall be valid unless the same is in writing and signed by the parties hereto. No waiver of any of the provisions of this Agreement, or any other agreement referred to herein, shall be valid unless in writing and signed by the party against whom it is sought to be enforced. Any consents or approvals with respect to the subject matter of this Agreement shall be in writing. 29. Governing Law; Venue. (a) This Agreement and the rights and duties of the parties hereto and the validity, construction, enforcement and interpretation of this Agreement shall be governed by the laws of the State of New York with respect to the New York Property and the laws of the State of New Jersey with respect to the New Jersey Property. (b) Any dispute, controversy or claim arising out of or concerning this Agreement shall be determined, settled and resolved by arbitration (and not by litigation) administered by the American Arbitration Association (or any successor thereto) under its Commercial Arbitration Rules and judgment on the award rendered by the arbitrator may be entered in any court having jurisdiction thereto. Such arbitration shall be conducted in the State of New Jersey. The fees and expenses of the arbitrator and all other expenses of the arbitration (other than the fees and disbursements of attorneys or witnesses for each party) shall be borne by the parties equally. 30. Confidentiality. Subject to the provisions of Paragraphs 31 and 36 below, the Partnership agrees that, unless and until the Applicable Closing occurs, all information and materials obtained by the Partnership in connection with the Subject Property that are not otherwise known by or readily available to the public will not be disclosed by the Partnership to any third persons (other than to its Authorized Representatives) without the prior written consent of the Applicable Contributor. If the transaction contemplated by this Agreement does not occur for any reason whatsoever, the Partnership shall promptly return to each Applicable Contributor, and shall instruct its Authorized Representatives to return to each Applicable Contributor all copies and originals of all documents and information provided to the Partnership. The provisions of this Paragraph 30 shall survive any termination of this Agreement. 71 31. Public Announcement. The parties agree that upon the prior written consent of Axinn, the Trust may issue a press release in in form and substance reasonably acceptable to both Axinn and the Trust and that the Trust may, upon execution and delivery of this Agreement, make such public filings as the Trust reasonably believes to be required to enable it to comply with applicable securities laws. 32. INTENTIONALLY DELETED 33. Limitation of Liability. The obligations of each Applicable Contributor are binding only on such Applicable Contributor and Axinn and such Applicable Contributor's and Axinn's assets and shall not be personally binding upon, nor shall any resort be had to, the private properties of any of the partners, officers, directors, shareholders or other beneficiaries of each Applicable Contributor (other than Axinn) or of any of each Applicable Contributor's employees or agents (other than Axinn). In addition, the obligations of Morris Greene are binding only on Morris Greene and Morris Greene's assets and shall not be personally binding upon, nor shall any resort be had to, the private properties of Axinn with respect thereto. No recourse shall be had for any obligation of the Partnership or the Trust under this Agreement or under any document executed in connection herewith or pursuant hereto, or for any claim based thereon or otherwise in respect thereof, against any past, present or future trustee, shareholder, partner, officer or employee of the Partnership or the Trust, whether by virtue of any statute or rule of law or by the enforcement of any assessment or penalty or otherwise, all such liability being expressly waived and released by all of the Contributors, all of the Participants and any other party claiming by, through or under any Contributor or Participant. 34. SEC Reporting Requirements. For the period of time commencing on the date hereof and continuing through the first anniversary of the final Closing Date hereunder, each Contributor shall, from time to time, upon reasonable advance written notice from the Partnership, provide the Trust and its representatives, with access to all financial and other information then in such Contributor's possession pertaining to the period of such Contributor's ownership and operation of its Real Property, which information is relevant and reasonably necessary, in the opinion of the Trust's outside, third party accountants (the "Accountants"), to enable the Trust and its Accountants to prepare financial statements in compliance with any or all of (a) Rule 3-05 or 3-14 of Regulation S-X of the Securities and Exchange Commission (the "Commission"); (b) any other rule issued by the Commission and applicable to the Trust; and (c) any registration statement, report or disclosure statement filed with the Commission by or on behalf of the Trust. Each Contributor shall deliver to the Trust's accountants a representation letter (the "Letter"), in the form annexed hereto as "Exhibit Z". 35. Partial Invalidity. If any term, covenant or condition of this Agreement, or the application thereof, to any person or circumstance shall be invalid or unenforceable at any time or to any extent, then the remainder of this Agreement, or the application of such term, covenant or condition to persons or circumstances other than those as to which it is invalid or unenforceable, shall not be affected thereby. Each term, covenant and condition of this Agreement shall be valid and enforced to the fullest extent permitted by law. 72 36. Reporting. The Trust may file this Agreement and any of the Exhibits and Schedules to this Agreement as an exhibit to a filing it may make with the Commission (such as a Current Report on Form 8-K) pursuant the Securities Exchange Act of 1934. 37. Tender. Formal tender of an executed deed, an entity assignment and assumptions and purchase money is hereby waived by the Partnership. 38. Further Assurances. After the Closing with respect to a Parcel of Property or with respect to an Entity Transfer, each Contributor shall execute, acknowledge and deliver, for no further consideration, all assignments, transfers, deeds and other documents as the Partnership may reasonably request to vest in the Partnership (or its designee) and perfect the Partnership's (or such designee's) right, title and interest in and to such Property. 39. Jury Trial Waiver. THE PARTNERSHIP, THE TRUST AND EACH CONTRIBUTOR AND PARTICIPANT HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE (TO THE EXTENT PERMITTED BY APPLICABLE LAW) ANY RIGHT EACH MAY HAVE TO A TRIAL BY JURY OF ANY DISPUTE ARISING UNDER OR RELATING TO THIS AGREEMENT AND AGREE THAT ANY SUCH DISPUTE SHALL BE TRIED BEFORE A JUDGE SITTING WITHOUT A JURY. 40. No Offer. THE DELIVERY OF THIS AGREEMENT DOES NOT CONSTITUTE AN OFFER AND THIS AGREEMENT SHALL NOT BE BINDING AND SHALL HAVE NO FORCE AND EFFECT UNLESS AND UNTIL A FULLY EXECUTED COUNTERPART HEREOF HAS BEEN DELIVERED TO EACH OF THE PARTIES. 41. Additional Trust and Partnership Covenants (a) Reasonable Efforts. Subject to the terms and conditions of this Agreement, the Trust and the Partnership shall use all commercially reasonable efforts to take, and cause to be taken, all actions, and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations, to cause the conditions to the Contributors' and Participants' obligation to close specified in Paragraph 20 to be satisfied and otherwise to consummate and make effective the transactions contemplated by this Agreement. (b) NYSE Requirements. The Trust shall file a supplemental listing application with the NYSE to list the Common Shares issuable upon redemption of the Units issuable hereunder and shall comply with its obligations under the Registration Rights Agreement. (c) Tax Deferral and Gain Recognition. The parties acknowledge that the Contributors and the Participants have entered into this Agreement and the transactions contemplated by this Agreement with an intention to defer recognition of gain for federal income tax purposes at Closing and to maintain such deferral thereafter to the extent provided herein based upon the agreement of the Trust and the Partnership to abide by certain covenants set forth 73 in this Agreement. Based upon the foregoing, the Trust and the Partnership hereby covenant as follows: (i) Debt Maintenance and Guaranty Requirements. (A) Guaranty or Indemnity. In order to allow the Contributors and the Participants to defer the recognition of gain for federal and state income tax purposes resulting from the contribution of the Properties and Entity Interests to the Partnership, the Trust and the Partnership will, during the Restricted Period (as defined below) permit the Contributors and the Participants to guarantee, or indemnify the Trust and the Partnership for the indebtedness of the Partnership (excluding, however, any indebtedness (not in excess of $25,000,000) that is, as of the date of Closing, the subject of any such guaranty, indemnity or similar arrangement). Subject to this Paragraph 41, the Trust and the Partnership agree to maintain, or caused to be maintained, at all times during the Restricted Period an amount of indebtedness not to exceed $46,500,000.00 (the "Debt Amount") solely for the Contributors and the Participants (as allocated by the Contributors and the Participants among themselves) either to guarantee (or to indemnify the Trust and the Partnership against liability for such indebtedness); provided, however, that if during the Restricted Period, the Trust and the Partnership do not maintain such indebtedness, they shall not be liable under this Agreement to a Contributor or Participant to the extent that the Trust or Partnership can prove that such failure did not cause the Contributor or Participant to recognize taxable income. In addition, after the Restricted Period, the Trust and the Partnership agree to allow the Contributors and the Participants to guarantee (or indemnify the Trust and the Partnership) any debt of the Trust and Partnership to the extent that the Trust or the Partnership has such debt outstanding and such debt is not guaranteed (or indemnified) by any other partners of the Partnership up to the Debt Amount. The Trust and the Partnership agree to execute and deliver the Indemnity Agreement in the form attached hereto as "Exhibit HH" at each Closing. The Trust and the Partnership agree to take commercially reasonable action necessary so that the execution of each guarantee or indemnity by the Contributor and the Participants results in tax basis for the Contributor and the Participants for federal income tax purposes. Each Contributor acknowledges that neither the Trust nor the Partnership has made or makes any representations or warranties regarding the effectiveness of the Indemnity Agreement (or any guaranty or indemnity agreement entered into by a Contributor or Participant in replacement thereof) in deferring the recognition of gain for federal or state income tax purposes and neither the Trust nor the Partnership shall have any liability to the Contributors and Participants on account of such ineffectiveness. (B) In the event that any Contributor or Participant (I) obtains a tax-free step-up in the basis of its Units for federal income tax purposes (e.g., upon the death of a member); (ii) sells, transfers or otherwise disposes of all or a portion of its Units in a taxable transaction; (iii) receives the Tax Payment from the Trust and the Partnership in reimbursement of Taxes imposed upon such Contributor or Participant as the result of the sale, transfer or other disposition of Property contributed by the Contributor or Participant to the Partnership or its designee; or (iv) receives an allocation under Treasury Reg. Section 1.704-3(b) using the traditional method without curative allocations that reduces the amount of Built-in-Gain (as defined below) then, in each case, the Debt Amount shall be reduced by the amount by 74 which the Built-in-Gain is reduced on account of the any of the events set forth in this Subsection. For purposes of this Agreement, Built-in-Gain shall mean with respect to each Property (including Properties that will be contributed to the Partnership or its designee through a contribution of Entity Interests), the amount of gain that would be allocated to the applicable Contributor or Participant under Section 704(c) of the Code if the Property or Entity Interest were disposed of in a fully taxable transaction. (ii) No Property Disposition. Subject to the following provisions of this Section, the Trust and the Partnership covenant for the benefit of the Contributors and Participants, not to sell, transfer or otherwise dispose of (including, without limitation, by way of foreclosure) the Properties (or property for which any such Properties are exchanged), or make distributions which are treated as taxable dispositions for federal income tax purposes, prior to expiration of the applicable Restricted Period for each Property, as set forth on Schedule 1 annexed hereto (in each case, the "Restricted Period") other than an exchange or other disposition which does not cause the applicable Contributor and Participant to recognize Built-in Gain for federal income tax purposes. During the Restricted Period the Trust and the Partnership shall have the right to dispose of or distribute the Properties (including Properties that will be contributed to the Partnership or its designee through a contribution of Entity Interests), provided the Trust and the Partnership pay to the applicable Contributor or Participant the Tax Payment within thirty (30) days after such disposition or distribution. (iii) Expiration of Restrictions. Upon a Contributor's or Participant's conversion into Common Shares or disposition of more than eighty (80%) percent of the Units issued to such Contributor or Participant pursuant to this Agreement the Trust and the Partnership shall no longer (I) be required to provide such Contributor or Participant with any guarantee or indemnity as described in Section 41(c)(I)(A) above and (ii) be liable to such Contributor or Participant for a Tax Payment as described in Section 41(c)(ii) above. (iv) Allocation Method. The Trust and the Partnership covenant that the "traditional method" (without curative allocations), as defined in Treas. Reg. 1.704-3(b), of allocating income, gain, loss and deduction to account for the variation between the fair market value and adjusted basis of the Property and Entity Interests for federal income tax purposes, shall be used (I) with respect to the contribution of the Property and Entity Interests, and (ii) with respect to any revaluation of the Property and Entity Interests, pursuant to Treas. Reg. ss.ss.1.704- 1(b)(2)(iv)(f), 1.704-1(b)(2)(iv)(g) and 1.704-3(a)(6). (v) Defined Terms "Tax Payment" means, with respect to each Contributor and Participant, an amount equal to the sum of (I) the product of (A) the Built-in-Gain allocable to such Participant or Contributor and (B) the maximum combined (federal, state and local) income Tax rate imposed on such Contributor or Participant on income of such character and (ii) an additional payment in the amount equal to the amount such that, after payment by such Contributor or Participant of all Taxes (including interest and penalties) on amounts received under clause (I) and this clause (ii), the Contributor or Participant retain an amount equal to the amount described in clause (I). 75 "Tax or Taxes" means any and all federal and state income taxes. "Tax Return" means returns, reports and forms required to be filed with any governmental authority. (vi) The Partnership and the Trust hereby agree that the terms and the provisions of this Paragraph 41 are for the benefit of the parties hereto and the Participants set forth in Schedule 1 of this Agreement. 76 IN WITNESS WHEREOF, intending to be legally bound hereby, the parties have duly executed this Agreement as of the day and year first above stated. BRANDYWINE OPERATING PARTNERSHIP, L.P. By: BRANDYWINE REALTY TRUST, its sole general partner By: /s/ Gerard H. Sweeney --------------------------------- Name: Gerard H. Sweeney Title: President & CEO BRANDYWINE REALTY TRUST By: /s/ Gerard H. Sweeney --------------------------------- Name: Gerard H. Sweeney Title: President & CEO /s/ Donald E. Axinn ------------------------------------- DONALD E. AXINN CONTRIBUTORS: ADDRESSES: 131 Jericho Turnpike /s/ Donald Everett Axinn Jericho, New York 11743 - ------------------------- DONALD EVERETT AXINN /s/ Morris L. Green ----------------------------- - ------------------------- ----------------------------- MORRIS L. GREEN AXINN AVENUE ASSOCIATES c/o 131 Jericho Turnpike Jericho, New York 11743 BY:/s/ Donald E. Axinn - ------------------------- 77 AXINN ELLIPSE ASSOCIATES c/o 131 Jericho Turnpike Jericho, New York 11743 BY:/s/ Donald E. Axinn --------------------------- AXINN-MELVILLE, LLP c/o 131 Jericho Turnpike Jericho, New York 11743 BY:/s/ Donald E. Axinn --------------------------- AXINN EDISON ASSOCIATES c/o 131 Jericho Turnpike Jericho, New York 11743 BY:/s/ Donald E. Axinn --------------------------- AXINN-NEW DURHAM ASSOCIATES c/o 131 Jericho Turnpike Jericho, New York 11743 BY:/s/ Donald E. Axinn --------------------------- DONALD E. AXINN, L.L.C. c/o 131 Jericho Turnpike Jericho, New York 11743 BY:/s/ Donald E. Axinn --------------------------- AXINN-BERNHARD ASSOCIATES c/o 131 Jericho Turnpike Jericho, New York 11743 BY:/s/ Donald E. Axinn --------------------------- 78 The Undersigned Hereby Acknowledges Receipt Of The Deposit And Agrees To Hold And Apply The Same In Accordance With The Provisions Of The Escrow Terms Commonwealth Land Title Insurance Company: By: _________________________ M. Gordon Daniels 79 BRANDYWINE/AXINN SCHEDULE 1
Axinn State Participant Participant of Restricted Property Contributor (Record Owner) Participants % % Residence Period - ------------------------------------------------------------------------------------------------------------------------------------ LONG ISLAND INDUSTRIAL - ------------------------------------------------------------------------------------------------------------------------------------ 111 Ames Court Donald Everett Axinn n/a n/a 100% New York 10 Years Plainview, NY - ------------------------------------------------------------------------------------------------------------------------------------
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- ------------------------------------------------------------------------------------------------------------------------------------ Axinn State Participant Participant of Restricted Property Contributor (Record Owner) Participants % % Residence Period - ------------------------------------------------------------------------------------------------------------------------------------ 55 Ames Court Donald Everett Axinn Donald E. Axinn 50% New York 10 Years Plainview, NY and Morris L. Green,(1) as tenants in common Morris Green 30.5% New York Arthur and Marion 4.56% Eberstein New York Coney Gottlieb .912% New York Barry Gruber 6.39% Wash. Daryl Kulok 1.82% (State) Conn. Naomi Suberi 3.65% New York Theodore Fain .912% Florida Ronald D. 1.25% Adelstein New York - ------------------------------------------------------------------------------------------------------------------------------------ 10 Skyline Drive Donald E. Axinn Donald E. Axinn 80 % New York 10 Years Plainview, NY Lennard Axinn 20% New York - ------------------------------------------------------------------------------------------------------------------------------------
- -------- (1) There is no written agreement regarding Morris Green's distribution of his fifty (50%) percent interest in the property. 2
- ------------------------------------------------------------------------------------------------------------------------------------ Axinn State Participant Participant of Restricted Property Contributor (Record Owner) Participants % % Residence Period - ------------------------------------------------------------------------------------------------------------------------------------ 31 Commercial Street Donald Everett Axinn n/a n/a 100% New York 10 Years Plainview, NY 11 Commercial Street Donald Everett Axinn n/a n/a 100% New York 10 Years Plainview, NY 80 Skyline - Express Donald Everett Axinn n/a n/a 100% New York 10 Years Plainview, NY 120 Express Street Donald Everett Axinn n/a n/a 100% New York 10 Years Plainview, NY 163-167 S. Service Road Donald Everett Axinn Donald E. Axinn 50% New York 10 Years Plainview, NY Radam Corp. 50% New York and Ontario, Canada - ------------------------------------------------------------------------------------------------------------------------------------ 336 S. Service Road Donald Everett Axinn n/a n/a 100% New York 10 Years Melville, NY - ------------------------------------------------------------------------------------------------------------------------------------
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- ------------------------------------------------------------------------------------------------------------------------------------ Axinn State Participant Participant of Restricted Property Contributor (Record Owner) Participants % % Residence Period - ------------------------------------------------------------------------------------------------------------------------------------ 180 Central Ave. Donald E. Axinn Donald E. Axinn 75% New York 10 Years 2 Engineers Lane Farmingdale, NY Helen Geffner 6.25% New York Howard Kantor 6.25% New York Estate of Irving 6.25% Hirschman Florida Judith Ann 2.97% Arizona Sussman 3.02% New York Thea Feldman 0.26% Mass. Ruth Siskind - ------------------------------------------------------------------------------------------------------------------------------------
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- ------------------------------------------------------------------------------------------------------------------------------------ Axinn State Participant Participant of Restricted Property Contributor (Record Owner) Participants % % Residence Period - ------------------------------------------------------------------------------------------------------------------------------------ 8 Engineers Lane Donald Everett Axinn Donald E. Axinn 75% New York 10 Years Farmingdale, NY Helen Geffner 6.25% New York Howard Kantor 6.25% New York Estate of Irving 6.25% Hirschman Florida Judith Ann 2.97% Arizona Sussman 3.02% New York Thea Feldman 0.26% Mass. Ruth Siskind - ------------------------------------------------------------------------------------------------------------------------------------ 19 Engineers Lane Donald Everett Axinn Donald E. Axinn 50% New York 10 Years Farmingdale, NY Leo Guthart 25% New York Howard Kantor 12.5% New York Gloria Kantor 12.5% New York - ------------------------------------------------------------------------------------------------------------------------------------ 91 N. Industry Court Donald E. Axinn n/a n/a 100% New York 10 Years Deer Park, NY - ------------------------------------------------------------------------------------------------------------------------------------ 100 Voice Road Donald Everett Axinn n/a n/a 100% New York 10 Years Carle Place, NY - ------------------------------------------------------------------------------------------------------------------------------------
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- ------------------------------------------------------------------------------------------------------------------------------------ Axinn State Participant Participant of Restricted Property Contributor (Record Owner) Participants % % Residence Period - ------------------------------------------------------------------------------------------------------------------------------------ 110 Voice Road Donald Everett Axinn n/a n/a 100% New York 10 Years Carle Place, NY - ------------------------------------------------------------------------------------------------------------------------------------ 1000 Axinn Avenue Axinn Avenue Associates, Donald E. Axinn 91.04% New York 10 Years Garden City, NY a New York general partnership Frank Zarb 8.96% Virginia - ------------------------------------------------------------------------------------------------------------------------------------ 645 Stewart Avenue Donald Everett Axinn n/a n/a 100% New York 10 Years Garden City, NY - ------------------------------------------------------------------------------------------------------------------------------------ 885 Waverly Avenue Donald E. Axinn n/a n/a 100% New York 10 Years Holtsville, NY - ------------------------------------------------------------------------------------------------------------------------------------ LONG ISLAND OFFICE - ------------------------------------------------------------------------------------------------------------------------------------ 125 Jericho Turnpike Donald E. Axinn n/a n/a 100% New York 10 Years Jericho, NY - ------------------------------------------------------------------------------------------------------------------------------------ 131 Jericho Turnpike Donald E. Axinn n/a n/a 100% New York 10 Years Jericho, NY - ------------------------------------------------------------------------------------------------------------------------------------ 245 Old Country Road Axinn Ellipse Associates, Donald E. Axinn 80% New York 10 Years Melville, NY a New York general partnership Lennard Axinn 20% New York - ------------------------------------------------------------------------------------------------------------------------------------ 263 Old Country Road Axinn-Melville, LLC, a Donald E. Axinn 100% New York 5 Years Melville, NY New York limited liability company - ------------------------------------------------------------------------------------------------------------------------------------
6
- ------------------------------------------------------------------------------------------------------------------------------------ Axinn State Participant Participant of Restricted Property Contributor (Record Owner) Participants % % Residence Period - ------------------------------------------------------------------------------------------------------------------------------------ NEW JERSEY INDUSTRIAL - ------------------------------------------------------------------------------------------------------------------------------------ 44 National Road Axinn Edison Associates, Donald E. Axinn 75% New York 10 Years Edison, NJ a New York general partnership Howard Kantor 12.5% New York Gloria Kantor 12.5% New York - ------------------------------------------------------------------------------------------------------------------------------------ 835/837 Durham Road Axinn-New Durham Donald E. Axinn 78.2% New York 10 Years Edison, NJ Associates, a New Jersey limited partnership Howard Kantor 8.29% New York Gloria Kantor 8.29% New York Stanley Spielman 5.4% New York - ------------------------------------------------------------------------------------------------------------------------------------ NEW JERSEY OFFICE - ------------------------------------------------------------------------------------------------------------------------------------ 102 Chestnut Ridge Donald E. Axinn, L.L.C. Donald E. Axinn 99% New York 10 Years Road No. 1, a New Jersey limited Montvale, NJ liability company Donald E. Axinn, 1% Inc. - ------------------------------------------------------------------------------------------------------------------------------------
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- ------------------------------------------------------------------------------------------------------------------------------------ Axinn State Participant Participant of Restricted Property Contributor (Record Owner) Participants % % Residence Period - ------------------------------------------------------------------------------------------------------------------------------------ 25 Phillips Parkway Donald E. Axinn(2) Donald E. Axinn 76% New York 10 Years Montvale, NJ James Beattie 5% New Jersey Howard Kantor 4% New York Ralph Padovano 5% New Jersey Thomas W. Dunn 5% New Jersey Martin W. Kafafian 5% New Jersey - ------------------------------------------------------------------------------------------------------------------------------------ 101 Paragon Drive Donald E. Axinn(3) Donald E. Axinn 87.5% New York 10 Years Montvale, NJ Lennard Axinn 10% New York Trust UTW of 2.5% New York Theodore Geffner - ------------------------------------------------------------------------------------------------------------------------------------
- -------- (2) At closing, the current record owner will be Montvale IV, a New Jersey joint venture. (3) At closing, the current record owner will be Axinn Montvale II Associates, a New York general partnership. 8
- ------------------------------------------------------------------------------------------------------------------------------------ Axinn State Participant Participant of Restricted Property Contributor (Record Owner) Participants % % Residence Period - ------------------------------------------------------------------------------------------------------------------------------------ 3 Paragon Drive Donald E. Axinn4 Donald E. Axinn 80% New York 5 Years Montvale, NJ Lennard Axinn 20% New York - ------------------------------------------------------------------------------------------------------------------------------------ 1255 Broad Street Axinn-Bernhard Donald E. Axinn 33.33% New York 10 Years Bloomfield, NJ Associates, a New York general partnership Richard Bernhard 33.33% New York Calvin Axinn 33.33% New York - ------------------------------------------------------------------------------------------------------------------------------------
- -------- (4) At closing, the current record owner will be 80-20 Associates, a New York general partnership. 9 BRANDYWINE/AXINN SCHEDULE 2
Property Purchase Price Mortgage Debt Equity Unit Equivalents -------- -------------- ------------- ------ ---------------- LONG ISLAND INDUSTRIAL - ----------------------------------------------------------------------------------------------------------------------------------- 111 Ames Court $ 862,493 $ 862,493 Plainview, NY - ----------------------------------------------------------------------------------------------------------------------------------- 55 Ames Court 3,918,112 3,918,112 Plainview, NY - ----------------------------------------------------------------------------------------------------------------------------------- 10 Skyline Drive 1,168,093 1,168,096 Plainview, NY - ----------------------------------------------------------------------------------------------------------------------------------- 31 Commercial Street 778,845 778,845 Plainview, NY - ----------------------------------------------------------------------------------------------------------------------------------- 11 Commercial Street 1,156,540 1,156,540 Plainview, NY - ----------------------------------------------------------------------------------------------------------------------------------- 80 Skyline - Express 2,363,755 2,363,755 Plainview, NY - ----------------------------------------------------------------------------------------------------------------------------------- 120 Express Street 1,973,836 1,973,836 Plainview, NY - ----------------------------------------------------------------------------------------------------------------------------------- 163-167 S. Service Road 2,774,167 $ 1,843,985 930,182 38,757.58 Plainview, NY - ----------------------------------------------------------------------------------------------------------------------------------- 336 S. Service Road 3,453,486 2,110,735 1,342,753 55,948.04 Melville, NY - ----------------------------------------------------------------------------------------------------------------------------------- 180 Central Ave. $1,082,691 $1,082,691 2 Engineers Lane Farmingdale, NY - ----------------------------------------------------------------------------------------------------------------------------------- 8 Engineers Lane 949,736 949,736 Farmingdale, NY - -----------------------------------------------------------------------------------------------------------------------------------
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Property Purchase Price Mortgage Debt Equity Unit Equivalents -------- -------------- ------------- ------ ---------------- 19 Engineers Lane 555,752 555,752 Farmingdale, NY - ----------------------------------------------------------------------------------------------------------------------------------- 91 N. Industry Court 2,690,045 2,690,045 Deer Park, NY - ----------------------------------------------------------------------------------------------------------------------------------- 100 Voice Road 1,957,029 1,957,029 Carla Place, NY - ----------------------------------------------------------------------------------------------------------------------------------- 110 Voice Road 1,249,964 1,249,964 Carla Place, NY - ----------------------------------------------------------------------------------------------------------------------------------- 1000 Axinn Avenue 2,667,340 2,667,340 Garden City, NY - ----------------------------------------------------------------------------------------------------------------------------------- 645 Stewart Avenue 2,023,833 2,023,833 Garden City, NY - ----------------------------------------------------------------------------------------------------------------------------------- LONG ISLAND OFFICE - ----------------------------------------------------------------------------------------------------------------------------------- 125 Jericho Turnpike $4,961,782 $4,961,782 Jericho, NY - ----------------------------------------------------------------------------------------------------------------------------------- 131 Jericho Turnpike 1,609,767 1,609,767 Jericho, NY - ----------------------------------------------------------------------------------------------------------------------------------- 245 Old Country Road 6,021,484 $5,790,678 230,806 9,616.92 Melville, NY - -----------------------------------------------------------------------------------------------------------------------------------
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Property Purchase Price Mortgage Debt Equity Unit Equivalents -------- -------------- ------------- ------ ---------------- 263 Old Country Road 7,800,000 7,800,000 Melville, NY - ----------------------------------------------------------------------------------------------------------------------------------- NEW JERSEY INDUSTRIAL - ----------------------------------------------------------------------------------------------------------------------------------- 44 National Road 1,587,714 1,587,714 Edison, NJ - ----------------------------------------------------------------------------------------------------------------------------------- 835/837 Durham Road 4,914,676 1,044,131 3,870,545 161,272.71 Edison, NJ - ----------------------------------------------------------------------------------------------------------------------------------- NEW JERSEY OFFICE - ----------------------------------------------------------------------------------------------------------------------------------- 102 Chestnut Ridge Road 7,936,863 3,948,796 3,988,067 166,169.46 Montvale, NJ - ----------------------------------------------------------------------------------------------------------------------------------- 25 Phillips Parkway 9,616,189 4,793,826 4,822,363 199,742.75 Montvale, NJ - ----------------------------------------------------------------------------------------------------------------------------------- 101 Paragon Drive 500,000 11,000,000 1,646,179 68,590.79 Montvale, NJ - ----------------------------------------------------------------------------------------------------------------------------------- 3 Paragon Drive $500,000 $12,214,174 $ 100,000 4,166.67 Montvale, NJ - ----------------------------------------------------------------------------------------------------------------------------------- 1255 Broad Street 4,866,400 4,866,400 Bloomfield, NJ - -----------------------------------------------------------------------------------------------------------------------------------
3- SCHEDULE 5 ASSUMED MORTGAGE LOANS
Earliest Pre-payment Assumed Date Debt(1) Assumed Property as of Principal Int. Maturity Without Differential Personal Other Debt 6/30/98 Balance Rate Date Lender Penalty Date Liability Participants Differential ------- ------- ---- ---- ------ ------- ---- --------- ------------ ------------ - ----------------------------------------------------------------------------------------------------------------------------------- 336 S. Service Rd. $2,090,350 9.875% June 1, Guardian June 1, June 1, 2001 No None $167,262 Melville, NY 2001 Life 2001 - ----------------------------------------------------------------------------------------------------------------------------------- 102 Chestnut $3,931,545 9.640% May 1, Lasalle May 1, May 1, 2007 No None $783,950 Ridge Rd. 2007 National 2007 Montvale, NJ Bank - ----------------------------------------------------------------------------------------------------------------------------------- 101 Paragon Dr.(3) $19,190,000 6.0% September NJRE N/A N/A DEA- None $0 Montvale, NJ 15, 2005 Corp. Limited $11,000,000 - ----------------------------------------------------------------------------------------------------------------------------------- 163 S. Service Rd. $1,825,428 8.375% October Roslyn October 1, September 1, DEA- None $60,966 Plainview, NY 1, 2007 Savings 2006 1998 Specific Bank Performance(2) - -----------------------------------------------------------------------------------------------------------------------------------
- -------- (1) Please see annexed documentation which sets forth how the assumed debt differential amounts were calculated. (2) DEA personal guaranty is limited to delivering the Premises occupied and paying rent. DEA has complied with this provision. 1-
835/837 New $1,016,849 9.375% August 1, Woodmen August 1, August 1, No None $50,218 Durham Rd. 2008 Insurance 2008 1998 Edison, NJ - ----------------------------------------------------------------------------------------------------------------------------------- 3 Paragon Dr. $10,500,000(4) 10.08% August 10, New N/A N/A DEA- None $0 Montvale, NJ(3) 1998 York Specific Life Performance(5) - ----------------------------------------------------------------------------------------------------------------------------------- 25 Phillips Pkwy. $4,713,145 9.875% January 10, Lasalle January 1, January 1, No None $434,269 Montvale, NJ 2002 National 2002 2002 Bank - ----------------------------------------------------------------------------------------------------------------------------------- 245 Old Country $5,761,959 8.0% October 1, Roslyn October 1, October 1, DEA- None $137,229 Rd. Melville, NY 2007 Savings 2006 2000 Limited Bank guaranty $1,000,000 - -----------------------------------------------------------------------------------------------------------------------------------
- -------- (3) Please see Section 14 of the Contribution Agreement. (4) It is anticipated that pursuant to a settlement agreement between New York Life and Donald E. Axinn that the existing principal balance totaling $12,207,367will be reduced to $10,500,000. (5) DEA personal guaranty is limited to "Good Guy" guaranty pursuant to settlement agreement with New York Life. 2- EX-10 3 EXHIBIT 10.2 Void after 5:00 p.m. New York Time, on _________, 2008. BRANDYWINE REALTY TRUST OPTION AGREEMENT OPTION AGREEMENT, dated as of __________, 1998, between Brandywine Realty Trust (the "Company") and Donald E. Axinn (the "Optionee"). 1. Grant of Option. The Company hereby grants to the Optionee an option (the "Option") to purchase a total of 100,000 common shares of beneficial interest, par value $.01 per share (the "Shares"), of the Company ("Common Shares"), subject to adjustment as and to the extent provided herein. 2. Date of Grant; Term of Option. This Option is granted this __ day of __________, 1998, and it may not be exercised later than 5:00 p.m. on _______, 2008 (the "Expiration Time"). All rights evidenced hereby shall terminate, and this Option shall be void, immediately following the Expiration Time. 3. Option Exercise Price. The Option exercise price ("Exercise Price") is twenty-four dollars ($24.00) per Share as to 50,000 Shares and twenty-six dollars and forty cents ($26.40) per Share as to 50,000 Shares, subject to adjustment as and to the extent provided herein. 4. Exercise of Option. This Option shall be exercisable during its term only in accordance with the following: (a) Right to Exercise. This Option is fully vested and exercisable as of the date hereof. (b) Method of Exercise. This Option shall be exercisable, in whole or in part (but not for fractional shares), during its term by written notice delivered to the Company at the address specified in Section 11 hereof, which notice shall state the Optionee's election to exercise this Option and the number of full Shares in respect to which this Option is being exercised. The written exercise notice shall be accompanied by payment of the Exercise Price multiplied by the number of Shares for which this Option is being exercised. Payment of the Exercise Price shall be in lawful money of the United States of America, in the form of a check, subject to collection, or such consideration and method of payment as may be authorized by the Board of Trustees of the Company. If this Option should be exercised in part only, the lower priced Shares shall be deemed to have been purchased first and the Company shall, upon surrender of this Option, execute and deliver a new Option evidencing the rights of the Optionee thereof to purchase the balance of the Shares purchasable hereunder. Upon receipt by the Company of this Option, together with proper payment of the purchase price, the Optionee shall be deemed to be the holder of record of the Shares, notwithstanding that the -1- share transfer books of the Company shall then be closed or that certificates representing such Shares shall not then be actually delivered to the Optionee. 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 Shares. The certificate or certificates for the Shares as to which this Option shall be exercised shall be registered in the name of the Optionee and shall be legended as the Company may reasonably require to comply with applicable federal and state securities laws. (c) Restrictions on Exercise. This Option may not be exercised if the issuance of the Shares upon such exercise would constitute a violation of any applicable federal or state securities laws or other laws or regulations. As a condition to the exercise of this Option, the Company may require the Optionee to make such representations and warranties to the Company as may be required to determine whether such exercise would constitute a violation of any applicable law or regulation. If it is determined pursuant to this Section 4(c) that an Option may not be exercised, then the Company must return to the Optionee, within one business day, any payment made by the Optionee to the Company with respect to such Option. The Company represents and warrants that as of the date of this Option, the Company has registered on a Form S-8 filed pursuant to the Securities Act of 1933 the Common Shares issuable upon exercise of this Option. 5. Reservation of Shares. The Company shall reserve at all times for issuance and delivery upon exercise of this Option the number of Common Shares from time to time issuable upon exercise of this Option. All such Shares shall be duly authorized and, when issued upon the exercise of this Option 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. 6. Investment Representations. The Optionee represents and warrants as follows: (a) The Optionee is acquiring this Option, and upon exercise of this Option, he will be acquiring the Shares for investment for his own account, not as a nominee or agent, and not with a view to, or for resale in connection with, any distribution thereof. (b) The Optionee has a preexisting business relationship with the Company and, by reason of his business and financial experience, has the capacity to protect his interests in connection with the acquisition of this Option and the Shares. 7. Non-transferability of Option. This Option may not be sold, pledged, assigned, hypothecated, gifted, transferred or disposed of in any manner either voluntarily or involuntarily by operation of law, other than by will or by the laws of descent or distribution, and may be exercised during the lifetime of the Optionee only by such Optionee. Subject to the -2- foregoing, the terms of this Option shall be binding upon the executors, administrators, heirs, successors and assigns of the Optionee. 8. Rights of the Optionee. The Optionee shall not, by virtue of his ownership of this Option alone, be entitled to any rights of a holder of Common Shares of the Company, either at law or equity, and the rights of the Optionee are limited to those expressly set forth in this Agreement. 9. Adjustment of Purchase Price and Number of Shares. The number and kind of securities purchasable upon the exercise of this Option and the Exercise Price shall be subject to adjustment from time to time upon the occurrence of certain events, as follows: (a) Adjustment for Certain Changes. If at any time after the date hereof, the Company: (i) pays a dividend or makes a distribution on its Common Shares in additional Common Shares; (ii) subdivides its outstanding Common Shares into a greater number of Common Shares; (iii) combines its outstanding Common Shares into a smaller number of Common Shares; or (iv) makes a distribution on its Common Shares in shares of beneficial interest of the Company other than Common Shares; then the Exercise Price in effect (and the number of Shares and other securities, if any, issuable upon exercise of this Option) immediately prior to such action shall be adjusted so that the Optionee may receive upon exercise of the Option, and payment of the same aggregate consideration, the number of shares of beneficial interest of the Company which the Optionee would have owned immediately following such action if the Optionee had exercised this Option 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. (b) Officers' Certificate. Whenever the Exercise Price shall be adjusted as required by the provisions of this Section 9, 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. -3- Each such officers' certificate shall be signed by the Chairman of the Board, President and Chief Executive Officer or the 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 the Optionee. 10. Reclassification, Reorganization, Consolidation or Merger. In the event of any reclassification, capital reorganization or other change of the outstanding Common Shares of the Company (other than a subdivision or combination of the outstanding Common Shares and other than a change in the par value of the Common Shares) 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 Common Shares) or in the event of any sale 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 Optionee shall have the right thereafter, by exercising this Option, to purchase the kind and amount of shares of beneficial interest 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 Common Shares that might have been received if this Option had been exercised immediately prior to such reclassification, capital reorganization, change, consolidation, merger, sale or conveyance. Any such provision shall include provisions for adjustments in respect of such shares of beneficial interest and other securities and property that shall be as nearly equivalent as may be practicable to the adjustments provided for in this Option. The foregoing provisions of this Section 10 shall similarly apply to successive reclassifications, capital reorganizations and changes of Common Shares and to successive consolidations, mergers, sales or conveyances. 11. Notices. Any notice required or permitted to be delivered hereunder to the Company or the Optionee shall be delivered or sent by certified mail or by overnight courier. If the notice is to the Company, it shall be sent to: 16 Campus Boulevard, Newtown Square, PA 19073, attention, Secretary. If the notice is sent to the Optionee, it shall be sent to: 131 Jericho Turnpike, Jericho, New York 11753. Any party may change the address to which notices are to be sent by delivery of written notice to the other party in the manner specified in the preceding sentence. 12. Entire Agreement. This Option has been granted pursuant to the Company's 1997 Long-Term Incentive Plan, as amended (the "Plan"). This Agreement, and the provisions of the Plan, represent the entire agreement between the parties with respect to the subject matter hereof. Termination of the Plan shall not impair the rights of the Optionee under this Option. 13. Governing Law. This Agreement shall be construed in accordance with the laws of the State of Maryland. -4- 14. Modification and Waiver. Neither this Agreement nor any term hereof may be amended, waived, discharged or terminated other than by an instrument in writing signed by the Company and the Optionee. 15. 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 liability being expressly waived and released by the Optionee. 16. Status of Option. The Option is intended to be a non-qualified stock option. Accordingly, it is intended that the transfer of property pursuant to the exercise of the Option shall be subject to federal income tax in accordance with section 83 of the Internal Revenue Code of 1986 (the "Code"). The Option is not intended to qualify as an incentive stock option within the meaning of section 422 of the Code. 17. Withholding of Taxes. Whenever the Company proposes or is required to deliver or transfer Common Shares in connection with the exercise of the Option, the Company shall have the right to (a) require the Optionee to remit to the Company an amount sufficient to satisfy any federal, state and/or local withholding tax requirements prior to the delivery or transfer of any certificate or certificates for such Common Shares or (b) take whatever action it deems necessary to protect its interests with respect to tax liabilities, and in connection with the foregoing, the Company agrees, to the extent consistent with the Plan and applicable law, and upon request of the Optionee, to withhold Common Shares otherwise issuable upon exercise of the Option to satisfy such tax liabilities. IN WITNESS WHEREOF, the Company has caused its duly authorized officer to execute this instrument this _____ day of __________, 1998. By: _______________________________ Name: Gerard H. Sweeney Title: President and Chief Executive Officer Acknowledged and Agreed: - ---------------- Donald E. Axinn -5- EX-10 4 EXHIBIT 10.3 Void after 5:00 p.m. New York Time, on , 2008. BRANDYWINE REALTY TRUST OPTION AGREEMENT OPTION AGREEMENT, dated as of ______, 1998, between Brandywine Realty Trust (the "Company") and Mark Hamer (the "Optionee"). 1. Grant of Option. The Company hereby grants to the Optionee an option (the "Option") to purchase a total of 100,000 common shares of beneficial interest, par value $.01 per share (the "Shares"), of the Company ("Common Shares"), subject to adjustment as and to the extent provided herein. 2. Date of Grant; Term of Option. This Option is granted this day of , 1998, and it may not be exercised later than 5:00 p.m. on ____________, 2008 (the "Expiration Time"). All rights evidenced hereby shall terminate, and this Option shall be void, immediately following the Expiration Time. 3. Option Exercise Price. The Option exercise price ("Exercise Price") is twenty-four dollars ($24.00) per Share as to 50,000 Shares and twenty-six dollars and forty cents ($26.40) per Share as to 50,000 Shares, subject to adjustment as and to the extent provided herein. 4. Exercise of Option. This Option shall be exercisable during its term only in accordance with the following: (a) Right to Exercise. Prior to the first anniversary of the date of this Option, this Option shall not be exercisable. If a Forfeiture Event (as defined below) has not occurred prior to the first anniversary of the date of this Option, then on such first anniversary and at any time thereafter until the earlier of the Expiration Time and a Forfeiture Event, this Option shall be exercisable for fifty percent (50%) of the Shares purchasable hereunder having an Exercise Price of $24.00 per Share and shall be exercisable for fifty percent (50%) of the Shares purchasable hereunder having an exercise price of $26.40 per Share. If a Forfeiture Event has not occurred prior to the second anniversary of the date of this Option, then on such second anniversary and at any time thereafter until the earlier of the Expiration Time and a Forfeiture Event, this Option shall be exercisable for the remaining fifty percent (50%) of the Shares purchasable hereunder. Notwithstanding the foregoing, in the event that a Change in Control of the Company (as defined in the Company's 1997 Long-Term Incentive Plan, as amended (the "Plan")) occurs prior to the earlier of the Expiration Time and a Forfeiture Event, this Option shall become fully exercisable. The term "Forfeiture Event" means either (i) the termination of the employment of the Optionee pursuant to Section 12 of the Employment Agreement dated _________, 1998 (the "Employment Agreement") between the Company and the Optionee (i.e., a "for Cause" termination) and (ii) the voluntary resignation by the Optionee as an employee of the Company prior to the second anniversary of the date of this Option that is not in response to a breach by the Company of its obligations under the Employment Agreement. Optionee shall not be deemed to have voluntarily resigned as an employee of the Company if his employment terminates on account of his death or disability (as defined in the Plan). (b) Method of Exercise. This Option shall be exercisable, in whole or in part (but not for fractional shares), during its term by written notice delivered to the Company at the address specified in Section 11 hereof, which notice shall state the Optionee's election to exercise this Option and the number of full Shares in respect to which this Option is being exercised. The written exercise notice shall be accompanied by payment of the Exercise Price multiplied by the number of Shares for which this Option is being exercised. Payment of the Exercise Price shall be in lawful money of the United States of America, in the form of a check, subject to collection, or such consideration and method of payment as may be authorized by the Board of Trustees of the Company. If this Option should be exercised in part only, the lower priced Shares shall be deemed to have been purchased first and the Company shall, upon surrender of this Option, execute and deliver a new Option evidencing the rights of the Optionee thereof to purchase the balance of the Shares purchasable hereunder. Upon receipt by the Company of this Option, together with proper payment of the purchase price, the Optionee shall be deemed to be the holder of record of the Shares, notwithstanding that the share transfer books of the Company shall then be closed or that certificates representing such Shares shall not then be actually delivered to the Optionee. 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 Shares. The certificate or certificates for the Shares as to which this Option shall be exercised shall be registered in the name of the Optionee and shall be legended as the Company may reasonably require to comply with applicable federal and state securities laws. (c) Restrictions on Exercise. This Option may not be exercised if the issuance of the Shares upon such exercise would constitute a violation of any applicable federal or state securities laws or other laws or regulations. As a condition to the exercise of this Option, the Company may require the Optionee to make such representations and warranties to the Company as may be required to determine whether such exercise would constitute a violation of any applicable law or regulation. If it is determined pursuant to this Section 4(c) that an Option may not be exercised, then the Company must return to the Optionee, within one business day, any payment made by the Optionee to the Company with respect to such Option. The Company represents and warrants that as of the date of this Option, the Company has registered on a Form -2- S-8 filed pursuant to the Securities Act of 1933 the Common Shares issuable upon exercise of this Option. 5. Reservation of Shares. The Company shall reserve at all times for issuance and delivery upon exercise of this Option the number of Common Shares from time to time issuable upon exercise of this Option. All such Shares shall be duly authorized and, when issued upon the exercise of this Option 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. 6. Investment Representations. The Optionee represents and warrants as follows: (a) The Optionee is acquiring this Option, and upon exercise of this Option, he will be acquiring the Shares for investment for his own account, not as a nominee or agent, and not with a view to, or for resale in connection with, any distribution thereof. (b) The Optionee has a preexisting business relationship with the Company and, by reason of his business and financial experience, has the capacity to protect his interests in connection with the acquisition of this Option and the Shares. 7. Non-transferability of Option. This Option may not be sold, pledged, assigned, hypothecated, gifted, transferred or disposed of in any manner either voluntarily or involuntarily by operation of law, other than by will or by the laws of descent or distribution, and may be exercised during the lifetime of the Optionee only by such Optionee. Subject to the foregoing, the terms of this Option shall be binding upon the executors, administrators, heirs, successors and assigns of the Optionee. 8. Rights of the Optionee. The Optionee shall not, by virtue of his ownership of this Option alone, be entitled to any rights of a holder of Common Shares of the Company, either at law or equity, and the rights of the Optionee are limited to those expressly set forth in this Agreement. 9. Adjustment of Purchase Price and Number of Shares. The number and kind of securities purchasable upon the exercise of this Option and the Exercise Price shall be subject to adjustment from time to time upon the occurrence of certain events, as follows: (a) Adjustment for Certain Changes. If at any time after the date hereof, the Company: -3- (i) pays a dividend or makes a distribution on its Common Shares in additional Common Shares; (ii) subdivides its outstanding Common Shares into a greater number of Common Shares; (iii) combines its outstanding Common Shares into a smaller number of Common Shares; or (iv) makes a distribution on its Common Shares in shares of beneficial interest of the Company other than Common Shares; then the Exercise Price in effect (and the number of Shares and other securities, if any, issuable upon exercise of this Option) immediately prior to such action shall be adjusted so that the Optionee may receive upon exercise of the Option, and payment of the same aggregate consideration, the number of shares of beneficial interest of the Company which the Optionee would have owned immediately following such action if the Optionee had exercised this Option 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. (b) Officers' Certificate. Whenever the Exercise Price shall be adjusted as required by the provisions of this Section 9, 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 of the Board, President and Chief Executive Officer or the 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 the Optionee. 10. Reclassification, Reorganization, Consolidation or Merger. In the event of any reclassification, capital reorganization or other change of the outstanding Common Shares of the Company (other than a subdivision or combination of the outstanding Common Shares and other than a change in the par value of the Common Shares) 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 -4- reclassification, capital reorganization or other change of outstanding Common Shares) or in the event of any sale 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 Optionee shall have the right thereafter, by exercising this Option, to purchase the kind and amount of shares of beneficial interest 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 Common Shares that might have been received if this Option had been exercised immediately prior to such reclassification, capital reorganization, change, consolidation, merger, sale or conveyance. Any such provision shall include provisions for adjustments in respect of such shares of beneficial interest and other securities and property that shall be as nearly equivalent as may be practicable to the adjustments provided for in this Option. The foregoing provisions of this Section 10 shall similarly apply to successive reclassifications, capital reorganizations and changes of Common Shares and to successive consolidations, mergers, sales or conveyances. 11. Notices. Any notice required or permitted to be delivered hereunder to the Company or the Optionee shall be delivered or sent by certified mail or by overnight courier. If the notice is to the Company, it shall be sent to: 16 Campus Boulevard, Newtown Square, PA 19073, attention, Secretary. If the notice is sent to the Optionee, it shall be sent to: Mark Hamer, 12 Blair Drive, Huntington, NY 11743. Any party may change the address to which notices are to be sent by delivery of written notice to the other party in the manner specified in the preceding sentence. 12. Entire Agreement. This Option has been granted pursuant to the Plan. This Agreement, and the provisions of the Plan, represent the entire agreement between the parties with respect to the subject matter hereof. Termination of the Plan shall not impair the rights of the Optionee under this Option. 13. Governing Law. This Agreement shall be construed in accordance with the laws of the State of Maryland. 14. Modification and Waiver. Neither this Agreement nor any term hereof may be amended, waived, discharged or terminated other than by an instrument in writing signed by the Company and the Optionee. 15. 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 -5- virtue of any statute or rule of law, or by the enforcement of any assessment or penalty or otherwise, all such liability being expressly waived and released by the Optionee. 16. Status of Option. The Option is intended to be a non-qualified stock option. Accordingly, it is intended that the transfer of property pursuant to the exercise of the Option shall be subject to federal income tax in accordance with section 83 of the Internal Revenue Code of 1986 (the "Code"). The Option is not intended to qualify as an incentive stock option within the meaning of section 422 of the Code. 17. Withholding of Taxes. Whenever the Company proposes or is required to deliver or transfer Common Shares in connection with the exercise of the Option, the Company shall have the right to (a) require the Optionee to remit to the Company an amount sufficient to satisfy any federal, state and/or local withholding tax requirements prior to the delivery or transfer of any certificate or certificates for such Common Shares or (b) take whatever action it deems necessary to protect its interests with respect to tax liabilities, and in connection with the foregoing, the Company agrees, to the extent consistent with the Plan and applicable law, and upon request of the Optionee, to withhold Common Shares otherwise issuable upon exercise of the Option to satisfy such tax liabilities. IN WITNESS WHEREOF, the Company has caused its duly authorized officer to execute this instrument this _____ day of __________, 1998. By: _________________________ Name: _________________________ Title: _________________________ Acknowledged and Agreed: - -------------------------- Mark Hamer -6- EX-10 5 EXHIBIT 10.4 REGISTRATION RIGHTS AGREEMENT THIS REGISTRATION RIGHTS AGREEMENT, dated as of __________, 1998, is entered into by and among BRANDYWINE REALTY TRUST, a Maryland real estate investment trust (the "Trust"), BRANDYWINE OPERATING PARTNERSHIP, L.P., a Delaware limited partnership (the "Partnership"), and the holders of Units (as defined below) listed on Schedule 1A hereto and signatory hereto (individually, an "Investor" and collectively, the "Investors"). RECITALS WHEREAS, the Investors are receiving on the date hereof Class A units of limited partnership interests ("Units") in the Partnership pursuant to that certain Contribution Agreement, dated as of _______, 1998, by and among the Partnership and the persons and entities set forth on the signature page thereof (the "Contribution Agreement"); and WHEREAS, pursuant to the Partnership Agreement (as defined below), the Units will be redeemable for cash or common shares of beneficial interest, par value $.01 per share, of the Trust (the "Common Shares") upon the terms and subject to the conditions contained therein; and WHEREAS, in order to induce the Investors to consummate the closings of the transactions contemplated by the Contribution Agreement and related transaction documents, the Trust has agreed to grant to each Investor the registration rights provided for herein. NOW, THEREFORE, in consideration of these premises and the mutual agreements herein contained, and for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. Definitions. In addition to the definitions set forth above, the following terms, as used herein, have the following meanings: "Affiliate" of any Person means any other Person directly or indirectly controlling or controlled by or under common control with such Person. For the purposes of this definition, "control", when used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Agreement" means this Registration Rights Agreement, as it may be amended, supplemented or restated from time to time. "Business Day" means any day except a Saturday, Sunday or other day on which commercial banks in New York, New York are authorized by law to close. "Commission" means the United States Securities and Exchange Commission. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Partnership Agreement" means the Amended and Restated Agreement of Limited Partnership of the Partnership, dated as of November 18, 1997, as previously amended and as the same may hereafter be amended, modified or restated from time to time. "Person" means an individual or a corporation, partnership, limited liability company, association, trust, or any other entity or organization, including a government or political subdivision or an agency or instrumentality thereof. "Registrable Securities" means Common Shares issued or issuable upon redemption of Units issued on the date hereof pursuant to the Contribution Agreement and any other Common Shares issued in respect of such shares (because of share splits, share dividends, reclassifications, recapitalizations or similar events); provided that such Common Shares shall cease to constitute Registrable Securities once: (i) a registration statement covering such Common Shares has been declared effective by the Commission and such Common Shares have been sold or transferred pursuant to such effective registration statement, (ii) such Common Shares may be sold pursuant to Rule 144(k) under the Securities Act or (iii) such Common Shares have been otherwise transferred in a transaction that would constitute a sale thereof under the Securities Act, the Trust has delivered a new certificate or other evidence of ownership for such Common Shares not bearing the Securities Act restricted stock legend and such Common Shares may be resold without subsequent registration under the Securities Act. In the event that the Partnership issues additional Units pursuant to the Contribution Agreement on or prior to the date that is 175 days after the date hereof, the Common Shares issued or issuable upon redemption of such Units shall also constitute Registrable Securities, and the holders of such Units shall execute a joinder to this Agreement (agreeing to be bound by the provisions hereof as if they were listed on Schedule 1A hereto and a signatory hereto) and thereupon shall be entitled to the benefits of this Agreement and be treated as Investors hereunder. "Registration Expenses" means all expenses incident to the Trust's performance of or compliance with Article 2, including, without limitation, all registration and filing fees, all listing fees, all fees and expenses of complying with securities or blue sky laws, and printing expenses, the fees and disbursements of counsel for the Trust and of the Trust's independent public accountants, but excluding fees and disbursements of counsel or other advisors for the Investors and excluding any brokerage discounts or commissions payable in connection with a sale of Registrable Securities. "Rule 144" means Rule 144 under the Securities Act, as amended from time to time (or any successor statute). "Securities Act" means the Securities Act of 1933, as amended. -2- 2. Registration Rights. 2.1 Registration on Demand. 2.1.1 Registration of Registrable Securities. Subject to Sections 2.1.3 and 2.1.6, within 200 days after the date hereof, the Trust shall prepare and file with the Commission a "shelf" registration statement under the Securities Act covering the offer and sale of all of the Registrable Securities by the Investors in an offering to be made on a continuous basis pursuant to Rule 415 under the Securities Act, and the Trust shall use its commercially reasonable efforts to cause that registration statement to become effective within 230 days after the date hereof. Thereafter, the Trust shall use commercially reasonable efforts to take all such action (including timely filing of all reports required to be filed pursuant to the Exchange Act) as may be necessary to cause that registration to remain in effect until all of the Registrable Securities have been sold by the Investors (or such earlier date as all Common Shares issued or issuable upon redemption of any Units have ceased to constitute Registrable Securities). 2.1.2 Registration of Other Securities. Whenever the Trust shall effect a registration pursuant to this Section 2.1, other holders of securities of the Trust who have registration rights may include all or a portion of such securities in such registration, offering or sale. 2.1.3 Registration Statement Form S-3. Registrations under this Section 2.1 shall only be required to be made on Form S-3, or any successor form. In the event the Trust is not eligible to use Form S-3 to register the Registrable Securities, it may delay the filing of the applicable registration statement until that date on which the Trust is again eligible to file a Form S-3. The Trust hereby represents and warrants to the Investors that, as of the date hereof, the Trust is eligible to register the Registrable Securities on Form S-3, and the Trust shall use its best efforts to remain eligible to register the Registrable Securities on Form S-3. 2.1.4 Expenses. The Trust shall pay the Registration Expenses in connection with the registration effected pursuant to this Section 2.1. If a registration pursuant to this Section 2.1 is withdrawn or otherwise not effected, other than at the request of the Investors, the Trust shall pay the Registration Expenses in connection therewith. If the registration is withdrawn solely at the request of the Investors and if the Investors elect not to have such registration count as their single registration under this Section 2.1, the Investors shall pay all the Registration Expenses of such registration. 2.1.5 Effective Registration Statement. A registration pursuant to this Section 2.1 shall not be deemed to have been effected (i) unless a registration statement with respect thereto has been declared effective by the Commission or (ii) if after it has become effective, such registration is interfered with by any stop order, injunction or other order or requirement of the Commission or other governmental agency or court for any reason and has not thereafter become effective. -3- 2.1.6 Limitations on Registration on Demand. (i) In no event shall the Trust be required to effect more than one registration pursuant to this Section 2.1. (ii) Notwithstanding anything herein, if the Trust reasonably believes that the filing of a registration statement with the Commission would materially and adversely affect the contemplated activities of the Trust, then the Trust may postpone the filing of the applicable registration statement for a period not in excess of 30 days or, in the event the filing is being postponed in connection with a proposed underwritten public offering of the Trust's securities, for such longer period (not to exceed an additional 30 days) as may be reasonably requested by the managing underwriter for such proposed offering. (iii) Notwithstanding anything herein, if the filing of a registration statement pursuant to this Agreement would require the Trust to include in a filing with the Commission financial statements of probable or completed acquisitions in order that such registration statement be in compliance with rules and regulations of the Commission, then the Trust may delay the filing of such registration statement until it has included the requisite financial statements (including any necessary pro forma financial information) in a filing with the Commission; provided, however, that the Trust may not delay the filing of such registration statement for such reason more often than once during any period of three consecutive months. 2.2 Registration Procedures. 2.2.1 In connection with the registration of any Registrable Securities under the Securities Act as provided in Section 2.1, the Trust shall as promptly as practicable: (i) prepare and file with the Commission the requisite registration statement to effect such registration and thereafter use commercially reasonable efforts to cause such registration statement to become and remain effective; (ii) prepare and file with the Commission such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective and to comply with provisions of the Securities Act with respect to the disposition of all Registrable Securities covered by such registration statement until all of such Registrable Securities have been sold thereunder; (iii) furnish to the Investors, without charge, such number of conformed copies of such registration statement and of each such amendment and supplement thereto (in each case including all exhibits), such number of copies of the prospectus contained in such registration statement (including each preliminary prospectus and any summary prospectus) and any other prospectus filed under Rule 424 under the Securities Act, in conformity -4- with the requirements of the Securities Act, and such number of copies of such other documents as the Investors may reasonably request; (iv) use commercially reasonable efforts (x) to register or qualify all Registrable Securities under such other securities or Blue Sky laws of such States of the United States of America where an exemption is not available and as an Investor shall reasonably request, (y) to keep such registration or qualification in effect for so long as such registration statement remains in effect, and (z) to take any other action which may reasonably be necessary or advisable to enable an Investor to consummate the disposition in such jurisdictions of the Registrable Securities to be sold by such Investor, except that the Trust shall not for any such purpose be required to qualify generally to do business as a foreign trust in any jurisdiction wherein it would not, but for the requirements of this paragraph (iv), be obligated to be so qualified or to consent to general service of process in any such jurisdiction; (v) notify the Investors upon discovery that, or upon the happening of any event as a result of which, the prospectus included in the registration statement filed pursuant to this agreement, as then in effect, includes an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading, in the light of the circumstances under which they were made, and, use its commercially reasonable efforts to promptly prepare and furnish to the Investors such number of copies of a supplement to or an amendment of such prospectus as may be necessary so that, as thereafter delivered to the purchasers of such securities, such prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances under which they were made; (vi) use commercially reasonable efforts to list all Registrable Securities covered by such registration statement on any national securities exchange or over-the-counter market, if any, on which the class of Registrable Securities of the Trust (i.e., Common Shares) covered by such registration statement are then listed; (vii) notify the Investors promptly (x) when the registration statement has become effective and when any post-effective amendments and supplements thereto become effective, (y) of the issuance of the Commission of any stop order suspending the effectiveness of the registration statement or the initiation of any proceeding for that purpose, and (z) if the Trust receives any notification with respect to the suspension of the qualification of the Registrable Securities for sale in any jurisdiction or of the initiation of any proceeding for such purpose; (viii) make every reasonable effort to obtain the withdrawal of any order suspending the effectiveness of the registration statement at the earliest possible moment. -5- The Investors agree that upon receipt of any notice from the Trust of the happening of an event of the kind described in Section 2.2.1(v) or 2.2.1 (vii)(y) or (z), the Investors shall forthwith discontinue their disposition of Registrable Securities pursuant to the registration statement relating to such Registrable Securities until the Investors' receipt of the copies of the supplemented or amended prospectus contemplated by Section 2.2.1(v) or until any such suspension is lifted, respectively. 2.3. Holdback Agreements; Information Blackout. 2.3.1 Holdback Agreements. In connection with an underwritten public offering of securities of the Trust, the Investors agree that, if required by the underwriter or underwriters, they will not effect any public sale or distribution, including any sale pursuant to Rule 144 of any Registrable Securities during the period commencing 10 days prior to the expected commencement of the offering and ending 30 days after the closing of such offering. 2.3.2 Information Blackout. At any time when a registration statement effected pursuant to this Section 2 relating to Registrable Securities is effective, upon written notice from the Trust to the Investors that the Trust has determined in good faith that sale of Registrable Securities pursuant to the registration statement would require disclosure by the Trust of non-public material information not otherwise required, in the judgment of the Trust, to be disclosed under applicable law, the Investors shall suspend sales of Registrable Securities pursuant to such registration statement until the earlier of (a) 30 days after the Trust makes such good faith determination and (b) such time as the Trust notifies the Investors that such material information has been disclosed to the public or has ceased to be material or that sales pursuant to such registration statement may otherwise be resumed; provided, however, that the Trust may not so direct the Investors to so suspend the sales of Registrable Securities more often than once during any period of three consecutive months. 2.4 Preparation. In connection with the preparation and filing of any registration statement under the Securities Act in which the Investors are selling shareholders, the Trust shall give the Investors not less than 20 days prior written notice of the preparation of such registration statement and give the Investors and their counsel and accountants the opportunity to review and comment on, at the Investors' expense, the applicable portions, relating to the Investors (including the "Selling Shareholder" and "Plan of Distribution" sections), of the registration statement, each prospectus included therein or filed with the Commission, and each amendment thereof or supplement thereto (provided that the Investors shall furnish the Trust with comments on any such amendment or supplement as promptly as the Trust shall reasonably require). 2.5 Indemnification. 2.5.1 Indemnification by the Trust. In the event of any registration of any securities of the Trust under the Securities Act in which an Investor is a selling shareholder, the Trust shall, and hereby does, indemnify and hold harmless such Investor, each -6- Person, if any, who controls the Investor (within the meaning of Section 15 of the Securities Act) and the officers, directors, shareholders, partners and employees of the Investor and each such controlling Person (collectively, the "Investor Indemnified Parties") from and against any losses, claims, damages or liabilities incurred by any of such Investor Indemnified Parties, insofar as losses, claims, damages, or liabilities (or actions, proceedings or investigations, whether commenced or threatened, in respect thereof) arise out of or are based upon (a) any untrue statement or alleged untrue statement of any fact contained in any registration statement under which such securities were registered under the Securities Act, any preliminary prospectus, final prospectus, or summary prospectus contained therein, or any amendment or supplement thereto, or any omission or alleged omission to state therein a fact required to be stated therein or necessary to make the statements therein in light of the circumstances in which they were made not misleading, or (b) any violation by the Trust, its trustees, officers, employees or agents of this Agreement or any law applicable to and in connection with such registration, and the Trust shall reimburse such Investor Indemnified Parties for any legal or any other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, liability, action, proceeding or investigation described in clauses (a) or (b); provided, however, that the Trust shall not be liable in any such case to the extent that any such loss, claim, damage, liability (or action or proceeding in respect thereof) or expense arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in such registration statement, any such preliminary prospectus, final prospectus, summary prospectus, amendment or supplement in reliance upon and in conformity with written information furnished to the Trust by such Investor specifically for inclusion in such registration statement, preliminary prospectus, final prospectus, summary prospectus, amendment or supplement. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such Investor and shall survive the transfer of such securities by such Investor. 2.5.2 Indemnification by the Investors If any Registrable Securities are included in any registration statement, the Investors shall, jointly and severally, indemnify and hold harmless (in the same manner and to the same extent as set forth in Section 2.5.1 above) the Trust and each trustee, officer, shareholder and employee of the Trust and each Person who controls the Trust within the meaning of the Securities Act, with respect to any statement or alleged statement in or omission or alleged omission from such registration statement, any preliminary prospectus, final prospectus or summary prospectus contained therein, or any amendment or supplement thereto, if such statement or alleged statement or omission or alleged omission was made in reliance upon and in conformity with written information furnished to the Trust by the Investors specifically for inclusion in such registration statement, preliminary prospectus, final prospectus, summary prospectus, amendment or supplement. 2.5.3 Notice of Claims, Etc. Promptly after receipt by an indemnified party of notice of the commencement of any action or proceeding involving a claim referred to in the preceding paragraphs of this Section 2.5, such indemnified party shall, if a claim in respect thereof is to be made against an indemnifying party, immediately give written notice to the latter of the commencement of such action; provided, however, that the failure of any indemnified party to give notice as provided herein shall not relieve the indemnifying party of its -7- obligations under the preceding paragraphs of this Section 2.5, except to the extent that the indemnifying party is materially prejudiced by such failure. In case any such action is brought against an indemnified party, unless in such indemnified party's reasonable judgment a conflict of interest between such indemnified and indemnifying parties may exist in respect of such claim, the indemnifying party shall be entitled to participate in and to assume the defense thereof, jointly with any other indemnifying party similarly notified to the extent that the indemnifying parties may agree, with counsel reasonably satisfactory to such indemnified party, and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party shall not be liable to such indemnified party for any legal or other expenses subsequently incurred by the latter in connection with the defense thereof other than reasonable out of pocket costs related to the indemnified party's cooperation with the indemnifying party, unless in such indemnified party's reasonable judgment a conflict of interest between such indemnified and indemnifying parties arises in respect of such claim after the assumption of the defense thereof. No indemnifying party shall be liable for any settlement of any action or proceeding effected without its written consent, which consent shall not be unreasonably withheld, delayed or conditioned. Consent of the indemnified party shall be required for the entry of any judgment or to enter into a settlement only when such judgment or settlement does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect such claim or litigation. 2.5.4 Contribution. If the indemnification provided for in this Section 2.5 shall for any reason be held by a court to be unavailable to an indemnified party under Section 2.5.1 or 2.5.2 hereof in respect of any loss, claim, damage or liability, or any action in respect thereof, then, in lieu of the amount paid or payable under Sections 2.5.1 or 2.5.2 hereof, the indemnified party and the indemnifying party under Sections 2.5.1 or 2.5.2 hereof shall contribute to the aggregate losses, claims, damages and liabilities (including legal or other expenses reasonably incurred in connection with investigating the same), in such proportion as shall be appropriate to reflect the relative fault of and benefits to the Trust on the one hand and the Investor on the other, in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities, or other relevant equitable considerations. The relative benefits to the indemnifying party and indemnified party shall be determined by reference to, among other things, the total proceeds received by the indemnifying party and indemnified party in connection with the offering to which such losses, claims, damages or liabilities relate. The relative fault of the indemnifying party and indemnified party shall be determined by reference to, among other things, whether the action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact, has been made by, or relates to information supplied by the indemnifying party or the indemnified party, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such action. The parties hereto agree that it would not be just or equitable if contribution pursuant to this Section 2.5.4 were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to in this paragraph. Notwithstanding any of the provisions of this Section 2.5.4, an Investor shall not be required to contribute any amount in excess of the amount of the total proceeds to the Investor from sales of the Registrable Securities of such Investor under the registration statement. No -8- Person guilty of fraudulent misrepresentation (within the meaning of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. In addition, no Person shall be obligated to contribute hereunder any amounts in payment for any settlement of any action or claim, effected without such Person's written consent, which consent shall not be unreasonably withheld. 3. Rule 144 Compliance. The Trust covenants that it will use commercially reasonable efforts to timely file the reports required to be filed by the Trust under the Securities Act and the Exchange Act so as to enable each Investor to sell Registrable Securities pursuant to Rule 144. In connection with any proposed sale by any Investor of any Registrable Securities pursuant to Rule 144, upon receipt by the Trust of an opinion of the Investor's counsel that the disposition by the Investor falls within the safe harbor provisions of Rule 144, the Trust shall cooperate with the Investor to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be sold and not bearing any Securities Act legend, and shall use commercially reasonable efforts to enable certificates for such Registrable Securities to be for such number of shares and registered in such names as the Investor may reasonably request prior to any sale of Registrable Securities under Rule 144. 4. Decisions; Modification; Waivers. This Agreement may be modified or amended only with the written consent the Trust, the Partnership and the Investors to whom the modification or amendment relates. No party shall be released from its obligations hereunder without the written consent of the other party. The observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively) by the party entitled to enforce such term, but any such waiver shall be effective only if in a writing signed by the party against which such waiver is to be asserted. Except as otherwise specifically provided herein, no delay on the part of any party hereto in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any waiver on the part of any party hereto of any right, power or privilege hereunder operate as a waiver of any other right, power or privilege hereunder nor shall any single or partial exercise of any right, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any right, power or privilege hereunder. 5. Entire Agreement. This Agreement represents the entire understanding and agreement between the parties hereto with respect to the subject matter hereof and supersedes all other prior and contemporaneous agreements and understandings, both written and oral, between the parties with respect to the subject matter hereof. 6. Severability. If any provision of this Agreement, or the application of such provision to any party or circumstance, shall be held invalid, the remainder of this Agreement or the application of such provision to other parties or circumstances, to the extent permitted by law, shall not be affected thereby; provided, that the parties shall negotiate in good faith with respect to an equitable modification of the provision or application thereof held to be invalid. -9- 7. Notices. All notices, requests and other communications required or permitted to be given under this Agreement shall be in writing and shall be delivered (i) in person, (ii) by certified mail, return receipt requested, (iii) by recognized overnight delivery service providing positive tracking of items (for example, Federal Express), or (iv) by confirmed telecopier, in each case addressed as follows: If to the Trust or the Partnership, addressed to: c/o Brandywine Realty Trust Newtown Square Corporate Campus 16 Campus Boulevard Suite 150 Newtown Square, PA 19073 Attention: Gerard H. Sweeney, President and Chief Executive Officer Fax: (610) 325-5622 with a copy in each instance to: Brad A. Molotsky, General Counsel Brandywine Operating Partnership, L.P. Newtown Square Corporate Campus 16 Campus Boulevard Suite 150 Newtown Square, PA 19073 Fax: (610) 325-5622 If to any Investor, addressed to: its respective address set forth on Schedule 1A hereto -10- with a copy in each instance to: Ralph A. Rosella, Esquire Lazer, Aptheker, Feldman, Rosella & Yedid LLP Melville Law Center 225 Old Country Road Melville, NY 11747-2712 Fax: (516) 761-0015 and Luke P. Iovine, III, Esquire Battle Fowler LLP Park Avenue Tower 75 East 55th Street New York, NY 10022 Fax: (212) 856-7821 or to such other address or addresses and to the attention of such other person or persons as any of the parties may notify the other in accordance with the provisions of this Agreement. All such notices, requests and other communications shall be deemed to have been sufficiently given for all purposes hereof only if given pursuant to the foregoing requirements as to both manner and address, and only upon receipt (or refusal to accept delivery) by the party to whom such notice is sent. Notices by the parties may be given on their behalf by their respective attorneys. 8. Counterparts. This Agreement may be executed in counterparts, each of which for all purposes shall be deemed to be an original and all of which together shall constitute the same agreement. 9. Headings. The Section headings in this Agreement are for convenience of reference only, and shall not be deemed to alter or affect the meaning or interpretation of any provisions hereof. 10. Construction. This Agreement shall be governed, construed and enforced in accordance with the laws of the State of Delaware without regard to its principles of conflict of laws. 11. Recapitalizations, etc. In the event that any shares of beneficial interest or other securities are issued in respect of, in exchange for, or in substitution of, any Registrable Securities by reason of any reorganization, recapitalization, reclassification, merger, consolidation, spin-off, partial or complete liquidation, share dividend, split-up, sale of assets, distribution to shareholders or combination of the Registrable Securities or any other similar change in the Trust's capital structure, appropriate adjustments shall be made in this Agreement so as to fairly and equitably preserve, as far as practicable, the original rights and obligations of the parties hereto under this Agreement. -11- 12. Specific Performance. The parties hereto acknowledge that there would be no adequate remedy at law if any party fails to perform any of its obligations hereunder, and accordingly agree that each party, in addition to any other remedy to which it may be entitled at law or in equity, shall be entitled to compel specific performance of the obligations of any other party under this Agreement in accordance with the terms and conditions of this Agreement in any court of the United States or any State thereof having jurisdiction. 13. Successors, Assigns and Transferees. This Agreement shall inure to the benefit of and be binding upon the successors, assigns and transferees of each of the parties. If any successor, assignee or transferee of an Investor shall acquire Registrable Securities, in any manner, whether by operation of law or otherwise, such Registrable 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 entitled to receive the benefits hereof and shall be conclusively deemed to have agreed to be bound by all of the terms and provisions hereof. -12- IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and delivered on the date first above written. BRANDYWINE REALTY TRUST By: ______________________________ Name: Gerard H. Sweeney Title: President & CEO BRANDYWINE OPERATING PARTNERSHIP, L.P. By: BRANDYWINE REALTY TRUST, its sole general partner By: ______________________________ Name: Gerard H. Sweeney Title: President & CEO __________________________________ Donald E. Axinn __________________________________ [ ] __________________________________ [ ] __________________________________ [ ] -13- EX-10 6 EXHIBIT 10.5 PLEDGE AGREEMENT PLEDGE AGREEMENT (the "Agreement") made as of this ___ day of _______, 1998 by and between Donald E. Axinn ("Pledgor") and Brandywine Operating Partnership, L.P., a Delaware limited partnership ("Pledgee"). Terms used herein as defined terms but not defined herein have the meanings assigned to them in that certain Contribution Agreement dated as of __________, 1998 by and between Pledgee and certain other persons signatory thereto, including Pledgor (the "Contribution Agreement"). WITNESSETH: WHEREAS, on the date hereof, Pledgor is depositing with Pledgee, in pledge pursuant to this Agreement, 312,500 Class A Units of limited partner interest of Pledgee ("Pledged Class A Units"). NOW, THEREFORE, intending to be legally bound hereby, the parties hereto agree as follows: 1. Defined Terms. For purposes of this Agreement, the following terms shall have the meanings specified below. "Average Closing Price" means, with respect to a particular date, the average of the closing prices per share of common shares of beneficial interest ("Common Shares") of Brandywine Realty Trust, as reported by the New York Stock Exchange (as published in The Wall Street Journal or, if not reported thereby, by another authoritative source), for the fifteen (15) consecutive trading days ending on the date immediately preceding such particular date. "Collateral" means the Pledged Class A Units and any Common Shares for which they may have been redeemed. Pledged Class A Units and any Common Shares and any dividends or proceeds deriving therefrom shall cease to constitute Collateral at such time as any such Class A Units or Common Shares are released to Pledgee under Section 6 or to Pledgor under Section 7. "Collateral Value" shall mean, as of any particular date, (i) in respect of Collateral consisting of Pledged Class A Units and Common Shares, the Average Closing Price as of such particular date multiplied by the number of Pledged Class A Units and Common Shares; (ii) in respect of cash, the amount of such cash; and (iii) in respect of Collateral consisting of property other than Pledged Class A Units, Common Shares or cash, if any, the fair market value thereof as determined in good faith by the Board of Trustees of Brandywine Realty Trust. -1- "First Release Date" means the __ day of ____, 1999. "Second Release Date" means the __ day of ____, 2000. "Reserve" shall mean, as of any given date, the aggregate amount of bona fide claims for indemnity that have been asserted by Pledgee under the Contribution Agreement as of such date but that have not then been resolved. 2. Pledge; Grant of Security Interest. The Pledgor hereby grants and confirms to Pledgee a first pledge and security interest in the Collateral, as collateral security for any and all liability of Pledgor and the other Contributors to or in favor of Pledgee in respect of Liquidated Claims arising out of the indemnification provisions of the Contribution Agreement. 3. Transfer Powers. Pledgor hereby delivers to Pledgee, and Pledgee acknowledges receipt of, a certificate representing the Pledged Class A Units, with an undated unit transfer power covering such certificate, duly executed in blank by Pledgor. Such certificates and unit transfer power shall be held and released by Pledgee pursuant to the terms hereof. 4. Representations and Warranties. Pledgor represents and warrants that: (a) Pledgor has the power and authority and the legal right to grant the lien on the Collateral pursuant to this Agreement; (b) Pledgor is the record owner of, and has good and marketable title to, the Pledged Class A Units, free of any and all liens or options in favor of any other person, except the lien granted by this Agreement; (c) the lien granted and confirmed pursuant to this Agreement constitutes a valid, first priority lien on the Collateral, enforceable as such against all creditors of Pledgor and any persons purporting to purchase any Collateral from Pledgor; and (d) this Agreement constitutes the valid and binding obligations of Pledgor, enforceable against Pledgor in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, or similar rights of creditors generally and by general principles of equity, and the execution, delivery and performance of this Agreement does not violate any agreement or understanding to which Pledgor is a party or by which Pledgor is bound, or any applicable law, rule or regulation. 5. Covenants. Pledgor and Pledgee covenant and agree that from the date of this Agreement until such time as Pledgee no longer holds any remaining Collateral: (a) If Pledgor shall, as a result of its ownership of the Pledged Class A Units or any proceeds thereof, become entitled to receive or shall receive any additional units of limited partner interest in Pledgee or Common Shares or any other property, as a result of any Unit or Common Share dividend, distribution or split, Pledgor shall immediately deliver the same to -2- Pledgee in the exact form received, duly endorsed by Pledgor to Pledgee, if required, together with a valid transfer power covering any certificates received, duly executed in blank by Pledgor to be held as part of the Collateral pursuant to this Agreement. (b) Pledgor will not create, incur or permit to exist any lien or option in favor of, or any claim of any person with respect to, the Collateral, or any interest therein, except for the lien provided for by this Agreement. Pledgor will, at its expense, defend the right, title and interest of Pledgee in and to the Collateral against the claims and demands of all person. (c) Pledgor agrees to pay, and to save Pledgee harmless from, any and all liability with respect to or resulting from any delay in paying any and all stamp, excise, sales or other taxes which may be payable or determined to be payable as a result of transactions contemplated by this Agreement. (d) As to Collateral consisting of Pledged Class A Units and Common Shares, Pledgor shall be permitted to direct the voting with respect to any such Collateral, and, except as provided in subparagraph (a), to receive all distributions, dividends or other similar payments payable on any such Collateral for all periods prior to such time as Pledgee is entitled to such Collateral as provided herein in satisfaction of a payment obligation owing to it under the Contribution Agreement. 6. Procedures and Remedies. (a) In the event Pledgee asserts that it is entitled to payment from Pledgor under the Contribution Agreement, concurrent with such assertion Pledgee shall deliver a written notice (the "Indemnification Notice") to Pledgor describing in reasonable detail the facts and circumstances giving rise to such indemnification obligation and the amount of the indemnification obligation. Any assertion by Pledgee of its entitlement to payment under the Contribution Agreement shall be subject to any applicable time limitations set forth in the Contribution Agreement. In the event that Pledgor does not dispute the validity or accuracy of Pledgee's assertion set forth in the Indemnification Notice by delivering to Pledgee a written notice (a "Dispute Notice") within twenty (20) days of its receipt of the Indemnification Notice, such claim shall be deemed a Liquidated Claim and Pledgee shall be deemed to be entitled to the payment described in the Indemnification Notice and to take the actions provided in Section 6. In the event that Pledgor delivers a Dispute Notice to Pledgee within twenty (20) days of its receipt of the Indemnification Notice, then the matter shall be resolved through arbitration in the manner provided in Section 29(b) of the Contribution Agreement unless Pledgor and Pledgee otherwise agree to a contrary approach to resolving the dispute. (b) In the event that (i) Pledgor receives an Indemnification Notice and fails to timely deliver a Dispute Notice to the Pledgee and fails to make payment to the Pledgee in respect of the claimed indemnification obligation within thirty (30) days after receipt by it of an Indemnification Notice or (ii) it has been determined pursuant to the arbitration procedures set forth in Section 29(b) of the Contribution Agreement that the Pledgor has an indemnification obligation to the Pledgee under the Contribution Agreement, and if the Pledgor does not satisfy -3- such obligation within ten (10) days after the decision rendered pursuant to such arbitration procedures, then, in either event, the Pledgee's claim shall be deemed a "Liquidated Claim" and the Pledgee shall be deemed, without the payment of any further consideration or the taking of any further action by the Pledgor, to have acquired from the Pledgor such portion of the Collateral as shall be equal in value (based on the Collateral Value, as of the date of such deemed acquisition) to the amount set forth in the Indemnification Notice or, in the case of clause (ii), the amount determined as a result of the arbitration procedures set forth in Section 29(b) of the Contribution Agreement. In the event the Pledgee shall have acquired from the Pledgor any collateral pursuant to this Section 6, the Pledgee shall deliver written notice to the Pledgor within five (5) Business Days thereafter identifying the specific collateral acquired. (c) The Pledgor shall have the right, in its sole discretion at any time and from time to time, to substitute cash (to be held in an escrow account and on such terms as the Pledgor and the Pledgee, acting in good faith, shall agree at the time of the first such substitution) for all or any portion of the Collateral and, in connection therewith, to have Collateral consisting of securities released from the pledge established hereby, so long as the total value of the Collateral released (based on the Collateral Value as of the date of the release) equals the amount of substituted cash. 7. Disposition of Collateral. (a) Promptly, but in no event later than five (5) days, after the First Release Date, the Second Release Date, and any Interim Release Date (as defined below), Pledgee shall distribute to Pledgor that portion of the Collateral, if any, determined as respectively set forth in clauses (i), (ii) and (iii) below; provided that if the Collateral is comprised of different types of property, Pledgee shall release whatever mix of property comprising the Collateral that it elects. (i) The value of Collateral, if any, to be released on the First Release Date shall be equal to "x" where "x" is calculated as follows: x = [(0.5)(Collateral Value at the First Release Date)] - (Reserve at the First Release Date) (ii) The value of Collateral to be released on the Second Release Date, if any, shall be equal to "y" where "y" is calculated as follows: y = [(1.0)(Collateral Value at the Second Release Date)] - (Reserve at the Second Release Date) -4- (iii) On any date (an "Interim Release Date") after the First Release Date on which Pledgee determines that the Reserve has decreased since Pledgee's most recent release of Collateral, or, if no such release has occurred, since the First Release Date, Pledgee shall release Collateral with a value equal to "z" where "z" is calculated as follows: z = (Reserve at the time of the most recent - (Reserve at such Interim release, or, if no such release has Release Date) occurred, at the First Release Date) provided; however, that "z" will be capped such that, prior to the Second Release Date, Pledgee shall always be entitled to hold Collateral with a value equal to [(0.5)(Collateral Value at the First Release Date)] + (Reserve at such Interim Release Date), and on or after the Second Release Date, Pledgee shall be entitled to hold Collateral with a value equal to the Reserve at such Interim Release Date until such claim becomes a Liquidated Claim. (b) This Agreement shall terminate on the later of the Second Release Date or the first day after the Second Release Date when all releases of Collateral to which Pledgor has become entitled pursuant to Section 7(a) have been made and either (i) the Reserve on such day is equal to zero, or (ii) the Collateral Value on such day is equal to zero (the "Termination Date"). Any remaining Collateral at the Termination Date shall be promptly released to Pledgor (the "Termination Date Release"). 8. Further Assurances. Pledgor agrees to cooperate with Pledgee and to execute and deliver, or cause to be executed and delivered, all such other instruments and to take all such actions as Pledgee may reasonably request from time to time which shall be appropriate or necessary in Pledgee's judgment in order to carry out the provisions and purposes of this Agreement. 9. Miscellaneous. (a) Indulgences, Etc. Neither the failure nor any delay on the part of Pledgee to exercise any right, remedy, power or privilege under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any right, remedy, power or privilege preclude any other or further exercise of the same or of any other right, remedy, power or privilege, nor shall any waiver of any right, remedy, power or privilege with respect to any occurrence be construed as a waiver of such right, remedy, power or privilege with respect to any other occurrence. No waiver shall be effective unless it is in writing and signed by the party asserted to have granted such waiver. -5- (b) Controlling Law. This Agreement and all questions relating to its validity, interpretation, performance and enforcement (including, without limitation, provisions concerning limitations of actions), shall be governed by and construed in accordance with the laws of the State of Delaware, notwithstanding any conflict-of-laws doctrines of such state or other jurisdiction to the contrary, and without the aid of any canon, custom or rule of law requiring construction against the draftsman. (c) Notices. All notices required or permitted hereunder shall be deemed given when delivered (personally or by recognized courier service such as Federal Express), or upon receipt by the party entitled to receive the notice two days after being sent by registered or certified mail, postage prepaid, addressed as follows or to such other address or addresses as may hereafter be furnished in writing by notice similarly given by one party to the other: (i) If to Pledgor: 131 Jericho Turnpike Jericho, New York 11753 Attention: Donald E. Axinn With a copy to: Lazer, Aptheker, Feldman, Rosella & Yedid, LLP Melville Law Center 225 Old Country Road Melville, NY 11747-2712 Attention: Steven B. Aptheker, Esquire (ii) If to Pledgee: Brandywine Operating Partnership, L.P. 16 Campus Boulevard, Suite 150 Newtown Square, PA 19073 Attention: Gerard H. Sweeney, President and Chief Executive Officer With a copy to: Brandywine Realty Trust 16 Campus Boulevard, Suite 150 Newtown Square, PA 19073 Attention: Brad A. Molotsky, Esquire General Counsel -6- (d) Binding Nature of Agreement; No Assignment. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. (e) Settlement of Disputes. Any and all controversies of every kind and nature between the parties hereto shall be resolved in accordance with the provisions set forth in Section 29(b) of the Contribution Agreement. (f) No Limitation. This Agreement and the security arrangements established hereby shall not limit any recourse Pledgee may have under any agreements entered into with Pledgor or Pledgor's affiliates or any other party to the Contribution Agreement. (g) Provisions Separable. The provisions of this Agreement are independent of and separable from each other, and no provision shall be affected or rendered invalid or unenforceable by virtue of the fact that for any reason any other or others of them may be invalid or unenforceable in whole or in part. (h) Entire Agreement. This Agreement, together with the Contribution Agreement, contains the entire understanding among the parties hereto with respect to the subject matter hereof, and supersedes all prior and contemporaneous agreements and understandings, inducements or conditions, express or implied, oral or written, except as herein contained. The express terms hereof control and supersede any course or performance and/or usage of the trade inconsistent with any of the terms hereof. This Agreement may not be modified or amended other than by agreement in writing. (i) Section Headings. The section headings in this Agreement are for convenience only; they form no part of this Agreement and shall not affect its interpretation. -7- (j) Execution in Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original as against any party whose signature appears thereon, and all of such shall together constitute one and the same instrument. This Agreement shall become binding when one or more counterparts hereof, individually or taken together, shall bear the signatures of all of the parties reflected hereon as the signatories. Execution of this Agreement may be delivered by fax transmission. -8- IN WITNESS WHEREOF, the undersigned have caused this Agreement to be duly executed and delivered as of the date first above written. PLEDGEE BRANDYWINE OPERATING PARTNERSHIP, L.P. By: BRANDYWINE REALTY TRUST, its sole general partner By:_________________________________ Name: Title: PLEDGOR --------------------------------- Donald E. Axinn -9- EX-10 7 EXHIBIT 10.6 FOURTH AMENDMENT TO AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF BRANDYWINE OPERATING PARTNERSHIP, L.P. THIS FOURTH AMENDMENT, dated as of ________, 1998 (the "Amendment"), further amends the Amended and Restated Agreement of Limited Partnership Agreement (as amended to date, the "Partnership Agreement") of BRANDYWINE OPERATING PARTNERSHIP, L.P., a Delaware limited partnership (the "Partnership"). Capitalized terms used herein but not defined herein shall have the meanings given such terms in the Partnership Agreement. BACKGROUND A. Pursuant to the Partnership Agreement, Brandywine Realty Trust (the "General Partner"), as the general partner of the Partnership, has the power and authority to issue additional Partnership Interests to persons on such terms and conditions as the General Partner may deem appropriate. B. The General Partner, pursuant to the exercise of such power and authority and in accordance with the Partnership Agreement, has determined to execute this Amendment to the Partnership Agreement to evidence the issuance of additional Partnership Interests and the admission of the other signatories hereto as Limited Partners of the Partnership in exchange for certain contributions of interests in real estate and real estate related assets that are being made to the Partnership on the date hereof pursuant to a "contribution" agreement (relating to properties owned by persons and entities that include Donald E. Axinn and affiliates) among the Partnership and the other signatories thereto. NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained and other good and valuable consideration, the receipt, adequacy and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, hereby amend the Partnership Agreement as follows: 1. The Partnership Agreement is hereby amended to reflect the admission as a Limited Partner on the date hereof of the Persons set forth on Schedule A attached hereto (the "Admitted Partners") and the ownership by such Persons of the number of Class A Units listed opposite each Person's name on Schedule A. Attached as Schedule B is a list of the Partners of the Partnership prior to the admission of the Admitted Partners, together with the number and class of Partnership Interests owned by such partners. 2. The Partnership Interests issued hereby shall constitute Class A Units; provided that any distribution to be received by the Admitted Partners on the Class A Units issued to them on the date hereof on account of the fiscal quarter in which they are admitted to the Partnership shall be -1- pro-rated to reflect the portion of the fiscal quarter of the Partnership for which the Admitted Partners held such Class A Units and shall not be pro-rata in accordance with their then Percentage Interests; provided further that the Redemption Right granted to holders of Class A Units in Article XV of the Partnership Agreement shall not be exercisable by the holders of the Class A Units issued on the date hereof to the Admitted Partners until the first anniversary of the date hereof, except that (i) if the holder of any such Class A Units dies, such holder's estate shall thereupon be permitted to exercise the Redemption Right with respect to all of such Class A Units held by it notwithstanding the foregoing restriction and (ii) if a Change of Control (as defined below) of the General Partner occurs, the foregoing restriction on exercise of the Redemption Right shall automatically terminate with respect to all of such Class A Units. Notwithstanding anything contained in the Partnership Agreement or this Amendment, if the holder of Class A Units exercises its Redemption Right and the General Partner or the holder reasonably believes that the issuance of Common Shares in satisfaction of the Redemption Right would require a notification and filing under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), the obligation of the Partnership and the General Partner to satisfy the Redemption Right may be suspended until applicable filings with the Federal Trade Commission and the Antitrust Division of the Department of Justice have been made and the applicable waiting periods have expired. The General Partner agrees to use commercially reasonable efforts to make any requisite filings under the HSR Act in order to promptly obtain expiration of the applicable waiting periods, and the Partnership and the applicable holder of Class A Units shall split equally any filing fees that may be payable under the HSR Act. 3. As used herein, the term "Change of Control" shall mean Change of Control" means: (i) the acquisition in one or more transactions by any "Person" (as the term person is used for purposes of Sections 13(d) or 14(d) of the Exchange Act) of "Beneficial ownership" (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of twenty-five percent (25%) or more of the combined voting power of the General Partner's then outstanding voting securities (the "Voting Securities"), provided that for purposes of this clause (i) Voting Securities acquired directly from the General Partner by any Person shall be excluded from the determination of such Person's Beneficial ownership of Voting Securities (but such Voting Securities shall be included in the calculation of the total number of Voting Securities then outstanding); or (ii) approval by shareholders of the General Partner of: -2- (A) a merger, reorganization or consolidation involving the General Partner if the shareholders of the General Partner immediately before such merger, reorganization or consolidation do not or will not own directly or indirectly immediately following such merger, reorganization or consolidation, more than fifty percent (50%) of the combined voting power of the outstanding voting securities of the General Partner resulting from or surviving such merger, reorganization or consolidation in substantially the same proportion as their ownership of the Voting Securities outstanding immediately before such merger, reorganization or consolidation; or (B) a complete liquidation or dissolution of the General Partner; or (C) an agreement for the sale or other disposition of all or substantially all of the assets of the General Partner; or (iii) acceptance by shareholders of the General Partner of shares in a share exchange if the shareholders of the General Partner immediately before such share exchange do not or will not own directly or indirectly immediately following such share exchange more than fifty percent (50%) of the combined voting power of the outstanding voting securities of the entity resulting from or surviving such share exchange in substantially the same proportion as their ownership of the Voting Securities outstanding immediately before such share exchange. 4. By execution of this Amendment to the Partnership Agreement by the General Partner, the Admitted Partners agree to be bound by each and every term of the Partnership Agreement as amended from time to time in accordance with the terms of the Partnership Agreement. The General Partner confirms that the provisions in Section 18.1(a) of the Partnership Agreement shall apply to the Admitted Partners notwithstanding Section 18.7 of the Partnership Agreement. 5. On the date of this Amendment, each of the Admitted Partners shall execute and deliver to Brandywine Realty Trust an Irrevocable Proxy coupled with an Interest in the form set forth on Exhibit 1 hereto attached. 6. Except as expressly set forth in this Amendment to the Partnership Agreement, the Partnership Agreement is hereby ratified and confirmed in each and every respect. -3- IN WITNESS WHEREOF, this Amendment to the Partnership Agreement has been executed and delivered as of the date first above written. GENERAL PARTNER: BRANDYWINE REALTY TRUST By: ________________________ Its: President and Chief Executive Officer ADMITTED PARTNERS: ---------------------------------------- Donald E. Axinn ---------------------------------------- [ ] ---------------------------------------- [ ] ---------------------------------------- [ ] -4- SCHEDULE "A" NUMBER OF ADMITTED PARTNERSHIP PARTNERS INTERESTS -------- ----------- SCHEDULE "B" BRANDYWINE OPERATING PARTNERSHIP, L.P. OUTSTANDING PARTNERSHIP INTERESTS AS OF ________, 1998 NUMBER OF PARTNERSHIP INTERESTS LIMITED PARTNERS (ALL CLASS A UNITS) - ---------------- ------------------- The Nichols Company 2,742 Brian F. Belcher 7,245 Jack R. Loew 1,245 Craig C. Hough 1,245 Werner A. Fricker 6,830 R. Randle Scarborough 59,578 M. Sean Scarborough 60,576 Steven L. Shapiro 1,902 Robert K. Scarborough 215,384 Raymond J. Perkins 2,536 Brandywine Holdings I, Inc. 5 Brandywine Realty Trust 467,220 NUMBER OF PARTNERSHIP INTERESTS GENERAL PARTNER (ALL GP UNITS) - --------------- -------------- Brandywine Realty Trust [37,636,457] IRREVOCABLE PROXY COUPLED WITH AN INTEREST KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby irrevocably constitutes and appoints the General Partner, any Liquidating Trustee, and authorized officers and attorneys-in-fact of each, and each of those acting singly, in each case with full power of substitution, as its true and lawful agent and attorney-in-fact, with full power and authority in its name, place and stead to: execute, swear to, acknowledge, deliver, file and record in the appropriate public offices (i) all certificates, documents and other instruments (including, without limitation, this Agreement and the Certificate and all amendments or restatements thereof) that the General Partner or the Liquidating Trustee deems appropriate or necessary to form, qualify or continue the existence or qualification of the Partnership as a limited partnership (or a partnership in which the limited partners have limited liability) in the State of Delaware and in all other jurisdictions in which the Partnership may conduct business or own property; (ii) all instruments that the General Partner deems appropriate or necessary to reflect any amendment, change, modification or restatement of this Agreement in accordance with the terms of this Agreement; (iii) all conveyances and other instruments or documents that the General Partner deems appropriate or necessary to reflect the dissolution and liquidation of the Partnership pursuant to the terms of this Agreement, including, without limitation, a certificate of cancellation; and (iv) all instruments relating to the admission, withdrawal, removal or substitution of any Partner pursuant to the provisions of this Agreement, or the Capital Contribution of any Partner. The foregoing power of attorney is irrevocable and a power coupled with an interest, in recognition of the fact that each of the Partners will be relying upon the power of the General Partner to act as contemplated by this Agreement in any filing or other action by it on behalf of the Partnership, and it shall survive the death, incapacity or incompetency of a Limited Partner to the effect and extent permitted by law and the Transfer of all or any portion of such Limited Partner's Partnership Units and shall extend to such Limited Partner's heirs, distributees, successors, assigns and personal representatives. IN WITNESS WHEREOF, the undersigned has executed and delivered this Proxy on this ____ day of _________________, 1998. ------------------------- Donald E. Axinn IRREVOCABLE PROXY COUPLED WITH AN INTEREST KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby irrevocably constitutes and appoints the General Partner, any Liquidating Trustee, and authorized officers and attorneys-in-fact of each, and each of those acting singly, in each case with full power of substitution, as its true and lawful agent and attorney-in-fact, with full power and authority in its name, place and stead to: execute, swear to, acknowledge, deliver, file and record in the appropriate public offices (i) all certificates, documents and other instruments (including, without limitation, this Agreement and the Certificate and all amendments or restatements thereof) that the General Partner or the Liquidating Trustee deems appropriate or necessary to form, qualify or continue the existence or qualification of the Partnership as a limited partnership (or a partnership in which the limited partners have limited liability) in the State of Delaware and in all other jurisdictions in which the Partnership may conduct business or own property; (ii) all instruments that the General Partner deems appropriate or necessary to reflect any amendment, change, modification or restatement of this Agreement in accordance with the terms of this Agreement; (iii) all conveyances and other instruments or documents that the General Partner deems appropriate or necessary to reflect the dissolution and liquidation of the Partnership pursuant to the terms of this Agreement, including, without limitation, a certificate of cancellation; and (iv) all instruments relating to the admission, withdrawal, removal or substitution of any Partner pursuant to the provisions of this Agreement, or the Capital Contribution of any Partner. The foregoing power of attorney is irrevocable and a power coupled with an interest, in recognition of the fact that each of the Partners will be relying upon the power of the General Partner to act as contemplated by this Agreement in any filing or other action by it on behalf of the Partnership, and it shall survive the death, incapacity or incompetency of a Limited Partner to the effect and extent permitted by law and the Transfer of all or any portion of such Limited Partner's Partnership Units and shall extend to such Limited Partner's heirs, distributees, successors, assigns and personal representatives. IN WITNESS WHEREOF, the undersigned has executed and delivered this Proxy on this ____ day of _________________, 1998. -------------------------------------- [ ] IRREVOCABLE PROXY COUPLED WITH AN INTEREST KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby irrevocably constitutes and appoints the General Partner, any Liquidating Trustee, and authorized officers and attorneys-in-fact of each, and each of those acting singly, in each case with full power of substitution, as its true and lawful agent and attorney-in-fact, with full power and authority in its name, place and stead to: execute, swear to, acknowledge, deliver, file and record in the appropriate public offices (i) all certificates, documents and other instruments (including, without limitation, this Agreement and the Certificate and all amendments or restatements thereof) that the General Partner or the Liquidating Trustee deems appropriate or necessary to form, qualify or continue the existence or qualification of the Partnership as a limited partnership (or a partnership in which the limited partners have limited liability) in the State of Delaware and in all other jurisdictions in which the Partnership may conduct business or own property; (ii) all instruments that the General Partner deems appropriate or necessary to reflect any amendment, change, modification or restatement of this Agreement in accordance with the terms of this Agreement; (iii) all conveyances and other instruments or documents that the General Partner deems appropriate or necessary to reflect the dissolution and liquidation of the Partnership pursuant to the terms of this Agreement, including, without limitation, a certificate of cancellation; and (iv) all instruments relating to the admission, withdrawal, removal or substitution of any Partner pursuant to the provisions of this Agreement, or the Capital Contribution of any Partner. The foregoing power of attorney is irrevocable and a power coupled with an interest, in recognition of the fact that each of the Partners will be relying upon the power of the General Partner to act as contemplated by this Agreement in any filing or other action by it on behalf of the Partnership, and it shall survive the death, incapacity or incompetency of a Limited Partner to the effect and extent permitted by law and the Transfer of all or any portion of such Limited Partner's Partnership Units and shall extend to such Limited Partner's heirs, distributees, successors, assigns and personal representatives. IN WITNESS WHEREOF, the undersigned has executed and delivered this Proxy on this ____ day of _________________, 1998. --------------------------------------- [ ] IRREVOCABLE PROXY COUPLED WITH AN INTEREST KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby irrevocably constitutes and appoints the General Partner, any Liquidating Trustee, and authorized officers and attorneys-in-fact of each, and each of those acting singly, in each case with full power of substitution, as its true and lawful agent and attorney-in-fact, with full power and authority in its name, place and stead to: execute, swear to, acknowledge, deliver, file and record in the appropriate public offices (i) all certificates, documents and other instruments (including, without limitation, this Agreement and the Certificate and all amendments or restatements thereof) that the General Partner or the Liquidating Trustee deems appropriate or necessary to form, qualify or continue the existence or qualification of the Partnership as a limited partnership (or a partnership in which the limited partners have limited liability) in the State of Delaware and in all other jurisdictions in which the Partnership may conduct business or own property; (ii) all instruments that the General Partner deems appropriate or necessary to reflect any amendment, change, modification or restatement of this Agreement in accordance with the terms of this Agreement; (iii) all conveyances and other instruments or documents that the General Partner deems appropriate or necessary to reflect the dissolution and liquidation of the Partnership pursuant to the terms of this Agreement, including, without limitation, a certificate of cancellation; and (iv) all instruments relating to the admission, withdrawal, removal or substitution of any Partner pursuant to the provisions of this Agreement, or the Capital Contribution of any Partner. The foregoing power of attorney is irrevocable and a power coupled with an interest, in recognition of the fact that each of the Partners will be relying upon the power of the General Partner to act as contemplated by this Agreement in any filing or other action by it on behalf of the Partnership, and it shall survive the death, incapacity or incompetency of a Limited Partner to the effect and extent permitted by law and the Transfer of all or any portion of such Limited Partner's Partnership Units and shall extend to such Limited Partner's heirs, distributees, successors, assigns and personal representatives. IN WITNESS WHEREOF, the undersigned has executed and delivered this Proxy on this ____ day of _________________, 1998. --------------------------------------- [ ] EX-23.1 8 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS Exhibit 23.1 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our report dated May 15, 1998, on the combined financial statement of revenue and certain expenses of The Axinn Properties for the year ended December 31, 1997, included in this Form 8-K, into the Company's previously filed Registration Statements on Form S-3 (File No. 333-20991, File No. 333-20999, File No. 333- 46647, File No. 333-53359 and File No. 333-56237) and Form S-8 (File No. 333-14243, File No. 333-28427 and File No. 333-52957) /s/ ARTHUR ANDERSEN LLP - ------------------------- Arthur Andersen LLP Philadelphia, PA., July 21, 1998 -----END PRIVACY-ENHANCED MESSAGE-----