AGREEMENT AND WAIVER
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AGREEMENT AND WAIVER (the "Waiver"), dated as of April 19,
1999, between Brandywine Realty Trust, a Maryland real estate investment trust
(the "Company"), and Five Arrows Realty Securities III L.L.C., a Delaware
limited liability company (the "Investor"). Terms used herein and not otherwise
defined herein shall have the meanings set forth in the Company's Declaration of
Trust, as amended through and on the date hereof (the "Declaration") and the
Articles Supplementary (the "Articles Supplementary") classifying 4,375,000
shares of the Company's 8.75% Series B Senior Cumulative Convertible Preferred
Shares of Beneficial Interest (the "Preferred Shares").
WHEREAS, the Company intends to issue and sell to the
Investor, and the Investor intends to purchase from the Company, the Preferred
Shares and a warrant (the "Warrant") to purchase 500,000 common shares of
beneficial interest of the Company ("Common Shares"), subject to adjustment in
the event of a stock dividend, stock split or similar subdivision of Common
Shares;
WHEREAS, the Declaration and the Articles Supplementary set
forth certain restrictions with respect to the ownership of the Company's shares
of beneficial interest ("Shares");
WHEREAS, the Company desires to waive certain of those
restrictions on the terms and conditions set forth in this Waiver; and
WHEREAS, the Company's Board of Trustees has approved the
provisions of this Waiver.
NOW, THEREFORE, in consideration of the foregoing and for
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties hereto hereby agree as follows:
1. Representations and Warranties of the Company. The Company
hereby represents and warrants to the Investor as follows:
(a) Except as set forth on Schedule 1(a) hereto, no
individual (as determined for purposes of Section 856(h) of
the Code but including "qualified trusts" (as defined in
Section 856(h)(3)(E) of the Code)), Beneficially Owns more
than 9.8% of the number of shares of each class of outstanding
Shares and, to the knowledge of the Company, no such
individual Beneficially Owns more than 5% of each such class.
(b) (i) Attached hereto as Exhibit A is a true and
complete list of the Tenants which have leases which provide
for the payment of annual "rents from real property" to the
Company (as such term is defined in Section 856(d) of the
Code, and giving effect to the provisions of Treasury
Regulation Section 1.856-3(g)) in an amount, determined solely
with reference to the amount required to be included in the
gross income of the Company for purposes of applying Section
856(c) of the Code, in excess of $500,000 annually (a "Major
Lease") (it being understood that at any time and from time to
time the Company may, subject to Section 3(b) hereof, notify
the Investor that there has been an addition to or a change in
Tenants and supply to the Investor a revised Exhibit A, which
shall become Exhibit A hereto as of and after the date of
receipt by the Investor of such revised Exhibit A), (ii) the
Company does not own, directly or indirectly (after applying
the constructive ownership rules of Section 856(d)(5) of the
Code) any stock or other equity interests in any such Tenant
(as determined for purposes of applying Section 856(d)(2)(B)
of the Code) (the representation in this clause (ii) is
sometimes hereinafter referred to as a "Tenant
Representation") and (iii) for purposes of Section 856(c)(2)
of the Code, at least 98% of the gross income of the Company
for the calendar year ending December 31, 1998 was derived
from the sources specified in Section 856(c)(2) of the Code
("Qualifying Income"). For purposes of this Agreement, the
term "Tenant" refers to any corporation, partnership, limited
liability company, joint venture, unincorporated organization,
estate, trust, or any other entity that pays or is expected to
pay "rents from real property" (as such term is defined in
Section 856(d) of the Code) to the Company or to any entity
all or part of the income of which would be attributed to the
Company for purposes of applying Sections 856(c)(2) and
856(c)(3) of the Code.
(c) Under current law, the only basis upon which the
Investor could cause the Company to fail to qualify as a REIT
solely by reason of the ownership by the Investor of the
Preferred Shares or Common Shares into which the Preferred
Shares have been converted (such Preferred Shares or Common
Shares, hereinafter, the "Subject Shares") or the Common
Shares which may be issued upon the exercise of the Warrant
(such Common Shares hereinafter, the "Additional Shares") (it
being understood that this representation does not apply to
any failure to qualify as a result of any action, inaction or
event, including but not limited to the provision of any
service or the institution of any legal proceeding, by any
person, including but not limited to the Investor, that could
affect the Company's status as a REIT), is by (i) the Investor
owning, actually or Beneficially, Shares to the extent that
such actual or Beneficial Ownership of Shares would result in
the Company being "closely-held" within the meaning of Section
856(h) of the Code or (ii) actual or constructive ownership of
an interest in the Company that, after application of the
constructive ownership rules of Section 856(d)(5) of the Code,
would result in the Company being deemed to own, after
application of such rules, an interest in a Tenant that would
cause the Company to own or be deemed to own, for purposes of
applying Section 856(d)(2)(B) of the Code, 10% or more of the
voting power or number of shares, or interests in assets or
net profits, as applicable, in such Tenant and the income
derived by the Company from such Tenants, when combined with
other income that is both (i) required to be taken into
account by the Company for purposes of applying Section 856(c)
of the Code and (ii) not described in Sections 856(c)(2)(A)
through (H) or Sections 856(c)(3)(A) through (I) of the Code,
as applicable, would cause the Company to fail to satisfy any
of the gross income requirements of Section 856(c) of the
Code.
2. Representations and Warranties of the Investor. The
Investor hereby represents and warrants to the Company as follows:
(a) Relying upon and assuming the accuracy of the
representations and warranties given by the Company set forth
in Section 1, the ownership by the Investor and The Public
Employees Retirement System of Ohio ("OPERS") of the Subject
Shares and/or the Additional Shares will not result in the
Company being "closely-held" within the meaning of Section
856(h) of the Code and will not result in the Company
otherwise failing to qualify as a REIT.
(b) Attached hereto as Exhibit B is a true and
complete list of the persons owning a capital or profits
interest in the Investor, the interest owned in the Investor
by each such person, the persons owning beneficial interests
in the entities (other than OPERS) owning a capital or profits
interest in the Investor and the interest owned by each such
person.
(c) OPERS is a "qualified trust" as that term is
defined in Section 856(h)(3)(E) of the Code except to the
extent that it not being a "qualified trust" would not result
in the Company being "closely-held" within the meaning of
Section 856(h) of the Code or would not result in the Company
otherwise failing to qualify as a REIT.
(d) The Investor and those persons owning a direct or
indirect interest in the Investor collectively own, directly
or indirectly, no more than 5% of the value of the Company,
not including the Subject Shares.
(e) No person has a beneficial interest in OPERS
(based on such person's actuarial interest in such trust, as
provided for in Section 856(h)(3)(A) of the Code) with a value
of more than 0.2% of the total value of all beneficial
interests in OPERS.
(f) (i) Except as notified to the Company by the
Investor pursuant to Section 4(b), the Investor directly owns
no stock or other equity interest in excess of 9.8% in a
Tenant identified on Exhibit A (as the same may be amended
from time to time), and (ii) except as notified to the Company
by the Investor pursuant to Section 4(b), no Person owns a
stock or other equity interest (as determined for purposes of
applying Section 856(d)(2)(B) of the Code) in a Tenant
identified on Exhibit A (as the same may be amended from time
to time) that would both (A) be attributable to the Investor
by operation of Section 318 of the Code, as modified by
Section 856(d)(5) of the Code and (B) result in the Investor
being deemed to own, pursuant to such section as so modified,
in excess of 9.8% of such stock or other equity interests in
such Tenant.
(g) For purposes of applying Section 856(h) of the
Code, no individual (as determined for purposes of applying
Section 856(h) but including "qualified trusts" other than
OPERS) is or will be deemed to own more than 0.2% of the value
or number, whichever is greater, of the outstanding Shares by
virtue of the Investor's or OPERS' ownership of the Subject
Shares and any Additional Shares, except for the direct or
indirect individual members of Rothschild Realty Investors II
L.L.C., no one of whom, following such acquisition, will be
deemed to own (for purposes of applying such section), more
than 9.8% of the value or the number, whichever is greater, of
the outstanding Shares.
3. Undertakings of the Company.
(a) Other than the waiver provided pursuant to this
Waiver, the Company will not hereafter grant any waiver of the
Ownership Limit in the Declaration or the Articles
Supplementary if such waiver would cause the Company to be
"closely-held" or a "pension-held REIT," both within the
meaning of Section 856(h) of the Code.
(b) Before the Company, or any entity, all or part of
the income of which would be attributed to the Company for
purposes of applying Sections 856(c)(2) and 856(c)(3) of the
Code, enters into a Major Lease, the Company will provide the
name of the proposed Tenant to the Investor and will represent
to the Investor the Tenant Representation contained in
1(b)(ii) hereof. The Company will not enter (or cause such
entity to enter) into such Major Lease unless the Investor
shall inform (or be treated as informing pursuant to Section
4(b) hereof) the Company that the Investor does not own and is
not deemed to own, for purposes of Section 856(d)(2)(B) of the
Code, more than a 9.8% interest in the proposed tenant.
(c) Except as provided in this Waiver, the Company
will not take any action or fail to take any reasonable action
that it knows (or reasonably should know) would reasonably be
expected to result in (other than (i) any action or failure to
take action required to preserve the Company's status as a
REIT or (ii) any action or failure to take action in reliance
upon the representations and warranties of the Investor in
Section 2 or the undertakings of the Investor in Section 4),
(x) the Investor owning, actually or Beneficially, Shares to
the extent that such actual or Beneficial Ownership of Shares
would result in the Company being "closely-held" within the
meaning of Section 856(h) of the Code or would result in the
Company otherwise failing to qualify as a REIT, in either case
solely by reason of the actual or Beneficial Ownership of the
Subject Shares and any Additional Shares by the Investor and
OPERS, or (y) less than 97% of the gross income of the Company
for any year (for purposes of Section 856(c)(2) of the Code)
being Qualifying Income (it being understood that, absent
actual knowledge to the contrary or the failure of the Company
to comply with Section 1(b) and 3(b) hereof, the Company shall
be entitled to assume for this purpose that the Company does
not own and is not deemed to own any interest in a Tenant
described in Section 856(d)(2)(B) by reason of the ownership
of the Subject Shares or any Additional Shares by the
Investor, OPERS or any transferee that executes a Successor
Waiver Agreement (as defined in Section 6)).
4. Undertakings of the Investor.
(a) The Investor and those persons identified on
Exhibit B or who, following the date hereof, acquire a direct
or indirect capital or profits interest in the Investor (the
"Investor Group") will not take any action or fail to take any
reasonable action that the Investor or any such Person knows
(or reasonably should know) would reasonably be expected to
cause: (i) the Investor to be an individual for purposes of
Section 542(a)(2) of the Code as modified by Section 856(h) of
the Code, (ii) OPERS to fail to qualify as a "qualified trust"
as that term is defined in Section 856(h)(3)(E) of the Code,
(iii) any individual (as determined for purposes of applying
Section 856(h) but including "qualified trusts" other than
OPERS), except for the direct or indirect individual members
of Rothschild Realty Investors II L.L.C., to be deemed to own
more than 0.2% of the value or number, whichever is greater,
of the outstanding Shares by virtue of the Investor's or
OPERS' ownership of the Subject Shares or any Additional
Shares, (iv) a direct or indirect individual member of
Rothschild Realty Investors II L.L.C. to be deemed to own (for
purposes of applying such section), more than 9.8% of the
value or number of shares, whichever is greater, of the
outstanding Shares, (v) any person to have a beneficial
interest in OPERS (based on such person's actuarial interest
in such trust, as provided in Section 856(h)(3)(A) of the
Code) with a value of more than 0.2% of the total value of all
beneficial interests in OPERS, (vi) except as notified to the
Company by the Investor pursuant to Section 4(b), the Investor
to directly acquire a stock or other equity interest in a
Tenant identified on Exhibit A (as the same may be amended
from time to time) following the date hereof in excess of 9.8%
of such stock or other equity interest in such Tenant, (vii)
except as notified to the Company by the Investor pursuant to
Section 4(b), any Person to acquire a stock or other equity
interest (as determined for purposes of applying Section
856(d)(2)(B) of the Code) in a Tenant identified on Exhibit A,
following the receipt of such Exhibit A (as the same may be
amended from time to time), that would both (A) result in the
Investor and the Company being deemed to own, by operation of
Section 318 of the Code, as modified by Section 856(d)(5) of
the Code, in excess of 9.8% of such stock or other equity
interests in such Tenant, and (B) result in the Company having
gross income for any year which is not Qualifying Income in
excess of 2% of the gross income of the Company (as determined
for purposes of Section 856(c)(2) of the Code) and (viii) the
Investor to own more than 25% of the value of the Company.
(b) The Investor shall inform the Company, (i) within
10 business days of receiving any notice from the Company set
forth in Section 3(b) hereof, if the Investor or any person
having a direct or indirect ownership interest in the Investor
owns or is deemed to own, for purposes of applying Section
856(d)(2)(B) of the Code, more than a 9.8% ownership interest
in such proposed Tenant and the nature of such ownership (any
such failure to notify the Company within such 10 business day
period will for all purposes be deemed to be an affirmative
statement by the Investor to the Company that neither the
Investor nor any person having a direct or indirect ownership
interest in the Investor owns or is deemed to own, for
purposes of applying such section, more than a 9.8% ownership
interest in such proposed Tenant), (ii) within 10 business
days of the end of each quarter of the Company's fiscal year,
if the Investor or any person having a direct or indirect
ownership interest in the Investor owns or is deemed to own,
for purposes of applying Section 856(d)(2)(B) of the Code,
more than a 9.8% ownership interest in any Tenant on Exhibit A
(as the same may be amended from time to time) and (iii)
within 10 business days of any reasonable request from the
Company, whether the level of ownership in any Tenant on
Exhibit A (as the same may be amended from time to time) by
the Investor or any person having a direct or indirect
ownership interest in the Investor exceeds 9.8% for purposes
of applying Section 856(d)(2)(B).
5. Waiver. On the basis of the accuracy of the representations
and warranties of the Investor contained in Section 2 and the undertakings in
Section 4, the Company, pursuant to subparagraph 6.6(k) of Article VI of the
Declaration, hereby exempts the Investor and its affiliates (as defined under
Rule 144 under the Securities Act of 1933, as amended ("Affiliates")) from the
restrictions on ownership of Shares set forth in the Declaration (the "Ownership
Restrictions"), including subparagraphs 6.6(b)(i) and (ii) of Article VI of the
Declaration; such exemption to be effective only to the extent it does not
result in any individual (as determined for purposes of Section 856(h) of the
Code but excluding OPERS and any qualified trusts as defined in Section
856(h)(3)(E) of the Code) Beneficially Owning more than 9.8% of the value or
number, whichever is greater, of the Company's outstanding Shares.
6. Transfer of Subject Shares. The provisions of this Section
6 apply in the event the Investor seeks to transfer Subject Shares, Additional
Shares and/or the Warrant in a manner that, but for this Section 6, would result
in a violation of the Ownership Restrictions.
(a) Subject to the provisions of this Section 6, the
Company hereby agrees to exempt from the Ownership
Restrictions any Person to whom the Investor seeks to transfer
Subject Shares, Additional Shares or the Warrant to the extent
necessary to enable the Investor to transfer ownership of
Subject Shares, Additional Shares or the Warrant to such other
Person. The agreement described in this paragraph (a) shall
not become effective until the expiration of the period ending
one year after the date hereof; provided, however, that an
exemption with respect to transfers to Affiliates of the
Investor shall be effective immediately.
(b) The agreement to exempt described in paragraph
(a) shall be conditioned on obtaining from the intended
transferee of the Subject Shares, Additional Shares or the
Warrant, as the case may be (the "Intended Transferee"),
representations and undertakings reasonably requested by the
Company in order to ensure that no individual (as determined
for purposes of Section 856(h) of the Code but excluding
"qualified trusts" as defined in Section 856(h)(3)(E) of the
Code) will Beneficially Own more than 9.8% of the value or
number, whichever is greater, of the outstanding Shares
following the Intended Transferee's acquisition of the Subject
Shares, Additional Shares and/or the Warrant. The parties
agree that the phrase "representations and undertakings
reasonably requested" includes, but is not limited to,
representations and undertakings similar to those set forth in
Section 2 and 4 hereof (but as modified by this Section 6).
Such representations and undertakings shall be included in an
agreement between the Company and the Intended Transferee
consistent with the terms of this Waiver (a "Successor Waiver
Agreement").
7. Violation.
(a) In the event of any breach of a representation or
warranty given by the Investor in Section 2 or a violation of
any of the undertakings set forth in Section 4 (other than as
a result of a breach by the Company of any of the
representations or warranties of the Company set forth in
Section 1 or a violation by the Company of any of the
undertakings of the Company set forth in Section 3), in
addition to all rights provided in this Waiver, in the
Declaration or the Articles Supplementary, or granted by law
(including recovery of damages), the Waiver set forth in
Section 5 hereof shall, to the extent reasonably determined by
the Board to be necessary in order for the Company to qualify
for taxation as a REIT, be void ab initio and shall result in
a conversion of all or a portion (as reasonably determined by
the Board to be necessary) of the Subject Shares and any
Additional Shares into Excess Shares or, if an IRS Ruling
Satisfactory to the Company has not been obtained, shall to
such extent cause the issuance or acquisition of all or a
portion of the Subject Shares and any Additional Shares to be
void ab initio, in either case to the same extent as if the
Waiver in Section 5 hereof had never been granted, and to be
subject to the ownership limits and related provisions set
forth in the Declaration and the Articles Supplementary.
(b) In addition to and not in limitation of the
provisions of paragraph (a), to the extent the Investor or
OPERS attempts to acquire Beneficial Ownership of Shares that
would result in any individual (other than OPERS or any other
"qualified trust") Beneficially Owning in excess of 9.8% of
the value or number, whichever is greater, of outstanding
Shares, such purported acquisition shall be void ab initio and
shall result in a conversion of such excess Shares into Excess
Shares, or if an IRS Ruling Satisfactory to the Company has
not been obtained, shall cause the issuance or acquisition of
such excess Shares to be void ab initio.
(c) In the event the Company breaches any of the
representations and warranties given by the Company in Section
1 or any of the undertakings in Section 3 and such breach
results in Subject Shares or Additional Shares being exchanged
for Excess Shares in accordance with subparagraph 6.6(c)(i) of
Article VI of the Declaration, the Investor shall be entitled
to exercise all rights provided herein or granted by law
(including recovery of damages) or in equity.
8. Change in Law. In the event that there is a change in law
or in the interpretation of the law of which the Company or the Investor has
knowledge that may cause or has caused any Subject Shares or Additional Shares
held by the Investor to be exchanged for Excess Shares or to be void ab initio,
the Company and the Investor shall communicate such knowledge to the other party
and shall use reasonable efforts (a) to prevent such occurrence or circumstance,
(b) to amend the documents and instruments with respect to the Subject Shares or
Additional Shares held by the Investor to mitigate the effect of such change
(provided, however, that in effecting such amendment, the Company shall in no
event be required to (i) materially disproportionately disadvantage any other
security holder of the Company, (ii) provide the Investor as a holder of the
Subject Shares and Additional Shares with better terms, on a whole, than existed
with respect to such Preferred Shares or Common Shares prior to such amendment
or (iii) repurchase any securities of the Company owned, directly or indirectly,
by the Investor), and (c) unless required by the Declaration or the Articles
Supplementary or in order to preserve the Company's status as a REIT, to not
disproportionately disadvantage the Investor with respect to other security
holders of the Company in determining, if the Company is permitted to make such
a determination, which Shares shall be void ab initio or exchanged for Excess
Shares or repurchased.
9. Assignment. Except to the extent provided herein, no party
hereto may assign (by operation of law or otherwise) either this Waiver or any
if its rights, interests, or obligations hereunder without the prior written
consent of the other party in its sole and absolute discretion.
10. Amendments. The provisions of this Waiver, including the
provisions of this sentence (but excluding Exhibit A, which may be amended in
accordance with Section 1), may not be amended, modified or supplemented, and
waivers or consents to departures from the provisions hereof may not be given,
unless each of the parties hereto consents in writing to such amendment,
modification, supplement or waiver. Each such consent or waiver shall be
effective only in the specific instance and for the specific purpose for which
given.
11. Notice. All notices hereunder shall be in writing and
shall be given: (a) if to the Company, at 00 Xxxxxx Xxxxxxxxx, Xxxxx 000,
Xxxxxxx Xxxxxx, Xxxxxxxxxxxx 00000, Attention: President and Chief Executive
Officer and General Counsel, or such other address or addresses of which the
Investor shall have been given notice, with copies to Xxxxxx Xxxxxxxx LLP, 3000
Two Xxxxx Square, Eighteenth and Arch Streets, Philadelphia, Pennsylvania
19103-2799, Attention: Xxxxxxx Xxxxxxxx, Esq., or such other address of which
the Investor shall have been given notice; and (b) if to the Investor, at
Rothschild Realty Inc., 0000 Xxxxxx xx xxx Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000,
Attn: X. Xxxx Xxxxxx, or such other address of which the Company shall have been
given notice, with copies to Xxxxxxx Xxxx & Xxxxx LLP, 000 Xxxxx Xxxxxx, Xxx
Xxxx, Xxx Xxxx 00000, Attn: Xxxx Xxxxxxxxxx, Esq., or such other address of
which the Company shall have been given notice. Any notice shall be deemed to
have been given if personally delivered or sent by United States mail or by
commercial courier or delivery service or by telegram or telex and shall be
deemed received, unless earlier received, (i) if sent by certified or registered
mail, return receipt requested, three business days after deposit in the mail,
postage prepaid, (ii) if sent by United States Express Mail or by commercial
courier or delivery service, one Business Day after delivery to a United States
Post Office of delivery service, postage prepaid, (iii) if sent by telegram,
telex or facsimile transmission, when receipt is acknowledged by answerback, and
(iv) if delivered by hand, on the date of receipt.
12. Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstance, is
held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions contained herein shall not be affected or impaired thereby.
13. Headings. The headings in this Waiver are for convenience
of reference only and shall not limit or otherwise affect the meaning hereof.
14. Governing Law. This Waiver shall be governed by and
construed in accordance with the laws of the State of Maryland as applied
between residents of that State entering into contracts wholly to be performed
in that State.
15. Counterparts. This Waiver may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
* * * * * *
IN WITNESS WHEREOF, the parties hereto have executed and
delivered this Waiver as of the date first written above.
BRANDYWINE REALTY TRUST,
a Maryland Real Estate Investment Trust
By:/s/ Xxxxxx X. Xxxxxxx
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Name: Xxxxxx X. Xxxxxxx
Title: President and Chief Executive Officer
FIVE ARROWS REALTY SECURITIES III L.L.C.,
a Delaware limited liability company
By: /s/ X. Xxxx Xxxxxx
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Name: X. Xxxx Aloian
Title: Manager
