-----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, JcD3wjdPyExrDADamTNvE/SYpbVb/ZVv8nup1Ff1LshziDVw6G0UtVr3H4D5Zp5V 6jLdtIPDzwpuIw6jeEBcvw== 0000950116-98-000735.txt : 19980401 0000950116-98-000735.hdr.sgml : 19980401 ACCESSION NUMBER: 0000950116-98-000735 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 16 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980331 SROS: NYSE 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: 10-K SEC ACT: SEC FILE NUMBER: 001-09106 FILM NUMBER: 98582232 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 10-K 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) (X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 (FEE REQUIRED) For the fiscal year ended December 31, 1997 ----------------- or ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 (NO FEE REQUIRED) For the transition period from __________________________ to ___________________ Commission file number 1-9106 ------ Brandywine Realty Trust - ------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Maryland 23-2413352 - ------------------------------- ----------------------------------- State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization 16 Campus Boulevard, Newtown Square, Pennsylvania 19073 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (610) 325-5600 -------------- Securities registered pursuant to Section 12(b) of the Act: Name of each exchange Title of each class on which registered ------------------- ------------------- Common Shares of Beneficial Interest, (par value $0.01 per share) New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: ________________________________________________________________________________ (Title of class) ________________________________________________________________________________ (Title of class) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] The aggregate market value of the voting shares held by non-affiliates of the registrant was approximately $864.0 million as of March 27, 1998. The aggregate market value has been computed by reference to the closing price at which the Common Shares of Beneficial Interest were sold on the New York Stock Exchange on such date. An aggregate of 37,426,000 Common Shares of Beneficial Interest were outstanding as of March 30, 1998. Documents Incorporated By Reference None -2- TABLE OF CONTENTS FORM 10-K
Page ---- PART I...................................................................................................4 Item 1. Business.................................................................................4 Item 2. Properties..............................................................................13 Item 3. Legal Proceedings.......................................................................25 Item 4. Submission of Matters to a Vote of Security Holders.....................................25 PART II.................................................................................................26 Item 5. Market for Registrant's Common Equity and Related Shareholder Matters...................26 Item 6. Selected Financial Data.................................................................27 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations...28 Item 7A. Quantitative and Qualitative Disclosure About Market Risk...............................32 Item 8. Financial Statements and Supplementary Data.............................................32 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure....32 PART III................................................................................................32 Item 10. Trustees and Executive Officers of the Registrant.......................................32 Item 11. Executive Compensation..................................................................35 Item 12. Security Ownership of Certain Beneficial Owners and Management..........................40 Item 13. Certain Relationships and Related Transactions..........................................42 PART IV.................................................................................................44 Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.........................44
-3- PART I Item 1. Business General Brandywine Realty Trust (collectively with its subsidiaries, the "Company") is a self-administered, self-managed and fully integrated real estate investment trust ("REIT") active in acquiring, developing, redeveloping, leasing and managing suburban office and industrial properties. As of December 31, 1997, the Company owned a portfolio of 95 office properties and 22 industrial facilities (the "Year-End Properties") that contained an aggregate of approximately 7.1 million net rentable square feet. As of December 31, 1997, the Year-End Properties (excluding two Year-End Properties under development or redevelopment) were approximately 91.2% leased to 688 tenants and had an average age of approximately 14 years. Between January 1, 1998 and March 15, 1998, the Company acquired 32 office properties and six industrial facilities and, as of March 15, 1998, the Company's portfolio contained 127 office properties and 28 industrial facilities (together with the Year-End Properties, the "Properties" ). As of March 15, 1998, the Properties were approximately 93.4% leased to 909 tenants and had an average age of approximately 15 years. As of March 15, 1998, 136 of the 155 Properties (approximately 81.4% of the Company's portfolio based on net rentable square feet) were located in the Suburban Philadelphia Office and Industrial Market. The term "Suburban Philadelphia Office and Industrial Market" or "Market" means the areas comprised of the following counties: Berks, Bucks, Chester, Delaware, Lehigh, Montgomery and Northampton in Pennsylvania and Burlington and Camden in New Jersey. The Properties consist primarily of Class A suburban office and industrial properties. The Company considers Class A suburban office and industrial properties to be those that have desirable locations, are well-maintained and professionally managed and have the potential of achieving rental and occupancy rates that are typically at or above those prevailing in their respective markets. Certain of the Properties serve as flex facilities, accommodating office use, warehouse space and research and development activities. As of December 31, 1997, 11 tenants individually represented more than 1.0% of the Company's aggregate Annualized Escalated Rent (as defined below) at the Year-End Properties. The Company's 10 largest tenants at December 31, 1997 accounted for approximately 21.1% of total Annualized Escalated Rent for the year ended December 31, 1997 and approximately 17.9% of the net rentable square feet at the Year-End Properties. As of March 15, 1998, the Company also owned, and held options to purchase, approximately 264.5 acres of undeveloped land directly, and owned or held options to purchase approximately 62 acres of undeveloped land through its economic interests in seven joint venture development entities (the "Development Entities"). The Company believes that this undeveloped land can accommodate development of at least 2.1 million net rentable square feet of office space and 340,000 net rentable square feet of industrial space. Two of the Development Entities are currently constructing two Class A suburban office properties which are scheduled for completion in 1998 and are expected to contain an aggregate of approximately 235,000 net rentable square feet. The Company's business objective is to increase cash available for distribution and to maximize shareholder value by: * maximizing cash flow through leasing strategies designed to capture potential rental growth as rental rates increase and as below-market leases are renewed; * ensuring a high tenant retention rate through an aggressive tenant services program responsive to the varying needs of the Company's diverse base of 909 tenants as of March 15, 1998; * broadening its geographic and economic diversification while maximizing economies of scale; * acquiring high-quality office and industrial properties and portfolios of such properties at attractive yields in selected submarkets within the Mid-Atlantic region (including Delaware, -4- Maryland, New Jersey, New York, Ohio, Pennsylvania, Virginia and the District of Columbia), which management expects will experience economic growth; * capitalizing on management's redevelopment expertise to selectively acquire, redevelop and reposition underperforming Properties in desirable locations; * acquiring land in anticipation of developing office or industrial properties on a build-to-suit basis, under circumstances where significant pre-leasing can be arranged or as otherwise warranted by market conditions; * enhancing the Company's investment strategy through the pursuit of joint venture opportunities with high quality partners having attractive real estate holdings or significant financial resources; and * optimizing the use of debt and equity financing to create a flexible and conservative capital structure that will enable the Company to continue its aggressive growth strategy. As a result of its business objective of increasing cash available for distribution and maximizing shareholder value, the Company has recently experienced rapid growth. Between January 1, 1997 and March 15, 1998, the Company has acquired 93 office properties containing approximately 6.7 million net rentable square feet and 25 industrial facilities containing approximately 1.7 million net rentable square feet and, together with the Development Entities, has acquired ownership of, or rights to acquire, approximately 326.5 acres of undeveloped land. The aggregate purchase price for the 118 Properties acquired by the Company since January 1, 1997 was approximately $738.8 million. The Company believes that, through the expertise and extensive relationships of its management and its flexible capital structure, it will continue to identify and capitalize on substantial opportunities for additional real estate investments from a variety of sources, including institutional and private holders of real estate seeking liquidity or reduction in their holdings or tax-deferred dispositions. The Company expects to continue to concentrate its real estate activities in submarkets within the Mid-Atlantic region where it believes that: (i) barriers to entry (such as zoning restrictions, infrastructure limitations and limited developable land) are likely to create supply constraints on office and industrial space; (ii) current market rents do not justify new construction; (iii) it can maximize market penetration by accumulating a critical mass of properties and thereby enhance operating efficiencies; and (iv) there is potential for economic growth. On November 25, 1996, the Company combined its common shares of beneficial interest, par value $.01 per share ("Common Shares") by means of a one-for-three reverse share split and all information contained herein has been adjusted to give effect to the reverse share split. On October 21, 1997, the Company changed the listing of its Common Shares from the American Stock Exchange to the New York Stock Exchange (the "NYSE"). The Company's executive offices are located at 16 Campus Boulevard, Newtown Square, Pennsylvania 19073 and its telephone number is (610) 325-5600. Organization The Company was organized and commenced its operations in 1986 as a finite life Maryland real estate investment trust. In October 1994, the Company's shareholders approved amendments to the Company's Declaration of Trust that eliminated the Company's finite life status. The Company owns its assets and conducts its operations through Brandywine Operating Partnership, L.P. (the "Operating Partnership") and subsidiaries of the Operating Partnership. As of December 31, 1997 and March 15, 1998, the Company's ownership interest in the Operating Partnership was approximately 97.2% and 98.8%, respectively. The structure of the Company as an "UPREIT" is designed to permit persons -5- contributing properties (or interests in properties) to the Company to defer some or all of the tax liability they might otherwise incur. The Company conducts its real estate management services through a management company (the "Management Company"). The Company, through its indirect ownership of preferred and common stock of the Management Company, is entitled to receive 95% of amounts paid as dividends by the Management Company. See "-- Management Company." Recent Acquisitions At December 31, 1997, the Company's portfolio consisted of 117 properties totaling approximately 7.1 million net rentable square feet compared to 37 properties containing approximately 2.0 million net rentable square feet at December 31, 1996 and four Properties containing approximately 254,000 net rentable square feet at December 31, 1995. Between January 1, 1998 and March 15, 1998, the Company acquired 32 office properties containing approximately 2.8 million net rentable square feet and six industrial properties containing approximately 413,000 net rentable square feet, for an aggregate purchase price of approximately $335.1 million. The 1998 acquisitions (net of approximately $2.8 million of the aggregate purchase price allocated to undeveloped land) had a weighted average purchase price of approximately $103 per square foot (approximately $113 per square foot for the office property acquisitions and approximately $37 per square foot for the industrial property acquisitions). The following table sets forth certain information regarding Property acquisitions completed between January 1, 1998 and March 15, 1998:
Percent Net Leased Purchase Number Rentable as of Purchase Price of Square March 15, Price Per Square Property Location Properties Feet 1998 (in 000's) Foot - -------------------------------------------------------- ------------- -------------- ------------ -------------- ----------- OFFICE PROPERTIES Pennsylvania Blue Bell / Plymouth Meeting / Fort Washington 1 48,122 100.0% $ 4,100 $ 85 Southern Bucks County 2 128,659 93.9% 11,234 87 Main Line 1 61,102 100.0% 8,338 136 King of Prussia / Valley Forge 13 916,904 100.0% 99,598 106(1) Reading / Allentown 2 95,805 91.5% 7,580 79 New Jersey Bergen County 2 483,189 85.5% 69,614 144 Delaware 8 596,132 94.3% 70,941 119 Ohio 1 156,175 100.0% 14,696 94 Maryland 2 329,008 94.4% 33,571 102 -- --------- ----- -------- ---- TOTAL - OFFICE PROPERTIES 32 2,815,096 88.1% $319,672 $113(1) -- --------- ----- -------- ---- INDUSTRIAL PROPERTIES Pennsylvania Southern Bucks County 1 78,213 100.0% $ 2,800 $360 King of Prussia / Valley Forge 5 334,835 92.7% 12,644 38 -- --------- ----- -------- ---- TOTAL - INDUSTRIAL PROPERTIES 6 413,048 94.1% $ 15,444 $ 37 -- --------- ----- -------- ---- TOTAL / WEIGHTED AVERAGE 38 3,228,144 88.8% $335,116 $103(1) == ========= ===== ======== ====
(1) Purchase price per square foot excludes $2,800,000, which is the cost of an acquired parcel of undeveloped land. -6- Equity Financings Since January 1, 1997, the Company has consummated seven underwritten public offerings pursuant to which the Company issued an aggregate of 28,056,350 Common Shares and raised aggregate net proceeds of approximately $594.8 million. The net proceeds from these financings, which the Company contributed to the Operating Partnership, were used: (i) to repay debt; (ii) to fund property acquisitions (iii) to fund capital contributions to the Development Entities; and (iv) for working capital purposes. On March 4, 1997, the Company consummated an underwritten public offering of 2,200,000 Common Shares at a price to the public of $20.62 per share. On March 17, 1997, the Company issued an additional 175,500 Common Shares pursuant to exercise by the underwriters of their over-allotment option. Proceeds to the Company were used to fund the purchase of additional properties, to repay indebtedness and for working capital purposes. On July 28, 1997, the Company consummated an underwritten public offering of 10,000,000 Common Shares at a price to the public of $20.75 per share. On August 20, 1997, the Company issued an additional 1,500,000 Common Shares pursuant to exercise by the underwriters of their over-allotment option. Proceeds to the Company were used to fund the purchase of additional properties, to repay indebtedness and for working capital purposes. On September 16, 1997, the Company consummated an underwritten public offering of 786,840 Common Shares at a price to the public of $22.31 per share. Proceeds to the Company were used to fund the purchase of additional properties and for working capital purposes. On December 23, 1997, the Company consummated an underwritten public offering of 751,269 Common Shares at a price to the public of $24.62 per share. Proceeds to the Company were used to repay indebtedness. On February 4, 1998, the Company consummated an underwritten public offering of 10,000,000 Common Shares at a price to the public of $24.00 per share. On March 6, 1998, the Company issued an additional 1,000,000 Common Shares pursuant to exercise by the underwriters of their over-allotment option. Proceeds to the Company were used to repay indebtedness and for working capital purposes. On February 18, 1998, the Company consummated an underwritten public offering of 1,012,820 Common Shares at a price to the public of $24.06 per share. Proceeds to the Company were used to repay indebtedness. On February 27, 1998, the Company consummated an underwritten public offering of 629,921 Common Shares at a price to the public of $23.81 per share. Proceeds to the Company were used to repay indebtedness. In addition, on December 11, 1997, the Operating Partnership issued 389,976 units of limited partnership interest ("Units"), which are redeemable for an equal number of Common Shares, as part of the acquisition price for a portfolio of 14 office and industrial properties. Credit Facility On January 5, 1998, the Company replaced its $150 million secured revolving credit facility (the "1997 Credit Facility") with a $300 million unsecured revolving credit facility (the "Credit Facility"). On March 15, 1998, the maximum amount available to be borrowed under the Credit Facility was increased from $300 million to $330 million. The Credit Facility enables the Company to borrow funds at an interest rate equal to the one, two, three or six month LIBOR, plus, in each case, a range of 100 to 137.5 basis points, depending on the Company's then existing leverage and debt rating. Alternatively, the Company can borrow funds at a Base Rate equal to the higher of (i) the Prime Rate or (ii) the Fed Funds Rate plus 50 basis points. As of March 15, 1998, approximately $158.3 million was outstanding under the Credit -7- Facility and such amounts bore interest at an average rate of 7.1% per annum. The Credit Facility matures on January 5, 2001 and is extendible to January 5, 2002 by the Company in the absence of default and upon payment of a fee. The Credit Facility requires the Company to maintain compliance with customary financial and other covenants, including leverage ratios based on gross implied asset value and debt service coverage ratios, limitations on additional indebtedness, liens and distributions and a minimum net worth requirement. A structuring fee equal to .15% of the maximum amount available under the Credit Facility and a commitment fee equal to .15% of the first $150,000,000 of availability under the Credit Facility plus .375% of the second $150,000,000 of availability under the Credit Facility were paid to the lender at the closing of the Credit Facility. In addition, an unused credit fee is payable at the end of each quarter with respect to the portion of the Credit Facility which is unutilized during such quarter. The fee is equal to .15% per annum if at least fifty percent of the available credit under the Credit Facility was utilized, based on daily averages, during such quarter and equal to .20% per annum if less than fifty percent of the available credit under the Credit Facility was utilized, based on daily averages, during such quarter. An annual fee in the amount of $25,000 is payable annually in advance to NationsBank, N.A. as compensation for administration of the Credit Facility. To facilitate certain 1998 property acquisitions, on January 5, 1998, the Company also obtained an additional unsecured credit facility (the "Additional Credit Facility") permitting advances of up to $100.0 million. The Additional Credit Facility bore interest at a per annum floating rate equal to the one month LIBOR plus 150 basis points and was scheduled to mature on May 5, 1998. The Company repaid all amounts outstanding under the Additional Credit Facility with proceeds of the February 4, 1998 offering of Common Shares. Management Company The Company conducts its real estate management services business through the Management Company. The Company manages, through the Management Company, certain of the Properties and additional properties on behalf of unaffiliated third parties. As of December 31, 1997, the Management Company was managing properties containing an aggregate of approximately 7.2 million net rentable square feet, of which approximately 7.1 million net rentable square feet related to Properties then owned by the Company or subject to purchase options held by the Company, and approximately 102,000 net rentable square feet related to properties owned by unaffiliated third parties. Through its ownership of 100% of the preferred stock and 5% of the common stock of the Management Company, the Operating Partnership is entitled to receive 95% of amounts paid as dividends by the Management Company. Industry Segments The Company operates in one industry segment. The Company does not have any foreign operations and its business is not seasonal. Competition The leasing of real estate is highly competitive. The Properties compete for tenants with similar properties located in its markets primarily on the basis of location, rent charged, services provided, and the design and condition of the improvements. The Company also faces competition when attempting to acquire real estate, including competition from domestic and foreign financial institutions, other REIT's, life insurance companies, pension trusts, trust funds, partnerships and individual investors. -8- Possible Environmental Liabilities Under various Federal, state and local laws, ordinances and regulations, a current or previous owner or operator of real estate may be required to investigate and clean up hazardous or toxic substances or releases at such property and may be held liable to a governmental entity or to third parties for property damage and for investigation and clean-up costs incurred by such parties in connection with contamination. The cost of investigation, remediation or removal of such substances may be substantial, and the presence of such substances, or the failure to properly remediate such substances, may adversely affect the owner's ability to sell or rent such property or to borrow using such property as collateral. In connection with the ownership (direct or indirect), operation, management and development of real properties, the Company may be considered an owner or operator of such properties or as having arranged for the disposal or treatment of hazardous or toxic substances and, therefore, potentially liable for removal or remediation costs, as well as certain other related costs, including governmental fines and injuries to persons and property. All of the Properties have been subject to a Phase I or similar environmental site assessment (which involves general inspections without soil sampling or groundwater analysis) completed by independent environmental consultants. Except as indicated below with respect to 110 Summit Drive at the Whitelands Business Park in Exton, Pennsylvania (the " Whitelands Property") and the Affected Properties at the Paint Works (as defined below), the Company is not aware of any environmental liability with respect to the Properties that the Company's management believes would have a material adverse effect on the Company. An environmental assessment has identified environmental contamination of potential concern with respect to the Whitelands Property. Petroleum products, solvents and heavy metals were detected in the groundwater. These contaminants are believed to be associated with debris deposited by third parties in a quarry formerly located on the Whitelands Property. The Whitelands Property previously appeared on the Comprehensive Environmental Response Compensation and Liability Information System List, a list maintained by the United States Environmental Protection Agency (the "EPA") of abandoned, inactive or uncontrolled hazardous waste sites which may require cleanup. The EPA conducted a preliminary assessment of the Whitelands Property in 1984, and subsequently the Whitelands Property was removed from the list. While the Company believes it is unlikely that it will be required to undertake remedial action with respect to such contamination, there can be no assurance in this regard. If the Company were required to undertake remedial action on the Whitelands Property, it has been indemnified through August 2001 against the cost of such remediation by Safeguard Scientifics, Inc. ("SSI") subject to a limitation of approximately $2.0 million. In the event SSI is unable to fulfill its obligations under its indemnity agreement or the Company is required to undertake remedial action after the expiration of the indemnity, the costs associated with any remediation could materially and adversely impact cash available for distribution to shareholders. Because the Company does not believe that any remediation at the Whitelands Property is probable, no amounts have been accrued for any such potential liability. An environmental assessment has identified environmental contamination at land acquired by the Company as part of its acquisition of certain Properties that include 6 East Clementon and 1, 4, 5, 7 and 10 Foster Avenue and an adjacent parking lot. These Properties (the "Affected Properties") and certain non-affected Properties are commonly referred to as the Paint Works Corporate Center ("Paint Works"). Volatile organic compounds, semi-volatile organic compounds and metals were detected in the groundwater, surface soils and sub-surface soils, principally on land acquired by the Company that is adjacent to the buildings located on the Affected Properties. These contaminants are associated with the use by prior owners and operators of the properties and are believed to be associated with the historic use of the Affected Properties as a paint and varnish factory since the mid-nineteenth century. The Affected Properties have been the subject of investigation by the New Jersey Department of Environmental Protection ("NJDEP") since the mid-1970's. The NJDEP has issued two directives to the former owners and operators of the site, ordering them to investigate and remediate the contamination at the site. The NJDEP has also entered into two administrative consent orders (the "ACO's") with Sherwin-Williams, the former owner and operator primarily responsible for the environmental contamination at the site, pursuant to which Sherwin-Williams has agreed to investigate and commence certain remediation. The NJDEP has provided written assurances to the Company that the NJDEP will not require the Company to investigate or -9- remediate the site so long as Sherwin-Williams continues to comply with the ACO's. In addition to the foregoing, the NJDEP has also issued a letter of non-applicability for the remainder of the Paint Works properties owned by the Company at the site. The Company has also been indemnified against Sherwin-Williams' failure to comply with the ACO's and from any migration of the aforesaid compounds onto the adjacent Company-owned properties which are not part of the Affected Properties by PWCCW, a New Jersey general partnership, and Robert K. Scarborough (collectively, "Scarborough"). In the event that Sherwin-Williams ceases to comply with the ACO's and Scarborough is unable to fulfill its obligations under its agreement with the Company, the Company could potentially be responsible for costs associated with any remediation. Because the Company does not believe that the occurrence of both of these events is probable, no amounts have been accrued for any such potential liability. No assurance can be given that existing environmental studies with respect to the Properties reveal all environmental liabilities or that any prior owner of any such property did not create any material environmental condition not known to the Company. Moreover, no assurance can be given that: (i) future laws, ordinances or regulations will not impose any material environmental liability on the Company, or (ii) the current environmental condition of the Properties will not be affected by tenants and occupants of the Properties, by the condition of properties in the vicinity of the Properties (such as the presence of underground storage tanks) or by third parties unrelated to the Company. Employees As of December 31, 1997, the Company employed 97 persons, including executive officers. Legal Proceedings The Company is not currently involved (nor was it involved at December 31, 1997) in any material legal proceedings nor, to the Company's knowledge, is any material legal proceeding currently threatened against the Company, other than routine litigation arising in the ordinary course of business, substantially all of which is expected to be covered by existing liability insurance. Mortgage and Other Debt Mortgage Indebtedness. The following table sets forth the Company's mortgage indebtedness outstanding at December 31, 1997. In addition to mortgage indebtedness listed below, on December 31, 1997, approximately $115.2 million was outstanding under the 1997 Credit Facility, which amounts were secured by cross-collateralized mortgages and assignments of rents on certain of the Properties. The 1997 Credit Facility was replaced with the Credit Facility (which is unsecured) on January 5, 1998. -10- Properties--Indebtedness
Principal Balance as of Interest Annual December 31, Rate at Debt 1997 December 31, Service Maturity Prepayment Property / Location (in 000's) 1997 (in 000's)(1) Date Premiums - ----------------------------------------------- --------------- --------------- -------------- ---------- -------------- Exton, PA 486 Thomas Jones Way (2) $ 6,279 8.00% $ 633 2/1998 None 468 Creamery Way(2) Horsham, PA Lot 17 & 18 - 655 Business Center Drive 369 0.00% - 3/1998 None Newtown Square, PA Lots 7,8 and 9 7/1998 to Newtown Square Business Campus 1,638 9.00% 4 2/1999 None Allentown, PA 7310 Tilghman Street 2,504 9.25% 257 3/2000 (5) 6575 Snowdrift Road 2,294 8.00% 232 2/1998 None Reading, PA Green Hills Corporate Center 1,500 5.00% 25 8/1998 to 8/2000 None Marlton, NJ One Greentree Centre (3) 7,138 7.56% 682 1/2002 (6) Two Greentree Centre (3) Three Greentree Centre (3) Cherry Hill, NJ 457 Haddonfield Road (4) 8,294 8.00% 815 1/1999 (7) 805 9.25% 74 1/1999 None Mt. Laurel, NJ 1120 Executive Plaza 5,922 9.875% 777 3/2002 (8) 1000 Howard Boulevard 5,784 9.25% 749 11/2004 (9) Raleigh, NC 5910 - 6090 Six Forks(3) 2,658 7.56% 254 1/2002 (10) -------- ------- Total Mortgage Indebtedness $ 45,185 $ 4,428 ======== =======
(1) "Annual Debt Service" is calculated for the twelve-month period ending December 31, 1997 and represents normal principal and interest amortization. For loans that bear interest at a variable rate, the rates in effect at December 31, 1997 have been assumed to remain constant. (2) Both of these Properties secure a single loan. (3) All of these Properties secure a single loan. (4) Pursuant to the terms of this loan, the Company has the right to borrow up to approximately $1.3 million to fund tenant improvements and leasing commissions and has a current outstanding balance of $805,000. (5) Two percent through December 31, 1998, which prepayment penalty is reduced by 1% in 1999. (6) This loan may not be prepaid unless the Six Forks loan is also prepaid. The prepayment penalty equals the greater of 1% of the principal amount prepaid or a yield maintenance premium. (7) One percent of the portion of the loan prepaid. (8) No prepayment is permitted until November, 1999, at which time the loan can be prepaid in full (but not in part) along with a penalty equal to the greater of 1% of the outstanding principal balance being prepaid or a yield maintenance premium. (9) No prepayment is permitted until March, 1999, at which time the loan can be prepaid in full (but not in part) along with a penalty equal to the greater of 1% of the outstanding principal balance being prepaid or a yield maintenance premium. (10) This loan may be prepaid without prepayment of the loan secured by One Greentree Centre, Two Greentree Centre and Three Greentree Centre, provided certain loan-to-value ratios and coverage tests with regard to the Greentree Centre loan are satisfied and upon payment of a premium equal to the greater of 1% of the principal balance being prepaid or a yield maintenance premium. Other Indebtedness. The Company incurred unsecured debt in the principal amount of $3.8 million on November 14, 1996 in connection with its acquisition of a property portfolio. The debt does not bear interest and is payable in two installments: $2.5 million on June 30, 1998 and $1.3 million on December 31, 1999. The Company recorded a $548,000 adjustment to the purchase price and a corresponding reduction in debt to reflect the fair value of the note payable to the seller and will accrue -11- interest expense to the date of maturity. The Company also maintains the Credit Facility. See "-- Credit Facility." Guaranties. As of March 15, 1998, the Company has guaranteed: (i) repayment of a $16.8 million construction loan made to a Development Entity; (ii) repayment of a $14.5 million construction loan made to a Development Entity (and has provided a $1.5 million letter of credit for the benefit of the construction lender); and (iii) repayment of a $500,000 loan made to a Development Entity. Payment under these guaranties would constitute loan obligations of, or preferred equity positions in, the applicable Development Entity in favor of the Company. -12- Item 2. Properties Properties As of December 31, 1997, the Company owned a portfolio of 95 office properties and 22 industrial facilities that contained an aggregate of approximately 7.1 million net rentable square feet. One hundred and eleven of the Year-End Properties (approximately 95% of the Company's December 31, 1997 portfolio based on net rentable square feet) were located in the Suburban Philadelphia Office and Industrial Market. As of December 31, 1997, the Year-End Properties (excluding two Year-End Properties under development or redevelopment) were approximately 91.2% leased to 688 tenants. The office Year-End Properties are primarily one to three story suburban office buildings containing an average of 61,000 net rentable square feet. The Company carries comprehensive liability, fire, extended coverage and rental loss insurance covering all of the Properties, with policy specifications and insured limits which the Company believes are adequate and appropriate under the circumstances. The following table sets forth certain information with respect to the Year-End Properties at December 31, 1997: -13-
Average Tenants Leasing 10% Total Base Rent Annualized or More of Rentable Net Percentage for the Twelve Rental Rate Square Footage per Rentable Leased as of Months Ended as of Property as of Year Square December December 31, December December 31, 1997 and Property Name Built Feet 31, 1997 (1) 1997 (2) (000's) 31, 1997 (3) Lease Expiration Date - -------------------------- -------------- ---------- ------------ ---------------- ------------ ----------------------- OFFICE PROPERTIES NORTHERN PHILADELPHIA SUBURBS Horsham/Willow Grove/ Jenkingtown, PA 700 Business Center Drive (4) 1986 82,009 99.2% $ 1,178 $ 14.83 Metpath (35%) -1/12 800 Business Center Drive (4) 1986 Macro (18%) - 4/01 Sprint (19%) - 4/01 Kelly Waldron (17%)-4/02 Advanta (10%) - 6/99 One Progress Avenue 1986 79,204 100.0% 782 9.80 Reed Technology (100%) - 6/11 500 Enterprise Road 1990 67,800 98.5% 718 14.44 Conti Mortgage (80%) - 4/01 Pioneer Technologies (19%) - 10/00 300 Welsh Road 1985 57,793 100.0% 138 16.78 American Meter Corporation (30%) - 9/99 Digital Cable Radio (18%) - 9/98 A.G. Edwards & Sons (14%) - 12/03 National Computer Systems (13%) - 8/00 Abington OB/GYN (11%) - 10/01 1155 Business Center Drive 1990 51,388 99.4% 669 20.24 IMS (79%) - 3/06 Motorola (16%) - 1/98 &2/99 650 Dresher Road 1984 30,138 100.0% 369 16.19 GMAC (100%) - 5/03 655 Business Center Drive 1997 30,000 72.1% 74 17.78 LD&B (50%) - 8/07 ------- ----- ----- ----- Paccar Financial (22%) - 6/02 398,332 97.4% 3,928 15.01 ------- ----- ----- ----- Blue Bell/Plymouth Meeting/ Fort Washington 501 Office Center Drive 1974 110,514 85.2% 346 16.96 Aetna Life Insurance (18%) - 12/97 500 Office Center Drive 1974 100,447 98.9% 371 17.42 Advanta (43%) - 9/98 Main Line Financial (15%) - 8/98 Flannigan, O'Hara & Gentry (11%) - 3/00 323 Norristown Road 1988 79,083 100.0% 943 16.45 Bisys (58%) - 7/02 Siemans Energy (20%) - 1/01 321 Norristown Road 1972 60,384 99.4% 646 17.38 Ecta Corporation (24%) - 12/97 Bisys (20%) - 7/02 Bradford White Corporation (19%) - 12/01 2240/50 Butler Pike 1984 52,183 99.4% 669 18.01 PNB/Corestates (58%) - 4/06 TWA Marketing (33%) - 10/99 220 Commerce Drive 1985 46,366 100.0% 115 16.12 U.S. Physicians, Inc. (29%) - 6/02 Temple University (25%) - 4/01 2260 Butler Pike 1984 31,892 100.0% 420 18.59 Information Resources (66%) - 12/00 Ostroff, Fair & Company (25%) - 7/04 120 West Germantown Pike 1984 30,546 100.0% 391 17.59 Clair Odell Insurance (82%) - 7/01 Kleinert's, Inc. (13%) - 10/01
-14-
Average Tenants Leasing 10% Total Base Rent Annualized or More of Rentable Net Percentage for the Twelve Rental Rate Square Footage per Rentable Leased as of Months Ended as of Property as of Year Square December December 31, December December 31, 1997 and Property Name Built Feet 31, 1997 (1) 1997 (2) (000's) 31, 1997 (3) Lease Expiration Date - -------------------------- -------------- ---------- ------------ ---------------- ------------ ----------------------- 140 West Germantown Pike 1984 25,947 98.7% 317 17.73 Healthcare Inc. (46%) -------- ----- ---- ------ - 9/99 Henkel (29%) - 6/98 National Health Equity (20%) - 5/99 537,362 96.6% 4,218 17.22 -------- ----- ---- ------ Southern Bucks County 3329 Street Road - Greenwood Square (4) 1985 165,929 76.4% 2,273 0.02 Nextel Communications (12%) - 7/02 3331 Street Road - Greenwood Square (4) 1986 3333 Street Road - Greenwood Square (4) 1988 2010 Cabot Boulevard 1985 53,421 85.7% 198 9.80 Computer Hardware Maintenance (42%) - 1/98 DiMark, Inc. (32%) - 9/99 Digital Descriptive Systems (11%) - 6/00 2000 Cabot Boulevard 1985 39,969 81.4% 187 10.48 Ecogen, Inc. (37%) - 3/00 Rom-Tec, Inc. (28%) - 9/02 Agietron Corporation (13%) - 1/98 3000 Cabot Boulevard 1986 34,640 90.3% 530 17.04 Geraghty & Miller (31%) - 4/98 Prudential Insurance (21%) - 7/98 Luigi Bormioli Company (11%) - 6/98 2260/70 Cabot Boulevard 1984 29,638 95.4% 255 12.60 Sager Electrical (14%) - 10/98 Manufacturers Survey (13%) - 12/01 Terminix International (13%) - 10/02 2005 Cabot Boulevard 1985 22,000 100.0% 131 10.84 Ecogen, Inc. (100%) --------- ----- ---- ------ - 3/00 345,597 82.9% 3,574 6.70 --------- ----- ---- ------ TOTAL NORTHERN PHILADELPHIA SUBURBS 1,281,291 93.1% 11,720 13.98 --------- ----- ---- ------ WESTERN PHILADELPHIA SUBURBS Southern Route 202 Corridor, PA 486 Thomas Jones Way 1990 51,500 80.5% 424 16.59 First American Real Estate (20%) - 12/99 Toshiba American Medical Systems (12%) - 6/02 Cape Environmental (12%) - 7/02 ICI America's Inc. (12%) - 11/00 855 Springdale Drive 1986 50,750 100.0% 444 14.75 Environmental Resources (100%) - 7/01 456 Creamery Way 1987 47,604 100.0% 355 7.36 Neutronics (100%) - 1/03 110 Summit Drive 1985 43,660 100.0% 298 11.13 Maris Equipment (49%) - 4/99 Pall Trincor (30 %) - 3/02 DGH Technology (12%) - 9/99 1336 Enterprise Drive 1989 38,470 100.0% 371 13.66 CFM Technologies Inc. (100%) - 11/00 468 Creamery Way 1990 28,934 100.0% 292 14.76 Franciscan Health Systems (82%) - 6/99 American Day Treatment (18%) - 6/00
-15-
Average Tenants Leasing 10% Total Base Rent Annualized or More of Rentable Net Percentage for the Twelve Rental Rate Square Footage per Rentable Leased as of Months Ended as of Property as of Year Square December December 31, December December 31, 1997 and Property Name Built Feet 31, 1997 (1) 1997 (2) (000's) 31, 1997 (3) Lease Expiration Date - -------------------------- -------------- ---------- ------------ ---------------- ------------ ----------------------- 748 Springdale Drive 1986 13,844 100.0% 122 15.90 Automated Financial Systems (68%) - 10/98 --------- ------- ------ ----- Chester County District Court (32%) - 1/99 274,762 96.3% 2,306 13.01 --------- ------- ------ ----- Main Line, PA 300 Berwyn Park 1989 107,919 100.0% 841 20.73 Delaware Valley Financial (53%) - 3/04 Vertex Inc. (13%) - 12/98 C.G.I. Systems, Inc. (11%) - 8/99 and 4/04 200 Berwyn Park 1987 76,065 100.0% 632 22.96 Devon Direct Mktg & Advert. (52%) - 12/01 VHA East Corporation (14%) - 11/99 Bucks Consultants (12%) - 8/01 16 Campus Boulevard 1990 65,463 100.0% 691 14.76 Creative Financial (49%) - 5/06 Atlantic E'ees Credit Union (35%) - 1/06 Brandywine Realty Trust (12%) - 3/01 1974 Sproul Road 1972 62,934 89.3% 428 14.53 Franklin Mint Credit Union (30%) - 5/02 Main Line Book Company (21%) - 12/98 TMR Inc. (11%) - 10/02 Allan Collautt Assoc. (10%) - 2/00 100 Berwyn Park 1986 58,612 96.4% 436 21.42 Shared Medical Systems (50%) - 3/98 and 3/02 Funds Associates, Ltd. (28%) - 10/02 18 Campus Boulevard 1990 37,700 83.0% 637 19.36 Devco Mutual (35%) - 1/98 --------- ------- ------ ----- EMAX Solution Partners (25%) - 6/01 Marshall Dennehey (17%) - 10/01 408,693 96.3% 3,665 19.27 --------- ------- ------ ----- King of Prussia / Valley Forge 7000 Geerdes Boulevard 1988 112,905 100.0% 859 12.55 Lockheed Martin Corp. (100%) - 12/98 1111 Old Eagle School Road 1962 107,000 100.0% 102 14.25 PECO (100%) -6/00 500 North Gulph Road 1979 92,851 99.9% 1,444 17.81 Transition Software (16%) --------- ------- ------ ----- - 9/00 Nason Cullen Group (15%) - 8/01 Strohl Systems (12%) - 10/99 312,756 100.0% 2,405 14.69 --------- ------- ------ ----- Bala Cynwyd 111 Presidential Boulevard 1974 173,079 98.4% 294 23.04 American Business Financial (22%) - 1/03 --------- ------- ------ ----- TOTAL WESTERN PHILADELPHIA SUBURBS 1,169,290 97.6% 8,670 17.13 --------- ------- ------ ----- READING / ALLENTOWN, PA 100-300 Gundy Drive 1970 443,165 80.5% 2,464 14.93 Parsons Corporation (45%) - 3/05 Penske Truck Leasing (25%) - 12/05 100 Katchel Blvd 1970 131,076 97.5% 1,139 19.82 Penske Truck Leasing (55%) - 12/05 UGI Utilities, Inc. (34%) - 3/03
-16-
Average Tenants Leasing 10% Total Base Rent Annualized or More of Rentable Net Percentage for the Twelve Rental Rate Square Footage per Rentable Leased as of Months Ended as of Property as of Year Square December December 31, December December 31, 1997 and Property Name Built Feet 31, 1997 (1) 1997 (2) (000's) 31, 1997 (3) Lease Expiration Date - -------------------------- -------------- ---------- ------------ ---------------- ------------ ----------------------- 6575 Snowdrift Road 1988 46,250 100.0% 331 9.78 Corning Packaging (100%) - 2/99 7248 Tilghman Street 1987 42,863 93.8% 439 15.43 Ohio Casualty (46%) - 7/01 IDS Financial (29%) - 7/01 Meridian Mortgage (12%) - 2/98 7310 Tilghman Street 1985 40,000 78.0% 356 11.96 AT & T Communications (60%) - 1/98 and 8/98 ------------ ------- ------- ------ Donnelley Directory (10%) - 7/99 703,354 85.6% 4,729 15.46 ------------ ------- ------- ------ SOUTHERN NEW JERSEY Burlington County 10000 Midlantic Drive 1990 175,573 88.6% 1,303 20.58 QAD, Inc. (35%) - 8/01 Deutsche Financial Services (13%) - 1/00 2000 Midlantic Drive 1989 121,658 84.9% 814 16.78 Lockheed Martin (47%) - 6/98, 5/99 and 10/04 Computer Associates Intl. (26%) - 12/02 Moore Business Forms (12%) - 4/00 1000 Howard Boulevard 1988 105,312 99.6% 1,952 21.01 Conrail (66%) - 6/00 Lincoln Technical (25%) - 5/07 1000 Atrium Way 1989 96,660 84.0% 317 17.53 IBM (18%) - 3/01 Navistar Financial (17%) - 12/99 Corporate Dynamics (14%) - 2/04 Janney, Montgomery, Scott (12%) - 9/02 Tri-Star Finance (10%) - 10/01 1120 Executive Boulevard 1987 95,124 94.4% 1,153 23.18 Computer Sciences (50%) - 5/02 Fleercorp (32%) - 4/00 15000 Midlantic Drive 1991 84,056 100.0% 722 17.86 New Jersey Bell (89%) - 7/06 Gallagher Bassett Services, Inc. (11%) - 11/02 Three Greentree Centre 1984 69,101 88.2% 1,009 16.55 Parker McCay (37%) - 5/01 Surety Title Company (15%) - 12/03 Eastern Mortgage Services (12%) - 7/00 Olde Discount (12%) - 3/00 9000 Midlantic Drive 1989 67,299 100.0% 405 17.65 Automotive Rentals (100%) - 8/00 4000/5000 West Lincoln Drive 1982 60,010 89.9% 489 13.47 Vitro Corporation (18%) - 5/01 1000/2000 West Lincoln Drive 1982 60,001 92.6% 513 13.42 Occupational Training (10%) - 7/02 Two Greentree Centre 1983 56,075 88.0% 834 18.31 Merrill Lynch (26%) - 12/98 and 11/05 Chubb Institute (10%) - 12/00 Medical Imaging Center (10 %) - 3/98 One Greentree Centre 1982 55,838 92.2% 838 17.52 American Executive Center (30%) - 1/06 Temple University (18%) - 12/97 West Jersey Health (15%) - 4/01 8000 Lincoln Drive 1983 54,923 100.0% 859 17.30 Computer Sciences (67%) - 11/01 Blue Cross (33%) - 5/07
-17-
Average Tenants Leasing 10% Total Base Rent Annualized or More of Rentable Net Percentage for the Twelve Rental Rate Square Footage per Rentable Leased as of Months Ended as of Property as of Year Square December December 31, December December 31, 1997 and Property Name Built Feet 31, 1997 (1) 1997 (2) (000's) 31, 1997 (3) Lease Expiration Date - -------------------------- -------------- ---------- ------------ ---------------- ------------ ----------------------- 4000 Midlantic Drive 1981 46,945 0.0% - Five Eves Drive 1986 45,889 65.1% 278 13.26 ADP Financial Information (36%) - 8/98 McCay Corporation (18%) - 10/00 9000 West Lincoln Drive 1983 43,719 88.7% 312 14.13 Counseeling Program (18%) - 1/00 Two Eves Drive 1987 37,517 95.0% 402 17.10 Basco Association (24%) - 2/01 Acceptance Risk Mgmt. (18%) - 4/00 3000 West Lincoln Drive 1982 36,070 86.1% 304 13.73 Abo, Uris & Allenburger (20%) - 1/99 Four B Eves Drive 1987 27,038 99.9% 268 15.14 ISO Commercial Risk (66%) - 6/00 Global Industries, Inc. (17%) - 8/00 Banc One Financial (16%) - 4/01 Four A Eves Drive 1987 24,631 80.8% 193 14.86 Advanced Systems (23%) --------- ------- ------- ---- - 4/99 Eastern American (18%) - 9/02 Benefit Resources (17%) - 2/99 HIP Health Plan of NJ (13%) - 6/99 Columbia Investment Builders (10%) - 1/01 1,363,439 87.6% 12,965 17.79 --------- ------- ------- ----- Camden County Main Street - Plaza 1000 1988 162,364 97.6% 2,249 18.07 Credit Lenders (16%) - 4/98 Dean Witter (11%) - 9/01 AMC (10%) - 12/99 457 Haddonfield Road 1990 121,737 82.9% 1,777 20.01 PHP Healthcare Corp. (31%) - 12/07 Dilworth Paxson (10%) - 5/04 One South Union Place(5) 1982 105,972 0.0% - 0.00 1007 Laurel Oak Road 1996 78,205 100.0% 35 7.94 R.F. Power (100%) - 10/06 6 East Clementon Road 1980 66,043 86.4% 52 16.74 West Jersey Health Systems (35%) - 6/98 and 3/01 Equifax Credit Info. Services (15%) - 12/99 Camden County Educational Serv. (13%) - 6/98 Premium Bank (12%) - 9/00 King & Harvard(5) 1974 65,223 13.6% 14 17.15 General Services Administration (14%) - 7/01 Main Street - Piazza 1990 41,400 100.0% 472 13.82 Cooper Hospital (41%) - 2/01 and 7/01 Lincoln Investments (20%) - 8/03 Chamber of Commerce (10%) - 8/01 South NJ Medical (10%) - 3/00 20 East Clementon Road 1986 40,755 75.7% 31 17.96 Serco, Inc. (15%) - 6/00 The State of NJ (GSA) (13%) - 8/07 MedQuist, Inc. (12%) - 4/98 Main Street - Promenade 1988 31,445 100.0% 317 12.70 West Jersey Hospital (25%) - 3/00 Morgenstern (14%) - 5/99 First Union (10%) - 2/99
-18-
Average Tenants Leasing 10% Total Base Rent Annualized or More of Rentable Net Percentage for the Twelve Rental Rate Square Footage per Rentable Leased as of Months Ended as of Property as of Year Square December December 31, December December 31, 1997 and Property Name Built Feet 31, 1997 (1) 1997 (2) (000's) 31, 1997 (3) Lease Expiration Date - -------------------------- -------------- ---------- ------------ ---------------- ------------ ----------------------- 7 Foster Avenue 1983 21,843 90.2% 17 15.41 West Jersey Health Systems (45%) - 8/98 Equifax Services, Inc. (35%) - 4/01 10 Foster Avenue 1983 18,941 98.5% 14 13.53 Dolphin, Inc. (35%) - 6/99 Ruttland Homes of New Jersey (29%) - 5/99 50 East Clementon Road 1986 3,080 100.0% 7 44.69 Corestates Financial Corp. (100%) - 10/02 5 Foster Avenue 1968 2,000 100.0% - 0.00 Police Station (100%) --------- ----- ----- ------ 759,008 93.7% 4,985 16.03 --------- ----- ----- ------ TOTAL SOUTHERN NEW JERSEY 2,122,447 89.0% 17,950 17.24 --------- ----- ----- ------ DELAWARE Northern Suburban Wimington One Righter Parkway(6) 1989 104,828 97.5% 2,315 19.43 Kimberly Clark (89%) - 12/05 100 Commerce Drive 1989 63,898 98.3% 252 13.71 The Travelers Bank (69%) - 12/01 ------- ----- ------ ------ Blaze Systems Corporation (12%) - 9/00 KCI Technologies (10%) - 6/00 TOTAL DELAWARE PROPERTIES 168,726 97.8% 2,567 17.25 --------- ----- ----- ------ OTHER MARKETS Twin Forks Office Park, Raleigh, NC 5910 -6090 Six Forks 1982 73,340 91.6% 954 15.19 Lawrenceville, NJ 168 Franklin Corner Drive 1976 32,000 55.8% 227 14.36 Pennsbury Family Medical (16%) - 7/98 Crawford & Company (14%) - 11/99 Atlantic County Dr. Belden (12%) - 5/01 500 Scarborough Drive 1987 44,750 66.4% 33 19.84 Raytheon Services Co. (16%) - 9/98 The Mitre Corporation (16%) - 12/00 NYMA, Inc. (13%) - 10/98 501 Scarborough Drive 1987 44,750 66.5% 51 16.74 Computer Sciences (34%) --------- ----- ----- ----- Lockheed Martin Corp. (33%) - 1/01 TOTAL - OFFICE PROPERTIES 5,639,948 91.1% 46,901 16.19 ========= ===== ====== =====
-19-
Average Tenants Leasing 10% Total Base Rent Annualized or More of Rentable Net Percentage for the Twelve Rental Rate Square Footage per Rentable Leased as of Months Ended as of Property as of Year Square December December 31, December December 31, 1997 and Property Name Built Feet 31, 1997 (1) 1997 (2) (000's) 31, 1997 (3) Lease Expiration Date - -------------------------- -------------- ---------- ------------ ---------------- ------------ ----------------------- INDUSTRIAL PROPERTIES NORTHERN PHILADELPHIA SUBURBS Southern Bucks County, PA 4667 Somerton Road (4) 1974 118,000 83.1% 522 5.16 American HomePatient Inc. (17%) - 10/99 BVI Industries, Inc. (17%) - 12/00 Brownell Electro, Inc. (14%) - 6/99 Carpet Transport, Inc. (14%) - 9/99 A.P. Green Refractories Co. (13%) - 12/01 2595 Metropolitan Drive (4) 1981 80,000 100.0% 7.35 Northtec LLC (100%) 6/06 2575 Metropolitan Drive (4) 1981 60,000 64.6% 3.99 Northtec LLC ( 65%) - 6/06 2560 Metropolitan Drive (4) 1983 70,000 81.7% 7.86 Picker International (48%) - 9/02 Delta Lighting Products, Inc. (19%) - 5/01 Precicontact, Inc. (15%) - 12/99 2535 Metropolitan Drive (4) 1974 42,000 100.0% 5.08 General Services Administration (100%) - 12/97 2520 Metropolitan Drive (4) 1981 37,000 100.0% 6.29 Bucks County Midweek, Inc. (40%) - 6/98 William Adams II, Inc. (30%) - 5/99 Philadelphia Newspapers, Inc. 17%) - 10/00 Stolarik Donohue Assoc. Inc. 14%) - 3/00 2510 Metropolitan Drive (4) 1981 40,000 100.0% 5.21 ACS Enterprises, Inc. (100%) - 6/99 2250 Cabot Boulevard 1982 40,000 100.0% 140 5.78 Bucks County Nut (100%) - 7/99 2200 Cabot Boulevard 1979 55,081 98.2% 240 6.84 Hussman Corporation (38%) ------- ---- --- ---- - 3/99 Nobel Printing Inks (36%) - 12/97 McCaffey Management (24%) - 8/00 TOTAL NORTHERN PHILADELPHIA SUBURBS 542,081 89.8% 902 6.06 ------- ---- --- ---- WESTERN PHILADELPHIA SUBURBS Lansdale, PA 1510 Gehman Road 1990 152,625 100.0% 719 6.92 Accupac, Inc. (65%) 1/01 Ford Electronics (35%) - 6/98 King of Prussia, PA 201/221 King Manor Drive 1964 124,960 100.0% 362 4.29 Reber - Friel Company (28%) - 6/01 ------- ---- --- ---- Country Fresh Batter (20%) - 9/03 Central Sprinkler (16%) - 4/99 Dillon Moving, Inc. (13%) - 6/99 TOTAL WESTERN PHILADELPHIA SUBURBS 277,585 100.0% 1,081 5.74 ------- ---- --- ----
-20-
Average Tenants Leasing 10% Total Base Rent Annualized or More of Rentable Net Percentage for the Twelve Rental Rate Square Footage per Rentable Leased as of Months Ended as of Property as of Year Square December December 31, December December 31, 1997 and Property Name Built Feet 31, 1997 (1) 1997 (2) (000's) 31, 1997 (3) Lease Expiration Date - -------------------------- -------------- ---------- ------------ ---------------- ------------ ----------------------- SOUTHERN NEW JERSEY Burlington County, NJ 500 Highland Drive 1990 127,340 100.0% 295 4.83 PFS - Pepsico (100%) - 12/99 300 Highland Drive 1990 126,905 100.0% 323 4.44 Walpole (40%) - 10/02 U.S. Postal Service (32%) - 4/09 Griffis Trucking , Inc. (16%) - 9/99 Faultless Casters Div., FKI (12%) - 5/00 400 Highland Drive 1990 68,660 100.0% 134 3.00 MBO Binder & Company (100%) - 1/02 600 Highland Drive 1990 65,862 82.5% 226 7.46 Excel Corporation (40%) - 7/01 Key Food Beverage (14%) - 9/02 Philadelphia Newspapers (12%) - 10/98 1000 East Lincoln Drive 1981 40,600 100.0% 7 3.45 Packquisition Corp. (75%) ------- ---- ----- ---- - 2/01 Allison Andrews Corporation (25%) - 10/99 429,367 97.3% 985 4.62 ------- ---- --- ---- Camden County, NJ 55 U.S. Avenue 1982 138,700 59.1% 32 7.63 Micro Warehouse, Inc. (59%) - 8/02 2 Foster Avenue 1974 50,761 94.6% 9 3.68 Harbor Laundry, Inc. (95%) - 8/00 1 Foster Avenue 1972 24,255 100.0% 6 4.32 West Jersey Health Systems (100%) - 3/98 4 Foster Avenue 1974 23,372 100.0% 10 7.56 Harbor Laundry, Inc. (62%) - 8/00 Medical Data Exchange (27%) - 8/98 Mr. William Feinberg (11%) - 2/00 5 U.S. Avenue 1987 5,000 100.0% 1 0.00 ------- ---- ----- ---- 242,088 75.4% 58 5.93 ------- ---- ----- ---- TOTAL SOUTHERN NEW JERSEY 671,455 89.4% 1,043 5.02 ------- ---- ----- ---- TOTAL - INDUSTRIAL PROPERTIES 1,491,121 91.5% 3,026 5.54 --------- ---- ----- ---- TOTAL ALL PROPERTIES / WEIGHTED AVG. 7,131,069 91.2% $49,927 $13.90 ========= ===== ======= ======
(1) Calculated by dividing net rentable square feet included in leases signed on or before December 31, 1997 at the Property by the aggregate net rentable square feet of the Property. (2) "Total Base Rent" for the twelve months ended December 31, 1997 represents base rents received during such period, excluding tenant reimbursements, calculated in accordance with generally accepted accounting principles determined on a straight-line basis. Tenant reimbursements generally include payment of real estate taxes, operating expenses and common area maintenance and utility charges. (3) "Average Annualized Rental Rate" is calculated as follows:(i) for office leases written on a triple net basis, the sum of the annualized contracted base rental rates payable for all space leased as of December 31, 1997 (without giving effect to free rent or scheduled rent increases that would be taken into account under generally accepted accountin principles) plus the 1997 budgeted operating expenses excluding tenant electricity; and (ii) for office leases written on a full service basis, the annualized contracted base rent payable for all space leased as of December 31, 1997. In both cases the annualized rental rate is divided by the total square footage leased as of December 31, 1997 without giving effect to free rent or scheduled rent increases that would be taken into account under generally accepted accounting principles. (4) The data reflected for these properties are presented on a consolidated basis. (5) These Properties are under redevelopment and are excluded from the percentages for weighted average Percentage Leased and Average Annualized Rental Rate information. (6) This Property is subject to a ground lease. -21- The table set forth below shows certain information regarding rental rates and lease expirations for the Year-End Properties in the Company's portfolio at December 31, 1997, assuming none of the tenants exercise renewal options or termination rights, if any, at or prior to scheduled expirations:
Final Percentage Rentable Final Annualized of Total Final Number of Square Annualized Base Rent Annualized Year of Leases Footage Base Rent Per Square Base Rent Lease Expiring Subject to Under Foot Under Under Expiration Within the Expiring Expiring Expiring Expiring Cumulative December 31, Year Leases Leases (1) Leases Leases Total - ------------------ --------------- --------------- ------------------ --------------- --------------- ------------ 1998 243 1,009,854 $ 12,774,453 $ 12.65 15.2% 15.2% 1999 156 996,945 9,542,978 9.57 11.4% 26.6% 2000 134 937,831 11,990,195 12.79 14.3% 40.9% 2001 108 1,080,532 14,894,432 13.78 17.8% 58.7% 2002 86 761,409 10,355,737 13.60 12.4% 71.1% 2003 36 260,066 4,321,969 16.62 5.2% 76.2% 2004 14 127,386 2,172,514 17.05 2.6% 78.8% 2005 16 494,286 9,984,512 20.20 11.9% 90.7% 2006 12 422,107 4,345,711 10.30 5.2% 95.9% 2007 7 106,494 1,835,273 17.23 2.2% 98.1% 2008 and after 5 152,059 1,605,899 10.56 1.9% 100.0% ---- --- --------- ------------ ------- ---- 817 6,348,969 $ 83,823,673 $ 13.20 100.0% ==== ========== ============ ======= =====
(1) "Final Annualized Base Rent" for each lease scheduled to expire represents the cash rental rate of base rents, excluding tenant reimbursements, in the final month prior to expiration multiplied by 12. Tenant reimbursements generally include payment of real estate taxes, operating expenses and common area maintenance and utility charges. The table set forth below shows certain information regarding rental rates and lease expirations for the Properties in the Company's portfolio at March 15, 1998, assuming none of the tenants exercise renewal options or termination rights, if any, at or prior to scheduled expirations: -22-
Final Percentage Rentable Final Annualized of Total Final Number of Square Annualized Base Rent Annualized Year of Leases Footage Base Rent Per Square Base Rent Lease Expiring Subject to Under Foot Under Under Expiration Within the Expiring Expiring Expiring Expiring Cumulative December 31, Year Leases Leases (1) Leases Leases Total - ------------------ --------------- --------------- ------------------ --------------- --------------- ------------ 1998 294 1,207,425 $15,510,213 $12.85 12.2% 12.2% 1999 204 1,228,666 13,454,854 10.95 10.6% 22.8% 2000 167 1,284,319 15,422,419 12.01 12.2% 35.0% 2001 152 1,489,063 21,247,940 14.27 16.7% 51.7% 2002 134 1,472,445 19,258,186 13.08 15.2% 66.9% 2003 61 492,646 8,176,324 16.60 6.4% 73.4% 2004 21 230,273 3,864,043 16.78 3.0% 76.4% 2005 24 809,851 14,538,912 17.95 11.5% 87.9% 2006 12 422,107 4,317,557 10.23 3.4% 91.3% 2007 8 118,880 2,135,510 17.96 1.7% 93.0% 2008 and after 32 568,058 8,933,001 15.73 7.0% 100.0% -------- ----------- ----------- ------ ----- 1,109 9,323,733 $126,858,959 $13.61 100.0% ======== =========== ============ ====== ======
(1) "Final Annualized Base Rent" for each lease scheduled to expire represents the cash rental rate of base rents, excluding tenant reimbursements, in the final month prior to expiration multiplied by 12. Tenant reimbursements generally include payment of real estate taxes, operating expenses and common area maintenance and utility charges. The Properties owned by the Company at December 31, 1997 were leased to 688 tenants that are engaged in a variety of businesses. The following table sets forth information regarding leases at the Year-End Properties with the 20 largest tenants based upon Annualized Escalated Rent from the Year-End Properties as of December 31, 1997:
Percentage of Remaining Aggregate Percentage Annualized Aggregate Number Lease Square of Aggregate Escalated Annualized of Term in Feet Leased Rent (in Escalated Tenant Name (a) Leases Months Leased Square Feet thousands) (b) Rent - -------------------------------------------- -------- ------------- ------------- -------------- ---------------- ------------- Parsons Corporation 4 87 200,000 3.1% $ 3,583 3.5% Penske Truck Leasing 8 96 182,064 2.9% 3,333 3.2% Lockheed Martin Corporation 5 (c) 184,389 2.9% 2,928 2.8% Computer Sciences Corporation 3 (d) 99,006 1.6% 2,266 2.2% Kimberly Clark Corporation 1 96 93,014 1.5% 2,000 1.9% Consolidated Rail Corporation ("Conrail") 1 30 69,511 1.1% 1,746 1.7% PECO 1 30 107,000 1.7% 1,739 1.7% New Jersey Bell Telephone Company 1 103 74,728 1.2% 1,482 1.4% QAD, Inc. 1 44 61,900 1.0% 1,377 1.3% Automotive Rentals, Inc. 1 32 67,299 1.1% 1,322 1.3% Delaware Valley Financial Services, Inc. 7 (e) 57,057 0.9% 1,293 1.3% West Jersey Health Systems 6 (f) 73,612 1.2% 1,034 1.0% Bisys Plan Services 5 55 58,586 0.9% 1,025 1.0% UGI Utilities, Inc. 4 63 44,665 0.7% 1,022 1.0% Advanta Corporation 3 (g) 51,547 0.8% 994 1.0% Northtec LLC 2 102 118,775 1.9% 980 1.0% Devon Direct Marketing & Advertising 2 (h) 39,330 0.6% 976 0.9% American Business Financial 15 61 38,149 0.6% 970 0.9% Reed Technology 1 162 79,204 1.2% 935 0.9% Conti Mortgage 1 40 53,906 0.8% 907 0.9% -- --- --------- ---- ------- ---- Consolidated Total/Weighted Average 72 65 1,753,742 27.6% $31,912 30.9% == === ========= ==== ======= ====
-23- (a) The identified tenant includes affiliates in certain circumstances. (b) Annualized Escalated Rent represents the monthly Escalated Rent for each lease in effect at December 31, 1997 multiplied by 12. Escalated Rent represents fixed base rental amounts plus pass-throughs of operating expenses, including electricity costs. The Company estimates operating expense pass-throughs based on historical amounts and comparable market data. (c) Consists of five leases: a lease representing 112,905 net rentable square feet that expires in December 1998, a lease representing 30,280 net rentable square feet that expires in May 1999, a lease representing 14,750 net rentable square feet that expires in January 2001, a lease representing 13,956 net rentable square feet that expires in October 2004 and a lease representing 12,498 net rentable square feet that expires in June 1998. (d) Consists of three leases: a lease representing 41,176 net rentable square feet that expires in May 2002, a lease representing 36,830 net rentable square feet that expires in November 2001 and a lease representing 15,000 net rentable square feet that expires in October 2000. (e) Consists of seven leases: six leases representing 55,857 net rentable square feet in the aggregate that expire in March 2004 and a lease representing 1,200 net rentable square feet (storage) that is leased on a month-to-month basis. (f) Consists of six leases: a lease representing 24,255 net rentable square feet that expires in March 1998, a lease representing 20,000 net rentable square feet that expires in March 2001, a lease representing 9,875 net rentable square feet that expires in August 1998, a lease representing 8,387 net rentable square feet that expires in April 2001, a lease representing 7,976 net rentable square feet that expires in March 2000 and a lease representing 3,119 net rentable square feet that expires in June 1998. (g) Consists of three leases: a lease representing 43,130 net rentable square feet that expires in September 1998, a lease representing 8,339 net rentable square feet that expires in June 1999 and a lease representing 1,294 net rentable square feet that expires in January 1998. (h) Consists of two leases: a lease representing 38,055 net rentable square feet that expires in December 2001 and a lease representing 1,275 net rentable square feet, which the tenant occupies on a month-to-month basis. Development Entities Since January 1, 1997, the Company, through the Operating Partnership and subsidiaries wholly-owned by the Operating Partnership, has entered into seven Development Entities. On September 19, 1997, the Operating Partnership acquired a 50% interest in a newly-formed company that is currently in the process of developing a three-story office property in Newark, Delaware which is expected to contain approximately 150,000 net rentable square feet upon completion. The Operating Partnership's initial equity contribution commitment to this company is approximately $2.0 million. Total project costs are estimated to be approximately $17.0 million, with construction scheduled to be completed during the second quarter of 1998. Project costs are being financed primarily through a $14.5 million third party construction loan, the repayment of which has been guaranteed by the Operating Partnership. On September 19, 1997, the Operating Partnership also acquired a 50% interest in a newly-formed company that acquired two parcels of undeveloped land containing an aggregate of approximately 11 acres in Newark, Delaware for a purchase price of approximately $1.0 million in anticipation of the construction on such land of two office buildings. The Operating Partnership's initial equity contribution to this company was $1.0 million. Architectural plans for the development of the land have not been completed and development of the land is subject to receipt of a construction loan as well as certain land development and other necessary approvals. On November 4, 1997, the Operating Partnership acquired a 65% interest in a newly-formed partnership that is currently in the process of developing a four-story office property in West Conshohocken, Pennsylvania which is expected to contain approximately 85,000 net rentable square feet upon completion. The Operating Partnership has committed to make an equity investment of $6.75 million upon maturity of the construction loan that is financing construction of the office property. Total project costs are estimated to be approximately $16.8 million, with construction scheduled to be completed during -24- the fourth quarter of 1998. Project costs are being financed primarily through a $16.8 million third party construction loan, the repayment of which has been guaranteed by the Operating Partnership. On November 4, 1997, the Operating Partnership also acquired a 65% interest in a newly-formed partnership that acquired an option to purchase approximately 9.3 acres of undeveloped land in West Conshohocken, Pennsylvania for approximately $3.2 million, subject to reduction in certain circumstances. The Company believes this land can accommodate an office building containing approximately 210,000 net rentable square feet. The term of the option is one-year, subject to extension for an additional one-year period. The Operating Partnership's initial equity contribution to this partnership was approximately $48,000. As part of the November 4, 1997 transactions, the Operating Partnership also acquired the right to become a 35% partner in an existing partnership that owns a four-story office property containing approximately 83,000 net rentable square feet in Conshohocken, Pennsylvania. This property was 100% leased as of December 31, 1997. The Operating Partnership expects to acquire its 35% interest for approximately $2.5 million during the second quarter of 1998. On December 31, 1997, the Operating Partnership acquired a 50% interest in a newly-formed partnership that was established to own and operate a project involving the redevelopment of a building situated on approximately five acres in Delaware County, Pennsylvania. The building has previously been used for retail and office purposes, and the partnership intends to redevelop the building in 1998 at an estimated cost of approximately $1.0 million for office purposes. The Operating Partnership's initial equity contribution to this partnership was approximately $850,000, and the Operating Partnership has agreed to contribute up to $650,000 in connection with the redevelopment of the building. The Operating Partnership has also guaranteed payment of $500,000 to secure a $1.75 million bank loan that funded a portion of the purchase price of the building and related land. On February 3, 1998, the Operating Partnership acquired an approximately 60% economic interest in a partnership that owns approximately 12.5 acres of land in Plymouth Meeting, Pennsylvania. The Company believes the land (on which an inn is currently situated) can accommodate an office building containing approximately 130,000 net rentable square feet. The Operating Partnership acquired its interest through a loan and equity contribution aggregating approximately $4.2 million. As of the date of this Annual Report on Form 10-K, the partnership has not determined its plans for the land. On February 25, 1998, the Operating Partnership acquired a 50% interest in a newly-formed partnership that was established to develop a three-story office property containing approximately 180,000 net rentable square feet in Chester County, Pennsylvania. Total project costs are estimated to be approximately $35.9 million. The Operating Partnership has agreed to contribute $5.4 million to the partnership, and the other partner has agreed to contribute approximately 12.5 acres of undeveloped land to the partnership upon receipt of a construction loan. Architectural plans for the development of the land have not been completed and development of the land is subject to receipt of a construction loan as well as certain land development and other necessary approvals. Item 3. Legal Proceedings The Company is not currently involved (nor was it involved at December 31, 1997) in any material legal proceedings nor, to the Company's knowledge, is any material legal proceeding currently threatened against the Company, other than routine litigation arising in the ordinary course of business, substantially all of which is expected to be covered by existing liability insurance. Item 4. Submission of Matters to a Vote of Security Holders The Company did not submit any matters to a vote of security holders in the fourth quarter of the fiscal year ended December 31, 1997. -25- PART II Item 5. Market for Registrant's Common Equity and Related Shareholder Matters The Common Shares commenced trading on the NYSE under the symbol "BDN" on October 21, 1997. Prior to October 21, 1997, the Common Shares were traded on the American Stock Exchange ("AMEX"). On March 17, 1998, there were approximately 354 holders of record of the Common Shares. On March 27, 1998, the last reported sale price of the Common Shares on the NYSE was $23 7/16. The following table sets forth the quarterly high and low closing sale price per share reported on the AMEX for the indicated periods through October 20, 1997 and on the NYSE for the indicated periods subsequent to October 20, 1997 and the distributions paid by the Company with respect to each such period. The data below has been adjusted to give effect to the one-for-three reverse split of the Common Shares effected on November 25, 1996.
Share Price Share Price Distributions High Low Declared For Quarter ------------ ------------ -------------------- First Quarter 1996 $16 5/16 $10 5/16 $0.18 (1) Second Quarter 1996 $22 1/8 $15 15/16 $0.18 (2) Third Quarter 1996 $18 3/8 $16 7/8 $0.21 (3) Fourth Quarter 1996 $19 3/4 $15 $0.25 (4) First Quarter 1997 $22 $19 3/8 $0.35 Second Quarter 1997 $20 3/4 $18 3/8 $0.36 Third Quarter 1997 $23 15/16 $20 1/4 $0.36 Fourth Quarter 1997 $25 1/8 $22 7/8 $0.37
(1) On May 1, 1996, the Company declared a distribution of $0.18 per share relating to first quarter operations that was paid to shareholders of record as of May 10, 1996. (2) On July 11, 1996, the Company declared a distribution of $0.18 per share relating to second quarter operations that was paid to shareholders of record as of July 26, 1996. (3) On November 1, 1996, the Company declared a distribution of $0.21 per share relating to third quarter operations that was paid to shareholders of record as of November 11, 1996. (4) Represents a distribution at a rate per share of $0.21 for the period from October 1, 1996 through December 1, 1996 (the day prior to the closing of the December 2, 1996 public offering of Common Shares) and a distribution at a rate per share of $0.35 for the period from December 2, 1996 through December 31, 1996. Future distributions by the Company will be at the discretion of the Board of Trustees and will depend on the actual cash flow of the Company, its financial condition, capital requirements, the annual distribution requirements under the REIT provisions of the Internal Revenue Code of 1986, as amended, and such other factors as the Board of Trustees deems relevant. Summarized below is information regarding the sale by the Company of securities during 1997 and through the date of this Annual Report on Form 10-K that were not registered under the Securities Act of 1933. During 1997, the Company issued an aggregate of 53,123 Common Shares upon the redemption of 53,123 Units: May 6, 1997 (9,370 Common Shares); June 16, 1997 (40,872 Common Shares); and August 18, 1997 (2,881 Common Shares). In addition, on January 6, 1998, the Company issued 252,387 Common Shares upon redemption of 252,837 Units. The redemptions were effected by the Company in accordance with the Agreement of Limited Partnership of the Operating Partnership and no cash proceeds were received by the Company in connection with such redemptions. -26- On December 11, 1997, the Operating Partnership issued an aggregate of 389,976 Units which are exchangeable for an equal number of Common Shares. The Operating Partnership issued the Units to five accredited investors as part of a transaction in which it acquired 14 Properties. No underwriter was involved in connection with the foregoing securities issuances, which were exempt from registration pursuant to Section 4(2) of the Securities Act of 1933, as amended, as transactions not involving public offerings. Item 6. Selected Financial Data
(in thousands, except per share data and number of properties) Year Ended December 31, 1997 1996 1995 1994 1993 ---- ---- ---- ---- ---- Operating Results Total revenue $ 61,060 $ 10,030 $ 3,666 $ 4,192 $ - Income (loss) from continuing operations 15,001 (162) (824) (1,841) 2,468 Income (loss)from continuing operations - per Common Share (diluted) 0.95 (0.44) (1.33) (0.64) 3.99 Cash distributions declared per Common Share 1.44 0.82 1.65 4.71 - Balance Sheet Data Real estate investments, net of accumulated depreciation $ 563,557 $ 151,901 $ 13,709 $ 13,948 $ - Total assets 621,481 178,326 17,105 17,873 4,604 Total mortgage notes payable and notes payable under Credit Facility 163,964 36,644 8,931 6,899 - Total liabilities 181,576 43,558 9,761 8,684 68 Minority interest 14,377 6,398 - - - Convertible preferred shares - 26,444 - - - Beneficiaries' equity 425,528 101,926 7,344 9,189 4,536 Other Data Funds from Operations $ 30,035 $ 2,589 $ 537 $ (533) $ (1) Cash flows provided by (used in): Operating activities 33,572 2,568 497 (628) - Investing activities (418,256) (35,401) (701) 9,559 2,469 Financing activities 395,847 50,272 (722) (9,635) - Property Data Number of properties owned at period end 117 37 4 4 7 Net rentable square feet owned at period end 7,131 1,994 255 255 546
-27- Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations The following discussion should be read in conjunction with the financial statements appearing elsewhere herein. The results of operations, liquidity and capital resources and cash flows of the Company include the historical results of operations of the Properties held by the Company during the years ended December 31, 1997, 1996 and 1995. This Annual Report on Form 10-K contains forward-looking statements for purposes of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended, and as such may involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Company to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. Although the Company believes that the expectations reflected in such forward-looking statements are based upon reasonable assumptions, there can be no assurance that these expectations will be realized. Factors that could cause actual results to differ materially from current expectations include changes in general economic conditions, changes in local real estate conditions, changes in industries in which the Company's principal tenants compete, the failure to timely lease unoccupied space, the failure to timely re-lease occupied space upon expiration of leases, the inability to generate sufficient revenues to meet debt service payments and operating expenses, the unavailability of equity and debt financing and the failure of the Company to manage its growth effectively. OVERVIEW The Company believes it has established an effective platform in the suburban Philadelphia, Pennsylvania market that provides a foundation for achieving the Company's goal of maximizing market penetration and operating economies of scale. The Company believes this platform provides a basis to continue its penetration into additional targeted markets in the Mid-Atlantic United States through strategic acquisitions structured to increase cash available for distribution and maximize shareholder value. The Company continued its growth in 1997 by purchasing 80 office and industrial properties for an aggregate purchase price of approximately $403.7 million and investing approximately $5.5 million in unconsolidated real estate ventures. As of December 31, 1997, the Company's portfolio consisted of 95 office and 22 industrial properties totaling approximately 7.1 million net rentable square feet. The 1997 acquisitions expanded the Company's presence in the suburban Philadelphia office and industrial market. The Company believes it is one of the largest owners of suburban office space in this market. The 1997 acquisitions were financed through a combination of proceeds received from four public offerings of an aggregate of approximately 15.4 million Common Shares which raised gross proceeds of approximately $323.7 million, borrowings under the Company's revolving credit facility and the issuance of 389,976 Units in the Operating Partnership valued at approximately $9.5 million. During the period January 1, 1998 through March 15, 1998, the Company acquired 38 additional properties (32 office and 6 industrial) containing an aggregate of approximately 3.4 million net rentable square feet for a total purchase price of approximately $335.1 million. These acquisitions expanded the Company's presence into Maryland, Delaware and Ohio while reinforcing its presence in suburban Philadelphia. The Company receives income primarily from rental revenue (including tenant reimbursements) from the Properties and, to a lesser extent, from the management of certain properties owned by third parties. The Company expects that revenue growth in the next two years will result primarily from additional acquisitions, as well as from rent increases in its current portfolio. -28- RESULTS OF OPERATIONS Comparison of the Year Ended December 31, 1997 to the Year Ended December 31, 1996 Net income for the year ended December 31, 1997 was $15.0 million compared with a net loss of $162,000 for the corresponding period in 1996. The increase in net income was primarily attributable to the operating results contributed by the 112 properties acquired from August 22, 1996 through December 31, 1997, and to a lesser extent attributable to a 1.9% increase in occupancy from 1996 to 1997 at properties owned on December 31, 1996. Revenues, which include rental income, recoveries from tenants and other income, increased by $51.0 million for the year ended December 31, 1997 as compared to the corresponding prior year period primarily as a result of property acquisitions and, to a lesser extent, increased occupancy. The impact of the straight-line rent adjustment increased revenues by $1.7 million for the year ended December 31, 1997. Property operating expenses, depreciation and amortization and management fees increased in the aggregate by $31.5 million for the year ended December 31, 1997 as compared with the prior year period primarily as a result of property acquisitions. Interest expense increased by $4.3 million as a result of additional indebtedness incurred to finance certain of the Company's acquisitions. Minority interest primarily represents the portion of the Operating Partnership which is not owned by the Company. Comparison of the Year Ended December 31, 1996 to the Year Ended December 31, 1995 The Company had a net loss of $162,000 for the year ended December 31, 1996 compared with a net loss of $824,000 for the corresponding period in 1995. Revenues, which include rental income, recoveries from tenants and other income, increased by $6.4 million for the year ended December 31, 1996 as compared to 1995 primarily as a result of property acquisitions. These increases were primarily attributable to the operating results contributed by the 33 properties acquired during 1996. The impact of the straight-line rent adjustment increased revenues by $337,000 for the year ended December 31, 1996. Property operating expenses, depreciation and amortization and management fees increased in aggregate by $3.5 million for the year ended December 31, 1996 as compared with the prior year period primarily as a result of property acquisitions. Interest expense increased by $2.0 million as a result of additional indebtedness incurred to finance certain of the Company's acquisitions. LIQUIDITY AND CAPITAL RESOURCES Cash Flows During the year ended December 31, 1997, the Company generated $33.6 million in cash flow from operating activities. Other sources of cash flow consisted of (i) $115.2 million in net additional borrowings under the Company's revolving credit facility, (ii) $0.4 million in additional mortgage notes payable, (iii) $305.1 million in net proceeds from share issuances and (iv) escrowed cash of $1.8 million. During the year ended December 31, 1997, the Company used an aggregate $456.1 million to (i) finance the cash portion ($406.9 million) of the acquisition cost of 80 Properties, (ii) invest $5.5 million in unconsolidated real estate ventures, (iii) fund capital expenditures and leasing commissions of $7.7 million, (iv) pay distributions to shareholders and minority partners in the Operating Partnership totaling $18.5 million, (v) pay scheduled amortization on mortgage principal of $1.0 million, (vi) satisfy $3.5 million of mortgage notes payable, (vii) purchase minority interests in the Operating Partnership for $0.5 million, (viii) pay other debt costs of $1.3 million and (ix) increase existing cash reserves by $11.2 million. -29- Capitalization As of December 31, 1997, the Company had approximately $163.9 million of debt outstanding, consisting of mortgage loans totaling $48.7 million and notes payable under the 1997 Credit Facility of $115.2 million. The mortgage loans mature between February 1998 and November 2004. As of December 31, 1997, the Company had $34.8 million of remaining availability under the 1997 Credit Facility, which provided for total borrowings up to $150.0 million and bore interest at a per annum floating rate equal to the 30, 60 or 90-day LIBOR, plus 175 basis points. For the year ended December 31, 1997, the weighted average interest rates on the Company's debt were 7.4% and 8.3% for borrowings under the 1997 Credit Facility and mortgage notes payable, respectively. The Company's debt to market capitalization was 20.8% as of December 31, 1997 and averaged 17.7% during the year. As a general policy, the Company intends, but is not obligated, to adhere to a policy of maintaining a debt to market capitalization ratio of no more than 50%. This policy is intended to provide the Company with financial flexibility to select the optimal source of capital to finance its growth. During the first quarter of 1998, the Company replaced the 1997 Credit Facility with the Credit Facility. The interest rate was reduced by 37.5 to 60 basis points depending on the Company's degree of leverage. Upon attainment of an investment rating, the overall interest rate reduction would be between 60 to 75 basis points regardless of the degree of leverage. The Credit Facility matures on January 5, 2001 and is extendible, under certain circumstances, at the Company's option to January 5, 2002. The Credit Facility requires the Company to maintain ongoing compliance with customary financial and other covenants, including leverage ratios based on gross implied asset value and debt service coverage ratios, limitations on liens and distributions and a minimum net worth requirement. During the period January 1, 1998 through March 15, 1998, the Company sold an aggregate 12,642,741 Common Shares for gross proceeds of $303.4 million pursuant to three public offerings. Short and Long Term Liquidity The Company believes that its cash flow from operations is adequate to fund its short-term liquidity requirements for the foreseeable future. Cash flow from operations is generated primarily from rental revenues and operating expense reimbursements from tenants and management services income from the provision of services to third parties. The Company intends to use these funds to meet its principal short-term liquidity needs, which are to fund operating expenses, debt service requirements, recurring capital expenditures, tenant allowances, leasing commissions and the minimum distribution required to maintain the Company's REIT qualifications under the Internal Revenue Code. On December 5, 1997, the Board of Trustees declared a quarterly dividend distribution of $0.37 per share, paid on January 15, 1998 to shareholders of record as of December 15, 1997. The increase to $0.37 in the fourth quarter was the fifth increase in the last six quarters. Cumulative distributions for 1997 were $1.44 per share compared to $0.82 in 1996, representing an increase of over 75%. As of December 31, 1997, the Company had entered into guaranties, and agreements contemplating the provision of guaranties, for the benefit of unconsolidated real estate ventures, aggregating approximately $33.3 million. Payment under these guaranties would constitute loan obligations of, or preferred equity positions in, the applicable unconsolidated real estate venture. The Company expects to meet its long-term liquidity requirements, such as for property acquisitions and development, scheduled debt maturities, renovations, expansions and other non-recurring capital improvements, through the Credit Facility and other long-term secured and unsecured indebtedness and the issuance of additional Operating Partnership units and equity securities. -30- Funds from Operations Management generally considers Funds from Operations ("FFO") as one measure of REIT performance. The Company adopted the NAREIT definition of FFO in 1996 and has used this definition for all periods presented in the financial statements included herein. FFO is calculated as net income (loss) adjusted for depreciation expense attributable to real property, amortization expense attributable to capitalized leasing costs, gains on sales of real estate investments and extraordinary and nonrecurring items. FFO should not be considered an alternative to net income as an indication of the Company's performance or to cash flows as a measure of liquidity. FFO for the years ended December 31, 1997 and 1996 is summarized in the following table (in thousands, except share and per share data).
Year ended December 31, ----------------------------------- 1997 1996 (2) ---------------- --------------- Income before minority interest $ 15,377 $ (117) Add (Deduct): Depreciation attributable to real property 13,966 2,493 Amortization attributable to leasing costs 708 230 Minority interest not attributable to unit holders (16) (17) ------------ ----------- Funds from Operations before minority interest $ 30,035 $ 2,589 ============ =========== Weighted average Common Shares (including common share equivalents) and Operating Partnership units 16,175,258 (1) 1,700,910 ============ =========== Funds from Operations per share $ 1.86 $ 1.52 ============ ===========
(1) Includes the weighted average effect of 1,424,736 Common Shares issued upon the conversion of preferred shares for the period prior to conversion, the weighted average effect of 317,450 Common Shares issuable upon the conversion of 317,450 Units, the weighted average effect of the 53,123 Common Shares issued upon the conversion of 53,123 Units for the period prior to conversion and the weighted average effect of the 28,994 convertible Units for the period prior to cancellation. (2) In 1997 the Company began computing FFO using a methodology which, in management's opinion, is more consistent with industry practice. This methodology presents FFO before any adjustments for amounts attributable to minority unit holders of the Operating Partnership and includes such units in the denominator of the FFO per share calculation. In restating FFO and FFO per share for the year ended December 31, 1996, FFO increased from $2,103 to $2,589 and FFO per share increased from $1.39 to $1.52 (after adjusting for the 1-for-3 reverse share split which occurred in the fourth quarter of 1996). Year 2000 Issue The Company has recognized the need to ensure that its systems, equipment and operations will not be adversely impacted by the change to the calendar year 2000. The Company has initiated the process of identifying potential areas of risk and the related effects on planning, purchasing and daily operations. No estimates can be made as to the potential adverse impact resulting from the failure of third party suppliers and tenants to prepare for the year 2000. However, the Company does not anticipate the total cost of successfully converting all internal systems, equipment and operations to the year 2000 to be material. Inflation A majority of the Company's leases provide for separate escalations of real estate taxes and operating expenses either on a triple net basis or over a base amount. In addition, many of the office leases provide for fixed base rent increases or indexed escalations (based on the CPI or other measure). The Company believes that inflationary increases in expenses will be significantly offset by the expense reimbursement and contractual rent increases. -31- Item 7A. Quantitative and Qualitative Disclosure About Market Risk None. Item 8. Financial Statements and Supplementary Data The financial statements and supplementary financial data are listed under Item 14(a) and filed as part of this Annual Report on Form 10-K. See Item 14. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None. PART III Item 10. Trustees and Executive Officers of the Registrant The following table sets forth certain information with respect to the officers, significant employees and Trustees of the Company:
Name Age Position ---- --- -------- Anthony A. Nichols, Sr. 58 Chairman of the Board and Trustee Gerard H. Sweeney 41 President, Chief Executive Officer and Trustee Mark S. Kripke 41 Chief Financial Officer Anthony S. Rimikis 49 Senior Vice President--Development and Construction John M. Adderly, Jr. 37 Senior Vice President--Operations Anthony A. Nichols, Jr. 31 Vice President--Operations H. Jeffrey DeVuono 32 Vice President--Operations Brad A. Molotsky 33 General Counsel and Secretary Barbara L. Yamarick 45 Director of Tenant Services and Property Management David Mackey 39 Regional Director--Operations and New Markets Warren V. Musser 71 Trustee Walter D'Alessio 64 Trustee Charles P. Pizzi 47 Trustee
The following are biographical summaries of the officers, significant employees and Trustees of the Company: Anthony A. Nichols, Sr., Chairman of the Board and Trustee. Mr. Nichols was elected Chairman of the Board on August 22, 1996. Mr. Nichols founded The Nichols Company, a private real estate development company, through a corporate joint venture with Safeguard Scientifics, Inc. ("SSI") and was President and Chief Executive Officer from 1982 through August 22, 1996. From 1968 to 1982, Mr. Nichols was Senior Vice President of Colonial Mortgage Service Company (now GMAC Mortgage Corporation), a subsidiary of CoreStates Bank, N.A. Mr. Nichols has been a member of the National Association of Real Estate Investment Trusts ("NAREIT"), a member of the Board of Governors of the Mortgage Banking Association and Chairman of the Income Loan Committee of the regional Mortgage Bankers Association. Mr. Nichols also serves on the Board of Directors of CenterCore Inc. and is a member of the National Association of Industrial and Office Parks ("NAIOP"), the Philadelphia Board of Realtors and the Urban Land Institute ("ULI"). -32- Gerard H. Sweeney, President, Chief Executive Officer and Trustee. Mr. Sweeney was elected a Trustee on February 9, 1996. Mr. Sweeney has served as President and Chief Executive Officer of the Company since August 8, 1994 and as President since November 9, 1989. Prior to August 8, 1994, Mr. Sweeney served as Vice President of LCOR, Incorporated ("LCOR"), a real estate development firm. Mr. Sweeney was employed by The Linpro Company (a predecessor of LCOR) from 1983 to 1994 and served in several capacities, including Financial Vice President and General Partner. Mr. Sweeney is a member of NAREIT, the ULI, the American Institute of Certified Public Accountants ("AICPA") and the Pennsylvania Institute of Certified Public Accountants ("PICPA"). Mark S. Kripke, Chief Financial Officer. Mr. Kripke became Chief Financial Officer of the Company on April 7, 1997. During the preceding thirteen years, Mr. Kripke was Chief Financial Officer for privately held real estate investment companies, Stoltz Management (and its predecessor, Cynwyd Investments) from November 1992 to April 1997 and St. John Group from January 1984 to October 1992. Mr. Kripke is a certified public accountant and had previously served as a tax manager with Price Waterhouse. Mr. Kripke is a member of NAREIT, the AICPA and the PICPA. Anthony S. Rimikis, Senior Vice President--Development and Construction. Mr. Rimikis became an executive of the Company on October 13, 1997. From January 1994 until October 1997, Mr. Rimikis served as Vice President of Emmes Realty Services, Inc., a New York based real estate services company where he managed the company's construction and development activities in New Jersey and Maryland. Prior to joining Emmes, he served as Vice President of Development for DKM Properties Corp. from 1988 to 1994. John M. Adderly, Jr., Senior Vice President--Operations. Mr. Adderly has served as an officer of the Company since January 1995. Mr. Adderly was employed by the Rodin Group, a Philadelphia-based real estate development, management and brokerage firm from 1982 until 1995, where he served as Vice President and Chief Financial Officer from 1986 until 1995, and as Corporate Controller from 1982 until 1986. Mr. Adderly serves on the Jefferson Bank Advisory Council and is a member of the Board of Directors of Businesses Committed to Burlington County. Anthony A. Nichols, Jr., Vice President--Operations. Mr. Nichols became an officer of the Company on August 22, 1996. Previously Mr. Nichols was employed at TNC, which he joined in 1989 as a marketing representative. In 1992 Mr. Nichols became an Assistant Vice President--Property Management of TNC and in 1995 he became Vice President--Marketing. Mr. Nichols is a member of the Board of Directors for the Eastern Pennsylvania Region of the NAIOP. Mr. Nichols is the son of Anthony A. Nichols, Sr., the Company's Chairman of the Board. H. Jeffrey DeVuono, Vice President--Operations. Mr. DeVuono became an officer of the Company on January 15, 1997. From January 1993 until that time he was employed in several capacities by LCOR, Incorporated, a real estate development firm. Brad A. Molotsky, General Counsel and Secretary. Mr. Molotsky became General Counsel of the Company on October 27, 1997 and Secretary of the Company on November 18, 1997. Prior to joining the Company he was an associate at Pepper Hamilton LLP, Philadelphia, Pennsylvania where he practiced law since September 1989. Mr. Molotsky is a member of NAIOP, NAREIT, the American Society of Corporate Secretaries, the American Bar Association, the New Jersey Bar Association and the Pennsylvania Bar Association. He also serves on the Board of Directors of Philadelphia Volunteer Lawyers for the Arts, Triple Threat Productions, Inc. and Businesses Committed to Burlington County. Barbara L. Yamarick, Director of Tenant Services and Property Management. Ms. Yamarick joined the Company on October 20, 1997. Prior to joining the Company she was a Regional Vice President of Premisys Real Estate Services, Inc., a subsidiary of Prudential Insurance Company engaged in the management and leasing of real estate, which she joined in 1991. -33- David Mackey, Regional Director--Operations and New Markets. Mr. Mackey joined the Company on October 1, 1997. Prior to joining the Company he was a Vice President of Premisys Real Estate Services, Inc., a subsidiary of Prudential Insurance Company engaged in the management and leasing of real estate, which he joined in November 1993. Prior to joining Premisys, Mr. Mackey was a partner with The Linpro Company, a real estate development firm, which he joined in 1986. Warren V. Musser, Trustee. Mr. Musser was elected a Trustee on August 22, 1996. He has served as Chairman and Chief Executive Officer of SSI since 1953. Mr. Musser also serves as the Chairman of the Board of Directors of Cambridge Technology Partners, Inc., and is a director of Coherent Communications Systems Corporation, CompuCom Systems, Inc. and National Media Corp. Mr. Musser also serves on a variety of civic, educational, and charitable Boards of Directors, including the Franklin Institute and the Board of Overseers of the Wharton School of the University of Pennsylvania. He also serves as Vice President/Development, Cradle of Liberty Council, Boy Scouts of America and as Vice Chairman of the Technology Council of the Philadelphia metropolitan area. Walter D'Alessio, Trustee. Mr. D'Alessio was elected a Trustee on August 22, 1996. He has served as President and Chief Executive Officer of Legg Mason Real Estate Services, Inc., a mortgage banking firm headquartered in Philadelphia, Pennsylvania since 1982. Previously, Mr. D'Alessio served as Executive Vice President of the Philadelphia Industrial Development Corporation and Executive Director of the Philadelphia Redevelopment Authority. He also serves on the Board of Directors of PECO Energy Company, Pennsylvania Blue Shield and Independence Blue Cross, the Philadelphia Private Industry Council and the Greater Philadelphia Chamber of Commerce. Charles P. Pizzi, Trustee. Mr. Pizzi was elected a Trustee on August 22, 1996. Mr. Pizzi has served as President of the Greater Philadelphia Chamber of Commerce since 1989. Mr. Pizzi is a director of Vestaur Securities, Inc. and also serves on a variety of civic, educational and charitable Boards of Directors, including the American Chamber of Commerce Executives, Boy Scouts of America (Philadelphia Council), Drexel University, Greater Philadelphia Chamber of Commerce, Independence Blue Cross, Pennsylvania Academy of the Fine Arts, Philadelphia Convention & Visitors Bureau, Temple University School of Business Management, United Way of Southeastern Pennsylvania, University of Pennsylvania Graduate School of Education Board of Overseers and the Urban League of Philadelphia. Each Trustee has been elected to serve for a one-year term expiring at the 1998 annual meeting of shareholders and until the election and qualification of his successor. Messrs. Nichols, Musser and D'Alessio were initially elected to the Board of Trustees as nominees of SSI and TNC in connection with the Company's acquisition of properties from SSI and TNC in August 1996, and Mr. Pizzi was initially elected to the Board of Trustees as the joint nominee of SSI, TNC and the Company in connection with such transaction. Committees of the Board of Trustees Audit Committee. The audit committee of the Board of Trustees (the "Audit Committee") currently consists of Messrs. D'Alessio and Pizzi. The Audit Committee makes recommendations concerning the engagement of independent public accountants, reviews with the independent public accountants the plans and results of the audit engagement, approves professional services provided by the independent public accountants, reviews the independence of the independent public accountants, considers the range of audit and non-audit fees and reviews the adequacy of the Company's internal accounting controls. Compensation Committee. The compensation committee of the Board of Trustees (the "Compensation Committee") currently consists of Messrs. D'Alessio and Pizzi. The Compensation Committee is authorized to determine compensation for the Company's executive officers, although formal action on compensation matters during 1997 was taken by the full Board (with interested members of the Board abstaining). -34- Executive Committee. The executive committee of the Board of Trustees (the "Executive Committee") currently consists of Messrs. Nichols, Sr., the Chairman of the Executive Committee, Mr. Musser and Mr. Sweeney. The Executive Committee has been delegated all powers of the Board of Trustees except the power to: (i) declare dividends on Shares; (ii) issue Shares (other than as permitted by the By-Laws as in effect from time to time); (iii) recommend to shareholders any action that requires shareholder approval; (iv) amend the Bylaws of the Company; or (v) approve any merger or share exchange which does not require shareholder approval. Section 16(a) Beneficial Ownership Reporting Compliance Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the Company's officers, Trustees and persons who own more than 10% of the Company's shares to file reports of ownership and changes in ownership with the Securities and Exchange Commission. Officers, Trustees and greater than 10% shareholders are required by regulation to furnish the Company with copies of all Section 16(a) forms they file. Based solely on review of the copies of such forms furnished to the Company, or written representations that no Annual Statements of Beneficial Ownership of Securities on Form 5 were required to be filed, the Company believes that during the fiscal year ended December 31, 1997, all Section 16(a) filing requirements applicable to its officers, Trustees and greater than 10% shareholders were complied with except for one filing by Mr. Nichols, Sr. that was related to the transfer by an affiliate of Mr. Nichols of 28,994 Units to the Company and that was filed approximately one month late. Item 11. Executive Compensation Cash and Non-Cash Compensation Paid to Executive Officers The following table sets forth certain information concerning the compensation paid for the years ended December 31, 1997, 1996 and 1995: (i) to the Company's President and Chief Executive Officer and (ii) to each of the other most highly compensated executive officers (the "Named Executive Officers") of the Company, having a combined salary and bonus during the year ended December 31, 1997 exceeding $100,000. -35- Summary Compensation Table
Annual Compensation Long-Term Compensation -------------------------- ----------------------- Name and Principal Position Securities Underlying Options/SARs Year Salary Bonus (#) (4) ------ --------- ---------- -------------------- Anthony A. Nichols, Sr. 1997 $ 200,000 $ 250,000 - Chairman of the Board (1) 1996 $ 49,000 $ 30,000 40,000 (5) 1995 - - - Gerard H. Sweeney 1997 $ 200,000 $ 250,000 - President and Chief Executive Officer 1996 $ 134,000 $ 30,000 100,000 (5) 1995 $ 130,000 - - John M. Adderly, Jr. 1997 $ 102,885 $ 35,000 - Senior Vice President - Operations (2) 1996 $ 66,100 $ 15,000 10,000 (5) 1995 $ 52,000 - - Mark S. Kripke 1997 $ 98,654 $ 40,000 - Chief Financial Officer (3) 1996 - - - 1995 - - -
(1) Mr. Nichols, Sr. became an employee of the Company on August 22, 1996. See "Employment Agreements" below. (2) Mr. Adderly became an employee of the Company on January 30, 1995. (3) Mr. Kripke became an employee of the Company on April 7, 1997. (4) During the years ended December 31, 1995, 1996 and 1997, the Company did not award "restricted shares" to any of its employees. Accordingly, the Company is not presenting in the Summary Compensation Table the column captioned "Restricted Stock Award(s)." At a meeting held on December 17, 1997, the Board of Trustees of the Company awarded certain employees of the Company an aggregate of 443,557 "restricted" Common Shares. These awards were effective as of January 2, 1998 and the number of shares so awarded was based on the closing price of the Common Shares on January 2, 1998 ($25.25). See "-- Restricted Share Awards." (5) The options awarded in 1996 are evidenced by certificates denominated as "warrants" and were vested and exercisable on the date of grant. Restricted Share Awards On January 2, 1998, six of the Company's executives were awarded an aggregate of 443,557 Common Shares, which are subject to certain restrictions. The number of shares awarded to each of the executives was equal to the dollar value specified below divided by the closing price of the Common Shares on January 2, 1998 ($25.25). -36- Name Number of Shares Dollar Value ---- ---------------- ------------ Gerard H. Sweeney 237,624 $6,000,000 Anthony A. Nichols, Sr. 158,416 $4,000,000 John M. Adderly, Jr. 21,109 $533,000 Anthony A. Nichols, Jr. 15,842 $400,000 Henry J. DeVuono 5,283 $133,400 Mark S. Kripke 5,283 $133,400 The "restricted" Common Shares awarded to Messrs. Nichols, Sr. and Sweeney vest over an eight-year period based on continued employment with the Company, subject to acceleration of vesting upon a change in control of the Company, death, disability or non-renewal of their employment agreements. The "restricted" Common Shares awarded to Messrs. Adderly, Nichols, Jr., DeVuono and Kripke vest over a five-year period based on continued employment with the Company, subject to acceleration of vesting upon certain conditions, including a change in control of the Company, death and disability. During the period the "restricted" Common Shares have not vested, the applicable executive is entitled to vote the shares and to receive dividends and distributions paid on Common Shares. Vesting of the "restricted" Common Shares is not subject to performance-based conditions. Section 162(m) of the Code provides that a publicly-held company may not deduct compensation paid to any one of certain specified officers in excess of $1 million per year unless such compensation qualifies as "performance-based" compensation within the meaning of that Section. The "restricted" Common Shares granted by the Company do not qualify as performance-based compensation under Section 162(m) of the Code. Therefore, if the aggregate taxable income recognized in any year by the executive officers of the Company that received the "restricted" Common Shares exceeds $1 million, the excess will not be deductible by the Company. Stock Options Granted to Executive Officers During Last Fiscal Year During the year ended December 31, 1997, the Company did not award options or share appreciation rights to any of its employees. Accordingly, the Company is not presenting the "Options/SAR Grants in Last Fiscal Year" table for 1997. At a meeting held on December 17, 1997, the Board of Trustees of the Company awarded certain employees of the Company options exercisable for an aggregate of 2,043,704 Common Shares. These option awards were effective as of January 2, 1998 and the exercise prices of the options were based on the closing price of the Common Shares on January 2, 1998. Options to purchase 1,737,261 of such Common Shares were granted subject to shareholder approval and, if not approved by shareholders, convert into share appreciation rights exercisable for a cash payment from the Company based on the excess, if any, of the market price of a Common Share on the date of exercise over the exercise price contained in the option/share appreciation right. Summarized below is information concerning the January 2 options awards received by the President and Chief Executive Officer and each of the other Named Executive Officers of the Company for the year ended December 31, 1997. -37-
Number of Common % of Total Shares Options/SARs Underlying Granted to Grant Date Options Granted Employees in Exercise Expiration Present Name (#) (1) Fiscal Year Price ($/sh) Date Value ($) (2) ---- ------- ----------- ------------ ---- ------------- Anthony A. Nichols, Sr. 197,923 $ 25.25 1/2/08 $526,673 Chairman of the Board 231,597 $ 27.78 1/2/08 $495,618 249,438 33.2% $ 29.04 1/2/08 $483,411 Gerard H. Sweeney 296,736 $ 25.25 1/2/08 $789,614 President and Chief Executive Officer 347,222 $ 27.78 1/2/08 $743,055 374,531 49.8% $ 29.04 1/2/08 $725,841 John M. Adderly, Jr. 26,409 $ 25.25 1/2/08 $ 70,274 Senior Vice President - Operations 30,902 $ 27.78 1/2/08 $ 66,130 33,333 4.4% $ 29.04 1/2/08 $ 64,599 Mark S. Kripke 6,587 $ 25.25 1/2/08 $ 17,528 Chief Financial Officer 7,708 $ 27.78 1/2/08 $ 16,495 8,314 1.1% $ 29.04 1/2/08 $ 16,113
(1) Options vest ratably over five years, subject to acceleration of vesting under certain circumstances, such as upon a change in control of the Company. (2) The grant date present values for the options are determined using the Black-Scholes option pricing model. The assumptions used in calculating the Black-Scholes present values for the option grants were as follows: (a) a risk-free interest rate of 5.81% (based on the yield on a U.S. Treasury security with a maturity of 10 years (the life of the option)); (b) a dividend yield of 6.785%; (c) volatility of the Common Shares of 18.7% (based on the daily Common Share price for one year prior to the option grant); and (d) an option term of ten years. The Black-Scholes option pricing model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable. The amount realized from an employee stock option ultimately depends on the market value of the Common Shares on the date of exercise. With respect to the options granted to John M. Adderly, Jr. and Mark S. Kripke, 72,933 and 18,191, respectively, of such options will qualify as performance-based compensation under Section 162(m) of the Code since the shares subject to these options have previously been approved for awards by the Company's shareholders. The balance of the options granted to Messrs. Adderly, Jr. and Kripke will not qualify as performance-based compensation under Section 162(m). With respect to the options granted to Anthony A. Nichols, Sr. and Gerard H. Sweeney, none of such options will qualify as performance-based compensation under Section 162(m) of the Code, and the taxable income recognized in any year with respect to these awards will count toward the $1.0 million limit on compensation deductible by the Company for compensation to each of Messrs. Nichols, Sr. and Sweeney for such year. Stock Options Held by Executive Officers at December 31, 1997 The following table sets forth certain information regarding options for the purchase of Common Shares that were held by: (a) the Company's President and Chief Executive Officer and (b) each of the other Named Executive Officers of the Company at December 31, 1997. No options for the purchase of Common Shares were exercised by such persons during the fiscal year ended December 31, 1997. The table does not reflect the January 2, 1998 award of options discussed above. -38- Aggregated Option/SAR Exercises in Fiscal Year Ended December 31, 1997 and 1997 Fiscal Year End Option/SAR Values
Number of Securities Underlying Value of Unexercised Unexercised In-the- Options/SAR at Money Options at Shares FY-End (#) FY End ($) Acquired on Value Exercisable/ Exercisable/ Name Exercise (#) Realized ($) Unexercisable (1) Unexercisable (1) ---- ------------ ------------ ----------------- ----------------- Anthony A. Nichols, Sr. Chairman of the Board N/A N/A 40,000 $225,000 Gerard H. Sweeney President and Chief Executive Officer N/A N/A 146,666 $1,175,190 John M. Adderly, Jr. Senior Vice President - Operations N/A N/A 10,000 $56,250 Mark S. Kripke Chief Financial Officer N/A N/A - -
(1) All options are exercisable. Employment Agreements On January 2, 1998, each of Messrs. Nichols, Sr. and Sweeney entered into a five-year employment agreement with the Company. These employment agreements replaced the two-year employment agreements entered into by each of them on August 22, 1996. The new employment agreements established annual base salaries for each of Messrs. Nichols, Sr. and Sweeney of $250,000 and $300,000, respectively, which compensation may be increased by the Board of Trustees in its discretion. The employment agreements include a provision entitling the applicable executive to a payment equal to three times the sum of his annual salary and bonus: (i) upon termination of the executive's employment without cause, (ii) upon resignation by the executive "for good reason" or (iii) upon his death. Resignation by the executive within six months following a reduction in the executive's salary, an adverse change in his status or responsibilities, certain changes in the location of the Company's headquarters or a change in control of the Company would each constitute a resignation "for good reason." Separation Agreement On August 1, 1997, the Company entered into a separation agreement (the "Separation Agreement") with Brian F. Belcher. Mr. Belcher became an employee of the Company on August 22, 1996 and served the Company through his termination date as Executive Vice President - Marketing and Development. Under the Separation Agreement, Mr. Belcher is entitled to salary continuation payments in the total amount of $125,000 payable over the period from August 1, 1997 to August 1, 1998. During the year ended December 31, 1997, Mr. Belcher received total salary payments from the Company equal to $86,538 and total salary continuation payments from the Company equal to $52,885. During such year, Mr. Belcher was not paid a bonus and was not awarded any equity securities of the Company or any options or rights to acquire any equity securities of the Company. Mr. Belcher retains ownership of warrants awarded to him on August 22, 1996 exercisable for an aggregate of 40,000 Common Shares at a price per share equal to $19.50. These warrants are currently exercisable and have a term that expires on August 22, 2002. 401(k) Plan -39- The Company maintains a Section 401(k) and Profit Sharing Plan (the "401(k) Plan") covering its eligible employees and other designated affiliates. The 401(k) Plan permits eligible employees of the adopting employers (the "Participating Companies") to defer up to a designated percentage of their annual compensation, subject to certain limitations imposed by the Code. The employees' elective deferrals are immediately vested and non-forfeitable upon contribution to the 401(k) Plan. Each Participating Company reserves the right to make matching contributions or discretionary profit sharing contributions in the future. The 401(k) Plan is designed to qualify under Section 401 of the Code so that contributions by employees or by the Participating Companies to the 401(k) Plan, and income earned on plan contributions, are not taxable to employees until withdrawn from the 401(k) Plan, and so that contributions by the Participating Companies, if any, will be deductible by them when made. Compensation Committee Interlocks and Insider Participation The Compensation Committee of the Board of Trustees is currently comprised of Charles P. Pizzi and Walter D'Alessio. No executive officer of the Company serves on the Compensation Committee. Mr. D'Alessio is President of Legg Mason Real Estate Services, Inc., a mortgage banking firm and a subsidiary of Legg Mason, Inc. Legg Mason, Inc. is the parent of Legg Mason Wood Walker, Incorporated, which was an underwriter in five of the seven public offerings of Common Shares consummated by the Company between January 1, 1997 and the date of this Annual Report on Form 10-K. On December 17, 1997, the Company acquired an office property in Valley Forge, Montgomery County, Pennsylvania (the "PECO Building") from PECO Energy Company for a purchase price of $9.5 million. Mr. D'Alessio is a director of PECO Energy Company. A committee of the Board of Trustees, of which Mr. D'Alessio was not a participant, made the decision to purchase the PECO Building and negotiated the terms of the transaction. Compensation of Trustees During 1997, the Company paid its Trustees who are not employees of the Company fees for their services as Trustees. These non-employee Trustees received annual compensation of $10,000 (of which one-half was paid in Common Shares and one-half was paid in cash) and a fee of $1,000 for attendance at each meeting of the Board of Trustees and $500 for participation at each meeting of a committee of the Board of Trustees. Trustees who are employees of the Company receive no separate compensation for service as a trustee or committee member. The annual compensation fee paid to non-employee Trustees has been increased to $20,000 for 1998. Item 12. Security Ownership of Certain Beneficial Owners and Management The following table sets forth certain information as of March 15, 1998 (except as indicated in notes 3 and 4) regarding the beneficial ownership of Common Shares (and Common Shares for which Units may be exchanged) by each Trustee, by each executive officer, by all Trustees and executive officers as a group, and by each person known to the Company to be the beneficial owner of 5% or more of the outstanding Common Shares. Except as indicted below, to the Company's knowledge, all of such Common Shares are owned directly, and the indicated person has sole voting and investment power. -40-
Number of Common Percentage of Name and Business Address of Beneficial Owner (1) Shares Common Shares (2) - ------------------------------------------------- -------- ----------------- Cohen & Steers Capital Management, Inc. (3) 2,860,100 7.64% Morgan Stanley, Dean Witter, Discover & Co. (4) 2,252,195 6.02% Anthony A. Nichols, Sr. (5) 390,984 1.04% Gerard H. Sweeney (6) 384,607 1.02% John M. Adderly, Jr. (7) 32,312 * Mark S. Kripke 5,283 * Warren V. Musser (8) 5,129 * Walter D'Alessio (9) 556 * Charles P. Pizzi (10) 256 * All Trustees and Executive Officers as a Group (8 persons) 819,127 2.17%
*Less than one percent. (1) Unless indicated otherwise, the business address of each person listed is 16 Campus Boulevard, Newtown Square, Pennsylvania 19073. (2) Assumes that all Units eligible for redemption held by each named person or entity are redeemed for Common Shares. The total number of Common Shares outstanding used in calculating the percentage of Common Shares assumes that none of the Units eligible for redemption held by other named persons or entities are redeemed for Common Shares. (3) Based on a Schedule 13G dated February 10, 1998, and filed for the year ended December 31, 1997. Cohen & Steers Capital Management, Inc. maintains its principal office at 757 Third Avenue, New York, New York 10017. (4) Based on a Schedule 13G dated February 12, 1998, and filed for the year ended December 31, 1997. Morgan Stanley, Dean Witter, Discovery & Co. maintains its principal office at 1585 Broadway, New York, New York 10036. Of this amount, 1,502,195 (or 67%) of the Common Shares are owned by investment advisory clients of Morgan Stanley Asset Management Inc., a wholly-owned subsidiary of Morgan Stanley, Dean Witter, Discover & Co. Morgan Stanley, Dean Witter, Discover & Co. and Morgan Stanley Asset Management Inc. disclaim beneficial ownership of all of the Common Shares. (5) Includes (a) 180,112 Common Shares, (b) 56,773 Common Shares issuable upon exercise of warrants that are currently exercisable or that become exercisable within 60 days of March 15, 1998, (c) 110,281 Common Shares held by Newtown I, L.L.C. and (d) 43,818 Common Shares issuable upon conversion of Units beneficially owned by TNC or issuable to TNC on or before September 1, 1999. Mr. Nichols shares investment and voting power over the Common Shares beneficially owned by Newtown I, L.L.C. and TNC. The foregoing includes 21,696 Common Shares and warrants to purchase an additional 16,773 Common Shares which Mr. Nichols owns jointly with his wife. (6) Includes (a) 237,941 Common Shares and (b) 146,666 Common Shares issuable upon the exercise of options and warrants that are currently exercisable or that become exercisable within 60 days of March 15, 1998. (7) Includes (a) 22,312 Common Shares and (b) 10,000 Common Shares issuable upon the exercise of warrants that are currently exercisable or that become exercisable within 60 days of March 15, 1998. (8) The business address of Mr. Musser is 800 The Safeguard Building, 435 Devon Park Drive, Wayne, Pennsylvania 19087. (9) The business address of Mr. D'Alessio is 1735 Market Street, Philadelphia, Pennsylvania 19103. (10) The business address of Mr. Pizzi is 200 South Broad, Philadelphia, Pennsylvania 19103. -41- Item 13. Certain Relationships and Related Transactions August 22, 1996 Transaction On August 22, 1996, the Company consummated a transaction (the "SSI/TNC Transaction") in which the Company acquired, through the Operating Partnership, substantially all of the real estate holdings of Safeguard Scientifics, Inc. ("SSI") and SSI's real estate affiliate, The Nichols Company ("TNC"), then a private real estate development and management services company. The then President of TNC, Anthony A. Nichols, Sr. and the Chairman and Chief Executive Officer of SSI, Warren V. Musser, became members of the Board of Trustees on August 22, 1996. In addition to the 495,837 Units issued on August 22, 1996 by the Operating Partnership to SSI, TNC and the other persons that became limited partners in the Operating Partnership as part of the SSI/TNC Transaction (collectively, the "Original Limited Partners") the Operating Partnership will be required to issue to certain of the Original Limited Partners 44,322 Units by September 1, 1999 to acquire residual interests retained by them in certain of the Properties contributed to the Operating Partnership on August 22, 1996. The Partnership Agreement of the Operating Partnership gives the Original Limited Partners the right to cause the Company to redeem their Units for cash, at a per Unit price based on the average closing price of the Common Shares for the five consecutive trading days prior to such determination (or, at the option of the Company, Common Shares on a one Common Share per Unit basis, subject to customary antidilution adjustments). In the Partnership Agreement, SSI and TNC made customary representations and warranties, on a several basis, in favor of the Company. The Company also made customary representations and warranties in favor of SSI and TNC. These representations survive until August 22, 1998. Option Properties At the closing of the SSI/TNC Transaction, the Operating Partnership acquired an option from an affiliate of TNC entitling it to acquire, in the Operating Partnership's discretion, four properties containing an aggregate of approximately 159,000 net rentable square feet (collectively, the "Option Properties") at any time during the two-year period ending August 22, 1998 (subject to two extensions of one year each). The parties have agreed that the purchase price payable by the Operating Partnership upon exercise of its option will consist of $10.00 in excess of the mortgage debt encumbering the Option Properties at the time of exercise (which as of December 31, 1997 aggregated $21.4 million, including accrued interest). Exercise of the option is subject to a right of first refusal in favor of, and the consent of, the holder of the mortgage encumbering the Option Properties. There can be no assurance that the Company will exercise its option or that the holder of such mortgage will consent to the exercise of the option. Lease with SSI Affiliate Approximately 21,580 square feet of space is leased by the Company to an affiliate of SSI at an average rental rate of $9.66 per square foot under a lease that expires in April 1999. The Company believes that this is the prevailing market rate for comparable space. Environmental Indemnity SSI has agreed to indemnify the Operating Partnership against the cost of remediation that may be required to be undertaken on account of certain environmental conditions at one of the Properties acquired in the SSI/TNC Transaction subject to an aggregate maximum liability of approximately $2.0 million. The term of the SSI indemnity agreement expires on August 22, 2001. Repayment of Certain Obligations On August 21, 1997, the Company paid an aggregate of approximately $594,384 (the "Payment Amount") to satisfy obligations of TNC (a company controlled by Mr. Nichols, Sr.) on account of brokerage commissions and tenant improvements. In exchange, TNC transferred to the Company 28,994 Units. The number of Units transferred to the Company equaled the Payment Amount divided by -42- the then market value of the number of Common Shares into which such transferred Units were then redeemable. Involvement of Legg Mason Walter D'Alessio, a member of the Company's Board of Trustees and Compensation Committee, is President of Legg Mason Real Estate Services, Inc., a mortgage banking firm and a subsidiary of Legg Mason, Inc. Legg Mason, Inc. is the parent of Legg Mason Wood Walker, Incorporated, which was an underwriter in five of the seven public offerings of Common Shares consummated by the Company between January 1, 1997 and the date of this Annual Report on Form 10-K. Interests in Sellers On March 7, 1997, the Company acquired a 6.8 acre parcel of undeveloped land located in Horsham Township, Montgomery County, Pennsylvania for approximately $1.0 million. The seller was Horsham Valley, Inc. The purchase price was paid through a combination of approximately $645,000 in cash and a non-interest bearing promissory note for $369,166 that was paid on February 27, 1998. The purchase price for the property was determined by negotiation between the Company and the seller. Mr. Nichols, Sr., the Company's Chairman, holds an approximately 25% interest in the seller. On December 17, 1997, the Company acquired an office property in Valley Forge, Montgomery County, Pennsylvania (the "PECO Building") from PECO Energy Company for a purchase price of $9.5 million. Mr. D'Alessio, a member of the Company's Board of Trustees, is a director of PECO Energy Company. A committee of the Board of Trustees, of which Mr. D'Alessio was not a participant, made the decision to purchase the PECO Building and negotiated the terms of the transaction. -43- PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K (a) 1. and 2. Financial Statements and Schedules The financial statements and schedules listed below are filed as part of this annual report on the pages indicated. Index to Financial Statements and Schedules
Page ---- Report of Independent Public Accountants.........................................................F-1 Consolidated Balance Sheets as of December 31, 1997 and December 31, 1996 .......................F-2 Consolidated Statements of Operations for the Years Ended December 31, 1997, 1996 and 1995..................................................................................F-3 Consolidated Statements of Beneficiaries' Equity for the Years Ended December 31, 1997, 1996 and 1995..................................................................................F-4 Consolidated Statements of Cash Flows for the Years Ended December 31, 1997, 1996 and 1995..................................................................................F-5 Notes to Financial Statements....................................................................F-6 Schedule III - Real Estate and Accumulated Depreciation .........................................F-15
3. Exhibits Exhibits No. Description - ------------ ----------- (1)3.1.1 Amended and Restated Declaration of Trust of the Company (amended and restated as of May 12, 1997). (2)3.1.2 Articles of Amendment to Declaration of Trust of the Company (September 4, 1997). (3)3.2 Amended and Restated Bylaws of the Company. (4)10.01 Brandywine Realty Partners General Partnership Agreement. (4)10.02 Second Amended and Restated Partnership Agreement of Brandywine Realty Services Partnership. (5)10.03 Amendment to Brandywine Realty Partners General Partnership Agreement. (6)10.04 Agreement among the Company, Richard M. Osborne and the Richard M. Osborne Trust. (7)10.05 Loan and Securities Purchase Agreement, dated June 21, 1996, between Turkey Vulture Fund XIII, Ltd. (the "RMO Fund") and the Company. (7)10.06 Promissory Note, dated June 21, 1996, in the original principal amount of $992,293 issued by the Company to the RMO Fund. (7)10.07 Warrant to purchase Common Shares, dated June 21, 1996, issued by the Company to the RMO Fund. (8)10.08 Purchase and Sale Agreement between UM Real Estate Investment Company, LLC ("UM") and the Company. (8)10.09 First Amendment to Purchase and Sale Agreement between UM and the Company. (8)10.10 Second Amendment to Purchase and Sale Agreement between UM and the Company. (8)10.11 Third Amendment to Purchase and Sale Agreement between UM and the Company. -44- (8)10.12 Promissory Note in the principal amount of $1,000,000 from the Company to UM. (8)10.13 Subordinated Mortgage from the Company to UM. (8)10.14 Amended and Restated Loan Agreement between the Company and Summit Bank ("SB"). (8)10.15 Amended and Restated Promissory Note from the Company to SB. (8)10.16 Amended and Restated Mortgage from the Company to SB. (9)10.17 Contribution Agreement among the Company, Safeguard Scientifics, Inc. ("SSI") and The Nichols Company ("TNC"). (9)10.18 Share and Warrant Purchase Agreement between the Company and SSI. (10)10.19 Distribution Support and Loan Agreement between the Operating Partnership and SSI (10) (10)10.20 Agreement among the Company, SSI and Safeguard Scientifics (Delaware), Inc. (10) (10)10.21 Registration Rights Agreement among the Company, SSI, TNC, the RMO Fund and certain other persons. (10)10.22 Warrant to purchase Common Shares issued by the Company to SSI. (10)10.23 Third Amendment to Brandywine Realty Partners General Partnership Agreement. (10)10.24 Form of Warrant issued to Executive Officers. ** (10)10.25 Environmental Indemnity Agreement between the Company and SSI. (10)10.26 Articles of Incorporation of Brandywine Realty Services Corporation, as amended. (10)10.27 Option Agreement between the Operating Partnership and C/N Horsham Towne Limited Partnership (the "Option Agreement"). (11)10.28 Amendment No. 1 to Option Agreement. (11)10.29 Contribution Agreement among the Company, Greenwood Square Corporation, BCBC Holding Company, 500 North Gulph Road and RAI Real Estate Advisers, Inc. ("RAI"), as voting trustee. (11)10.30 Securities Purchaser Agreement between the Company and RAI, as voting trustee. (11)10.31 Form of Warrant to purchase Common Shares in favor of RAI, as voting trustee. (11)10.32 Form of Standstill Agreement between the Company and RAI, as voting trustee. (11)10.33 Form of Registration Rights Agreement between the Company and RAI, as voting trustee. (11)10.34 Form of Pledge Agreement between the Company and RAI, as voting trustee. (11)10.35 Form of Voting Agreement between the Company, RAI as voting trustee, and certain other parties. (11)10.36 Purchase Agreement between the Company and K/B Fund II, ("K/B"). (11)10.37 Reinstatement and First Amendment to Purchase Agreement between the Company and K/B. (11)10.38 Real Estate Sale and Purchase Contract between the Company and Monumental Life Insurance Company ("Monumental"). (11)10.39 First Amendment to Real Estate Sale and Purchase Contract between the Company and Monumental. (11)10.40 Second Amendment to Real Estate Sale and Purchase Contract between the Company and Monumental. (11)10.41 Agreement for Purchase and Sale of Real Estate and Related Property between the Company and Horsham Office Center Associates Limited Partnership ("Horsham"). (11)10.42 Amendment to Agreement for Purchase and Sale of Real Estate and Related Property between the Company and Horsham. (11)10.43 Securities Purchase Agreement between the Company and Morgan Stanley Funds. (11)10.44 Form of Registration Rights Agreement between the Company and Morgan Stanley Funds. (11)10.45 Letter from Safeguard Scientifics, Inc. and subsidiary to the Company. (11)10.46 Letter from Richard M. Osborne and affiliates to the Company. (12)10.47 1996 Credit Agreement, with Exhibits [replaced]. (12)10.48 Agreement of Sale - 1120 Executive Plaza, Mt. Laurel Corporate Park, Executive Court and Option Parcel. (13)10.49 Assumption, Modification and Release Agreement - 1120 Executive Plaza. (13)10.50 Assumption, Modification and Release Agreement - 1000 Howard Boulevard, Mt. Laurel, New Jersey. -45- (13)10.51 Option Agreement - Lot 8, Block 1104, Mt. Laurel, New Jersey. (13)10.52 Sun Life Mortgage Note - 1120 Associates Limited Partnership. (13)10.53 Sun Life Mortgage and Security Agreement - 1120 Associates Limited Partnership. (13)10.54 Sun Life Letter - 1120 Associates Limited Partnership. (13)10.55 Sun Life Mortgage Note - MLCP Associates Limited Partnership. (13)10.56 Sun Life Mortgage and Security Agreement - MLCP Associates Limited Partnership. (13)10.57 Sun Life Letter - MLCP Associates Limited Partnership. (14)10.58 Agreement of Sale - 1336 Enterprise Drive (14)10.59 Agreement of Sale between Radnor-Camco Partnership and Brandywine Realty Trust. (15)10.60 Agreement of Sale - 201 and 221 King Manor (16)10.61 Agreement of Sale - 1000 Greentree Executive Campus (16)10.62 Agreement of Sale - 2000 Greentree Executive Campus (16)10.63 Agreement of Sale - 3000 Greentree Executive Campus (16)10.64 Agreement of Sale - 4000/5000 Greentree Executive Campus (16)10.65 Agreement of Sale - 5 Eves Drive (16)10.66 Agreement of Sale - Parcel 8 (Horsham Business Center) (16)10.67 Promissory Note ($369,166) - Oxford Corporate Center, Springhouse Corporate Center and Highlands Business Center (17)10.68 Agreement of Sale - 7000 Geerdes Boulevard, and Midlantic Drive Properties (17)10.69 Agreement of Purchase and Sale (Advent Realty) - Oxford Corporate Center, Springhouse Corporate Center, Greentree Commons, Highlands Business Center (17)10.70 Bridge Loan documents ($70 million) (18)10.71 Agreement of Purchase and Sale - 1974 Sproul Road (19)10.72 Agreement of Sale - 100 Commerce Drive (19)10.73 Agreement of Sale - 200 and 300 Commerce Drive (19)10.74 Agreement of Sale - 400 Commerce Drive (19)10.75 Operating Agreement of Christiana Center Operating Company I LLC (19)10.76 Operating Agreement of Christiana Center Operating Company II LLC (20)10.77 Guaranty from Brock J. Vinton and Brandywine Realty Trust in favor of PNC Bank, Delaware (20)10.78 Loan Commitment Letter dated October 16, 1997 from Brandywine Realty Trust to Christiana Operating Company I LLC (21)10.79 Project Participation Agreement (21)10.80 Agreement of Limited Partnership of Four Tower Bridge Associates (21)10.81 Agreement of Limited Partnership of Five Tower Bridge Associates (21)10.82 Agreement of Sale - Four Tower Bridge (21)10.83 Purchase Option Agreement - Five Tower Bridge (21)10.84 Right of First Offer Agreement - Tower Bridge North (21)10.85 Right of First Offer Agreement - Three Tower Bridge (21)10.86 Right of First Offer Agreement - One Tower Bridge (22)10.87 Amended and Restated Agreement of Limited Partnership of Brandywine Operating Partnership, L.P. (the "Operating Partnership"). (22)10.88 Amendment No. 1 to Amended and Restated Agreement of Limited Partnership of the Operating Partnership. (22)10.89 Agreement among the Company, the Operating Partnership and Certain Subsidiaries (22)10.90 Purchase and Sale Agreement - 111-121 Presidential Boulevard (22)10.91 Agreement - 500 Scarborough Drive (22)10.92 Agreement - 1007 Laurel Oak Road (22)10.93 Agreement - Foster Avenue/East Clementon Drive/United States Avenue (22)10.94 Agreement of Sale - 55 United States Avenue (22)10.95 Agreement of Sale - 50 East Clementon Avenue (22)10.96 Agreement of Sale - 501 Scarborough Drive (22)10.97 Agreement of Sale - 20 East Clementon Drive (22)10.98 Registration Rights Agreement (22)10.99 First Amendment to Amended and Restated Agreement of Limited Partnership of the Operating Partnership -46- (22)10.100 Tax Indemnification Agreement - PWCC (22)10.101 Tax Indemnification Agreement - Laurel Oak (22)10.102 Tax Indemnification Agreement - English Creek (23)10.103 Amended and Restated Credit Agreement with NationsBank, N.A. (23)10.104 Form of Promissory Note (23)10.105 Form of Revolving Note (23)10.106 Form of Guaranty Agreement (23)10.107 General Partnership Agreement of Interstate 202 General Partnership (23)10.108 Agreement of Purchase and Sale - The Berkshire Group (23)10.109 Agreement of Purchase and Sale - Bowpl Park, LLC (23)10.110 Agreement of Purchase and Sale - Linden Park Limited Partnership (23)10.111 Agreement of Sale - Park 80 LLC (23)10.112 Agreement of Purchase and Sale - Trend Associates (23)10.113 Agreement of Purchase and Sale - University Plaza, L.P. (23)10.114 Agreement of Purchase and Sale - WHDWA Real Estate Limited Partnership (24)10.115 Forward Commitment (25)10.116 Agreement of Purchase and Sale - Three Christina Center (25)10.117 Second Amendment to Amended and Restated Credit Agreement (26)10.118 Separation Agreement with John P. Gallagher (27)10.119 Separation Agreement with Brian Belcher (27)10.120 Agreement of Sale - Green Hills (27)10.121 Sale Agreement - Berwyn Park 10.122 Amended and Restated Employment Agreement of Anthony A. Nichols, Sr. ** 10.123 Amended and Restated Employment Agreement of Gerard H. Sweeney ** 10.124 Restricted Share Award with Anthony A. Nichols, Sr. ** 10.125 Restricted Share Award with Gerard H. Sweeney ** 10.126 Non-Qualified Option Award to Anthony A. Nichols, Sr. ** 10.127 Non-Qualified Option Award to Gerard H. Sweeney ** 10.128 Restricted Share Award with John M. Adderly, Jr. ** 10.129 Restricted Share Award with Mark S. Kripke ** 10.130 Restricted Share Award with Anthony A. Nichols, Jr. ** 10.131 Restricted Share Award to Henry J. DeVuono ** 10.132 Non-Qualified Option Award to John M. Adderly, Jr. ** 10.133 Non-Qualified Option Award to Mark S. Kripke ** 21.1 List of Subsidiaries of the Company. 23.1 Consent of Arthur Andersen LLP. 24.1 Powers of Attorney (included on signature page hereto). 27.1 Financial Data Schedule. _______________ (1) Previously filed as an exhibit to the Company's Form 8-K dated June 9, 1997 and incorporated herein by reference. (2) Previously filed as an exhibit to the Company's Form 8-K dated September 10, 1997 and incorporated herein by reference. (3) Previously filed as an exhibit to the Company's Form 10-K for the fiscal year ended December 31, 1996 and incorporated herein by reference. (4) Previously filed as an exhibit to the Company's Registration statement of Form S-11 (File No. 33-4175) and incorporated herein by reference. (5) Previously filed as an exhibit to the Company's Form 10-K for the fiscal year ended December 31, 1993 and incorporated herein by reference. (6) Previously filed as an exhibit to the Company's Form 10-K for the fiscal year ended December 31, 1995 and incorporated herein by reference. (7) Previously filed as an exhibit to the Company's Form 8-K dated June 21, 1996 and incorporated herein by reference. (8) Previously filed as an exhibit to the Company's Form 8-K dated August 1, 1996 and incorporated herein by reference. -47- (9) Previously filed as an exhibit to the Company's Form 10-Q for the quarter ended June 30, 1996 and incorporated herein by reference. (10) Previously filed as an exhibit to the Company's Form 8-K dated August 22, 1996 and incorporated herein by reference. (11) Previously filed as an exhibit to the Company's Registration Statement on Form S-11 (File No. 333-13969) and incorporated herein by reference. (12) Previously filed as an exhibit to the Company's Form 8-K dated December 16, 1996 and incorporated herein by reference. (13) Previously filed as an exhibit to the Company's Form 8-K dated February 7, 1997 and incorporated herein by reference. (14) Previously filed as an exhibit to the Company's Form 8-K dated March 18, 1997 and incorporated herein by reference. (15) Previously filed as an exhibit to the Company's Form 8-K dated April 18, 1997 and incorporated herein by reference. (16) Previously filed as an exhibit to the Company's Form 8-K dated May 1, 1997 and incorporated herein by reference. (17) Previously filed as an exhibit to the Company's Form 8-K dated June 9, 1997 and incorporated herein by reference. (18) Previously filed as an exhibit to the Company's Form 8-K dated June 26, 1997 and incorporated herein by reference. (19) Previously filed as an exhibit to the Company's Form 8-K dated October 3, 1997 and incorporated herein by reference. (20) Previously filed as an exhibit to the Company's Form 8-K dated October 30, 1997 and incorporated herein by reference. (21) Previously filed as an exhibit to the Company's Form 8-K dated November 18, 1997 and incorporated herein by reference. (22) Previously filed as an exhibit to the Company's Form 8-K dated December 17, 1997 and incorporated herein by reference. (23) Previously filed as an exhibit to the Company's Form 8-K dated January 8, 1998 and incorporated herein by reference. (24) Previously filed as an exhibit to the Company's Form 8-K dated January 27, 1998 and incorporated herein by reference. (25) Previously filed as an exhibit to the Company's Form 8-K dated March 17, 1998 and incorporated herein by reference. (26) Previously filed as an exhibit to the Company's Form 10-Q for the quarter ended March 31, 1997 and incorporated herein by reference. (27) Previously filed as an exhibit to the Company's Form 10-Q for the quarter ended June 30, 1997 and incorporated herein by reference. ** Management contract or compensatory plan or arrangement. -48- (b) Reports on Form 8-K During the fourth quarter of the year ended December 31, 1997, the Company filed five Current Reports on Form 8-K. On October 3, 1997, the Company filed a Current Report on Form 8-K (reporting under Items 5 and 7). This Current Report included an audited statement of revenues and certain operating expenses of Metropolitan Industrial Center for the year ended December 31, 1996 and the unaudited statement of revenue and certain operating expenses for the six months ended June 30, 1997. This Current Report also included pro forma financial information for the six months ended June 30, 1997 and for the year ended December 31, 1996. On November 18, 1997, the Company filed a Current Report on From 8-K (reporting under Items 5 and 7). On December 17, 1997, the Company filed a Current Report on Form 8-K (reporting under Items 2, 5 and 7). On December 19, 1997, the Company filed a Current Report on Form 8-K (reporting under Items 5 and 7). -49- SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. BRANDYWINE REALTY TRUST By: /s/ Gerard H. Sweeney ----------------------------- Gerard H. Sweeney President and Chief Executive Officer Pursuant to the requirements of the Securities and Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant in the capacities and on the dates indicated.
Signature Title Date --------- ----- ---- /s/ Anthony A. Nichols, Sr. Chairman of the Board and Trustee March 30, 1998 - ------------------------------------ Anthony A. Nichols, Sr. /s/ Gerard H. Sweeney President, Chief Executive Officer and Trustee - ------------------------------------ (Principal Executive Officer) March 30, 1998 Gerard H. Sweeney /s/ Mark S. Kripke Chief Financial Officer -- (Principal March 30, 1998 - ------------------------------------ Financial and Accounting Officer) Mark S. Kripke /s/ Warren V. Musser Trustee March 30, 1998 - ------------------------------------ Warren V. Musser /s/ Walter D'Alessio Trustee March 30, 1998 - ------------------------------------ Walter D'Alessio /s/ Charles P. Pizzi Trustee March 30, 1998 - ------------------------------------ Charles P. Pizzi
-50- REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Beneficiaries of Brandywine Realty Trust: We have audited the consolidated balance sheets of Brandywine Realty Trust (a Maryland real estate investment trust) and subsidiaries as of December 31, 1997 and 1996, and the related consolidated statements of operations, beneficiaries' equity and cash flows for each of the three years in the period ended December 31, 1997. These consolidated financial statements and the schedule referred to below are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements and schedule based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Brandywine Realty Trust and subsidiaries as of December 31, 1997 and 1996, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1997, in conformity with generally accepted accounting principles. Our audit was made for the purpose of forming an opinion of the basic financial statements taken as a whole. Schedule III is presented for purposes of complying with the Securities and Exchange Commission's rules and is not a required part of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. ARTHUR ANDERSEN LLP Philadelphia, Pennsylvania March 4, 1998 BRANDYWINE REALTY TRUST CONSOLIDATED BALANCE SHEETS (in thousands)
December 31, December 31, 1997 1996 ASSETS Real estate investments Operating properties $ 586,414 $ 161,284 Accumulated depreciation (22,857) (9,383) --------- --------- 563,557 151,901 Cash and cash equivalents 29,442 18,279 Escrowed cash 212 2,044 Accounts receivable 3,689 1,366 Due from affiliates 214 517 Investment in management company 74 -- Investment in unconsolidated real estate ventures 5,480 Deposits 12,133 -- Deferred costs and other assets 6,680 4,219 --------- --------- Total assets $ 621,481 $ 178,326 ========= ========= LIABILITIES AND BENEFICIARIES' EQUITY Mortgage notes payable $ 48,731 $ 36,644 Notes payable, Credit Facility 115,233 -- Accrued interest 857 202 Accounts payable and accrued expenses 2,377 3,119 Distributions payable 8,843 2,255 Excess of losses over investment in management company -- 14 Tenant security deposits and deferred rents 5,535 1,324 --------- --------- Total liabilities 181,576 43,558 --------- --------- Minority interest 14,377 6,398 --------- --------- Preferred shares - $0.01 par value, 5,000,000 preferred shares authorized -- 26,444 --------- --------- Beneficiaries' equity Shares of beneficial interest, $0.01 par value, 100,000,000 common shares authorized, 24,087,315 shares issued and outstanding 241 70 Additional paid-in capital 446,054 113,047 Share warrants 962 962 Cumulative earnings (deficit) 11,753 (3,248) Cumulative distributions (33,482) (8,905) --------- --------- Total beneficiaries' equity 425,528 101,926 --------- --------- Total liabilities and beneficiaries' equity $ 621,481 $ 178,326 ========= =========
The accompanying notes are an integral part of these statements. F-2 BRANDYWINE REALTY TRUST CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share information)
Year Ended December 31, -------------------------------------------------------- 1997 1996 1995 --------------- --------------- -------------- Revenue: Rents $ 49,928 $ 8,462 $ 3,517 Tenant reimbursements 9,396 1,372 66 Other 1,736 196 83 -------- -------- -------- Total revenue 61,060 10,030 3,666 -------- -------- -------- Operating Expenses: Interest 7,079 2,751 793 Depreciation and amortization 15,589 2,836 1,402 Property operating expenses 20,144 3,403 1,561 Management fees 2,301 306 47 Administrative expenses 659 825 682 -------- -------- -------- Total operating expenses 45,772 10,121 4,485 -------- -------- -------- Income (loss) before equity in income of management company and minority interest 15,288 (91) (819) Equity in income (loss) of management company 89 (26) -- -------- -------- -------- Income (loss) before minority interest 15,377 (117) (819) Minority interest in income (376) (45) (5) -------- -------- -------- Net Income (loss) 15,001 (162) (824) Income allocated to Preferred Shares (499) (401) -- -------- -------- -------- Income (loss) allocated to Common Shares $ 14,502 $ (563) $ (824) ======== ======== ======== Basic earnings per Common Share $ 0.96 $ (0.44) $ (1.33) ======== ======== ======== Diluted earnings per Common Share $ 0.95 $ (0.44) $ (1.33) ======== ======== ========
The accompanying notes are an integral part of these statements. F-3 BRANDYWINE REALTY TRUST CONSOLIDATED STATEMENTS OF BENEFICIARIES' EQUITY FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 (in thousands, except number of shares)
Common Shares of Common Capital In Cumulative Beneficial Shares Par Excess of Par Earnings Cumulative Interest Value Value Share Warrants (Deficit) Distributions -------- ----- ----- -------------- --------- ------------- BALANCE, January 1, 1995 618,733 $ 6 $ 16,785 $ -- $ (2,262) $ (5,340) Net loss -- -- -- -- (824) -- Distributions ($1.65 per share) -- -- -- -- -- (1,021) ---------- ---------- ---------- ---------- ---------- ---------- BALANCE, December 31, 1995 618,733 6 16,785 -- (3,086) (6,361) Issuance of Common Shares 6,394,507 64 96,262 906 -- -- Issuance of warrants in connection with Series A Preferred Shares -- -- -- 56 -- -- Net loss -- -- -- -- (162) -- Preferred Share Distributions -- -- -- -- -- (401) Distributions ($0.82 per share) -- -- -- -- -- (2,143) ---------- ---------- ---------- ---------- ---------- ---------- BALANCE, December 31, 1996 7,013,240 70 113,047 962 (3,248) (8,905) Issuance of Common Shares 17,074,075 171 333,007 -- -- -- Net income -- -- -- -- 15,001 -- Preferred Share Distributions -- -- -- -- -- (499) Distributions ($1.44 per share) -- -- -- -- -- (24,078) ---------- ---------- ---------- ---------- ---------- ---------- BALANCE, December 31, 1997 24,087,315 $ 241 $ 446,054 $ 962 $ 11,753 $ (33,482) ========== ========== ========== ========== ========== ==========
The accompanying notes are an integral part of these statements. F-4 BRANDYWINE REALTY TRUST CONSOLIDATED STATEMENTS OF CASH FLOW (in thousands)
Year Ended December 31, ---------------------------------------------------- 1997 1996 1995 --------------- --------------- ---------- Cash flows from operating activities: Net income $ 15,001 $ (162) $ (824) Adjustments to reconcile net income to net cash provided by operating activities: Minority interest 376 45 5 Depreciation and amortization 15,589 2,836 1,402 Equity in income (loss) of affiliate (89) 26 -- Amortization of discounted notes payable 334 32 Changes in assets and liabilities: (Increase) decrease in accounts receivable (2,323) (493) (54) (Increase) decrease in affiliate receivable 303 (517) -- (Increase) decrease in other assets (1,303) (45) 13 Increase (decrease) in accounts payable and accrued expenses 818 726 (50) Increase (decrease) in accrued mortgage interest 655 (137) 24 Increase (decrease) in other liabilities 4,211 257 (19) --------- --------- --------- Net cash provided by operating activites 33,572 2,568 497 --------- --------- --------- Cash flows from investing activities: Purchase of properties (406,871) (33,918) -- Investment in real estate ventures (5,480) -- -- Decrease (increase) in escrowed cash 1,832 600 (41) Capital expenditures and leasing commissions paid (7,737) (2,083) (660) --------- --------- --------- Net cash used in investing activities (418,256) (35,401) (701) --------- --------- --------- Cash flows from financing activites: Proceeds from issuance of shares, net 305,055 91,297 -- Distributions paid to shareholders (18,069) (510) (2,227) Distributions paid to minority partners (448) (9) (5) Proceeds from note payable to shareholder -- 1,392 -- Proceeds from mortgage notes payable 388 9,896 9,000 Repayment of mortgage notes payable (4,485) (50,873) (6,968) Proceeds from notes payable, Credit Facility 293,208 -- -- Repayment of notes payable, Credit Facility (177,975) -- -- Purchase of minority interests (531) -- -- Other debt costs (1,296) (921) (522) --------- --------- --------- Net cash provided by (used in) financing activities 395,847 50,272 (722) --------- --------- --------- Increase (decrease) in cash and cash equivalents 11,163 17,439 (926) Cash and cash equivalents at beginning of period 18,279 840 1,766 --------- --------- --------- Cash and cash equivalents at end of period $ 29,442 $ 18,279 $ 840 ========= ========= =========
The accompanying notes are an integral part of these statements. F-5 1. ORGANIZATION AND NATURE OF OPERATIONS: Brandywine Realty Trust (collectively with its subsidiaries, the "Company") is a self-administered, self-managed and fully integrated real estate investment trust (a "REIT"). The Company currently owns a portfolio of real estate assets located primarily in the Mid-Atlantic Region. As of December 31, 1997, the Company's portfolio included 95 office properties and 22 industrial facilities (collectively, the "Properties") that contain an aggregate of approximately 7.1 million net rentable square feet. As of December 31, 1997, the Company also held economic interests in five office development entities (the "Development Entities"). The Company's interest in 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 December 31, 1997, the Company held a 97.2% interest in the Operating Partnership. The Operating Partnership holds a 95% economic interest in Brandywine Realty Services Corporation (the "Management Company") through its ownership of 100% of the Management Company's non-voting preferred stock and 5% of its voting common stock. As of December 31, 1997, the Management Company was responsible for managing and leasing 115 of the Company's Properties and other properties on behalf of third parties. A majority of the Properties are located within the suburban Philadelphia office and industrial market. As such, a downturn in business activity in this market could negatively impact the Company. Management believes the Philadelphia office and industrial market provides a well-diversified economic base which helps to insulate the region from the types of market vicissitudes that can adversely affect a single-sector economy. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Principles of Consolidation The Company consolidates its accounts and the accounts of the Operating Partnership and reflects the remaining interest in the Operating Partnership as Minority Interest. All significant intercompany accounts and transactions have been eliminated in consolidation. Use of Estimates in the Preparation of Financial Statements The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Capitalization of Costs The Company has capitalized as deferred costs certain expenditures related to the financing and leasing of the Properties. Capitalized loan fees are being amortized over the terms of the related loans and leasing commissions are being amortized over the term of the related leases. Deferred costs and other assets are presented net of accumulated amortization totaling $1,994,000 and $729,000 as of December 31, 1997 and 1996, respectively. Real estate investments Real estate investments are carried at cost, less accumulated depreciation. It is the Company's policy to review the carrying value of long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying value of such assets may not be recoverable. Measurement of the impairment F-6 loss is based on fair value of the asset. Generally, fair value will be determined using valuation techniques such as the present value of expected future cash flows. No impairment adjustments have been made as a result of this review process during 1997, 1996 or 1995. Depreciation and Amortization Depreciation is computed using the straight-line method. Estimated useful lives range from 25 to 35 years for buildings and improvements and five years for personal property. Amortization of tenant improvements is provided over the shorter of the lease term or the life of the assets. Investment in Management Company Investment in the Management Company is accounted for using the equity method. See Note 4 for further discussion. Investment in Unconsolidated Real Estate Ventures The Company accounts for its non-controlling interests in the Development Entities using the equity method. Non-controlling ownership interests range from 50% - 65%. These investments are recorded initially at the Company's cost and subsequently adjusted for the Company's net equity in income and cash contributions and distributions. Federal Income Taxes The Company intends to maintain its election to be taxed as a real estate investment trust under Sections 856-860 of the Internal Revenue Code. Accordingly, no provision for Federal income taxes has been reflected in the financial statements. Earnings and profits, which will determine the taxability of distributions to shareholders, will differ from net income reported for financial reporting purposes due to differences in cost basis, differences in the estimated useful lives used to compute depreciation and differences between the allocation of the Company's net income and loss for financial reporting purposes and for tax reporting purposes. Under current law, the Company is subject to a 4% Federal excise tax if it does not distribute a sufficient amount of its taxable income within the prescribed time limits. The excise tax equals 4% of the annual amount, if any, by which the sum of (a) 85% of the Company's ordinary income and (b) 95% of the Company's capital gain net income exceeds cash distributions and certain taxes paid by the Company. No excise tax was incurred in 1997, 1996 or 1995. The Management Company is subject to Federal and state income taxes. The operating results of the Management Company include a provision for income taxes. Revenue Recognition Rental revenue from tenants is recognized on a straight-line basis over the term of the lease agreements regardless of when payments are due and accrued rents are included in accounts receivable on the balance sheets. The impact of the straight-line rent adjustment increased revenues by $1,724,000, $337,000 and $51,000 during the years ended December 31, 1997, 1996 and 1995, respectively. Certain lease agreements contain provisions which provide for reimbursement of the tenants' share of real estate taxes and certain common area maintenance costs. These reimbursements are reflected on the accrual basis. No tenant represented 10% or more of the Company's rental revenue in 1997 or 1996. During 1995, two tenants each individually represented 10% of the Company's total rental revenue. F-7 Fair Value of Financial Instruments The carrying amounts reported in the balance sheet for cash, accrued liabilities, and short-term borrowings approximate their fair values due to the short-term nature of these instruments. Accordingly, these items have been excluded from the fair value disclosures included elsewhere in these notes. Statements of Cash Flows For purposes of reporting cash flows, cash and cash equivalents include cash on hand and short-term investments with original maturities of 90 days or less. At December 31, 1997, 1996 and 1995, cash and cash equivalents totaling $29,442,000, $18,279,000 and $840,000, respectively, included tenant escrow deposits of $2,739,000, $789,000 and $198,000, respectively. Reclassifications Certain 1996 and 1995 amounts have been reclassified to conform to the current year presentation. 3. ACQUISITIONS OF REAL ESTATE INVESTMENTS: 1998 Subsequent to December 31, 1997 and through March 4, 1998, the Company acquired 38 Properties (32 office properties and six industrial facilities) which contained an aggregate of approximately 3.4 million net rentable square feet. The 38 Properties were purchased for an aggregate cash price of $335.1 million. 1997 During 1997, the Company acquired 80 properties (61 office properties and 19 industrial facilities) which contained an aggregate of approximately 5.1 million net rentable square feet. The aggregate purchase price for the 1997 property acquisitions was $403.7 million, consisting of $378.3 million of cash, $15.9 million of debt assumed and $9.5 million in units of limited partnership ("Units") in the Operating Partnership. The following unaudited pro forma financial information of the Company for the years ended December 31, 1997 and 1996 gives effect to the properties acquired during 1997 and 1996 as if the purchases had occurred on January 1, 1997 and January 1, 1996, respectively.
Year Ended December 31, ----------------------- 1997 1996 ----------- ------------ (Unaudited and in thousands, except per share data) Pro forma total revenues $94,856 $86,309 Pro forma net income allocated to Common Shares $23,890 $15,450 Pro forma net income per Common Share $ 1.02 $ 0.69
1996 The Company acquired 33 properties in 1996 (30 office properties and 3 industrial facilities) which contain an aggregate of approximately 1.7 million net rentable square feet. The aggregate purchase price for the 1996 property acquisitions was $139.7 million, consisting of $36.6 million of cash, $63.6 million of debt assumed and $39.5 million in Units, Common Shares and warrants. F-8 The following unaudited pro forma financial information of the Company for the years ended December 31, 1996 and 1995 gives effect to the properties acquired during 1996 as if the purchases had occurred on January 1, 1996 and January 1, 1995, respectively.
Year Ended December 31, ----------------------- 1997 1996 ----------- ------------ (Unaudited and in thousands, except per share data) Pro forma total revenues $ 25,614 $ 22,845 Pro forma net income (loss) allocated to Common Shares $ 632 $ (1,243) Pro forma net income (loss) per Common Share $ 0.09 $ (0.18)
All acquisitions described above were accounted for by the purchase method. The results of operations for each of the aquired properties have been included from the respective purchase dates. All pro forma financial information presented within this footnote is unaudited and is not necessarily indicative of the results which actually would have occurred if acquisitions had been consummated on the respective dates indicated, nor does the pro forma information purport to represent the results of operations for future periods. 4. MANAGEMENT COMPANY On August 22, 1996, the Management Company commenced operations and is responsible for various activities including: management, leasing, construction, redevelopment and development of the Company's Properties and properties on behalf of third parties as well as providing other real estate related services for third parties. Total management fees paid by the Company's Properties to the Management Company are included in management fee expense in the accompanying statements of operations and amounted to $2,263,000 during 1997 and $263,000 for the period from August 22, 1996 to December 31, 1996. The Management Company also receives payments of certain costs attributable to the operation of the Properties. Such reimbursements are included in property operating expenses in the accompanying statements of operations and amounted to $1.9 million during 1997 and $147,000 for the period from August 22, 1996 to December 31, 1996. Summarized unaudited financial information for the Management Company as of December 31, 1997 and 1996, for the year ended December 31, 1997 and for the period from August 22, 1996 to December 31, 1996 is as follows: Year Ended December 31, ----------------------- 1997 1996 ------------ ------------ (Unaudited and in thousands) Total assets $ 924 $ 345 Total revenue $ 5,077 $ 301 Net income (loss) $ 93 $ (42) Company's share of net income (loss) $ 89 $ (26) 5. INDEBTEDNESS Notes Payable Credit Facility - The Company utilizes credit facility borrowings for general business purposes, including the acquisition of office and industrial properties and the repayment of certain outstanding debt. On July 15, 1997, the Company increased the availability for borrowing under its revolving credit facility (the "1997 Credit Facility") from $80.0 million to $150.0 million. At year end, $34.8 million remained available for borrowing under this facility. The 1997 Credit Facility was secured by 39 of the Properties and bore interest at a per annum floating rate equal to the Company's choice of 30, 60 or 90-day LIBOR, plus 175 basis points. The weighted average interest rate during 1997 for F-9 borrowings under the 1997 Credit Facility was 7.4%. No amounts were borrowed under the facility in 1996. During the first quarter of 1998, the Company replaced the 1997 Credit Facility with a $330 million unsecured revolving credit facility (the "1998 Credit Facility"). The new facility enables the Company to borrow funds at a reduced interest rate equal to the 30, 60, 90 or 180-day LIBOR, plus, in each case, a range of 100 to 137.5 basis points, depending on the Company's then existing leverage and debt rating. Alternatively, the Company can borrow funds at a base rate equal to the higher of (i) the Prime Rate or (ii) the Fed Funds Rate plus 50 basis points. The 1998 Credit Facility matures on January 5, 2001 and is extendible, under certain circumstances, at the Company's option to January 5, 2002. The 1998 Credit Facility requires the Company to maintain ongoing compliance with a number of customary financial and other covenants, including leverage ratios based on gross implied asset value and debt service coverage ratios, limitations on liens and distributions and a minimum net worth requirement. Mortgage Notes Payable - Mortgage loans encumbered 20 and 18 of the Properties as of December 31, 1997 and 1996, respectively. Additionally, as of December 31, 1997, mortgage loans encumbered certain of the Company's land holdings. Interest rates on the mortgage loans ranged from 5.0% to 9.9% and had weighted average interest rates of 8.3%, 8.4% and 9.2% during 1997, 1996 and 1995, respectively. Included in mortgage notes payable are non-interest bearing loans which have an imputed 8% interest rate. On December 31, 1997, these loans totaled $3.8 million with unamortized discounts of $254,000. On December 31, 1996, non-interest bearing loans totaled $4.8 million with unamortized discounts of $587,000. Amortization of the discounts aggregated $333,000 and $63,000 during 1997 and 1996, respectively. Aggregate principal payments on mortgage notes payable at December 31, 1997 are due as follows: 1998 $ 13,092,000 1999 12,823,000 2000 3,883,000 2001 1,021,000 2002 13,835,000 2003 and thereafter 4,077,000 ----------------- $ 48,731,000 ================= As of December 31, 1997, the Company was in compliance with all debt covenants. During the years ended December 31, 1997, 1996 and 1995, interest paid totaled $6,071,000, $2,827,000 and $784,000, respectively. As of December 31, 1997, 59 of the 117 Properties were mortgaged or subject to liens under the secured Credit Facility and mortgage notes payable and had an aggregate net book value of $308.1 million. As of December 31, 1997, the fair values of mortgage notes payable and notes payable under the Credit Facility approximate carrying costs. As of December 31, 1997, the Company had entered into guarantees, and agreements contemplating the provision of guarantees, for the benefit of unconsolidated real estate ventures, aggregating approximately $33.3 million. Payment under these guarantees would constitute loan obligations of, or preferred equity positions in, the applicable unconsolidated real estate venture. F-10 6. ISSUANCE OF SHARES, WARRANTS AND OPTIONS: The following table summarizes the Company's issuance of shares, warrants and options:
Number of Number of Date of Common Share options / Exercise Proceeds (in Type of issuance Investor issuance Shares (1) Price warrants Price thousands) (2) - -------------------- ----------------- ---------- ----------- ------- --------- --------- ------------- 1997 Activity: - --------------------------------------- Share offering Public 3/4/97 2,200,000 $ 20.63 - - $ 42,999 Share offering (3) Public 3/17/97 175,500 $ 20.63 - - 3,430 Share offering Public 7/28/97 10,000,000 $ 20.75 - - 196,600 Share offering (3) Public 8/20/97 1,500,000 $ 20.75 - - 29,490 Trustee fees (4) Trustees 9/2/97 1,284 - - - - Share offering Public 9/16/97 786,840 $ 22.31 - - 16,679 Share offering Public 12/23/97 751,269 $ 24.63 - - 17,668 Preferred share conversion SERS (5) Various 1,606,060 (6) - - - - Unit redemptions (7) Various Various 53,122 - - - - ---------- ------- -------- 17,074,075 - 306,866 ---------- ------- ======== 1996 Activity: - ------------------------------------------ Share offering RMO (8) 6/21/96 19,983 $ 16.89(9) 19,983 $ 19.50 $ 338 Share offering Safeguard Scientifics 8/22/96 258,333 $ 16.50 258,333 $ 19.50 - Employee share options Company employees 8/22/96 - - 243,333 $ 19.50 - Share offering RMO (8) 8/23/96 14,135 $ 16.89(9) 14,135 $ 19.50 239 Preferred share offering SERS (5) 11/14/96 - (6) $ 16.50 133,333 $ 25.50 26,500 Share offering RMO (8) 11/15/96 46,321 $ 16.89(9) 46,321 $ 19.50 782 Share offering Morgan Stanley 12/2/96 709,090 $ 16.50 - - 11,700 Share offering SERS (5) 12/2/96 636,363 $ 16.50 - - 10,500 Share offering Public 12/2/96 4,000,000 $ 16.50 - - 61,880 Share offering (3) Public 12/13/96 600,000 $ 16.50 - - 9,282 Unit Redemptions (5) Various Various 110,282 - - - - ---------- ------- -------- 6,394,507 715,438 $121,221 ---------- ------- ======== Amounts outstanding as of January 1, 1996 - --------------------------------------------------------- Shares outstanding Public 1/1/96 618,733 - - Employee share options Company employees 8/1/94 - 33,333 $ 14.31 Employee share options Company employees 8/1/94 - 13,334 $ 6.21 ---------- ------- 618,733 46,667 ---------- ------- Total outstanding as of December 31, 1997 24,087,315 762,105 ========== =======
(1) During 1996, the Company effected a one-for-three reverse share split of its Common Shares. All share and per share amounts have been presented on a post-split basis. (2) Proceeds are net of underwriter's discounts and before deducting other expenses, if any. (3) These offerings were pursuant to the exercise of underwriters' over-allotment options. (4) The Company issued Common Shares as partial payment of annual fees to non-employee Trustees. (5) SERS represents the Commonwealth of Pennsylvania State Employees' Retirement System. (6) On November 14, 1996, the Company issued 481,818 Series A preferred shares of beneficial interest. During 1997 the preferred shares were converted into 1,606,060 Common Shares. (7) Unit Redemptions represent Common Shares issued upon redemption of Units. (8) RMO represents an investment fund controlled by Richard M. Osborne, a former Trustee of the Company. (9) Indicated price represents the aggregate per share value of the Common Shares and warrants issued. During the period January 1, 1998 through March 4, 1998, the Company sold an aggregate 12,642,741 Common Shares for gross proceeds of $303.4 million pursuant to three public offerings. The Company has reserved, as of December 31, 1997, 762,105 Common Shares for issuance upon the exercise of share options and warrants described above. At December 31, 1997, all options and warrants outstanding were exercisable and were granted with an exercise price equal to the fair market value on the date of grant. Outstanding options and warrants have a weighted average remaining contractual life of 4.0 years, an average exercise price of $20.09 per share and an aggregate purchase price of $15,311,000. F-11 During 1997 and 1996, there were no options or warrants exercised or canceled and no options or warrants expired. During 1996, the Company adopted a new stock-based compensation accounting standard, "Accounting for Stock-Based Compensation" ("SFAS No. 123"). SFAS No. 123 encourages a fair value method of accounting for employee stock options and similar equity instruments. The statement also allows an entity to continue to account for stock-based compensation using the intrinsic value based method in APB Opinion No. 25. As provided for in the statement, the Company elected to continue the intrinsic value method of expense recognition. If compensation cost for the warrants and options granted to executive officers and employees during 1996 had been determined using the fair value method prescribed by SFAS No. 123, the Company's net earnings and earnings per share would have been the pro forma amounts indicated below: Year ended December 31, --------------------------------- 1997 1996 --------------- --------------- (unaudited and in thousands, except per share data) Net income (loss): As reported $ 14,502 $ (563) Pro forma 14,203 (894) Earnings (loss) per share: As reported Basic $ 0.96 $ (0.44) Diluted $ 0.95 $ (0.44) Pro forma Basic $ 0.94 $ (0.69) Diluted $ 0.93 $ (0.69) The pro forma effect on results may not be representative of the impact in future years because the fair value method was not applied to options granted before 1995. The weighted average fair value of each warrant issued in 1996 was $1.38 for warrants issued to the executive officers and $1.13 for warrants issued to Company employees. Fair value was estimated on the grant date using the Black-Scholes option pricing model with the following assumptions: Executive Company officers employees ---------- -------------- Expected life in years 5 3 Risk-free interest rate 6.0% 6.0% Volatility 17.5% 17.5% Dividend yield 7.0% 7.0% On January 2, 1998, the Company awarded an aggregate of 443,557 "restricted" Common Shares to six of the Company's executives. These restricted shares vest over five to eight year periods and were valued at approximately $11.2 million (based on the closing price of Common Shares on January 2, 1998). Also on January 2, 1998, the Company awarded certain of its employees options exercisable for an aggregate 2,043,704 Common Shares. Of the options awarded, 1,737,261 were granted subject to shareholder approval. These options vest over two to five years and have exercise prices ranging from $25.25 to $29.04. 7. NET INCOME (LOSS) PER SHARE: In February 1997, the Financial Accounting Standards Board issued Statement No. 128, "Earnings per Share" ("SFAS 128"). SFAS 128 establishes standards for computing and presenting earnings per share ("EPS"). Basic earnings per share are based on the weighted average number of Common Shares outstanding during the year. Diluted earnings per share are based on the weighted average number of F-12 Common Shares outstanding during the year adjusted to give effect to common share equivalents. All per share amounts for all periods presented have been restated to conform to SFAS 128. A reconciliation between basic and diluted EPS is shown below (in thousands, except share and per share data).
1997 1996 1995 ----------------------- ------------------------ ------------------------- Basic Diluted Basic Diluted Basic Diluted ----- ------- ----- ------- ----- ------- Net income (loss) $ 15,001 $ 15,001 $ (162) $ (162) $ (824) $ (824) Income allocated to Preferred Shares (499) -- (401) (401) -- -- ------------ ------------ ------------ ------------ ------------ ------------ Income (loss) available to common shareholders $ 14,502 $ 15,001 $ (563) $ (563) $ (824) $ (824) ------------ ------------ ------------ ------------ ------------ ------------ Weighted average shares outstanding 15,030,002 15,030,002 1,289,704 1,289,704 618,733 618,733 Preferred Shares -- 686,214 -- -- -- -- Options and warrants -- 77,113 -- -- -- -- ------------ ------------ ------------ ------------ ------------ ------------ Total weighted average shares outstanding 15,030,002 15,793,329 1,289,704 1,289,704 618,733 618,733 ------------ ------------ ------------ ------------ ------------ ------------ Earnings (loss) per share $ 0.96 $ 0.95 $ (0.44) $ (0.44) $ (1.33) $ (1.33) ============ ============ ============ ============ ============ ============
8. DISTRIBUTIONS:
1997 1996 1995 --------- --------- -------- Common Share Distributions: Distributions declared - per share $ 1.44 $ 0.82 $ 1.65 Percentage classified as ordinary income 82.0% 11.5% 0.0% Percentage classified as return of capital 18.0% 88.5% 100.0% Classified as ordinary income - per share $ 1.18 $ 0.09 $ - Classified as return of capital - per share $ 0.26 $ 0.73 $ 1.65 Preferred Share Distributions: Distributions declared $ 499,000 $ 401,000 $ -
9. RELATED-PARTY TRANSACTIONS: During 1996, the Company consummated a transaction (the "SSI/TNC Transaction") in which the Company acquired substantially all of the real estate holdings of Safeguard Scientifics, Inc. ("SSI") and SSI's real estate affiliate, The Nichols Company ("TNC"), then a private real estate development and management services company. The then President of TNC, Anthony A. Nichols, Sr. and the Chairman and Chief Executive Officer of SSI, Warren V. Musser, became members of the Company's Board of Trustees. Approximately 21,580 net rentable square feet is leased by the Company to an affiliate of SSI at an average rental rate of $9.66 per square foot under a lease that expires in April 1999. In March 1997, the Company acquired a parcel of undeveloped land from Horsham Valley, Inc., an entity in which Mr. Nichols, Sr. holds an approximate 25% interest. The purchase price of approximately $1.0 million was determined through arm's-length negotiation between the Company and the seller. In August 1997, the Company satisfied obligations of TNC (a company controlled by Mr. Nichols, Sr.) on account of brokerage commissions and tenant improvements. In exchange, TNC transferred to the Company 28,944 Units. Walter D'Alessio, a member of the Company's Board of Trustees, is President and Chief Executive Officer of a subsidiary of Legg Mason Wood Walker Incorporated, which performed investment banking services and other financial advisory services for the Company during 1997 and 1996. F-13 Mr. D'Alessio is a director of PECO Energy Company. In December 1997, the Company acquired an office property from PECO Energy Company for a purchase price of $9.5 million. The Company's Trustee was not a participant in the committee which made the decision to purchase the property and negotiated the related terms of the transaction. 10. OPERATING LEASES: The Company leases its properties to tenants under operating leases with various expiration dates extending to the year 2012. At December 31, 1997, leases covering approximately 1.0 million square feet or 14% of the net leasable space were scheduled to expire during 1998. Gross minimum future rentals and accrued rental income on noncancelable leases at December 31, 1997 are as follows (in thousands): Accrued rental Total accrual basis Year Cash rentals income rental income - ------------------ -------------- ------------- ----------------- 1998 $ 73,646 $ 2,048 $ 75,694 1999 64,175 1,125 65,300 2000 54,020 206 54,226 2001 41,779 (539) 41,240 2002 29,416 (854) 28,562 2003 and thereafter 68,743 (4,217) 64,526 ----------- --------- ---------- $ 331,779 $ (2,231) $ 329,548 =========== ========= ========== The total minimum future rentals presented above do not include amounts that may be received as tenant reimbursements for charges to cover increases in certain operating costs. 11. SUMMARY OF INTERIM RESULTS (UNAUDITED): The following summary interim financial information is unaudited and presented in thousands, except per share data:
1st 2nd 3rd 4th quarter quarter quarter quarter 1997 1997 1997 1997 -------------- ------------- ------------- ------------- Total revenue $ 8,598 $ 12,120 $ 18,121 $ 22,221 Net income (loss) 2,050 1,658 4,748 6,545 Income (loss) allocated to Common Shares 1,551 1,658 4,748 6,545 Basic net income (loss) per Common Share $ 0.20 $ 0.17 $ 0.25 $ 0.28 Diluted net income (loss) per Common Share $ 0.20 $ 0.15 $ 0.25 $ 0.28 1st 2nd 3rd 4th quarter quarter quarter quarter 1996 1996 1996 1996 -------------- ------------- ------------- ------------- Total revenue $ 1,045 $ 982 $ 2,572 $ 5,431 Net income (loss) 10 (9) (129) (34) Income (loss) allocated to Common Shares 10 (9) (129) (435) Basic net income (loss) per Common Share $ -- $ -- $ (0.18) $ (0.14) Diluted net income (loss) per Common Share $ -- $ -- $ (0.18) $ (0.14)
F-14 SCHEDULE III Real Estate and Accumulated Depreciation - December 31, 1997 (in thousands)
Initial Cost -------------------------------------- Net Encumberances Improvements at (Retirements) December 31, Building and Since Property Name 1997 Land Improvements Acquisition - ---------------------------------------------------------------------------------------------- OFFICE PROPERTIES NORTHERN PHILADELPHIA SUBURBS Horsham / Willow Grove / Jenkingtown, PA 700 Business Center Drive $ - $ 550 $ 2,201 $ 13 800 Business Center Drive - 895 3,585 47 One Progress Avenue - 1,403 5,629 51 500 Enterprise Road - 1,302 5,188 - 300 Welsh Road - 1,289 5,157 - 1155 Business Center Drive - 1,029 4,124 10 650 Dresher Road - 635 2,501 64 655 Business Center Drive 369 1,218 2,529 524 Blue Bell / Plymouth Meeting / Fort Washington 501 Office Center Drive - 1,796 7,192 46 500 Office Center Drive - 1,617 6,480 - 323 Norristown Road - 1,685 6,751 - 321 Norristown Road - 1,286 5,176 89 2240/50 Butler Pike - 1,103 4,627 29 220 Commerce Drive - 1,086 4,338 - 2260 Butler Pike - 661 2,727 73 120 West Germantown Pike - 684 2,773 51 140 West Germantown Pike - 481 1,976 13
Gross Amount at Which Carried December 31, 1997 ---------------------------------------------- Accumulated Building Depreciation at and December 31, Date of Date Depreciable Property Name Land Improvements Total (3) 1997 (4) Construction Acquired Life - ------------------------------------------- ---------------------------------------------- --------------------------------------- OFFICE PROPERTIES NORTHERN PHILADELPHIA SUBURBS Horsham / Willow Grove / Jenkingtown, PA 700 Business Center Drive $ 550 $ 2,214 $ 2,764 $ 96 1986 1996 25 800 Business Center Drive 895 3,632 4,527 179 1986 1996 25 One Progress Avenue 1,403 5,680 7,083 306 1986 1996 25 500 Enterprise Road 1,302 5,188 6,490 508 1990 1996 25 300 Welsh Road 1,289 5,157 6,446 31 1985 1997 25 1155 Business Center Drive 1,029 4,134 5,163 451 1990 1996 25 650 Dresher Road 635 2,565 3,200 189 1984 1996 25 655 Business Center Drive 1,218 3,053 4,271 120 1997 1997 31.5 Blue Bell / Plymouth Meeting / Fort Washington 501 Office Center Drive 1,796 7,238 9,034 109 1974 1997 25 500 Office Center Drive 1,617 6,480 8,097 99 1974 1997 25 323 Norristown Road 1,685 6,751 8,436 164 1988 1997 25 321 Norristown Road 1,286 5,265 6,551 137 1972 1997 25 2240/50 Butler Pike 1,103 4,656 5,759 383 1984 1996 25 220 Commerce Drive 1,086 4,338 5,424 27 1985 1997 25 2260 Butler Pike 661 2,800 3,461 211 1984 1996 25 120 West Germantown Pike 684 2,824 3,508 183 1984 1996 25 140 West Germantown Pike 481 1,989 2,470 167 1984 1996 25
F-15
Initial Cost ---------------------- Encumberances at December 31, Building and Property Name 1997 Land Improvements - -------------------------------------------------------------------------------- Southern Bucks County 33 Street Road - Greenwood Square I - 851 3,407 33 Street Road - Greenwood Square II - 1,126 4,511 33 Street Road - Greenwood Square III - 350 1,401 2010 Cabot Boulevard - 760 3,091 2000 Cabot Boulevard - 569 2,281 3000 Cabot Boulevard - 485 1,940 2260/70 Cabot Boulevard - 415 1,661 2005 Cabot Blolevard - 313 1,257 ------ ------ ------ Total Northern Philadelphia Suburbs 369 23,589 92,503 ------ ------ ------ WESTERN PHILADELPHIA SUBURBS Southern Route 202 Corridor, PA 486 Thomas Jones Way 6,279 (1) 805 3,256 855 Springdale Drive - 838 3,370 456 Creamery Way - 635 2,548 110 Summit Drive - 402 1,647 1336 Enterprise Drive - 731 2,946 468 Creamery Way - (1) 526 2,112 748 Springdale Drive - 231 931 Main Line, PA 300 Berwyn Park - 3,358 13,422 200 Berwyn Park - 2,364 9,460 16 Campus Boulevard - 1,152 4,627 Campus Boulevard - Lot 13 - 912 -
Intial Gross Amount at Which Carried Cost December 31, 1997 -------------- ------------------------------------------------ Net Improvements Accumulated (Retirements) Building Depreciation at Depre- Since and December 31, Date of Date ciable Property Name Acquisition Land Improvements Total(3) 1997 (4) Construction Acquired Life - -------------------------------------------------------- ---------------------------------------------- --------------------------- Southern Bucks County 33 Street Road - Greenwood Square I 289 851 3,696 4,547 209 1985 1996 25 33 Street Road - Greenwood Square II 226 1,126 4,737 5,863 238 1985 1996 25 33 Street Road - Greenwood Square III 270 350 1,671 2,021 79 1985 1996 25 2010 Cabot Boulevard - 760 3,091 3,851 79 1985 1997 25 2000 Cabot Boulevard 28 569 2,309 2,878 62 1985 1997 25 3000 Cabot Boulevard 27 485 1,967 2,452 91 1986 1996 25 2260/70 Cabot Boulevard 66 415 1,727 2,142 88 1984 1996 25 2005 Cabot Boulevard - 313 1,257 1,570 31 1985 1997 25 -------------- ---------------------------------------------- Total Northern Philadelphia Suburbs 1,916 23,589 94,419 118,008 4,237 -------------- ---------------------------------------------- WESTERN PHILADELPHIA SUBURBS Southern Route 202 Corridor, PA 486 Thomas Jones Way 215 805 3,471 4,276 357 1990 1996 25 855 Springdale Drive - 838 3,370 4,208 77 1986 1997 25 456 Creamery Way - 635 2,548 3,183 163 1987 1996 25 110 Summit Drive 145 402 1,792 2,194 124 1985 1996 25 1336 Enterprise Drive - 731 2,946 3,677 97 1989 1997 25 468 Creamery Way 10 526 2,122 2,648 167 1990 1996 25 748 Springdale Drive - 231 931 1,162 21 1986 1997 25 Main Line, PA 300 Berwyn Park - 3,358 13,422 16,780 228 1989 1997 25 200 Berwyn Park 4 2,364 9,464 11,828 161 1987 1997 25 16 Campus Boulevard 28 1,152 4,655 5,807 350 1990 1996 25 Campus Boulevard - Lot 13 - 912 - 912 - 1997
F-16
Initial Cost ------------------------------------ Net Encumberances Improvements at Building (Retirements) December 13, and Since Property Name 1997 Land Improvements Acquisition - ----------------------------------------------------------------------------------------------- Campus Boulevard - Lot 7, 8 & 9 1,638 2,527 - - 1974 Sproul Road - 841 3,368 37 100 Berwyn Park - 1,821 7,290 - 18 Campus Boulevard - 786 3,312 (104) King of Prussia / Valley Forge 7000 Geerdes Boulevard - 2,664 10,670 - 1111 Old Eagle School Road - 1,932 7,721 - 500 North Gulph Road - 1,299 5,201 381 Bala Cynwyd 111 Presidential Boulevard - 5,412 21,612 - --------- -------- -------- ------ Total Western Philadelphia Suburbs 7,917 29,236 103,493 716 --------- -------- -------- ------ READING / ALLENTOWN, PA 100-300 Gundy Drive 1,500 6,295 25,180 9 100 Katchel Blvd - 1,854 7,423 1 6575 Snowdrift Road 2,294 600 2,411 - 7248 Tilghman Street - 731 2,969 (69) 7310 Tilghman Street 2,504 553 2,246 - --------- -------- -------- ------ Total Reading/Allentown 6,298 10,033 40,229 (59) --------- -------- -------- ------
Gross Amount at Which Carried December 31, 1997 ----------------------------------------------- Accumulated Building Depreciation at and December 31, Date of Date Depreciable Property Name Land Improvements Total (3) 1997 (4) Construction Acquired Life - ------------------------------------------ ----------------------------------------------- ---------------------------------------- Campus Boulevard - Lot 7, 8 & 9 2,527 - 2,527 - 1997 1974 Sproul Road 841 3,405 4,246 74 1972 1997 25 100 Berwyn Park 1,821 7,290 9,111 124 1986 1997 25 18 Campus Boulevard 786 3,208 3,994 325 1990 1996 25 King of Prussia / Valley Forge 7000 Geerdes Boulevard 2,664 10,670 13,334 251 1988 1997 25 1111 Old Eagle School Road 1,932 7,721 9,653 30 1962 1997 25 500 North Gulph Road 1,299 5,582 6,881 294 1979 1996 25 Bala Cynwyd 111 Presidential Boulevard 5,412 21,612 27,024 62 1974 1997 25 ----------------------------------------------- Total Western Philadelphia Suburbs 29,236 104,209 133,445 133,445 ----------------------------------------------- READING / ALLENTOWN, PA 100-300 Gundy Drive 6,295 25,189 31,484 424 1970 1997 25 100 Katchel Blvd 1,854 7,424 9,278 124 1970 1997 25 6575 Snowdrift Road 600 2,411 3,011 229 1988 1996 25 7248 Tilghman Street 731 2,900 3,631 208 1987 1996 25 7310 Tilghman Street 553 2,246 2,799 307 1985 1996 25 ----------------------------------------------- Total Reading/Allentown 10,033 40,170 50,203 1,292 -----------------------------------------------
F-17
Initial Cost ------------------------------------ Net Encumberances Improvements at Building (Retirements) December 31, and Since Property Name 1997 Land Improvements Acquisition - -------------------------------------------------------------------------------------------------- SOUTHERN NEW JERSEY Burlington County 10000 Midlantic Drive - 3,206 12,857 151 2000 Midlantic Drive - 2,203 8,823 1 1000 Howard Boulevard 5,784 2,297 9,288 417 1000 Atrium Way - 2,060 8,180 - 1120 Executive Boulevard 5,922 2,074 8,415 373 15000 Midlantic Drive - 3,061 12,254 104 Three Greentree Centre 9,796 (2) 324 6,024 115 9000 Midlantic Drive - 1,472 5,895 - 4000/5000 West Lincoln Drive - 877 3,526 5 1000/2000 West Lincoln Drive - 888 3,568 27 Two Greentree Centre - (2) 264 4,693 41 One Greentree Centre - (2) 345 4,440 34 8000 Lincoln Drive - 606 2,887 770 4000 Midlantic Drive - 714 2,947 89 Five Eves Drive - 703 2,819 - 9000 West Lincoln Drive - 610 2,422 26 Two Eves Drive - 818 3,461 35 3000 West Lincoln Drive - 569 2,293 - Four B Eves Drive - 588 2,369 30 Four A Eves Drive - 539 2,168 -
Gross Amount at Which Carried December 31, 1997 ---------------------------------------------- Accumulated Building Depreciation at and December 31, Date of Date Depreciable Property Name Land Improvements Total (3) 1997 (4) Construction Acquired Life - ---------------------------------------------------------------------------------------- ----------------------------------------- SOUTHERN NEW JERSEY Burlington County 10000 Midlantic Drive 3,206 13,008 16,214 303 1990 1997 25 2000 Midlantic Drive 2,203 8,824 11,027 208 1989 1997 25 1000 Howard Boulevard 2,297 9,705 12,002 421 1988 1997 25 1000 Atrium Way 2,060 8,180 10,240 72 1989 1997 25 1120 Executive Boulevard 2,074 8,788 10,862 367 1987 1997 25 15000 Midlantic Drive 3,061 12,358 15,419 293 1991 1997 25 Three Greentree Centre 324 6,139 6,463 2,817 1984 1986 9000 Midlantic Drive 1,472 5,895 7,367 139 1989 1997 25 4000/5000 West Lincoln Drive 877 3,531 4,408 99 1982 1997 25 1000/2000 West Lincoln Drive 888 3,595 4,483 111 1982 1997 25 Two Greentree Centre 264 4,734 4,998 2,213 1983 1986 One Greentree Centre 345 4,474 4,819 2,072 1982 1986 8000 Lincoln Drive 606 3,657 4,263 344 1983 1996 25 4000 Midlantic Drive 714 3,036 3,750 69 1981 1997 25 Five Eves Drive 703 2,819 3,522 79 1986 1997 25 9000 West Lincoln Drive 610 2,448 3,058 64 1983 1997 25 Two Eves Drive 818 3,496 4,314 182 1987 1997 25 3000 West Lincoln Drive 569 2,293 2,862 64 1982 1997 25 Four B Eves Drive 588 2,399 2,987 98 1987 1997 25 Four A Eves Drive 539 2,168 2,707 81 1987 1997 25
F-18
Initial Cost ------------------------------------ Net Encumberances Improvements at Building (Retirements) December 31, and Since Property Name 1997 Land Improvements Acquisition - -------------------------------------------------------------------------------------------------- Camden County Main Street - Plaza 1000 - 2,726 10,931 27 Main Street- CAM - 1 11 - 457 Haddonfield Road 9,099 2,142 9,120 464 One South Union Place - 445 1,803 - 1007 Laurel Oak Road - 1,225 4,900 - 6 East Clementon Road - 564 2,253 - King & Harvard - 263 1,069 - Main Street - Piazza - 695 2,802 - 20 East Clementon Road - 517 2,070 - Main Street - Promenade - 531 2,052 - 7 Foster Avenue - 174 696 - 10 Foster Avenue - 152 609 - 50 East Clementon Road - 640 2,561 - 5 Foster Avenue - 16 64 - ------- -------- --------- ------- Total Southern New Jersey 30,601 34,309 150,270 2,709 ------- -------- --------- ------- DELAWARE Northern Suburban Wimington One Righter Parkway - 2,545 10,195 22 100 Commerce Drive - 1,158 4,633 8 ------- -------- --------- ------- Total Delaware Properties - 3,703 14,828 30 ------- -------- --------- -------
Gross Amount at Which Carried December 31, 1997 ---------------------------------------------- Accumulated Building Depreciation at and December 31, Date of Date Depreciable Property Name Land Improvements Total (3) 1997 (4) Construction Acquired Life - ----------------------------------------------------------------------------------- ---------------------------------------- Camden County Main Street - Plaza 1000 2,726 10,958 13,684 364 1988 1997 25 Main Street- CAM 1 11 12 2 1997 25 457 Haddonfield Road 2,142 9,584 11,726 529 1990 1996 31.5 One South Union Place 445 1,803 2,248 12 1997 25 1007 Laurel Oak Road 1,225 4,900 6,125 11 1996 1997 25 6 East Clementon Road 564 2,253 2,817 5 1980 1997 25 King & Harvard 263 1,069 1,332 7 1997 25 Main Street - Piazza 695 2,802 3,497 93 1990 1997 25 20 East Clementon Road 517 2,070 2,587 5 1986 1997 25 Main Street - Promenade 531 2,052 2,583 68 1988 1997 25 7 Foster Avenue 174 696 870 2 1983 1997 25 10 Foster Avenue 152 609 761 1 1983 1997 25 50 East Clementon Road 640 2,561 3,201 6 1986 1997 25 5 Foster Avenue 16 64 80 - 1968 1997 25 ---------------------------------------------- Total Southern New Jersey 34,309 152,979 187,288 11,201 ---------------------------------------------- DELAWARE Northern Suburban Wimington One Righter Parkway 2,545 10,217 12,762 443 1989 1996 25 100 Commerce Drive 1,158 4,641 5,799 53 1989 1997 25 ---------------------------------------------- Total Delaware Properties 3,703 14,858 18,561 496 ----------------------------------------------
F-19
Initial Cost ------------------------------------- Net Encumberances Improvements at Building (Retirements) December 31, and Since Property Name 1997 Land Improvements Acquisition - --------------------------------------------------------------------------------------------------- OTHER MARKETS Twin Forks Office Park, - (2) 2,194 3,324 239 Raleigh, NC 5910 -6090 Six Forks Lawrenceville, NJ 168 Franklin Corner Drive - 398 1,597 39 Atlantic County 500 Scarborough Drive - 1,233 4,932 - 501 Scarborough Drive - 1,241 4,966 - ------- -------- -------- ------- Subtotal - Office Properties 45,185 105,936 416,142 5,590 ------- -------- -------- ------- INDUSTRIAL PROPERTIES NORTHERN PHILADELPHIA SUBURBS Southern Bucks County, PA 2200 Cabot Boulevard - 770 3,117 - 2250 Cabot Boulevard - 559 2,240 - 2510 Metropolitan Drive - 3,304 13,218 - ------- -------- -------- ------- Total Northern Philadelphia Suburbs - 4,633 18,575 - ------- -------- -------- -------
Gross Amount at Which Carried December 31, 1997 ----------------------------------------------- Accumulated Building Depreciation at and December 31, Date of Date Depreciable Property Name Land Improvements Total (3) 1997 (4) Construction Acquired Life - -------------------------------------- ----------------------------------------------- ----------------------------------------- OTHER MARKETS Twin Forks Office Park, 2,194 3,563 5,757 1,546 1982 1986 25 Raleigh, NC 5910 -6090 Six Forks Lawrenceville, NJ 168 Franklin Corner Drive 398 1,636 2,034 88 1976 1996 25 Atlantic County 500 Scarborough Drive 1,233 4,932 6,165 11 1987 1997 25 501 Scarborough Drive 1,241 4,966 6,207 11 1987 1997 25 ----------------------------------------------- Subtotal - Office Properties 105,936 421,732 527,668 21,787 ----------------------------------------------- INDUSTRIAL PROPERTIES NORTHERN PHILADELPHIA SUBURBS Southern Bucks County, PA 2200 Cabot Boulevard 770 3,117 3,887 141 1985 1996 25 2250 Cabot Boulevard 559 2,240 2,799 101 1985 1996 25 2510 Metropolitan Drive 3,304 13,218 16,522 133 1981 1997 25 ----------------------------------------------- Total Northern Philadelphia Suburbs 4,633 18,575 23,208 375 -----------------------------------------------
F-20
Initial Cost --------------------------------------- Net Encumberances Improvements at Building (Retirements) December 31, and Since Property Name 1997 Land Improvements Acquisition - ----------------------------------------------------------------------------------------------------- WESTERN PHILADELPHIA SUBURBS Lansdale, PA 1510 Gehman Road - 1,201 4,846 (225) King of Prussia, PA 201/221 King Manor Drive - 713 2,898 - -------- --------- --------- ------- Total Western Philadelphia Suburbs - 1,914 7,744 (225) -------- --------- --------- ------- SOUTHERN NEW JERSEY Burlington County, NJ 500 Highland Drive - 1,062 4,265 - 300 Highland Drive - 1,069 4,247 28 400 Highland Drive - 572 2,299 - 600 Highland Drive - 549 2,205 - 1000 East Lincoln Drive - 263 1,059 - Camden County, NJ 2 Foster Avenue - 404 1,618 - 1 Foster Avenue - 198 790 - 4 Foster Avenue - 187 746 - 55 U.S. Avenue - 869 3,476 - 5 U.S. Avenue - 40 159 - -------- --------- --------- ------- Total Southern New Jersey - 5,213 20,864 28 -------- --------- --------- ------- Subtotal - Industrial Properties - 11,760 47,183 (197) -------- --------- --------- ------- Grand Total - All Properties $ 45,185 $ 117,696 $ 463,325 $ 5,393 ======== ========= ========= =======
Gross Amount at Which Carried December 31, 1997 --------------------------------------------------- Accumulated Building Depreciation at and December 31, Date of Date Depreciable Property Name Land Improvements Total (3) 1997 (4) Construction Acquired Life - --------------------------------------- --------------------------------------------------- ------------------------------- WESTERN PHILADELPHIA SUBURBS Lansdale, PA 1510 Gehman Road 1,201 4,621 5,822 273 1990 1996 25 King of Prussia, PA 201/221 King Manor Drive 713 2,898 3,611 86 1964 1997 25 --------------------------------------------------- Total Western Philadelphia Suburbs 1,914 7,519 9,433 359 --------------------------------------------------- SOUTHERN NEW JERSEY Burlington County, NJ 500 Highland Drive 1,062 4,265 5,327 104 1990 1997 25 300 Highland Drive 1,069 4,275 5,344 107 1990 1997 25 400 Highland Drive 572 2,299 2,871 56 1990 1997 25 600 Highland Drive 549 2,205 2,754 54 1990 1997 25 1000 East Lincoln Drive 263 1,059 1,322 1 1981 1997 25 Camden County, NJ 2 Foster Avenue 404 1,618 2,022 4 1974 1997 25 1 Foster Avenue 198 790 988 1 1972 1997 25 4 Foster Avenue 187 746 933 1 1974 1997 25 55 U.S. Avenue 869 3,476 4,345 8 1982 1997 25 5 U.S. Avenue 40 159 199 - 1987 1997 25 --------------------------------------------------- Total Southern New Jersey 5,213 20,892 26,105 336 --------------------------------------------------- Subtotal - Industrial Properties 11,760 46,986 58,746 1,070 --------------------------------------------------- Grand Total - All Properties $ 117,696 $ 468,718 $ 586,414 $ 22,857 ===================================================
F-21 (1) Both of these properties secure a single loan. (2) At December 31, 1997, the two mortgage loans total $2,658,000 and $7,138,000, receptively. The loans are cross-collateralized and are secured by first mortgages on each property. (3) Reconciliation of Real Estate: The following table reconciles the real estate investments from January 1, 1997 to December 31, 1997(in thousands): Balance at beginning of year $161,284 Additions during year: Acquisitions 419,502 Capital expenditures 6,120 Deletions during year: Retirements (492) Balance at end of year $586,414 (4) Reconciliation of Accumulated Depreciation: The following table reconciles the accumulated depreciation on real estate investments from January 1, 1997 to December 31, 1997(in thousands): Balance at beginning of year $ 9,383 Additions during year: Depreciation expense 13,966 Deletions during year: Retirements (492) -------- Balance at end of year $22,857 F-22 Exhibit Index Exhibit 10.122 Amended and Restated Employment Agreement of Anthony A. Nichols, Sr.* Exhibit 10.123 Amended and Restated Employment Agreement of Gerard H. Sweeney* Exhibit 10.124 Restricted Share Award with Anthony A. Nichols, Sr.* Exhibit 10.125 Restricted Share Award with Gerard H. Sweeney* Exhibit 10.126 Non-Qualified Option Award to Anthony A. Nichols, Sr.* Exhibit 10.127 Non-Qualified Option Award to Gerard H. Sweeney* Exhibit 10.128 Restricted Share Award with John M. Adderly, Jr.* Exhibit 10.129 Restricted Share Award with Mark S. Kripke* Exhibit 10.130 Restricted Share Award with Anthony A. Nichols, Jr.* Exhibit 10.131 Restricted Share Award to Henry J. DeVuono* Exhibit 10.132 Non-Qualified Option Award to John M. Adderly, Jr.* Exhibit 10.133 Non-Qualified Option Award to Mark S. Kripke* Exhibit 21.1 Subsidiaries of Company Exhibit 23.1 Consent of Arthur Andersen LLP Exhibit 27 Financial Data Schedule - ------------------------ *Indicates management contract or compensatory plan or arrangement. EX-10.122 2 EXHIBIT 10.122 Exhibit 10.122 AMENDED AND RESTATED EMPLOYMENT AGREEMENT This Amended and Restated Employment Agreement (the "Agreement") is made as of February 11, 1998 and amends and restates in its entirety the Employment Agreement made and entered into as of January 2, 1998 by and between Anthony A. Nichols, Sr. ("Employee") and Brandywine Realty Trust, a Maryland real estate investment trust (the "Company"). BACKGROUND The Company desires to employ Employee, and Employee desires to enter into the employ of the Company, on the terms and conditions contained in this Agreement. NOW, THEREFORE, in consideration of the mutual agreements contained herein, and intending to be legally bound hereby, the parties hereto agree as follows: 1. Employment. The Company hereby employs Employee, and Employee hereby accepts employment by the Company, for the period and upon the terms and conditions contained in this Agreement. 2. Office and Duties. (a) Employee shall be employed by the Company as its Chairman of the Board and will serve as a member of the Board of Trustees of the Company (the "Board") and as Chairman of the Executive Committee of the Board, and shall perform such duties and shall have such authority as may from time to time be specified by the Board. Employee shall report directly to the Board. (b) Without further consideration, Employee shall, as directed by the Board, serve as a director or officer of, or perform such other duties and services as may be requested for and with respect to, any of the Company's Subsidiaries, including, without limitation, Brandywine Realty Services Corporation. As used in this Agreement, the terms "Subsidiary" and "Subsidiaries" shall mean, with respect to any entity, any corporation, partnership, limited liability company or other business entity in which the subject entity has the power (whether by contract, through securities ownership, or otherwise and whether directly or indirectly through control of one or more intermediate Subsidiaries) to elect a majority of board of directors or other governing body, including, in the case of a partnership, a majority of the board of directors or other governing body of the general partner. (c) Employee shall devote his full working time, energy, skill and best efforts to the performance of his duties hereunder, in a manner which will faithfully and diligently further the business interests of the Company and its Subsidiaries. 3. Term. Unless sooner terminated as hereinafter provided, the term of Employee's employment shall be for a period of five (5) years (the "Term") commencing on the date hereof. The Term shall automatically renew for additional one-year periods at the expiration of the then current Term unless either party shall give notice of his or its election to terminate Employee's employment at least one year prior to the end of the then-current Term, unless earlier terminated as hereinafter provided. 4. Base Salary. For all of the services rendered by Employee to the Company and its Subsidiaries, Employee shall receive an aggregate base salary of $250,000 per annum during the term of his employment hereunder. Such salary may be paid, at the election of the Company, either by the Company or by one or more of its Subsidiaries, in such relative proportions as the Company may determine, as earned in periodic installments in accordance with the Company's normal payment policies for executive officers. In the event that the Employee is also employed during any period by a Subsidiary of the Company, the amount of the base salary payable by the Company during such period shall be reduced by the amount of salary received by Employee during such period from such Subsidiary. Employee's base salary shall be subject to review by the Board not less frequently than annually, and Employee shall receive such salary increases as the Board may from time to time approve. 5. Bonus. Employee shall receive, during the term of his employment hereunder, such annual bonus as the Board, in its sole discretion, may determine from time to time. Any such bonus may be based on Employee's annual performance goals as established by the Board from time to time. 6. Participation in Incentive Plans. In addition to Employee's eligibility to receive annual bonuses pursuant to Section 5, Employee shall be entitled to participate in short-term and long-term incentive plans as shall be maintained by the Company from time to time on such terms and conditions as shall be established by the Board. 7. Prior Warrants. Nothing in this Agreement shall affect the terms and conditions of warrants granted by the Company to Employee before the date of this Agreement. Such warrants shall continue in force as in effect immediately before the date of this Agreement. 8. Fringe Benefits. Throughout the term of his employment and as long as they are kept in force by the Company, Employee shall be entitled to participate in and receive the benefits of any profit sharing plan, retirement plan, health or other employee benefit plan made available to other executive officers of the Company, but in no event shall such benefits be less favorable to Employee than the benefits listed on Schedule A hereto. 9. Automobile Allowance. Employee shall receive, during the term of his employment hereunder, an automobile allowance of $833 per month. 10. Expenses. The Company shall reimburse Employee for all reasonable, ordinary and necessary business expenses incurred by Employee in connection with the performance of Employee's duties hereunder upon receipt of vouchers therefor and in accordance with the Company's regular reimbursement procedures and practices in effect from time to time. 11. Vacation. Employee shall be entitled to a vacation of four (4) weeks during each twelve (12) month period of his employment hereunder, during which time Employee's compensation hereunder shall be paid in full. Employee shall be permitted to carry over unused vacation during each twelve (12) month period during the term and use such unused vacation in any subsequent twelve (12) month period during the term. 12. Disability. If the Board determines in good faith by a vote of a majority of its members (other than Employee) that Employee is unable to perform his duties hereunder due to partial or total disability or incapacity resulting from a mental or physical illness or injury or any similar cause for a period of one hundred and twenty (120) consecutive days or for a cumulative period of one hundred and eighty (180) days during any twelve (12) month period, the Company shall have the right to terminate Employee's employment at any time thereafter. 13. Death. Employee's employment shall terminate at the time of his death. 14. Termination of Employment for Cause. The Company may discharge Employee at any time for Cause. Cause shall mean: (i) habitual intoxication; (ii) drug addiction; (iii) intentional and willful violation of any express direction of the Board; (iv) theft, misappropriation or embezzlement of the Company's funds; (v) conviction of a felony; or (vi) repeated and consistent failure of Employee to be present at work during regular hours without valid reason therefor. 15. Termination of Employment Without Cause. The Board, in its sole discretion, may terminate Employee's employment hereunder without Cause upon 30 days' prior written notice to Employee at any time. 16. Resignation For Good Reason. Employee's resignation shall be treated as a "Resignation for Good Reason" if Employee resigns within six (6) months after any of the following circumstances, unless in the case of the circumstances set forth in paragraphs (b), (c) or (d) below, such circumstances are fully corrected within 30 days of Employee's delivery of notice to the Company: (a) A reduction in Employee's annual rate of base salary; (b) A failure of the Company to make the payments required by Section 4 hereof; (c) A significant adverse alteration in the nature or status of Employee's responsibilities; (d) Any other material breach by the Company of this Agreement; (e) Relocation (without the written consent of Employee) of the Company's executive offices to a location more than 30 miles from its current location; or (f) Upon a Change of Control (as defined in Section 17). 17. Change of Control. For purpose of this Agreement, a "Change of Control" means: (a) A "Change of Control" within the meaning of Section 1(d) of the Brandywine Realty Trust 1997 Long-Term Incentive Plan, as currently in effect; or (b) The purchase of any common shares of beneficial interest of the Company pursuant to a tender or exchange offer other than an offer by the Company. 18. Payments Upon or After Termination of Employment. (a) Voluntary Resignation Other than for Good Reason; Termination for Cause; Non-Renewal of Employment Agreement. If Employee's employment hereunder is terminated before the expiration of the Term because of Employee's voluntary resignation (other than a Resignation for Good Reason) or because of the Company's termination of Employee's employment for Cause, or if Employee's employment is terminated at the expiration of the Term following an election by either the Company or Employee not to renew the Term pursuant to Section 3, the Company, or at its direction, its Subsidiaries shall pay to Employee or, as appropriate, his legal representatives, heirs or estate all amounts payable under Sections 4 and 8 accrued through the applicable date of termination (the "Accrued Amount") within 30 days after such date of termination. If Employee's employment is terminated by the Company for Cause or by the Employee voluntarily (unless such termination of employment is a Resignation for Good Reason), or if Employee's employment is terminated at the expiration of the Term following an election by either the Company or Employee not to renew the Term pursuant to Section 3, the Company shall have no obligation or liability hereunder after the date of discharge or termination to pay or provide base salary, bonus compensation, fringe benefits, or any other form of compensation hereunder other than to pay the Accrued Amount. (b) Termination of Employment Because of Death. If Employee's employment is terminated as a result of the Employee's death before the expiration of the Term, the Company shall pay Employee's legal representatives the Accrued Amount as of the date of Employee's death, and, in addition, the product of three (3) times the greater of (1) the sum of the amounts paid or payable to Employee pursuant to Sections 4 and 5 hereunder (and the short-term portion of any bonus amounts paid or payable pursuant to Section 6 hereunder) for the calendar year preceding the calendar year in which the death occurs or (2) the sum of the amounts paid or payable to Employee pursuant to Sections 4 and 5 hereunder (and the short-term portion of any bonus amounts paid or payable pursuant to Section 6 hereunder) during the one-year period ending on the date of such death, provided that if such date of death occurs before the first anniversary of the date hereof, the cash lump sum payment shall be equal to the product of three (3) times the sum of (x) Employee's annualized base salary pay rate in effect as of such date of death and (y) the maximum bonus that would have been payable for the year that includes such date of death if all of the conditions for the payment of such maximum bonus had been satisfied, less the proceeds receivable by Employee's heirs and legal representatives from any life insurance policy provided by the Company. (c) Termination of Employment Because of Disability. If Employee's employment is terminated by the Company for disability before the expiration of the Term, the Company shall pay Employee the Accrued Amount as of the such date of termination, and, in addition, the consideration described in Sections 4 and 8 hereof, at the rate in effect at the date of termination, until one year after Employee becomes eligible to receive benefits pursuant to the disability insurance policy provided by the Company, at the rate in effect at such date of termination, less the amount of disability insurance proceeds receivable by Employee, provided that such period shall not exceed two years in the aggregate. In addition, Employee shall be entitled to receive an amount equal to the product that results from multiplying the amount of the bonus paid to him pursuant to Section 5 hereof for the calendar year prior to the year in which Employee's employment is terminated for disability multiplied by a fraction, the numerator of which is the number of days that elapsed prior to the termination during the year in which the termination occurs and the denominator of which is 365. (d) Termination of Employment by Company Without Cause; Resignation for Good Reason. If Employee's employment is terminated by the Company without Cause, or Employee Resigns for Good Reason, within 30 days following the date of such termination of employment, the Company shall pay Employee the Accrued Amount as of the date of such termination, and in addition: (i) Subject to Section 18(d)(ii), the Company shall make a cash lump sum payment to Employee equal to the greater of: (A) the product of three (3) times the greater of (1) the sum of the amounts paid or payable to Employee pursuant to Sections 4 and 5 hereunder (and the short-term portion of any bonus amounts paid or payable pursuant to Section 6 hereunder) for the calendar year preceding the calendar year in which such termination of employment occurs or (2) the sum of the amounts paid or payable to Employee pursuant to Sections 4 and 5 hereunder (and the short-term portion of any bonus amounts paid or payable pursuant to Section 6 hereunder) during the one-year period ending on the date of such termination, provided that if such date of termination occurs before the first anniversary of the date hereof, the cash lump sum payment shall be equal to the product of three (3) times the sum of (x) Employee's annualized base salary pay rate in effect as of such date of termination and (y) the maximum bonus that would have been payable for the year that includes such date of termination if all of the conditions for the payment of such maximum bonus had been satisfied; or (B) The amount payable pursuant to Section 4 hereunder for the remainder of the Term at a rate equal to his base salary in effect at the time of the date of such termination. (ii) Employee may, in his sole discretion, elect in writing to decline to receive part or all of the amount otherwise payable pursuant to Section 18(d)(i). In addition, if, following payment of part or all of the amount payable pursuant to Section 18(d)(i), Employee determines that Employee would be in a better net after-tax position than he would be in if he retained such amount, Employee may elect in writing to repay the Company the amount, plus interest payable from the date of payment to the date of repayment at the "applicable federal rate" as determined pursuant to section 1274 of the Code, and upon such repayment and to the extent thereof, the original payment shall be treated as a loan between the Company and Employee. (e) In the event that Employee is employed by a Subsidiary of the Company at the time of termination of employment, any amounts payable to the Employee pursuant to this Section 18 shall be reduced by the amounts paid to Employee by any such Subsidiary. (f) Upon the payment of the amounts payable under this Section 18, neither the Company nor any of its Subsidiaries shall have any further obligations hereunder to Employee (or to his estate, heirs, beneficiaries, or legal representatives, as appropriate, or otherwise) to pay or provide any base salary, bonus compensation, or fringe benefits, provided that if Employee Resigns for Good Reason or the Company terminates Employee's employment without Cause, Company shall, at its own expense, for a thirty-six (36) month period after the date of termination of employment, arrange to provide Employee with life, disability, accident and health insurance benefits substantially similar to those which Employee was entitled to receive immediately prior to such date of termination. 19. Prior Agreement. This Agreement is the successor to the Employment Agreement between Employee and the Company dated as of July 31, 1996 (which Agreement was assigned to the Company as of October 31, 1996). Employee represents to the Company that (a) there are no other agreements or understandings with the Company to which Employee is a party relating to employment, benefits or retirement, (b) there are no restrictions, agreements or understandings whatsoever to which Employee is a party which would prevent or make unlawful his execution of this Agreement or his employment hereunder, (c) his execution of this Agreement and his employment hereunder shall not constitute a breach of any contract, agreement or understanding, oral or written, to which he is a party or by which he is bound, and (d) he is free and able to execute this Agreement and to continue in the employment of the Company. 20. Key Man Insurance. The Company shall have the right at its expense to purchase insurance on the life of Employee in such amounts as it shall from time to time determine, of which the Company shall be the beneficiary. Employee shall submit to such physical examinations as may be required, and shall otherwise cooperate with the Company, in connection with the Company obtaining such insurance. 21. Miscellaneous. (a) Controlling Law. This Agreement, and all questions relating to its validity, interpretation, performance and enforcement, shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania. (b) Notices. All notices, requests, demands and other communications required or permitted under this Agreement shall be in writing and shall be deemed to have been duly given, made and received when delivered in person against receipt, or when sent by United States registered or certified mail, return receipt requested, postage prepaid, addressed as set forth below: (i) If to Employee: Anthony A. Nichols, Sr. 1125 Cymry Drive Newtown Square, PA 19073 (ii) If to the Company: Brandywine Realty Trust 16 Campus Boulevard Suite 150 Newtown Square, PA 19073 Attention: General Counsel In addition, notice by mail shall be by air mail if posted outside of the continental United States. Any party may alter the address to which communications or copies are to be sent by giving notice of such change of address in conformity with the provisions of this paragraph for the giving of notice. (c) Binding Nature of Agreement. This Agreement shall be binding upon and inure to the benefit of the Company and its successors and assigns and shall be binding upon Employee, his heirs and legal representatives. (d) 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 who executes the same, and all of which shall 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. (e) 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. (f) Entire Agreement. This Agreement contains the entire understanding among the parties hereto with respect to the subject matter hereof and supersedes all prior 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 of 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 an agreement in writing. (g) Section and Paragraph Headings. The section and paragraph headings in this Agreement are for convenience only; they form no part of this Agreement and shall not affect its interpretation. (h) Gender, Etc. Words used herein, regardless of the number and gender specifically used, shall be deemed and construed to include any other number, singular or plural, and any other gender, masculine, feminine or neuter, as the context requires. (i) Number of Days. In computing the number of days for purposes of this Agreement, all days shall be counted, including Saturdays, Sundays and holidays; provided, however, that if the final day of any time period falls on a Saturday, Sunday or holiday, then the final day shall be deemed to be the next day which is not a Saturday, Sunday or holiday. (j) Survival. The provisions of Sections 7, 12, 13, 14, 15, 16, 17, 18 and 19 shall survive the expiration or termination of the term of Employee's employment hereunder. (k) Assignability. This Agreement is not assignable by Employee. It is assignable by the Company only (i) to any subsidiary of the Company so long as the Company agrees to guarantee such subsidiary's obligations hereunder, or (ii) subject to Sections 16 and 18 and only upon Employee's prior written consent, to a person which is a successor in interest to the Company in the business operated by it or which acquires all or substantially all of its assets. (l) Liability of Trustees, etc. 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 each party hereto. IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and delivered on the date first above-written. BRANDYWINE REALTY TRUST By: /s/ Gerard H. Sweeney --------------------------------- Gerard H. Sweeney Title: President and Chief Executive Officer EMPLOYEE /s/ Anthony A. Nichols, Sr. ------------------------------------- Anthony A. Nichols, Sr. GUARANTEE In the event that the Company fails to perform its obligations under the foregoing Employment Agreement, Brandywine Operating Partnership, L.P. shall promptly perform the obligations of the Company arising thereunder which have not been performed in strict accordance with the terms and conditions thereof. BRANDYWINE OPERATING PARTNERSHIP, L.P. By: BRANDYWINE REALTY TRUST, its general partner By: /s/ Gerard H. Sweeney -------------------------------------- Gerard H. Sweeney, President and Chief Executive Officer EX-10.123 3 EXHIBIT 10.123 Exhibit 10.123 AMENDED AND RESTATED EMPLOYMENT AGREEMENT This Amended and Restated Employment Agreement (the "Agreement") is made as of February 11, 1998 and amends and restates in its entirety the Employment Agreement made and entered into as of January 2, 1998 by and between Gerard H. Sweeney ("Employee") and Brandywine Realty Trust, a Maryland real estate investment trust (the "Company"). BACKGROUND The Company desires to employ Employee, and Employee desires to enter into the employ of the Company, on the terms and conditions contained in this Agreement. NOW, THEREFORE, in consideration of the mutual agreements contained herein, and intending to be legally bound hereby, the parties hereto agree as follows: 1. Employment. The Company hereby employs Employee, and Employee hereby accepts employment by the Company, for the period and upon the terms and conditions contained in this Agreement. 2. Office and Duties. (a) Employee shall be employed by the Company as its President and Chief Executive Officer and will serve as a member of the Board of Trustees of the Company (the "Board") and member of the Executive Committee of the Board, and shall perform such duties and shall have such authority as may from time to time be specified by the Board. Employee shall report directly to the Board. (b) Without further consideration, Employee shall, as directed by the Board, serve as a director or officer of, or perform such other duties and services as may be requested for and with respect to, any of the Company's Subsidiaries, including, without limitation, Brandywine Realty Services Corporation. As used in this Agreement, the terms "Subsidiary" and "Subsidiaries" shall mean, with respect to any entity, any corporation, partnership, limited liability company or other business entity in which the subject entity has the power (whether by contract, through securities ownership, or otherwise and whether directly or indirectly through control of one or more intermediate Subsidiaries) to elect a majority of board of directors or other governing body, including, in the case of a partnership, a majority of the board of directors or other governing body of the general partner. (c) Employee shall devote his full working time, energy, skill and best efforts to the performance of his duties hereunder, in a manner which will faithfully and diligently further the business interests of the Company and its Subsidiaries. 3. Term. Unless sooner terminated as hereinafter provided, the term of Employee's employment shall be for a period of five (5) years (the "Term") commencing on the date hereof. The Term shall automatically renew for additional one-year periods at the expiration of the then current Term unless either party shall give notice of his or its election to terminate Employee's employment at least one year prior to the end of the then-current Term, unless earlier terminated as hereinafter provided. 4. Base Salary. For all of the services rendered by Employee to the Company and its Subsidiaries, Employee shall receive an aggregate base salary of $300,000 per annum during the term of his employment hereunder. Such salary may be paid, at the election of the Company, either by the Company or by one or more of its Subsidiaries, in such relative proportions as the Company may determine, as earned in periodic installments in accordance with the Company's normal payment policies for executive officers. In the event that the Employee is also employed during any period by a Subsidiary of the Company, the amount of the base salary payable by the Company during such period shall be reduced by the amount of salary received by Employee during such period from such Subsidiary. Employee's base salary shall be subject to review by the Board not less frequently than annually, and Employee shall receive such salary increases as the Board may from time to time approve. 5. Bonus. Employee shall receive, during the term of his employment hereunder, such annual bonus as the Board, in its sole discretion, may determine from time to time. Any such bonus may be based on Employee's annual performance goals as established by the Board from time to time. 6. Participation in Incentive Plans. In addition to Employee's eligibility to receive annual bonuses pursuant to Section 5, Employee shall be entitled to participate in short-term and long-term incentive plans as shall be maintained by the Company from time to time on such terms and conditions as shall be established by the Board. 7. Prior Option and Warrants. Nothing in this Agreement shall affect the terms and conditions of options and warrants granted by the Company to Employee before the date of this Agreement. Such options and warrants shall continue in force as in effect immediately before the date of this Agreement. Without limiting the generality of the foregoing, the options granted to Employee under his employment agreement executed on August 8, 1994 (the "1994 Agreement") shall remain in effect, and those provisions of the 1994 Agreement which govern Employee's entitlement to exercise such options shall continue in effect as if such 1994 Agreement had not been terminated. In furtherance of the foregoing, references in Section 4.1(b)(v) of the 1994 Agreement to "the Company" shall hereafter be construed as references to the Company and its Subsidiaries. 8. Fringe Benefits. Throughout the term of his employment and as long as they are kept in force by the Company, Employee shall be entitled to participate in and receive the benefits of any profit sharing plan, retirement plan, health or other employee benefit plan made available to other executive officers of the Company, but in no event shall such benefits be less favorable to Employee than the benefits listed on Schedule A hereto. 9. Automobile Allowance. Employee shall receive, during the term of his employment hereunder, an automobile allowance of $833 per month. 10. Expenses. The Company shall reimburse Employee for all reasonable, ordinary and necessary business expenses incurred by Employee in connection with the performance of Employee's duties hereunder upon receipt of vouchers therefor and in accordance with the Company's regular reimbursement procedures and practices in effect from time to time. 11. Vacation. Employee shall be entitled to a vacation of four (4) weeks during each twelve (12) month period of his employment hereunder, during which time Employee's compensation hereunder shall be paid in full. Employee shall be permitted to carry over unused vacation during each twelve (12) month period during the term and use such unused vacation in any subsequent twelve (12) month period during the term. 12. Disability. If the Board determines in good faith by a vote of a majority of its members (other than Employee) that Employee is unable to perform his duties hereunder due to partial or total disability or incapacity resulting from a mental or physical illness or injury or any similar cause for a period of one hundred and twenty (120) consecutive days or for a cumulative period of one hundred and eighty (180) days during any twelve (12) month period, the Company shall have the right to terminate Employee's employment at any time thereafter. 13. Death. Employee's employment shall terminate at the time of his death. 14. Termination of Employment for Cause. The Company may discharge Employee at any time for Cause. Cause shall mean: (i) habitual intoxication; (ii) drug addiction; (iii) intentional and willful violation of any express direction of the Board; (iv) theft, misappropriation or embezzlement of the Company's funds; (v) conviction of a felony; or (vi) repeated and consistent failure of Employee to be present at work during regular hours without valid reason therefor. 15. Termination of Employment Without Cause. The Board, in its sole discretion, may terminate Employee's employment hereunder without Cause upon 30 days' prior written notice to Employee at any time. 16. Resignation For Good Reason. Employee's resignation shall be treated as a "Resignation for Good Reason" if Employee resigns within six (6) months after any of the following circumstances, unless in the case of the circumstances set forth in paragraphs (b), (c) or (d) below, such circumstances are fully corrected within 30 days of Employee's delivery of notice to the Company: (a) A reduction in Employee's annual rate of base salary; (b) A failure of the Company to make the payments required by Section 4 hereof; (c) A significant adverse alteration in the nature or status of Employee's responsibilities; (d) Any other material breach by the Company of this Agreement; (e) Relocation (without the written consent of Employee) of the Company's executive offices to a location more than 30 miles from its current location; or (f) Upon a Change of Control (as defined in Section 17). 17. Change of Control. For purpose of this Agreement, a "Change of Control" means: (a) A "Change of Control" within the meaning of Section 1(d) of the Brandywine Realty Trust 1997 Long-Term Incentive Plan, as currently in effect; or (b) The purchase of any common shares of beneficial interest of the Company pursuant to a tender or exchange offer other than an offer by the Company. 18. Payments Upon or After Termination of Employment. (a) Voluntary Resignation Other than for Good Reason; Termination for Cause; Non-Renewal of Employment Agreement. If Employee's employment hereunder is terminated before the expiration of the Term because of Employee's voluntary resignation (other than a Resignation for Good Reason) or because of the Company's termination of Employee's employment for Cause, or if Employee's employment is terminated at the expiration of the Term following an election by either the Company or Employee not to renew the Term pursuant to Section 3, the Company, or at its direction, its Subsidiaries shall pay to Employee or, as appropriate, his legal representatives, heirs or estate all amounts payable under Sections 4 and 8 accrued through the applicable date of termination (the "Accrued Amount") within 30 days after such date of termination. If Employee's employment is terminated by the Company for Cause or by the Employee voluntarily (unless such termination of employment is a Resignation for Good Reason), or if Employee's employment is terminated at the expiration of the Term following an election by either the Company or Employee not to renew the Term pursuant to Section 3, the Company shall have no obligation or liability hereunder after the date of discharge or termination to pay or provide base salary, bonus compensation, fringe benefits, or any other form of compensation hereunder other than to pay the Accrued Amount. (b) Termination of Employment Because of Death. If Employee's employment is terminated as a result of the Employee's death before the expiration of the Term, the Company shall pay Employee's legal representatives the Accrued Amount as of the date of Employee's death, and, in addition, the product of three (3) times the greater of (1) the sum of the amounts paid or payable to Employee pursuant to Sections 4 and 5 hereunder (and the short-term portion of any bonus amounts paid or payable pursuant to Section 6 hereunder) for the calendar year preceding the calendar year in which the death occurs or (2) the sum of the amounts paid or payable to Employee pursuant to Sections 4 and 5 hereunder (and the short-term portion of any bonus amounts paid or payable pursuant to Section 6 hereunder) during the one-year period ending on the date of such death, provided that if such date of death occurs before the first anniversary of the date hereof, the cash lump sum payment shall be equal to the product of three (3) times the sum of (x) Employee's annualized base salary pay rate in effect as of such date of death and (y) the maximum bonus that would have been payable for the year that includes such date of death if all of the conditions for the payment of such maximum bonus had been satisfied, less the proceeds receivable by Employee's heirs and legal representatives from any life insurance policy provided by the Company. (c) Termination of Employment Because of Disability. If Employee's employment is terminated by the Company for disability before the expiration of the Term, the Company shall pay Employee the Accrued Amount as of the such date of termination, and, in addition, the consideration described in Sections 4 and 8 hereof, at the rate in effect at the date of termination, until one year after Employee becomes eligible to receive benefits pursuant to the disability insurance policy provided by the Company, at the rate in effect at such date of termination, less the amount of disability insurance proceeds receivable by Employee, provided that such period shall not exceed two years in the aggregate. In addition, Employee shall be entitled to receive an amount equal to the product that results from multiplying the amount of the bonus paid to him pursuant to Section 5 hereof for the calendar year prior to the year in which Employee's employment is terminated for disability multiplied by a fraction, the numerator of which is the number of days that elapsed prior to the termination during the year in which the termination occurs and the denominator of which is 365. (d) Termination of Employment by Company Without Cause; Resignation for Good Reason. If Employee's employment is terminated by the Company without Cause, or Employee Resigns for Good Reason, within 30 days following the date of such termination of employment, the Company shall pay Employee the Accrued Amount as of the date of such termination, and in addition: (i) Subject to Section 18(d)(ii), the Company shall make a cash lump sum payment to Employee equal to the greater of: (A) the product of three (3) times the greater of (1) the sum of the amounts paid or payable to Employee pursuant to Sections 4 and 5 hereunder (and the short-term portion of any bonus amounts paid or payable pursuant to Section 6 hereunder) for the calendar year preceding the calendar year in which such termination of employment occurs or (2) the sum of the amounts paid or payable to Employee pursuant to Sections 4 and 5 hereunder (and the short-term portion of any bonus amounts paid or payable pursuant to Section 6 hereunder) during the one-year period ending on the date of such termination, provided that if such date of termination occurs before the first anniversary of the date hereof, the cash lump sum payment shall be equal to the product of three (3) times the sum of (x) Employee's annualized base salary pay rate in effect as of such date of termination and (y) the maximum bonus that would have been payable for the year that includes such date of termination if all of the conditions for the payment of such maximum bonus had been satisfied; or (B) The amount payable pursuant to Section 4 hereunder for the remainder of the Term at a rate equal to his base salary in effect at the time of the date of such termination. (ii) Employee may, in his sole discretion, elect in writing to decline to receive part or all of the amount otherwise payable pursuant to Section 18(d)(i). In addition, if, following payment of part or all of the amount payable pursuant to Section 18(d)(i), Employee determines that Employee would be in a better net after-tax position than he would be in if he retained such amount, Employee may elect in writing to repay the Company the amount, plus interest payable from the date of payment to the date of repayment at the "applicable federal rate" as determined pursuant to section 1274 of the Code, and upon such repayment and to the extent thereof, the original payment shall be treated as a loan between the Company and Employee. (e) In the event that Employee is employed by a Subsidiary of the Company at the time of termination of employment, any amounts payable to the Employee pursuant to this Section 18 shall be reduced by the amounts paid to Employee by any such Subsidiary. (f) Upon the payment of the amounts payable under this Section 18, neither the Company nor any of its Subsidiaries shall have any further obligations hereunder to Employee (or to his estate, heirs, beneficiaries, or legal representatives, as appropriate, or otherwise) to pay or provide any base salary, bonus compensation, or fringe benefits, provided that if Employee Resigns for Good Reason or the Company terminates Employee's employment without Cause, Company shall, at its own expense, for a thirty-six (36) month period after the date of termination of employment, arrange to provide Employee with life, disability, accident and health insurance benefits substantially similar to those which Employee was entitled to receive immediately prior to such date of termination. 19. Prior Agreement. This Agreement is the successor to the Employment Agreement between Employee and the Company dated as of July 31, 1996 (which Agreement was assigned to the Company as of October 31, 1996). Employee represents to the Company that (a) there are no other agreements or understandings with the Company to which Employee is a party relating to employment, benefits or retirement, (b) there are no restrictions, agreements or understandings whatsoever to which Employee is a party which would prevent or make unlawful his execution of this Agreement or his employment hereunder, (c) his execution of this Agreement and his employment hereunder shall not constitute a breach of any contract, agreement or understanding, oral or written, to which he is a party or by which he is bound, and (d) he is free and able to execute this Agreement and to continue in the employment of the Company. 20. Key Man Insurance. The Company shall have the right at its expense to purchase insurance on the life of Employee in such amounts as it shall from time to time determine, of which the Company shall be the beneficiary. Employee shall submit to such physical examinations as may be required, and shall otherwise cooperate with the Company, in connection with the Company obtaining such insurance. 21. Miscellaneous. (a) Controlling Law. This Agreement, and all questions relating to its validity, interpretation, performance and enforcement, shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania. (b) Notices. All notices, requests, demands and other communications required or permitted under this Agreement shall be in writing and shall be deemed to have been duly given, made and received when delivered in person against receipt, or when sent by United States registered or certified mail, return receipt requested, postage prepaid, addressed as set forth below: (i) If to Employee: Gerard H. Sweeney 2 Craig Lane Haverford, PA 19041 (ii) If to the Company: Brandywine Realty Trust 16 Campus Boulevard Suite 150 Newtown Square, PA 19073 Attention: General Counsel In addition, notice by mail shall be by air mail if posted outside of the continental United States. Any party may alter the address to which communications or copies are to be sent by giving notice of such change of address in conformity with the provisions of this paragraph for the giving of notice. (c) Binding Nature of Agreement. This Agreement shall be binding upon and inure to the benefit of the Company and its successors and assigns and shall be binding upon Employee, his heirs and legal representatives. (d) 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 who executes the same, and all of which shall 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. (e) 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. (f) Entire Agreement. This Agreement contains the entire understanding among the parties hereto with respect to the subject matter hereof and supersedes all prior 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 of 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 an agreement in writing. (g) Section and Paragraph Headings. The section and paragraph headings in this Agreement are for convenience only; they form no part of this Agreement and shall not affect its interpretation. (h) Gender, Etc. Words used herein, regardless of the number and gender specifically used, shall be deemed and construed to include any other number, singular or plural, and any other gender, masculine, feminine or neuter, as the context requires. (i) Number of Days. In computing the number of days for purposes of this Agreement, all days shall be counted, including Saturdays, Sundays and holidays; provided, however, that if the final day of any time period falls on a Saturday, Sunday or holiday, then the final day shall be deemed to be the next day which is not a Saturday, Sunday or holiday. (j) Survival. The provisions of Sections 7, 12, 13, 14, 15, 16, 17, 18 and 19 shall survive the expiration or termination of the term of Employee's employment hereunder. (k) Assignability. This Agreement is not assignable by Employee. It is assignable by the Company only (i) to any subsidiary of the Company so long as the Company agrees to guarantee such subsidiary's obligations hereunder, or (ii) subject to Sections 16 and 18 and only upon Employee's prior written consent, to a person which is a successor in interest to the Company in the business operated by it or which acquires all or substantially all of its assets. (l) Liability of Trustees, etc. 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 each party hereto. IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and delivered on the date first above-written. BRANDYWINE REALTY TRUST By: /s/ Gerard H. Sweeney --------------------------- Gerard H. Sweeney Title: President and Chief Executive Officer -------------------------------------- EMPLOYEE /s/ Gerard H. Sweeney ---------------------------- Gerard H. Sweeney GUARANTEE In the event that the Company fails to perform its obligations under the foregoing Employment Agreement, Brandywine Operating Partnership, L.P. shall promptly perform the obligations of the Company arising thereunder which have not been performed in strict accordance with the terms and conditions thereof. BRANDYWINE OPERATING PARTNERSHIP, L.P. By: BRANDYWINE REALTY TRUST, its general partner By: /s/ Gerard H. Sweeney ------------------------------------ Gerard H. Sweeney, President and Chief Executive Officer EX-10.124 4 EXHIBIT 10.124 Exhibit 10.124 BRANDYWINE REALTY TRUST RESTRICTED SHARE AWARD This is a Restricted Share Award dated January 2, 1998 from Brandywine Realty Trust, a Maryland real estate investment trust (the "Company") to Anthony A. Nichols, Sr. ("Grantee"). Terms used herein as defined terms and not defined herein have the meanings assigned to them in the Brandywine Realty Trust 1997 Long-Term Incentive Plan, as amended from time to time (the "Plan"). 1. Definitions. As used herein: (a) "Award" means the award of Restricted Shares hereby granted. (b) "Board" means the Board of Trustees of the Company, as constituted from time to time. (c) "Cause" means "Cause" as defined in the Employment Agreement or the Plan. (d) "Change of Control" means "Change of Control" as defined in the Plan. (e) "Code" means the Internal Revenue Code of 1986, as amended from time to time, and any successor thereto. (f) "Committee" means the Committee appointed by the Board in accordance with Section 2 of the Plan, if one is appointed and in existence at the time of reference. If no committee has been appointed pursuant to Section 2, or if such a committee is not in existence at the time of reference, "Committee" means the Board. (g) "Date of Grant" means January 2, 1998, the date on which the Company awarded the Restricted Shares. (h) "Disability" means "Disability" as defined in the Plan. (i) "Employer" means the Company or the Subsidiary for which Grantee is performing services on the applicable Vesting Date. (j) "Employment Agreement" means the employment agreement between Grantee and the Company, dated January 2, 1998, or any subsequent employment agreement between Grantee and the Company as in effect at the time of determination. (k) "Resignation for Good Reason" means "Resignation for Good Reason" as defined in the Employment Agreement. (l) "Restricted Period" means, with respect to each Restricted Share, the period beginning on the Date of Grant and ending on the Vesting Date. (m) "Restricted Shares" means the 158,416 Shares which are the subject of the Award hereby granted. (n) "Rule 16b-3" means Rule 16b-3 promulgated under the 1934 Act, as in effect from time to time. (o) "Share" means a common share of beneficial interest, $.01 par value per share, of the Company, subject to substitution or adjustment as provided in Section 3(c) of the Plan. (p) "Subsidiary" means, with respect to the Company, a subsidiary company, whether now or hereafter existing, as defined in section 424(f) of the Code, and any other entity 50% or more of the economic interests in which are owned, directly or indirectly, by the Company. (q) "Vesting Date" means the date on which the restrictions imposed under Paragraph 3 on a Restricted Share lapse, as provided in Paragraph 4. 2. Grant of Restricted Shares. Subject to the terms and conditions set forth herein and in the Plan, the Company hereby grants to Grantee the Restricted Shares. Grantee shall pay to the Company $.01 per Restricted Share granted to him. 3. Restrictions on Restricted Share. Subject to the terms and conditions set forth herein and in the Plan, prior to the Vesting Date in respect of Restricted Shares, Grantee shall not be permitted to sell, transfer, pledge or assign such Restricted Shares. Share certificates evidencing Restricted Shares shall be held in custody by the Company until the restrictions thereon have lapsed. Concurrently herewith, Participant shall deliver to the Company a share power, endorsed in blank, relating to the Restricted Shares covered by the Award. During the Restricted Period, share certificates evidencing Restricted Shares shall bear a legend in substantially the following form: THE TRANSFERABILITY OF THIS CERTIFICATE AND THE SHARES REPRESENTED HEREBY ARE SUBJECT TO THE TERMS AND CONDITIONS (INCLUDING FORFEITURE) OF THE BRANDYWINE REALTY TRUST 1997 LONG-TERM INCENTIVE PLAN AND AN AGREEMENT ENTERED INTO BETWEEN THE REGISTERED OWNER AND BRANDYWINE REALTY TRUST. COPIES OF SUCH PLAN AND AGREEMENT ARE ON FILE IN THE PRINCIPAL OFFICES OF BRANDYWINE REALTY TRUST AND WILL BE MADE AVAILABLE TO ANY SHAREHOLDER WITHOUT CHARGE UPON REQUEST TO THE SECRETARY OF THE COMPANY. 4. Lapse of Restrictions. (a) Subject to the terms and conditions set forth herein and in the Plan, the restrictions set forth in Paragraph 3 on each Restricted Share that has not been forfeited shall lapse on the applicable Vesting Date in respect of such Restricted Share, provided that either (i) on the Vesting Date, Grantee is, and has from the Date of Grant continuously been, an employee of the Company or a Subsidiary during the Restricted Period, or (ii) Grantee's termination of employment before the Vesting Date is described in Paragraph 5(a)(i) or Paragraph 5(a)(ii). (b) Subject to Paragraph 4(a), a Vesting Date for Restricted Shares subject to the Award shall occur in accordance with the following schedule: (i) As to twelve and one-half percent (12.5%) of the Restricted Shares, December 31, 1998; (ii) As to an additional twelve and one-half percent (12.5%) of the Restricted Shares, December 31, 1999; (iii) As to an additional twelve and one-half percent (12.5%) of the Restricted Shares, December 31, 2000; (iv) As to an additional twelve and one-half percent (12.5%) of the Restricted Shares, December 31, 2001; (v) As to an additional twelve and one-half percent (12.5%) of the Restricted Shares, December 31, 2002; (vi) As to an additional twelve and one-half percent (12.5%) of the Restricted Shares, December 31, 2003; (vii) As to an additional twelve and one-half percent (12.5%) of the Restricted Shares, December 31, 2004; (viii) As to an additional twelve and one-half percent (12.5%) of the Restricted Shares, December 31, 2005. (c) Notwithstanding Paragraph 4(b), a Vesting Date for all Restricted Shares subject to the Award shall occur upon the occurrence of any of the following events, and the Restricted Shares, to the extent not previously vested, shall thereupon vest in full: (i) Change of Control, provided that (A) as of the date of the Change of Control, Grantee is, and has from the Date of Grant continuously been, an employee of the Company or a Subsidiary or (B) Grantee's termination of employment before the date of the Change of Control is described in Paragraph 5(a)(i) or Paragraph 5(a)(ii). (ii) The purchase of any common share of beneficial interest of the Company pursuant to a tender or exchange offer other than an offer by the Company, provided that (A) as of the date of such purchase, Grantee is, and has from the Date of Grant, continuously been, an employee of Company or a Subsidiary or (B) Grantee's termination of employment before the date of such purchase is described in Paragraph 5(a)(i) or Paragraph 5(a)(ii). (iii) Termination of the Grantee's employment by the Employer without Cause; (iv) The Grantee's resignation from the Employer if such resignation is a Resignation for Good Reason. 5. Forfeiture of Restricted Shares. (a) Subject to the terms and conditions set forth herein, if Grantee terminates employment with the Company and all Subsidiaries during the Restricted Period for reasons other than as described in Paragraph 4(c), Grantee shall forfeit the Restricted Shares which have not vested as of such termination of employment, provided that Grantee shall not, on account of such termination, forfeit Restricted Shares which have not vested as of: (i) Grantee's termination of employment following the Company's notification to Grantee of its intention not to renew the term of the Employment Agreement; or (ii) Grantee's termination of employment with the Employer because of death or Disability. Upon a forfeiture of the Restricted Shares as provided in this Paragraph 5, the Restricted Shares shall be deemed canceled. (b) The provisions of this Paragraph 5 shall not apply to Restricted Shares as to which the restrictions of Paragraph 3 have lapsed. 6. Rights of Grantee. During the Restricted Period, with respect to the Restricted Shares, Grantee shall have all of the rights of a shareholder of the Company, including the right to vote the Restricted Shares and the right to receive any distributions or dividends payable on Shares. 7. Notices. Any notice to the Company under this Award shall be made to: Brandywine Realty Trust 16 Campus Boulevard Suite 150 Newtown Square, PA 19073 Attention: Chief Financial Officer or such other address as may be provided to Grantee by written notice. Any notice to Grantee under this award shall be made to Grantee at the address listed in the Company's personnel files. All notices under this Award shall be deemed to have been given when hand-delivered, telecopied or mailed, first class postage prepaid, and shall be irrevocable once given. 8. Securities Laws. The Committee may from time to time impose any conditions on the Restricted Shares as it deems necessary or advisable to ensure that the Plan satisfies the conditions of Rule 16b-3, and that Shares are issued and resold in compliance with the Securities Act of 1933, as amended. 9. Delivery of Shares. Upon a Vesting Date, the Company shall notify Grantee (or Grantee's legal representatives, estate or heirs, in the event of Grantee's death before a Vesting Date) that the restrictions on the Restricted Shares have lapsed. Within ten (10) business days of a Vesting Date, the Company shall, without payment from Grantee for the Restricted Shares, deliver to Grantee a certificate for the Restricted Shares without any legend or restrictions, except for such restrictions as may be imposed by the Committee, in its sole judgment, under Paragraph 8, provided that no certificates for Shares will be delivered to Grantee until appropriate arrangements have been made with Employer for the withholding of any taxes which may be due with respect to such Shares. The Company may condition delivery of certificates for Shares upon the prior receipt from Grantee of any undertakings which it may determine are required to assure that the certificates are being issued in compliance with federal and state securities laws. The right to payment of any fractional Shares shall be satisfied in cash, measured by the product of the fractional amount times the fair market value of a Share on the Vesting Date, as determined by the Committee. 10. Award Not to Affect Employment. The Award granted hereunder shall not confer upon Grantee any right to continue in the employment of the Company or any Subsidiary. 11. Miscellaneous. (a) The address for Grantee to which notice, demands and other communications are to be given or delivered under or by reason of the provisions hereof shall be the Grantee's address as reflected in the Company's personnel records. (b) This Award and all questions relating to its validity, interpretation, performance and enforcement shall be governed by and construed in accordance with the laws of Pennsylvania. BRANDYWINE REALTY TRUST BY: ________________________________ TITLE:______________________________ EX-10.125 5 EXHIBIT 10.125 Exhibit 10.125 -------------- BRANDYWINE REALTY TRUST RESTRICTED SHARE AWARD ---------------------- This is a Restricted Share Award dated January 2, 1998 from Brandywine Realty Trust, a Maryland real estate investment trust (the "Company") to Gerard H. Sweeney ("Grantee"). Terms used herein as defined terms and not defined herein have the meanings assigned to them in the Brandywine Realty Trust 1997 Long-Term Incentive Plan, as amended from time to time (the "Plan"). 1. Definitions. As used herein: (a) "Award" means the award of Restricted Shares hereby granted. (b) "Board" means the Board of Trustees of the Company, as constituted from time to time. (c) "Cause" means "Cause" as defined in the Employment Agreement or the Plan. (d) "Change of Control" means "Change of Control" as defined in the Plan. (e) "Code" means the Internal Revenue Code of 1986, as amended from time to time, and any successor thereto. (f) "Committee" means the Committee appointed by the Board in accordance with Section 2 of the Plan, if one is appointed and in existence at the time of reference. If no committee has been appointed pursuant to Section 2, or if such a committee is not in existence at the time of reference, "Committee" means the Board. (g) "Date of Grant" means January 2, 1998, the date on which the Company awarded the Restricted Shares. (h) "Disability" means "Disability" as defined in the Plan. (i) "Employer" means the Company or the Subsidiary for which Grantee is performing services on the applicable Vesting Date. (j) "Employment Agreement" means the employment agreement between Grantee and the Company, dated January 2, 1998, or any subsequent employment agreement between Grantee and the Company as in effect at the time of determination. (k) "Resignation for Good Reason" means "Resignation for Good Reason" as defined in the Employment Agreement. (l) "Restricted Period" means, with respect to each Restricted Share, the period beginning on the Date of Grant and ending on the Vesting Date. (m) "Restricted Shares" means the 237,624 Shares which are the subject of the Award hereby granted. (n) "Rule 16b-3" means Rule 16b-3 promulgated under the 1934 Act, as in effect from time to time. (o) "Share" means a common share of beneficial interest, $.01 par value per share, of the Company, subject to substitution or adjustment as provided in Section 3(c) of the Plan. (p) "Subsidiary" means, with respect to the Company, a subsidiary company, whether now or hereafter existing, as defined in section 424(f) of the Code, and any other entity 50% or more of the economic interests in which are owned, directly or indirectly, by the Company. (q) "Vesting Date" means the date on which the restrictions imposed under Paragraph 3 on a Restricted Share lapse, as provided in Paragraph 4. 2. Grant of Restricted Shares. Subject to the terms and conditions set forth herein and in the Plan, the Company hereby grants to Grantee the Restricted Shares. Grantee shall pay to the Company $.01 per Restricted Share granted to him. 3. Restrictions on Restricted Share. Subject to the terms and conditions set forth herein and in the Plan, prior to the Vesting Date in respect of Restricted Shares, Grantee shall not be permitted to sell, transfer, pledge or assign such Restricted Shares. Share certificates evidencing Restricted Shares shall be held in custody by the Company until the restrictions thereon have lapsed. Concurrently herewith, Participant shall deliver to the Company a share power, endorsed in blank, relating to the Restricted Shares covered by the Award. During the Restricted Period, share certificates evidencing Restricted Shares shall bear a legend in substantially the following form: THE TRANSFERABILITY OF THIS CERTIFICATE AND THE SHARES REPRESENTED HEREBY ARE SUBJECT TO THE TERMS AND CONDITIONS (INCLUDING FORFEITURE) OF THE BRANDYWINE REALTY TRUST 1997 LONG-TERM INCENTIVE PLAN AND AN AGREEMENT ENTERED INTO BETWEEN THE REGISTERED OWNER AND BRANDYWINE REALTY TRUST. COPIES OF SUCH PLAN AND AGREEMENT ARE ON FILE IN THE PRINCIPAL OFFICES OF BRANDYWINE REALTY TRUST AND WILL BE MADE AVAILABLE TO ANY SHAREHOLDER WITHOUT CHARGE UPON REQUEST TO THE SECRETARY OF THE COMPANY. 4. Lapse of Restrictions. (a) Subject to the terms and conditions set forth herein and in the Plan, the restrictions set forth in Paragraph 3 on each Restricted Share that has not been forfeited shall lapse on the applicable Vesting Date in respect of such Restricted Share, provided that either (i) on the Vesting Date, Grantee is, and has from the Date of Grant continuously been, an employee of the Company or a Subsidiary during the Restricted Period, or (ii) Grantee's termination of employment before the Vesting Date is described in Paragraph 5(a)(i) or Paragraph 5(a)(ii). (b) Subject to Paragraph 4(a), a Vesting Date for Restricted Shares subject to the Award shall occur in accordance with the following schedule: (i) As to twelve and one-half percent (12.5%) of the Restricted Shares, December 31, 1998; (ii) As to an additional twelve and one-half percent (12.5%) of the Restricted Shares, December 31, 1999; (iii) As to an additional twelve and one-half percent (12.5%) of the Restricted Shares, December 31, 2000; (iv) As to an additional twelve and one-half percent (12.5%) of the Restricted Shares, December 31, 2001; (v) As to an additional twelve and one-half percent (12.5%) of the Restricted Shares, December 31, 2002; (vi) As to an additional twelve and one-half percent (12.5%) of the Restricted Shares, December 31, 2003; (vii) As to an additional twelve and one-half percent (12.5%) of the Restricted Shares, December 31, 2004; (viii) As to an additional twelve and one-half percent (12.5%) of the Restricted Shares, December 31, 2005. (c) Notwithstanding Paragraph 4(b), a Vesting Date for all Restricted Shares subject to the Award shall occur upon the occurrence of any of the following events, and the Restricted Shares, to the extent not previously vested, shall thereupon vest in full: (i) Change of Control, provided that (A) as of the date of the Change of Control, Grantee is, and has from the Date of Grant continuously been, an employee of the Company or a Subsidiary or (B) Grantee's termination of employment before the date of the Change of Control is described in Paragraph 5(a)(i) or Paragraph 5(a)(ii). (ii) The purchase of any common share of beneficial interest of the Company pursuant to a tender or exchange offer other than an offer by the Company, provided that (A) as of the date of such purchase, Grantee is, and has from the Date of Grant, continuously been, an employee of Company or a Subsidiary or (B) Grantee's termination of employment before the date of such purchase is described in Paragraph 5(a)(i) or Paragraph 5(a)(ii). (iii) Termination of the Grantee's employment by the Employer without Cause; (iv) The Grantee's resignation from the Employer if such resignation is a Resignation for Good Reason. 5. Forfeiture of Restricted Shares. (a) Subject to the terms and conditions set forth herein, if Grantee terminates employment with the Company and all Subsidiaries during the Restricted Period for reasons other than as described in Paragraph 4(c), Grantee shall forfeit the Restricted Shares which have not vested as of such termination of employment, provided that Grantee shall not, on account of such termination, forfeit Restricted Shares which have not vested as of: (i) Grantee's termination of employment following the Company's notification to Grantee of its intention not to renew the term of the Employment Agreement; or (ii) Grantee's termination of employment with the Employer because of death or Disability. Upon a forfeiture of the Restricted Shares as provided in this Paragraph 5, the Restricted Shares shall be deemed canceled. (b) The provisions of this Paragraph 5 shall not apply to Restricted Shares as to which the restrictions of Paragraph 3 have lapsed. 6. Rights of Grantee. During the Restricted Period, with respect to the Restricted Shares, Grantee shall have all of the rights of a shareholder of the Company, including the right to vote the Restricted Shares and the right to receive any distributions or dividends payable on Shares. 7. Notices. Any notice to the Company under this Award shall be made to: Brandywine Realty Trust 16 Campus Boulevard Suite 150 Newtown Square, PA 19073 Attention: Chief Financial Officer or such other address as may be provided to Grantee by written notice. Any notice to Grantee under this award shall be made to Grantee at the address listed in the Company's personnel files. All notices under this Award shall be deemed to have been given when hand-delivered, telecopied or mailed, first class postage prepaid, and shall be irrevocable once given. 8. Securities Laws. The Committee may from time to time impose any conditions on the Restricted Shares as it deems necessary or advisable to ensure that the Plan satisfies the conditions of Rule 16b-3, and that Shares are issued and resold in compliance with the Securities Act of 1933, as amended. 9. Delivery of Shares. Upon a Vesting Date, the Company shall notify Grantee (or Grantee's legal representatives, estate or heirs, in the event of Grantee's death before a Vesting Date) that the restrictions on the Restricted Shares have lapsed. Within ten (10) business days of a Vesting Date, the Company shall, without payment from Grantee for the Restricted Shares, deliver to Grantee a certificate for the Restricted Shares without any legend or restrictions, except for such restrictions as may be imposed by the Committee, in its sole judgment, under Paragraph 8, provided that no certificates for Shares will be delivered to Grantee until appropriate arrangements have been made with Employer for the withholding of any taxes which may be due with respect to such Shares. The Company may condition delivery of certificates for Shares upon the prior receipt from Grantee of any undertakings which it may determine are required to assure that the certificates are being issued in compliance with federal and state securities laws. The right to payment of any fractional Shares shall be satisfied in cash, measured by the product of the fractional amount times the fair market value of a Share on the Vesting Date, as determined by the Committee. 10. Award Not to Affect Employment. The Award granted hereunder shall not confer upon Grantee any right to continue in the employment of the Company or any Subsidiary. 11. Miscellaneous. (a) The address for Grantee to which notice, demands and other communications are to be given or delivered under or by reason of the provisions hereof shall be the Grantee's address as reflected in the Company's personnel records. (b) This Award and all questions relating to its validity, interpretation, performance and enforcement shall be governed by and construed in accordance with the laws of Pennsylvania. BRANDYWINE REALTY TRUST BY: ________________________________ TITLE:______________________________ EX-10.126 6 EXHIBIT 10.126 Exhibit 10.126 BRANDYWINE REALTY TRUST NON-QUALIFIED OPTION This is a Non-Qualified Stock Option Award dated January 2, 1998 (the "Award") from Brandywine Realty Trust, a Maryland real estate investment trust (the "Company") to Anthony A. Nichols, Sr. ("Optionee"). Terms used herein as defined terms and not defined herein have the meanings assigned to them in the Brandywine Realty Trust 1997 Long-Term Incentive Plan, as amended from time to time (the "Plan"). 1. Definitions. As used herein: (a) "Board" means the Board of Trustees of the Company, as constituted from time to time. (b) "Cause" means "Cause" as defined in the Employment Agreement or the Plan. (c) "Change of Control" means "Change of Control" as defined in the Plan. (d) "Closing" means the closing of the acquisition and sale of the Shares as described in, and subject to the provisions of, Paragraph 9 hereof. (e) "Closing Date" means the date of the Closing. (f) "Code" means the Internal Revenue Code of 1986, as amended from time to time, and any successor thereto. (g) "Common Share" means a common share of beneficial interest, $.01 par value per share, of the Company. (h) "Committee" means the Committee appointed by the Board in accordance with Section 2 of the Plan, if one is appointed and in existence at the time of reference. If no committee has been appointed pursuant to Section 2, or if such a committee is not in existence at the time of reference, "Committee" means the Board. (i) "Date of Exercise" means the date on which the notice required by Paragraph 6 hereof is hand-delivered, placed in the United States mail postage prepaid, or delivered to a telegraph or telex facility. (j) "Date of Grant" means January 2, 1998, the date on which the Company awarded the Option. (k) "Disability" means "Disability" as defined in the Plan. (l) "Employment Agreement" means the employment agreement between Optionee and the Company, dated January 2, 1998, or any subsequent employment agreement between Optionee and the Company as in effect at the time of determination. (m) "Expiration Date" means the earliest of the following: (i) If the Optionee terminates employment with the Company for any reason other than death, Disability or for Cause, 5:00 p.m. on the date 90 days following such termination of employment; (ii) If the Optionee terminates employment with the Company because of death, 5:00 p.m. on the first anniversary of the date the Optionee terminates employment because of such death; (iii) If the Optionee terminates employment with the Company because of Disability, 5:00 p.m. on the date six months following such termination of employment, provided that if the Optionee dies during such period, any Option otherwise exercisable shall be exercisable until the first anniversary of the Optionee's death; (iv) If the Optionee terminates employment with the Company for Cause, 5:00 p.m. on the date of such termination of employment; (v) 5:00 p.m. on the day before the tenth anniversary of the Date of Grant. (n) "Fair Market Value" means the Fair Market Value of a Share, as determined pursuant to the Plan. (o) "100% Shares" means the 197,923 Shares subject to the Option and described in Paragraph 1(s)(i). (p) "110% Shares" means the 231,597 Shares subject to the Option and described in Paragraph 1(s)(ii). (q) "115% Shares" means the 249,438 Shares subject to the Option and described in Paragraph 1(s)(iii). (r) "Option" means the option to purchase Shares hereby granted. (s) "Option Price" means: (i) with respect to 197,923 Shares subject to the Option, $25.25; and (ii) with respect to 231,597 Shares subject to the Option, $27.78; and (iii) with respect to 249,438 Shares subject to the Option, $29.04. In the event of any recapitalization, Share distribution or dividend, Share split or combination, the Option Price shall be equitably and proportionally adjusted. The Option Price shall also be subject to adjustment pursuant to Section 3(c) of the Plan. (t) "Resignation for Good Reason" means "Resignation for Good Reason" as defined in the Employment Agreement. (u) "Shares" means the 678,958 Common Shares which are the subject of the Option hereby granted. In the event of any recapitalization, Share distribution or dividend, Share split or combination, the number of Shares that remain subject to the Option shall be equitably and proportionally adjusted. The number of Shares that remain subject to the Option shall also be subject to adjustment pursuant to Section 3(c) of the Plan. (v) "Subsidiary" means, with respect to the Company, a subsidiary company, whether now or hereafter existing, as defined in section 424(f) of the Code, and any other entity 50% or more of the economic interests in which are owned, directly or indirectly, by the Company. 2. Grant of Option. Subject to the terms and conditions set forth herein and in the Plan, the Company hereby grants to the Optionee the Option to purchase any or all of the Shares. The grant of the Option is subject to and conditioned on the approval of such grant by the shareholders of the Company, as described in Paragraph 4. 3. Time of Exercise of Options. (a) Subject to Paragraph 3(b), the Option may be exercised after such time or times as set forth below, and shall remain exercisable until the Expiration Date, when the right to exercise shall terminate absolutely: (i) The Option may be exercised for twenty percent (20%) of each of (A) the 100% Shares, (B) the 110% shares, and (C) the 115% Shares subject to the Option following December 31, 1998. (ii) The Option may be exercised for an additional twenty percent (20%) of each of (A) the 100% Shares, (B) the 110% Shares, and (C) the 115% Shares subject to the Option following December 31, 1999. (iii) The Option may be exercised for an additional twenty percent (20%) of each of (A) the 100% Shares, (B) the 110% Shares, and (C) the 115% Shares subject to the Option following December 31, 2000. (iv) The Option may be exercised for an additional twenty percent (20%) of each of (A) the 100% Shares, (B) the 110% Shares, and (C) the 115% Shares subject to the Option following December 31, 2001. (v) The Option may be exercised for an additional twenty percent (20%) of each of (A) the 100% Shares, (B) the 110% Shares, and (C) the 115% Shares subject to the Option following December 31, 2002. Notwithstanding the foregoing, the number of Shares available for exercise as determined under this Paragraph 3(a) shall be rounded down to the nearest whole Share. No Shares subject to the Option shall first become exercisable following the Optionee's termination of employment, except as provided in Paragraph 3(b). (b) Notwithstanding Paragraph 3(a), the Option shall become fully exercisable upon the occurrence of any of the following events: (i) A Change of Control; (ii) The purchase of any Common Shares pursuant to a tender or exchange offer other than offer by the Company; (iii) Termination of the Optionee's employment by the Company or an Affiliate without Cause; or (iv) The Optionee's Resignation for Good Reason. 4. Contingency Upon Shareholder Approval. The grant of the Option and all rights of the Optionee thereunder are subject to, and conditioned on, the approval of such grant by a majority of the votes cast by the shareholders of the Company at the shareholders' meeting next following the Date of Grant, provided that the total votes cast on the proposal represent over 50% of all votes entitled to be cast on the proposal In the event the shareholders of the Company do not approve the grant of the Options at such meeting, the Options shall be considered to represent, in lieu of options to purchase Shares, stock appreciation rights ("SARs"), subject to the following terms and conditions: (a) The terms of the SARs, including but not limited to restrictions on vesting and exercise and the manner of exercise, will be generally the same as the terms of the Option granted in this Award, but, upon the exercise thereof, Optionee shall not be required to tender any payment, and the Company, rather than issuing Shares, shall pay to the Optionee a cash amount equal to the product of (x) the number of Shares with respect to which the SAR is then deemed to be exercised, multiplied by (y) the excess of the Fair Market Value of a Share as of the day before the Date of Exercise over the applicable Option Price for such Share. (b) Payment by the Company to the Optionee upon the exercise of an SAR shall be subject to the Company's or Affiliate's right to withhold in accordance with applicable law, any taxes required to be withheld under federal, state or local law as a result of the exercise of the SAR in accordance with Paragraph 14. 5. Payment for Shares. Full payment for Shares purchased upon the exercise of an Option shall be made in cash or, at the election of the Optionee and as the Committee may, in its sole discretion, approve, by surrendering Common Shares with an aggregate Fair Market Value equal to the aggregate Option Price, or by delivering such combination of Common Shares and cash as the Committee may, in its sole discretion, approve. 6. Manner of Exercise. The Option shall be exercised by giving written notice of exercise to: Brandywine Realty Trust 16 Campus Boulevard Suite 150 Newtown Square, PA 19073 Attention: Chief Financial Officer All notices under this agreement shall be deemed to have been given when hand-delivered, telecopied or mailed, first class postage prepaid, and shall be irrevocable once given. 7. Nontransferability of Option. The Option may not be transferred or assigned by the Optionee otherwise than as and to the extent permitted by Section 5(e) of the Plan; and any attempt at assignment or transfer contrary to the provisions of the Plan or the levy of any execution, attachment or similar process upon the Option shall be null and void and without effect. Any exercise of the Option by a person other than the Optionee shall be accompanied by appropriate proofs of the right of such person to exercise the Option. 8. Securities Laws. The Committee may from time to time impose any conditions on the exercise of the Option as it deems necessary or appropriate to comply with the then-existing requirements of the Securities Act of 1933, as amended, or of the Securities Exchange Act of 1934, as amended, including Rule 16b-3 (or any similar rule) of the Securities and Exchange Commission. If the listing, registration or qualification of Shares issuable on the exercise of the Option upon any securities exchange or under any federal or state law, or the consent or approval of any governmental regulatory body is necessary as a condition of or in connection with the purchase of such Shares, the Company shall not be obligated to issue or deliver the certificates representing the Shares otherwise issuable on the exercise of the Option unless and until such listing, registration, qualification, consent or approval shall have been effected or obtained. If registration is considered unnecessary by the Company or its counsel, the Company may cause a legend to be placed on such Shares calling attention to the fact that they have been acquired for investment and have not been registered. 9. Issuance of Certificate at Closing; Payment of Cash. Subject to the provisions of this Paragraph 9, the Closing Date shall occur as promptly as is feasible after the exercise of the Option. Subject to the provisions of Paragraphs 8 and 10 hereof, a certificate for the Shares issuable on the exercise of the Option shall be delivered to the Optionee or to his personal representative, heir or legatee at the Closing, provided that no certificates for Shares will be delivered to the Optionee or to his personal representative, heir or legatee unless the Option Price has been paid in full. 10. Rights Prior to Exercise. The Optionee shall not have any right as a shareholder with respect to any Shares subject to his Options until the Option shall have been exercised in accordance with the terms of the Plan and this Award and the Optionee shall have paid the full purchase price for the number of Shares in respect of which the Option was exercised, provided that in the event that the Optionee's employment with the Company is terminated for Cause, upon a determination by the Committee, the Optionee shall automatically forfeit all Shares otherwise subject to delivery upon exercise of an Option but for which the Company has not yet delivered the Share certificates, upon refund by the Company of the Option Price. 11. Status of Option; Interpretation. 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 Code. The Option is not intended to qualify as an incentive stock option within the meaning of section 422 of the Code. The interpretation and construction of any provision of this Option or the Plan made by the Committee shall be final and conclusive and, insofar as possible, shall be consistent with the intention expressed in this Paragraph 11. 12. Option Not to Affect Employment. The Option granted hereunder shall not confer upon the Optionee any right to continue in the employment of the Company or any Subsidiary. 13. Miscellaneous. (a) The address for the Optionee to which notice, demands and other communications to be given or delivered under or by reason of the provisions hereof shall be the address contained in the Company's personnel records. (b) This Award and all questions relating to its validity, interpretation, performance, and enforcement shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania. 14. Withholding of Taxes. Whenever the Company proposes or is required to deliver or transfer Shares in connection with the exercise of the Option, or in connection with the grant or payment upon the exercise of an SAR, 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 Shares or (b) take whatever action it deems necessary to protect its interests with respect to tax liabilities. IN WITNESS WHEREOF, the Company has granted this Award on the day and year first above written. BRANDYWINE REALTY TRUST BY: ________________________________ TITLE:______________________________ EX-10.127 7 EXHIBIT 10.127 Exhibit 10.127 BRANDYWINE REALTY TRUST NON-QUALIFIED OPTION This is a Non-Qualified Stock Option Award dated January 2, 1998 (the "Award") from Brandywine Realty Trust, a Maryland real estate investment trust (the "Company") to Gerard H. Sweeney ("Optionee"). Terms used herein as defined terms and not defined herein have the meanings assigned to them in the Brandywine Realty Trust 1997 Long-Term Incentive Plan, as amended from time to time (the "Plan"). 1. Definitions. As used herein: (a) "Board" means the Board of Trustees of the Company, as constituted from time to time. (b) "Cause" means "Cause" as defined in the Employment Agreement or the Plan. (c) "Change of Control" means "Change of Control" as defined in the Plan. (d) "Closing" means the closing of the acquisition and sale of the Shares as described in, and subject to the provisions of, Paragraph 9 hereof. (e) "Closing Date" means the date of the Closing. (f) "Code" means the Internal Revenue Code of 1986, as amended from time to time, and any successor thereto. (g) "Common Share" means a common share of beneficial interest, $.01 par value per share, of the Company. (h) "Committee" means the Committee appointed by the Board in accordance with Section 2 of the Plan, if one is appointed and in existence at the time of reference. If no committee has been appointed pursuant to Section 2, or if such a committee is not in existence at the time of reference, "Committee" means the Board. (i) "Date of Exercise" means the date on which the notice required by Paragraph 6 hereof is hand-delivered, placed in the United States mail postage prepaid, or delivered to a telegraph or telex facility. (j) "Date of Grant" means January 2, 1998, the date on which the Company awarded the Option. (k) "Disability" means "Disability" as defined in the Plan. (l) "Employment Agreement" means the employment agreement between Optionee and the Company, dated January 2, 1998, or any subsequent employment agreement between Optionee and the Company as in effect at the time of determination. (m) "Expiration Date" means the earliest of the following: (i) If the Optionee terminates employment with the Company for any reason other than death, Disability or for Cause, 5:00 p.m. on the date 90 days following such termination of employment; (ii) If the Optionee terminates employment with the Company because of death, 5:00 p.m. on the first anniversary of the date the Optionee terminates employment because of such death; (iii) If the Optionee terminates employment with the Company because of Disability, 5:00 p.m. on the date six months following such termination of employment, provided that if the Optionee dies during such period, any Option otherwise exercisable shall be exercisable until the first anniversary of the Optionee's death; (iv) If the Optionee terminates employment with the Company for Cause, 5:00 p.m. on the date of such termination of employment; (v) 5:00 p.m. on the day before the tenth anniversary of the Date of Grant. (n) "Fair Market Value" means the Fair Market Value of a Share, as determined pursuant to the Plan. (o) "100% Shares" means the 296,736 Shares subject to the Option and described in Paragraph 1(s)(i). (p) "110% Shares" means the 347,222 Shares subject to the Option and described in Paragraph 1(s)(ii). (q) "115% Shares" means the 374,531 Shares subject to the Option and described in Paragraph 1(s)(iii). (r) "Option" means the option to purchase Shares hereby granted. (s) "Option Price" means: (i) with respect to 296,736 Shares subject to the Option, $25.25; and (ii) with respect to 347,222 Shares subject to the Option, $27.78; and (iii) with respect to 374,531 Shares subject to the Option, $29.04. In the event of any recapitalization, Share distribution or dividend, Share split or combination, the Option Price shall be equitably and proportionally adjusted. The Option Price shall also be subject to adjustment pursuant to Section 3(c) of the Plan. (t) "Resignation for Good Reason" means "Resignation for Good Reason" as defined in the Employment Agreement. (u) "Shares" means the 1,018,489 Common Shares which are the subject of the Option hereby granted. In the event of any recapitalization, Share distribution or dividend, Share split or combination, the number of Shares that remain subject to the Option shall be equitably and proportionally adjusted. The number of Shares that remain subject to the Option shall also be subject to adjustment pursuant to Section 3(c) of the Plan. (v) "Subsidiary" means, with respect to the Company, a subsidiary company, whether now or hereafter existing, as defined in section 424(f) of the Code, and any other entity 50% or more of the economic interests in which are owned, directly or indirectly, by the Company. 2. Grant of Option. Subject to the terms and conditions set forth herein and in the Plan, the Company hereby grants to the Optionee the Option to purchase any or all of the Shares. The grant of the Option is subject to and conditioned on the approval of such grant by the shareholders of the Company, as described in Paragraph 4. 3. Time of Exercise of Options. (a) Subject to Paragraph 3(b), the Option may be exercised after such time or times as set forth below, and shall remain exercisable until the Expiration Date, when the right to exercise shall terminate absolutely: (i) The Option may be exercised for twenty percent (20%) of each of (A) the 100% Shares, (B) the 110% shares, and (C) the 115% Shares subject to the Option following December 31, 1998. (ii) The Option may be exercised for an additional twenty percent (20%) of each of (A) the 100% Shares, (B) the 110% Shares, and (C) the 115% Shares subject to the Option following December 31, 1999. (iii) The Option may be exercised for an additional twenty percent (20%) of each of (A) the 100% Shares, (B) the 110% Shares, and (C) the 115% Shares subject to the Option following December 31, 2000. (iv) The Option may be exercised for an additional twenty percent (20%) of each of (A) the 100% Shares, (B) the 110% Shares, and (C) the 115% Shares subject to the Option following December 31, 2001. (v) The Option may be exercised for an additional twenty percent (20%) of each of (A) the 100% Shares, (B) the 110% Shares, and (C) the 115% Shares subject to the Option following December 31, 2002. Notwithstanding the foregoing, the number of Shares available for exercise as determined under this Paragraph 3(a) shall be rounded down to the nearest whole Share. No Shares subject to the Option shall first become exercisable following the Optionee's termination of employment, except as provided in Paragraph 3(b). (b) Notwithstanding Paragraph 3(a), the Option shall become fully exercisable upon the occurrence of any of the following events: (i) A Change of Control; (ii) The purchase of any Common Shares pursuant to a tender or exchange offer other than offer by the Company; (iii) Termination of the Optionee's employment by the Company or an Affiliate without Cause; or (iv) The Optionee's Resignation for Good Reason. 4. Contingency Upon Shareholder Approval. The grant of the Option and all rights of the Optionee thereunder are subject to, and conditioned on, the approval of such grant by a majority of the votes cast by the shareholders of the Company at the shareholders' meeting next following the Date of Grant, provided that the total votes cast on the proposal represent over 50% of all votes entitled to be cast on the proposal In the event the shareholders of the Company do not approve the grant of the Options at such meeting, the Options shall be considered to represent, in lieu of options to purchase Shares, stock appreciation rights ("SARs"), subject to the following terms and conditions: (a) The terms of the SARs, including but not limited to restrictions on vesting and exercise and the manner of exercise, will be generally the same as the terms of the Option granted in this Award, but, upon the exercise thereof, Optionee shall not be required to tender any payment, and the Company, rather than issuing Shares, shall pay to the Optionee a cash amount equal to the product of (x) the number of Shares with respect to which the SAR is then deemed to be exercised, multiplied by (y) the excess of the Fair Market Value of a Share as of the day before the Date of Exercise over the applicable Option Price for such Share. (b) Payment by the Company to the Optionee upon the exercise of an SAR shall be subject to the Company's or Affiliate's right to withhold in accordance with applicable law, any taxes required to be withheld under federal, state or local law as a result of the exercise of the SAR in accordance with Paragraph 14. 5. Payment for Shares. Full payment for Shares purchased upon the exercise of an Option shall be made in cash or, at the election of the Optionee and as the Committee may, in its sole discretion, approve, by surrendering Common Shares with an aggregate Fair Market Value equal to the aggregate Option Price, or by delivering such combination of Common Shares and cash as the Committee may, in its sole discretion, approve. 6. Manner of Exercise. The Option shall be exercised by giving written notice of exercise to: Brandywine Realty Trust 16 Campus Boulevard Suite 150 Newtown Square, PA 19073 Attention: Chief Financial Officer All notices under this agreement shall be deemed to have been given when hand-delivered, telecopied or mailed, first class postage prepaid, and shall be irrevocable once given. 7. Nontransferability of Option. The Option may not be transferred or assigned by the Optionee otherwise than as and to the extent permitted by Section 5(e) of the Plan; and any attempt at assignment or transfer contrary to the provisions of the Plan or the levy of any execution, attachment or similar process upon the Option shall be null and void and without effect. Any exercise of the Option by a person other than the Optionee shall be accompanied by appropriate proofs of the right of such person to exercise the Option. 8. Securities Laws. The Committee may from time to time impose any conditions on the exercise of the Option as it deems necessary or appropriate to comply with the then-existing requirements of the Securities Act of 1933, as amended, or of the Securities Exchange Act of 1934, as amended, including Rule 16b-3 (or any similar rule) of the Securities and Exchange Commission. If the listing, registration or qualification of Shares issuable on the exercise of the Option upon any securities exchange or under any federal or state law, or the consent or approval of any governmental regulatory body is necessary as a condition of or in connection with the purchase of such Shares, the Company shall not be obligated to issue or deliver the certificates representing the Shares otherwise issuable on the exercise of the Option unless and until such listing, registration, qualification, consent or approval shall have been effected or obtained. If registration is considered unnecessary by the Company or its counsel, the Company may cause a legend to be placed on such Shares calling attention to the fact that they have been acquired for investment and have not been registered. 9. Issuance of Certificate at Closing; Payment of Cash. Subject to the provisions of this Paragraph 9, the Closing Date shall occur as promptly as is feasible after the exercise of the Option. Subject to the provisions of Paragraphs 8 and 10 hereof, a certificate for the Shares issuable on the exercise of the Option shall be delivered to the Optionee or to his personal representative, heir or legatee at the Closing, provided that no certificates for Shares will be delivered to the Optionee or to his personal representative, heir or legatee unless the Option Price has been paid in full. 10. Rights Prior to Exercise. The Optionee shall not have any right as a shareholder with respect to any Shares subject to his Options until the Option shall have been exercised in accordance with the terms of the Plan and this Award and the Optionee shall have paid the full purchase price for the number of Shares in respect of which the Option was exercised, provided that in the event that the Optionee's employment with the Company is terminated for Cause, upon a determination by the Committee, the Optionee shall automatically forfeit all Shares otherwise subject to delivery upon exercise of an Option but for which the Company has not yet delivered the Share certificates, upon refund by the Company of the Option Price. 11. Status of Option; Interpretation. 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 Code. The Option is not intended to qualify as an incentive stock option within the meaning of section 422 of the Code. The interpretation and construction of any provision of this Option or the Plan made by the Committee shall be final and conclusive and, insofar as possible, shall be consistent with the intention expressed in this Paragraph 11. 12. Option Not to Affect Employment. The Option granted hereunder shall not confer upon the Optionee any right to continue in the employment of the Company or any Subsidiary. 13. Miscellaneous. (a) The address for the Optionee to which notice, demands and other communications to be given or delivered under or by reason of the provisions hereof shall be the address contained in the Company's personnel records. (b) This Award and all questions relating to its validity, interpretation, performance, and enforcement shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania. 14. Withholding of Taxes. Whenever the Company proposes or is required to deliver or transfer Shares in connection with the exercise of the Option, or in connection with the grant or payment upon the exercise of an SAR, 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 Shares or (b) take whatever action it deems necessary to protect its interests with respect to tax liabilities. IN WITNESS WHEREOF, the Company has granted this Award on the day and year first above written. BRANDYWINE REALTY TRUST BY: ________________________________ TITLE:______________________________ EX-10.128 8 RESTRICTED SHARE AWARD Exhibit 10.128 BRANDYWINE REALTY TRUST RESTRICTED SHARE AWARD This is a Restricted Share Award dated January 2, 1998 from Brandywine Realty Trust, a Maryland real estate investment trust (the "Company") to John M. Adderly, Jr. ("Grantee"). Terms used herein as defined terms and not defined herein have the meanings assigned to them in the Brandywine Realty Trust 1997 Long-Term Incentive Plan, as amended from time to time (the "Plan"). 1. Definitions. As used herein: (a) "Award" means the award of Restricted Shares hereby granted. (b) "Board" means the Board of Trustees of the Company, as constituted from time to time. (c) "Cause" means "Cause" as defined in the Plan. (d) "Change of Control" means "Change of Control" as defined in the Plan. (e) "Code" means the Internal Revenue Code of 1986, as amended from time to time, and any successor thereto. (f) "Committee" means the Committee appointed by the Board in accordance with Section 2 of the Plan, if one is appointed and in existence at the time of reference. If no committee has been appointed pursuant to Section 2, or if such a committee is not in existence at the time of reference, "Committee" means the Board. (g) "Date of Grant" means January 2, 1998, the date on which the Company awarded the Restricted Shares. (h) "Employer" means the Company or the Subsidiary for which Grantee is performing services on the applicable Vesting Date. (i) "Restricted Period" means, with respect to each Restricted Share, the period beginning on the Date of Grant and ending on the Vesting Date. (j) "Restricted Shares" means the 21,109 Shares which are the subject of the Award hereby granted. (k) "Rule 16b-3" means Rule 16b-3 promulgated under the 1934 Act, as in effect from time to time. (l) "Share" means a common share of beneficial interest, $.01 par value per share, of the Company, subject to substitution or adjustment as provided in Section 3(c) of the Plan. (m) "Subsidiary" means, with respect to the Company or parent, a subsidiary company, whether now or hereafter existing, as defined in section 424(f) of the Code, and any other entity 50% or more of the economic interests in which are owned, directly or indirectly by the Company. (n) "Vesting Date" means the date on which the restrictions imposed under Paragraph 3 on a Restricted Share lapse, as provided in Paragraph 4. 2. Grant of Restricted Shares. Subject to the terms and conditions set forth herein and in the Plan, the Company hereby grants to Grantee the Restricted Shares. Grantee shall pay to the Company $.01 per Restricted Share granted to him. 3. Restrictions on Restricted Share. Subject to the terms and conditions set forth herein and in the Plan, prior to the Vesting Date in respect of Restricted Shares, Grantee shall not be permitted to sell, transfer, pledge or assign such Restricted Shares. Share certificates evidencing Restricted Shares shall be held in custody by the Company until the restrictions thereon have lapsed. Concurrently herewith, Participant shall deliver to the Company a share power, endorsed in blank, relating to the Restricted Shares covered by the Award. During the Restricted Period, share certificates evidencing Restricted Shares shall bear a legend in substantially the following form: THE TRANSFERABILITY OF THIS CERTIFICATE AND THE SHARES REPRESENTED HEREBY ARE SUBJECT TO THE TERMS AND CONDITIONS (INCLUDING FORFEITURE) OF THE BRANDYWINE REALTY TRUST 1997 LONG-TERM INCENTIVE PLAN AND AN AGREEMENT ENTERED INTO BETWEEN THE REGISTERED OWNER AND BRANDYWINE REALTY TRUST. COPIES OF SUCH PLAN AND AGREEMENT ARE ON FILE IN THE PRINCIPAL OFFICES OF BRANDYWINE REALTY TRUST AND WILL BE MADE AVAILABLE TO ANY SHAREHOLDER WITHOUT CHARGE UPON REQUEST TO THE SECRETARY OF THE COMPANY. 4. Lapse of Restrictions. (a) Subject to the terms and conditions set forth herein and in the Plan, the restrictions set forth in Paragraph 3 on each Restricted Share that has not been forfeited shall lapse on the applicable Vesting Date in respect of such Restricted Share, provided that either (i) on the Vesting Date, Grantee is, and has from the Date of Grant continuously been, an employee of the Company or a Subsidiary during the Restricted Period, or (ii) Grantee's termination of employment before the Vesting Date is due to death or disability. (b) Subject to Paragraph 4(a), a Vesting Date for Restricted Shares subject to the Award shall occur in accordance with the following schedule: (i) As to twenty percent (20%) of the Restricted Shares, December 31, 1998; (ii) As to an additional twenty percent (20%) of the Restricted Shares, December 31, 1999; (iii) As to an additional twenty percent (20%) of the Restricted Shares, December 31, 2000; (iv) As to an additional twenty percent (20%) of the Restricted Shares, December 31, 2001; (v) As to an additional twenty percent (20%) of the Restricted Shares, December 31, 2002. (c) Notwithstanding Paragraph 4(b), a Vesting Date for all Restricted Shares subject to the Award shall occur upon the occurrence of a Change of Control, and the Restricted Shares, to the extent not previously vested, shall thereupon vest in full, provided that (i) as of the date of the Change of Control, Grantee is, and has from the Date of Grant continuously been, an employee of the Company or a Subsidiary or (ii) Grantee's termination of employment before the date of the Change of Control is because of death or disability. 5. Forfeiture of Restricted Shares. (a) Subject to the terms and conditions set forth herein, if Grantee terminates employment with the Company and all Subsidiaries during the Restricted Period for reasons other than as described in Paragraph 4(c), Grantee shall forfeit the Restricted Shares which have not vested as of such termination of employment, provided that Grantee shall not, on account of such termination, forfeit Restricted Shares which have not vested as of Grantee's termination of employment with the Employer because of death or disability. Upon a forfeiture of the Restricted Shares as provided in this Paragraph 5, the Restricted Shares shall be deemed canceled. (b) The provisions of this Paragraph 5 shall not apply to Restricted Shares as to which the restrictions of Paragraph 3 have lapsed. 6. Rights of Grantee. During the Restricted Period, with respect to the Restricted Shares, Grantee shall have all of the rights of a shareholder of the Company, including the right to vote the Restricted Shares and the right to receive any distributions or dividends payable on Shares. 7. Notices. Any notice to the Company under this Award shall be made to: Brandywine Realty Trust 16 Campus Boulevard Suite 150 Newtown Square, PA 19073 Attention: Chief Financial Officer or such other address as may be provided to Grantee by written notice. Any notice to Grantee under this award shall be made to Grantee at the address listed in the Company's personnel files. All notices under this Award shall be deemed to have been given when hand-delivered, telecopied or mailed, first class postage prepaid, and shall be irrevocable once given. 8. Securities Laws. The Committee may from time to time impose any conditions on the Restricted Shares as it deems necessary or advisable to ensure that the Plan satisfies the conditions of Rule 16b-3, and that Shares are issued and resold in compliance with the Securities Act of 1933, as amended. 9. Delivery of Shares. Upon a Vesting Date, the Company shall notify Grantee (or Grantee's legal representatives, estate or heirs, in the event of Grantee's death before a Vesting Date) that the restrictions on the Restricted Shares have lapsed. Within ten (10) business days of a Vesting Date, the Company shall, without payment from Grantee for the Restricted Shares, deliver to Grantee a certificate for the Restricted Shares without any legend or restrictions, except for such restrictions as may be imposed by the Committee, in its sole judgment, under Paragraph 8, provided that no certificates for Shares will be delivered to Grantee until appropriate arrangements have been made with Employer for the withholding of any taxes which may be due with respect to such Shares. The Company may condition delivery of certificates for Shares upon the prior receipt from Grantee of any undertakings which it may determine are required to assure that the certificates are being issued in compliance with federal and state securities laws. The right to payment of any fractional Shares shall be satisfied in cash, measured by the product of the fractional amount times the fair market value of a Share on the Vesting Date, as determined by the Committee. 10. Award Not to Affect Employment. The Award granted hereunder shall not confer upon Grantee any right to continue in the employment of the Company or any Subsidiary. 11. Miscellaneous. (a) The address for Grantee to which notice, demands and other communications are to be given or delivered under or by reason of the provisions hereof shall be the Grantee's address as reflected in the Company's personnel records. (b) This Award and all questions relating to its validity, interpretation, performance and enforcement shall be governed by and construed in accordance with the laws of Pennsylvania. BRANDYWINE REALTY TRUST BY: ________________________________ TITLE:______________________________ EX-10.129 9 RESTRICTED SHARE AWARD Exhibit 10.129 BRANDYWINE REALTY TRUST RESTRICTED SHARE AWARD This is a Restricted Share Award dated January 2, 1998 from Brandywine Realty Trust, a Maryland real estate investment trust (the "Company") to Mark S. Kripke ("Grantee"). Terms used herein as defined terms and not defined herein have the meanings assigned to them in the Brandywine Realty Trust 1997 Long-Term Incentive Plan, as amended from time to time (the "Plan"). 1. Definitions. As used herein: (a) "Award" means the award of Restricted Shares hereby granted. (b) "Board" means the Board of Trustees of the Company, as constituted from time to time. (c) "Cause" means "Cause" as defined in the Plan. (d) "Change of Control" means "Change of Control" as defined in the Plan. (e) "Code" means the Internal Revenue Code of 1986, as amended from time to time, and any successor thereto. (f) "Committee" means the Committee appointed by the Board in accordance with Section 2 of the Plan, if one is appointed and in existence at the time of reference. If no committee has been appointed pursuant to Section 2, or if such a committee is not in existence at the time of reference, "Committee" means the Board. (g) "Date of Grant" means January 2, 1998, the date on which the Company awarded the Restricted Shares. (h) "Employer" means the Company or the Subsidiary for which Grantee is performing services on the applicable Vesting Date. (i) "Restricted Period" means, with respect to each Restricted Share, the period beginning on the Date of Grant and ending on the Vesting Date. (j) "Restricted Shares" means the 5,283 Shares which are the subject of the Award hereby granted. (k) "Rule 16b-3" means Rule 16b-3 promulgated under the 1934 Act, as in effect from time to time. (l) "Share" means a common share of beneficial interest, $.01 par value per share, of the Company, subject to substitution or adjustment as provided in Section 3(c) of the Plan. (m) "Subsidiary" means, with respect to the Company or parent, a subsidiary company, whether now or hereafter existing, as defined in section 424(f) of the Code, and any other entity 50% or more of the economic interests in which are owned, directly or indirectly, by the Company. (n) "Vesting Date" means the date on which the restrictions imposed under Paragraph 3 on a Restricted Share lapse, as provided in Paragraph 4. 2. Grant of Restricted Shares. Subject to the terms and conditions set forth herein and in the Plan, the Company hereby grants to Grantee the Restricted Shares. Grantee shall pay to the Company $.01 per Restricted Share granted to him. 3. Restrictions on Restricted Share. Subject to the terms and conditions set forth herein and in the Plan, prior to the Vesting Date in respect of Restricted Shares, Grantee shall not be permitted to sell, transfer, pledge or assign such Restricted Shares. Share certificates evidencing Restricted Shares shall be held in custody by the Company until the restrictions thereon have lapsed. Concurrently herewith, Participant shall deliver to the Company a share power, endorsed in blank, relating to the Restricted Shares covered by the Award. During the Restricted Period, share certificates evidencing Restricted Shares shall bear a legend in substantially the following form: THE TRANSFERABILITY OF THIS CERTIFICATE AND THE SHARES REPRESENTED HEREBY ARE SUBJECT TO THE TERMS AND CONDITIONS (INCLUDING FORFEITURE) OF THE BRANDYWINE REALTY TRUST 1997 LONG-TERM INCENTIVE PLAN AND AN AGREEMENT ENTERED INTO BETWEEN THE REGISTERED OWNER AND BRANDYWINE REALTY TRUST. COPIES OF SUCH PLAN AND AGREEMENT ARE ON FILE IN THE PRINCIPAL OFFICES OF BRANDYWINE REALTY TRUST AND WILL BE MADE AVAILABLE TO ANY SHAREHOLDER WITHOUT CHARGE UPON REQUEST TO THE SECRETARY OF THE COMPANY. 4. Lapse of Restrictions. (a) Subject to the terms and conditions set forth herein and in the Plan, the restrictions set forth in Paragraph 3 on each Restricted Share that has not been forfeited shall lapse on the applicable Vesting Date in respect of such Restricted Share, provided that either (i) on the Vesting Date, Grantee is, and has from the Date of Grant continuously been, an employee of the Company or a Subsidiary during the Restricted Period, or (ii) Grantee's termination of employment before the Vesting Date is due to death or disability. (b) Subject to Paragraph 4(a), a Vesting Date for Restricted Shares subject to the Award shall occur in accordance with the following schedule: (i) As to twenty percent (20%) of the Restricted Shares, December 31, 1998; (ii) As to an additional twenty percent (20%) of the Restricted Shares, December 31, 1999; (iii) As to an additional twenty percent (20%) of the Restricted Shares, December 31, 2000; (iv) As to an additional twenty percent (20%) of the Restricted Shares, December 31, 2001; (v) As to an additional twenty percent (20%) of the Restricted Shares, December 31, 2002. (c) Notwithstanding Paragraph 4(b), a Vesting Date for all Restricted Shares subject to the Award shall occur upon the occurrence of a Change of Control, and the Restricted Shares, to the extent not previously vested, shall thereupon vest in full, provided that (i) as of the date of the Change of Control, Grantee is, and has from the Date of Grant continuously been, an employee of the Company or a Subsidiary or (ii) Grantee's termination of employment before the date of the Change of Control is because of death or disability. 5. Forfeiture of Restricted Shares. (a) Subject to the terms and conditions set forth herein, if Grantee terminates employment with the Company and all Subsidiaries during the Restricted Period for reasons other than as described in Paragraph 4(c), Grantee shall forfeit the Restricted Shares which have not vested as of such termination of employment, provided that Grantee shall not, on account of such termination, forfeit Restricted Shares which have not vested as of Grantee's termination of employment with the Employer because of death or disability. Upon a forfeiture of the Restricted Shares as provided in this Paragraph 5, the Restricted Shares shall be deemed canceled. (b) The provisions of this Paragraph 5 shall not apply to Restricted Shares as to which the restrictions of Paragraph 3 have lapsed. 6. Rights of Grantee. During the Restricted Period, with respect to the Restricted Shares, Grantee shall have all of the rights of a shareholder of the Company, including the right to vote the Restricted Shares and the right to receive any distributions or dividends payable on Shares. 7. Notices. Any notice to the Company under this Award shall be made to: Brandywine Realty Trust 16 Campus Boulevard Suite 150 Newtown Square, PA 19073 Attention: Chief Financial Officer or such other address as may be provided to Grantee by written notice. Any notice to Grantee under this award shall be made to Grantee at the address listed in the Company's personnel files. All notices under this Award shall be deemed to have been given when hand-delivered, telecopied or mailed, first class postage prepaid, and shall be irrevocable once given. 8. Securities Laws. The Committee may from time to time impose any conditions on the Restricted Shares as it deems necessary or advisable to ensure that the Plan satisfies the conditions of Rule 16b-3, and that Shares are issued and resold in compliance with the Securities Act of 1933, as amended. 9. Delivery of Shares. Upon a Vesting Date, the Company shall notify Grantee (or Grantee's legal representatives, estate or heirs, in the event of Grantee's death before a Vesting Date) that the restrictions on the Restricted Shares have lapsed. Within ten (10) business days of a Vesting Date, the Company shall, without payment from Grantee for the Restricted Shares, deliver to Grantee a certificate for the Restricted Shares without any legend or restrictions, except for such restrictions as may be imposed by the Committee, in its sole judgment, under Paragraph 8, provided that no certificates for Shares will be delivered to Grantee until appropriate arrangements have been made with Employer for the withholding of any taxes which may be due with respect to such Shares. The Company may condition delivery of certificates for Shares upon the prior receipt from Grantee of any undertakings which it may determine are required to assure that the certificates are being issued in compliance with federal and state securities laws. The right to payment of any fractional Shares shall be satisfied in cash, measured by the product of the fractional amount times the fair market value of a Share on the Vesting Date, as determined by the Committee. 10. Award Not to Affect Employment. The Award granted hereunder shall not confer upon Grantee any right to continue in the employment of the Company or any Subsidiary. 11. Miscellaneous. (a) The address for Grantee to which notice, demands and other communications are to be given or delivered under or by reason of the provisions hereof shall be the Grantee's address as reflected in the Company's personnel records. (b) This Award and all questions relating to its validity, interpretation, performance and enforcement shall be governed by and construed in accordance with the laws of Pennsylvania. BRANDYWINE REALTY TRUST BY: ________________________________ TITLE:______________________________ EX-10.130 10 RESTRICTED SHARE AWARD Exhibit 10.130 BRANDYWINE REALTY TRUST RESTRICTED SHARE AWARD This is a Restricted Share Award dated January 2, 1998 from Brandywine Realty Trust, a Maryland real estate investment trust (the "Company") to Anthony A. Nichols, Jr. ("Grantee"). Terms used herein as defined terms and not defined herein have the meanings assigned to them in the Brandywine Realty Trust 1997 Long-Term Incentive Plan, as amended from time to time (the "Plan"). 1. Definitions. As used herein: (a) "Award" means the award of Restricted Shares hereby granted. (b) "Board" means the Board of Trustees of the Company, as constituted from time to time. (c) "Cause" means "Cause" as defined in the Plan. (d) "Change of Control" means "Change of Control" as defined in the Plan. (e) "Code" means the Internal Revenue Code of 1986, as amended from time to time, and any successor thereto. (f) "Committee" means the Committee appointed by the Board in accordance with Section 2 of the Plan, if one is appointed and in existence at the time of reference. If no committee has been appointed pursuant to Section 2, or if such a committee is not in existence at the time of reference, "Committee" means the Board. (g) "Date of Grant" means January 2, 1998, the date on which the Company awarded the Restricted Shares. (h) "Employer" means the Company or the Subsidiary for which Grantee is performing services on the applicable Vesting Date. (i) "Restricted Period" means, with respect to each Restricted Share, the period beginning on the Date of Grant and ending on the Vesting Date. (j) "Restricted Shares" means the 15,842 Shares which are the subject of the Award hereby granted. (k) "Rule 16b-3" means Rule 16b-3 promulgated under the 1934 Act, as in effect from time to time. (l) "Share" means a common share of beneficial interest, $.01 par value per share, of the Company, subject to substitution or adjustment as provided in Section 3(c) of the Plan. (m) "Subsidiary" means, with respect to the Company or parent, a subsidiary company, whether now or hereafter existing, as defined in section 424(f) of the Code, and any other entity 50% or more of the economic interests in which are owned, directly or indirectly, by the Company. (n) "Vesting Date" means the date on which the restrictions imposed under Paragraph 3 on a Restricted Share lapse, as provided in Paragraph 4. 2. Grant of Restricted Shares. Subject to the terms and conditions set forth herein and in the Plan, the Company hereby grants to Grantee the Restricted Shares. Grantee shall pay to the Company $.01 per Restricted Share granted to him. 3. Restrictions on Restricted Share. Subject to the terms and conditions set forth herein and in the Plan, prior to the Vesting Date in respect of Restricted Shares, Grantee shall not be permitted to sell, transfer, pledge or assign such Restricted Shares. Share certificates evidencing Restricted Shares shall be held in custody by the Company until the restrictions thereon have lapsed. Concurrently herewith, Participant shall deliver to the Company a share power, endorsed in blank, relating to the Restricted Shares covered by the Award. During the Restricted Period, share certificates evidencing Restricted Shares shall bear a legend in substantially the following form: THE TRANSFERABILITY OF THIS CERTIFICATE AND THE SHARES REPRESENTED HEREBY ARE SUBJECT TO THE TERMS AND CONDITIONS (INCLUDING FORFEITURE) OF THE BRANDYWINE REALTY TRUST 1997 LONG-TERM INCENTIVE PLAN AND AN AGREEMENT ENTERED INTO BETWEEN THE REGISTERED OWNER AND BRANDYWINE REALTY TRUST. COPIES OF SUCH PLAN AND AGREEMENT ARE ON FILE IN THE PRINCIPAL OFFICES OF BRANDYWINE REALTY TRUST AND WILL BE MADE AVAILABLE TO ANY SHAREHOLDER WITHOUT CHARGE UPON REQUEST TO THE SECRETARY OF THE COMPANY. 4. Lapse of Restrictions. (a) Subject to the terms and conditions set forth herein and in the Plan, the restrictions set forth in Paragraph 3 on each Restricted Share that has not been forfeited shall lapse on the applicable Vesting Date in respect of such Restricted Share, provided that either (i) on the Vesting Date, Grantee is, and has from the Date of Grant continuously been, an employee of the Company or a Subsidiary during the Restricted Period, or (ii) Grantee's termination of employment before the Vesting Date is due to death or disability. (b) Subject to Paragraph 4(a), a Vesting Date for Restricted Shares subject to the Award shall occur in accordance with the following schedule: (i) As to twenty percent (20%) of the Restricted Shares, December 31, 1998; (ii) As to an additional twenty percent (20%) of the Restricted Shares, December 31, 1999; (iii) As to an additional twenty percent (20%) of the Restricted Shares, December 31, 2000; (iv) As to an additional twenty percent (20%) of the Restricted Shares, December 31, 2001; (v) As to an additional twenty percent (20%) of the Restricted Shares, December 31, 2002. (c) Notwithstanding Paragraph 4(b), a Vesting Date for all Restricted Shares subject to the Award shall occur upon the occurrence of a Change of Control, and the Restricted Shares, to the extent not previously vested, shall thereupon vest in full, provided that (i) as of the date of the Change of Control, Grantee is, and has from the Date of Grant continuously been, an employee of the Company or a Subsidiary or (ii) Grantee's termination of employment before the date of the Change of Control is because of death or disability. 5. Forfeiture of Restricted Shares. (a) Subject to the terms and conditions set forth herein, if Grantee terminates employment with the Company and all Subsidiaries during the Restricted Period for reasons other than as described in Paragraph 4(c), Grantee shall forfeit the Restricted Shares which have not vested as of such termination of employment, provided that Grantee shall not, on account of such termination, forfeit Restricted Shares which have not vested as of Grantee's termination of employment with the Employer because of death or disability. Upon a forfeiture of the Restricted Shares as provided in this Paragraph 5, the Restricted Shares shall be deemed canceled. (b) The provisions of this Paragraph 5 shall not apply to Restricted Shares as to which the restrictions of Paragraph 3 have lapsed. 6. Rights of Grantee. During the Restricted Period, with respect to the Restricted Shares, Grantee shall have all of the rights of a shareholder of the Company, including the right to vote the Restricted Shares and the right to receive any distributions or dividends payable on Shares. 7. Notices. Any notice to the Company under this Award shall be made to: Brandywine Realty Trust 16 Campus Boulevard Suite 150 Newtown Square, PA 19073 Attention: Chief Financial Officer or such other address as may be provided to Grantee by written notice. Any notice to Grantee under this award shall be made to Grantee at the address listed in the Company's personnel files. All notices under this Award shall be deemed to have been given when hand-delivered, telecopied or mailed, first class postage prepaid, and shall be irrevocable once given. 8. Securities Laws. The Committee may from time to time impose any conditions on the Restricted Shares as it deems necessary or advisable to ensure that the Plan satisfies the conditions of Rule 16b-3, and that Shares are issued and resold in compliance with the Securities Act of 1933, as amended. 9. Delivery of Shares. Upon a Vesting Date, the Company shall notify Grantee (or Grantee's legal representatives, estate or heirs, in the event of Grantee's death before a Vesting Date) that the restrictions on the Restricted Shares have lapsed. Within ten (10) business days of a Vesting Date, the Company shall, without payment from Grantee for the Restricted Shares, deliver to Grantee a certificate for the Restricted Shares without any legend or restrictions, except for such restrictions as may be imposed by the Committee, in its sole judgment, under Paragraph 8, provided that no certificates for Shares will be delivered to Grantee until appropriate arrangements have been made with Employer for the withholding of any taxes which may be due with respect to such Shares. The Company may condition delivery of certificates for Shares upon the prior receipt from Grantee of any undertakings which it may determine are required to assure that the certificates are being issued in compliance with federal and state securities laws. The right to payment of any fractional Shares shall be satisfied in cash, measured by the product of the fractional amount times the fair market value of a Share on the Vesting Date, as determined by the Committee. 10. Award Not to Affect Employment. The Award granted hereunder shall not confer upon Grantee any right to continue in the employment of the Company or any Subsidiary. 11. Miscellaneous. (a) The address for Grantee to which notice, demands and other communications are to be given or delivered under or by reason of the provisions hereof shall be the Grantee's address as reflected in the Company's personnel records. (b) This Award and all questions relating to its validity, interpretation, performance and enforcement shall be governed by and construed in accordance with the laws of Pennsylvania. BRANDYWINE REALTY TRUST BY: ______________________________ TITLE:____________________________ EX-10.131 11 RESTRICTED SHARE AWARD Exhibit 10.131 BRANDYWINE REALTY TRUST RESTRICTED SHARE AWARD This is a Restricted Share Award dated January 2, 1998 from Brandywine Realty Trust, a Maryland real estate investment trust (the "Company") to Henry J. Devuono ("Grantee"). Terms used herein as defined terms and not defined herein have the meanings assigned to them in the Brandywine Realty Trust 1997 Long-Term Incentive Plan, as amended from time to time (the "Plan"). 1. Definitions. As used herein: (a) "Award" means the award of Restricted Shares hereby granted. (b) "Board" means the Board of Trustees of the Company, as constituted from time to time. (c) "Cause" means "Cause" as defined in the Plan. (d) "Change of Control" means "Change of Control" as defined in the Plan. (e) "Code" means the Internal Revenue Code of 1986, as amended from time to time, and any successor thereto. (f) "Committee" means the Committee appointed by the Board in accordance with Section 2 of the Plan, if one is appointed and in existence at the time of reference. If no committee has been appointed pursuant to Section 2, or if such a committee is not in existence at the time of reference, "Committee" means the Board. (g) "Date of Grant" means January 2, 1998, the date on which the Company awarded the Restricted Shares. (h) "Employer" means the Company or the Subsidiary for which Grantee is performing services on the applicable Vesting Date. (i) "Restricted Period" means, with respect to each Restricted Share, the period beginning on the Date of Grant and ending on the Vesting Date. (j) "Restricted Shares" means the 5,283 Shares which are the subject of the Award hereby granted. (k) "Rule 16b-3" means Rule 16b-3 promulgated under the 1934 Act, as in effect from time to time. (l) "Share" means a common share of beneficial interest, $.01 par value per share, of the Company, subject to substitution or adjustment as provided in Section 3(c) of the Plan. (m) "Subsidiary" means, with respect to the Company or parent, a subsidiary company, whether now or hereafter existing, as defined in section 424(f) of the Code, and any other entity 50% or more of the economic interests in which are owned, directly or indirectly, by the Company. (n) "Vesting Date" means the date on which the restrictions imposed under Paragraph 3 on a Restricted Share lapse, as provided in Paragraph 4. 2. Grant of Restricted Shares. Subject to the terms and conditions set forth herein and in the Plan, the Company hereby grants to Grantee the Restricted Shares. Grantee shall pay to the Company $.01 per Restricted Share granted to him. 3. Restrictions on Restricted Share. Subject to the terms and conditions set forth herein and in the Plan, prior to the Vesting Date in respect of Restricted Shares, Grantee shall not be permitted to sell, transfer, pledge or assign such Restricted Shares. Share certificates evidencing Restricted Shares shall be held in custody by the Company until the restrictions thereon have lapsed. Concurrently herewith, Participant shall deliver to the Company a share power, endorsed in blank, relating to the Restricted Shares covered by the Award. During the Restricted Period, share certificates evidencing Restricted Shares shall bear a legend in substantially the following form: THE TRANSFERABILITY OF THIS CERTIFICATE AND THE SHARES REPRESENTED HEREBY ARE SUBJECT TO THE TERMS AND CONDITIONS (INCLUDING FORFEITURE) OF THE BRANDYWINE REALTY TRUST 1997 LONG-TERM INCENTIVE PLAN AND AN AGREEMENT ENTERED INTO BETWEEN THE REGISTERED OWNER AND BRANDYWINE REALTY TRUST. COPIES OF SUCH PLAN AND AGREEMENT ARE ON FILE IN THE PRINCIPAL OFFICES OF BRANDYWINE REALTY TRUST AND WILL BE MADE AVAILABLE TO ANY SHAREHOLDER WITHOUT CHARGE UPON REQUEST TO THE SECRETARY OF THE COMPANY. 4. Lapse of Restrictions. (a) Subject to the terms and conditions set forth herein and in the Plan, the restrictions set forth in Paragraph 3 on each Restricted Share that has not been forfeited shall lapse on the applicable Vesting Date in respect of such Restricted Share, provided that either (i) on the Vesting Date, Grantee is, and has from the Date of Grant continuously been, an employee of the Company or a Subsidiary during the Restricted Period, or (ii) Grantee's termination of employment before the Vesting Date is due to death or disability. (b) Subject to Paragraph 4(a), a Vesting Date for Restricted Shares subject to the Award shall occur in accordance with the following schedule: (i) As to twenty percent (20%) of the Restricted Shares, December 31, 1998; (ii) As to an additional twenty percent (20%) of the Restricted Shares, December 31, 1999; (iii) As to an additional twenty percent (20%) of the Restricted Shares, December 31, 2000; (iv) As to an additional twenty percent (20%) of the Restricted Shares, December 31, 2001; (v) As to an additional twenty percent (20%) of the Restricted Shares, December 31, 2002. (c) Notwithstanding Paragraph 4(b), a Vesting Date for all Restricted Shares subject to the Award shall occur upon the occurrence of a Change of Control, and the Restricted Shares, to the extent not previously vested, shall thereupon vest in full, provided that (i) as of the date of the Change of Control, Grantee is, and has from the Date of Grant continuously been, an employee of the Company or a Subsidiary or (ii) Grantee's termination of employment before the date of the Change of Control is because of death or disability. 5. Forfeiture of Restricted Shares. (a) Subject to the terms and conditions set forth herein, if Grantee terminates employment with the Company and all Subsidiaries during the Restricted Period for reasons other than as described in Paragraph 4(c), Grantee shall forfeit the Restricted Shares which have not vested as of such termination of employment, provided that Grantee shall not, on account of such termination, forfeit Restricted Shares which have not vested as of Grantee's termination of employment with the Employer because of death or disability. Upon a forfeiture of the Restricted Shares as provided in this Paragraph 5, the Restricted Shares shall be deemed canceled. (b) The provisions of this Paragraph 5 shall not apply to Restricted Shares as to which the restrictions of Paragraph 3 have lapsed. 6. Rights of Grantee. During the Restricted Period, with respect to the Restricted Shares, Grantee shall have all of the rights of a shareholder of the Company, including the right to vote the Restricted Shares and the right to receive any distributions or dividends payable on Shares. 7. Notices. Any notice to the Company under this Award shall be made to: Brandywine Realty Trust 16 Campus Boulevard Suite 150 Newtown Square, PA 19073 Attention: Chief Financial Officer or such other address as may be provided to Grantee by written notice. Any notice to Grantee under this award shall be made to Grantee at the address listed in the Company's personnel files. All notices under this Award shall be deemed to have been given when hand-delivered, telecopied or mailed, first class postage prepaid, and shall be irrevocable once given. 8. Securities Laws. The Committee may from time to time impose any conditions on the Restricted Shares as it deems necessary or advisable to ensure that the Plan satisfies the conditions of Rule 16b-3, and that Shares are issued and resold in compliance with the Securities Act of 1933, as amended. 9. Delivery of Shares. Upon a Vesting Date, the Company shall notify Grantee (or Grantee's legal representatives, estate or heirs, in the event of Grantee's death before a Vesting Date) that the restrictions on the Restricted Shares have lapsed. Within ten (10) business days of a Vesting Date, the Company shall, without payment from Grantee for the Restricted Shares, deliver to Grantee a certificate for the Restricted Shares without any legend or restrictions, except for such restrictions as may be imposed by the Committee, in its sole judgment, under Paragraph 8, provided that no certificates for Shares will be delivered to Grantee until appropriate arrangements have been made with Employer for the withholding of any taxes which may be due with respect to such Shares. The Company may condition delivery of certificates for Shares upon the prior receipt from Grantee of any undertakings which it may determine are required to assure that the certificates are being issued in compliance with federal and state securities laws. The right to payment of any fractional Shares shall be satisfied in cash, measured by the product of the fractional amount times the fair market value of a Share on the Vesting Date, as determined by the Committee. 10. Award Not to Affect Employment. The Award granted hereunder shall not confer upon Grantee any right to continue in the employment of the Company or any Subsidiary. 11. Miscellaneous. (a) The address for Grantee to which notice, demands and other communications are to be given or delivered under or by reason of the provisions hereof shall be the Grantee's address as reflected in the Company's personnel records. (b) This Award and all questions relating to its validity, interpretation, performance and enforcement shall be governed by and construed in accordance with the laws of Pennsylvania. BRANDYWINE REALTY TRUST BY: ________________________________ TITLE:______________________________ EX-10.132 12 EXHIBIT 10.132 Exhibit 10.132 BRANDYWINE REALTY TRUST NON-QUALIFIED OPTION This is a Non-Qualified Stock Option Award dated January 2, 1998 (the "Award") from Brandywine Realty Trust, a Maryland real estate investment trust (the "Company") to John M. Adderly, Jr. ("Optionee"). Terms used herein as defined terms and not defined herein have the meanings assigned to them in the Brandywine Realty Trust 1997 Long-Term Incentive Plan, as amended from time to time (the "Plan"). 1. Definitions. As used herein: (a) "Board" means the Board of Trustees of the Company, as constituted from time to time. (b) "Cause" means "Cause" as defined in the Plan. (c) "Change of Control" means "Change of Control" as defined in the Plan. (d) "Closing" means the closing of the acquisition and sale of the Shares as described in, and subject to the provisions of, Paragraph 9 hereof. (e) "Closing Date" means the date of the Closing. (f) "Code" means the Internal Revenue Code of 1986, as amended from time to time, and any successor thereto. (g) "Common Share" means a common share of beneficial interest, $.01 par value per share, of the Company. (h) "Committee" means the Committee appointed by the Board in accordance with Section 2 of the Plan, if one is appointed and in existence at the time of reference. If no committee has been appointed pursuant to Section 2, or if such a committee is not in existence at the time of reference, "Committee" means the Board. (i) "Date of Exercise" means the date on which the notice required by Paragraph 6 hereof is hand-delivered, placed in the United States mail postage prepaid, or delivered to a telegraph or telex facility. (j) "Date of Grant" means January 2, 1998, the date on which the Company awarded the Option. (k) "Disability" means "Disability" as defined in the Plan. (l) "Expiration Date" means the earliest of the following: (i) If the Optionee terminates employment with the Company for any reason other than death, Disability or for Cause, 5:00 p.m. on the date 90 days following such termination of employment; (ii) If the Optionee terminates employment with the Company because of death, 5:00 p.m. on the first anniversary of the date the Optionee terminates employment because of such death; (iii) If the Optionee terminates employment with the Company because of Disability, 5:00 p.m. on the date six months following such termination of employment, provided that if the Optionee dies during such period, any Option otherwise exercisable shall be exercisable until the first anniversary of the Optionee's death; (iv) If the Optionee terminates employment with the Company for Cause, 5:00 p.m. on the date of such termination of employment; (v) 5:00 p.m. on the day before the tenth anniversary of the Date of Grant. (m) "Fair Market Value" means the Fair Market Value of a Share, as determined pursuant to the Plan. (n) "100% Shares" means the 26,409 Shares subject to the Option and described in Paragraph 1(r)(i). (o) "110% Shares" means the 30,902 Shares subject to the Option and described in Paragraph 1(r)(ii). (p) "115% Shares" means the 33,333 Shares subject to the Option and described in Paragraph 1(r)(iii). (q) "Option" means the option to purchase Shares hereby granted. (r) "Option Price" means: (i) with respect to 26,409 Shares subject to the Option, $25.25; and (ii) with respect to 30,902 Shares subject to the Option, $27.78; and (iii) with respect to 33,333 Shares subject to the Option, $29.04. In the event of any recapitalization, Share distribution or dividend, Share split or combination, the Option Price shall be equitably and proportionally adjusted. The Option Price shall also be subject to adjustment pursuant to Section 3(c) of the Plan. (s) "Shares" means the 90,644 Common Shares which are the subject of the Option hereby granted. In the event of any recapitalization, Share distribution or dividend, Share split or combination, the number of Shares that remain subject to the Option shall be equitably and proportionally adjusted. The number of Shares that remain subject to the Option shall also be subject to adjustment pursuant to Section 3(c) of the Plan. (t) "Subsidiary" means, with respect to the Company, a subsidiary company, whether now or hereafter existing, as defined in section 424(f) of the Code, and any other entity 50% or more of the economic interests in which are owned, directly or indirectly, by the Company. 2. Grant of Option. Subject to the terms and conditions set forth herein and in the Plan, the Company hereby grants to the Optionee the Option to purchase any or all of the Shares. The grant of the Option is subject to and conditioned on the approval of such grant by the shareholders of the Company, as described in Paragraph 4. 3. Time of Exercise of Options. (a) Subject to Paragraph 3(b), the Option may be exercised after such time or times as set forth below, and shall remain exercisable until the Expiration Date, when the right to exercise shall terminate absolutely: (i) The Option may be exercised for twenty percent (20%) of each of (A) the 100% Shares, (B) the 110% shares, and (C) the 115% Shares subject to the Option following December 31, 1998. (ii) The Option may be exercised for an additional twenty percent (20%) of each of (A) the 100% Shares, (B) the 110% Shares, and (C) the 115% Shares subject to the Option following December 31, 1999. (iii) The Option may be exercised for an additional twenty percent (20%) of each of (A) the 100% Shares, (B) the 110% Shares, and (C) the 115% Shares subject to the Option following December 31, 2000. (iv) The Option may be exercised for an additional twenty percent (20%) of each of (A) the 100% Shares, (B) the 110% Shares, and (C) the 115% Shares subject to the Option following December 31, 2001. (v) The Option may be exercised for an additional twenty percent (20%) of each of (A) the 100% Shares, (B) the 110% Shares, and (C) the 115% Shares subject to the Option following December 31, 2002. Notwithstanding the foregoing, the number of Shares available for exercise as determined under this Paragraph 3(a) shall be rounded down to the nearest whole Share. No Shares subject to the Option shall first become exercisable following the Optionee's termination of employment, except as provided in Paragraph 3(b). (b) Notwithstanding Paragraph 3(a), the Option shall become fully exercisable upon the occurrence of a Change of Control. 4. Contingency Upon Shareholder Approval. (a) The grant of the Option for the Shares listed in Paragraph 4(b), and all rights of the Optionee thereunder are subject to, and conditioned on, the approval of such grant by a majority of the votes cast by the shareholders of the Company at the shareholders' meeting next following the Date of Grant, provided that the total votes cast on the proposal represent over 50% of all votes entitled to be cast on the proposal In the event the shareholders of the Company do not approve the grant of the Options at such meeting, the Options shall be considered to represent, in lieu of options to purchase Shares, stock appreciation rights ("SARs"), subject to the following terms and conditions: (i) The terms of the SARs, including but not limited to restrictions on vesting and exercise and the manner of exercise, will be generally the same as the terms of the Option granted in this Award, but, upon the exercise thereof, Optionee shall not be required to tender any payment, and the Company, rather than issuing Shares, shall pay to the Optionee a cash amount equal to the product of (x) the number of Shares with respect to which the SAR is then deemed to be exercised, multiplied by (y) the excess of the Fair Market Value of a Share as of the day before the Date of Exercise over the applicable Option Price for such Share. (ii) Payment by the Company to the Optionee upon the exercise of an SAR shall be subject to the Company's or Affiliate's right to withhold in accordance with applicable law, any taxes required to be withheld under federal, state or local law as a result of the exercise of the SAR in accordance with Paragraph 14. (b) Following are the Shares subject to the Option that are subject to the conditions described in Paragraph 4(a): (i) 1,032 of the 100% Shares, 1,208 of the 110% Shares and 1,303 of the 115% Shares described in Paragraph 3(a)(i). (ii) 1,032 of the 100% Shares, 1,207 of the 110% Shares and 1,302 of the 115% Shares described in Paragraph 3(a)(ii). (iii) 1,032 of the 100% Shares, 1,208 of the 110% Shares and 1,303 of the 115% Shares described in Paragraph 3(a)(iii). (iv) 1,032 of the 100% Shares, 1,207 of the 110% Shares and 1,302 of the 115% Shares described in Paragraph 3(a)(iv). (v) 1,032 of the 100% Shares, 1,208 of the 110% Shares and 1,303 of the 115% Shares described in Paragraph 3(a)(v). 5. Payment for Shares. Full payment for Shares purchased upon the exercise of an Option shall be made in cash or, at the election of the Optionee and as the Committee may, in its sole discretion, approve, by surrendering Common Shares with an aggregate Fair Market Value equal to the aggregate Option Price, or by delivering such combination of Common Shares and cash as the Committee may, in its sole discretion, approve. 6. Manner of Exercise. The Option shall be exercised by giving written notice of exercise to: Brandywine Realty Trust 16 Campus Boulevard Suite 150 Newtown Square, PA 19073 Attention: Chief Financial Officer All notices under this agreement shall be deemed to have been given when hand-delivered, telecopied or mailed, first class postage prepaid, and shall be irrevocable once given. 7. Nontransferability of Option. The Option may not be transferred or assigned by the Optionee otherwise than as and to the extent permitted by Section 5(e) of the Plan; and any attempt at assignment or transfer contrary to the provisions of the Plan or the levy of any execution, attachment or similar process upon the Option shall be null and void and without effect. Any exercise of the Option by a person other than the Optionee shall be accompanied by appropriate proofs of the right of such person to exercise the Option. 8. Securities Laws. The Committee may from time to time impose any conditions on the exercise of the Option as it deems necessary or appropriate to comply with the then-existing requirements of the Securities Act of 1933, as amended, or of the Securities Exchange Act of 1934, as amended, including Rule 16b-3 (or any similar rule) of the Securities and Exchange Commission. If the listing, registration or qualification of Shares issuable on the exercise of the Option upon any securities exchange or under any federal or state law, or the consent or approval of any governmental regulatory body is necessary as a condition of or in connection with the purchase of such Shares, the Company shall not be obligated to issue or deliver the certificates representing the Shares otherwise issuable on the exercise of the Option unless and until such listing, registration, qualification, consent or approval shall have been effected or obtained. If registration is considered unnecessary by the Company or its counsel, the Company may cause a legend to be placed on such Shares calling attention to the fact that they have been acquired for investment and have not been registered. 9. Issuance of Certificate at Closing; Payment of Cash. Subject to the provisions of this Paragraph 9, the Closing Date shall occur as promptly as is feasible after the exercise of the Option. Subject to the provisions of Paragraphs 8 and 10 hereof, a certificate for the Shares issuable on the exercise of the Option shall be delivered to the Optionee or to his personal representative, heir or legatee at the Closing, provided that no certificates for Shares will be delivered to the Optionee or to his personal representative, heir or legatee unless the Option Price has been paid in full. 10. Rights Prior to Exercise. The Optionee shall not have any right as a shareholder with respect to any Shares subject to his Options until the Option shall have been exercised in accordance with the terms of the Plan and this Award and the Optionee shall have paid the full purchase price for the number of Shares in respect of which the Option was exercised, provided that in the event that the Optionee's employment with the Company is terminated for Cause, upon a determination by the Committee, the Optionee shall automatically forfeit all Shares otherwise subject to delivery upon exercise of an Option but for which the Company has not yet delivered the Share certificates, upon refund by the Company of the Option Price. 11. Status of Option; Interpretation. 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 Code. The Option is not intended to qualify as an incentive stock option within the meaning of section 422 of the Code. The interpretation and construction of any provision of this Option or the Plan made by the Committee shall be final and conclusive and, insofar as possible, shall be consistent with the intention expressed in this Paragraph 11. 12. Option Not to Affect Employment. The Option granted hereunder shall not confer upon the Optionee any right to continue in the employment of the Company or any Subsidiary. 13. Miscellaneous. (a) The address for the Optionee to which notice, demands and other communications to be given or delivered under or by reason of the provisions hereof shall be the address contained in the Company's personnel records. (b) This Award and all questions relating to its validity, interpretation, performance, and enforcement shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania. 14. Withholding of Taxes. Whenever the Company proposes or is required to deliver or transfer Shares in connection with the exercise of the Option, or in connection with the grant or payment upon the exercise of an SAR, 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 Shares or (b) take whatever action it deems necessary to protect its interests with respect to tax liabilities. IN WITNESS WHEREOF, the Company has granted this Award on the day and year first above written. BRANDYWINE REALTY TRUST BY: ________________________________ TITLE:______________________________ EX-10.133 13 EXHIBIT 10.133 Exhibit 10.133 -------------- BRANDYWINE REALTY TRUST NON-QUALIFIED OPTION -------------------- This is a Non-Qualified Stock Option Award dated January 2, 1998 (the "Award") from Brandywine Realty Trust, a Maryland real estate investment trust (the "Company") to Mark S. Kripke ("Optionee"). Terms used herein as defined terms and not defined herein have the meanings assigned to them in the Brandywine Realty Trust 1997 Long-Term Incentive Plan, as amended from time to time (the "Plan"). 1. Definitions. As used herein: (a) "Board" means the Board of Trustees of the Company, as constituted from time to time. (b) "Cause" means "Cause" as defined in the Plan. (c) "Change of Control" means "Change of Control" as defined in the Plan. (d) "Closing" means the closing of the acquisition and sale of the Shares as described in, and subject to the provisions of, Paragraph 9 hereof. (e) "Closing Date" means the date of the Closing. (f) "Code" means the Internal Revenue Code of 1986, as amended from time to time, and any successor thereto. (g) "Common Share" means a common share of beneficial interest, $.01 par value per share, of the Company. (h) "Committee" means the Committee appointed by the Board in accordance with Section 2 of the Plan, if one is appointed and in existence at the time of reference. If no committee has been appointed pursuant to Section 2, or if such a committee is not in existence at the time of reference, "Committee" means the Board. (i) "Date of Exercise" means the date on which the notice required by Paragraph 6 hereof is hand-delivered, placed in the United States mail postage prepaid, or delivered to a telegraph or telex facility. (j) "Date of Grant" means January 2, 1998, the date on which the Company awarded the Option. (k) "Disability" means "Disability" as defined in the Plan. (l) "Expiration Date" means the earliest of the following: (i) If the Optionee terminates employment with the Company for any reason other than death, Disability or for Cause, 5:00 p.m. on the date 90 days following such termination of employment; (ii) If the Optionee terminates employment with the Company because of death, 5:00 p.m. on the first anniversary of the date the Optionee terminates employment because of such death; (iii) If the Optionee terminates employment with the Company because of Disability, 5:00 p.m. on the date six months following such termination of employment, provided that if the Optionee dies during such period, any Option otherwise exercisable shall be exercisable until the first anniversary of the Optionee's death; (iv) If the Optionee terminates employment with the Company for Cause, 5:00 p.m. on the date of such termination of employment; (v) 5:00 p.m. on the day before the tenth anniversary of the Date of Grant. (m) "Fair Market Value" means the Fair Market Value of a Share, as determined pursuant to the Plan. (n) "100% Shares" means the 6,587 Shares subject to the Option and described in Paragraph 1(r)(i). (o) "110% Shares" means the 7,708 Shares subject to the Option and described in Paragraph 1(r)(ii). (p) "115% Shares" means the 8,314 Shares subject to the Option and described in Paragraph 1(r)(iii). (q) "Option" means the option to purchase Shares hereby granted. (r) "Option Price" means: (i) with respect to 6,587 Shares subject to the Option, $25.25; and (ii) with respect to 7,708 Shares subject to the Option, $27.78; and (iii) with respect to 8,314 Shares subject to the Option, $29.04. In the event of any recapitalization, Share distribution or dividend, Share split or combination, the Option Price shall be equitably and proportionally adjusted. The Option Price shall also be subject to adjustment pursuant to Section 3(c) of the Plan. (s) "Shares" means the 22,609 Common Shares which are the subject of the Option hereby granted. In the event of any recapitalization, Share distribution or dividend, Share split or combination, the number of Shares that remain subject to the Option shall be equitably and proportionally adjusted. The number of Shares that remain subject to the Option shall also be subject to adjustment pursuant to Section 3(c) of the Plan. (t) "Subsidiary" means, with respect to the Company, a subsidiary company, whether now or hereafter existing, as defined in section 424(f) of the Code, and any other entity 50% or more of the economic interests in which are owned, directly or indirectly, by the Company. 2. Grant of Option. Subject to the terms and conditions set forth herein and in the Plan, the Company hereby grants to the Optionee the Option to purchase any or all of the Shares. The grant of the Option is subject to and conditioned on the approval of such grant by the shareholders of the Company, as described in Paragraph 4. 3. Time of Exercise of Options. (a) Subject to Paragraph 3(b), the Option may be exercised after such time or times as set forth below, and shall remain exercisable until the Expiration Date, when the right to exercise shall terminate absolutely: (i) The Option may be exercised for twenty percent (20%) of each of (A) the 100% Shares, (B) the 110% shares, and (C) the 115% Shares subject to the Option following December 31, 1998. (ii) The Option may be exercised for an additional twenty percent (20%) of each of (A) the 100% Shares, (B) the 110% Shares, and (C) the 115% Shares subject to the Option following December 31, 1999. (iii) The Option may be exercised for an additional twenty percent (20%) of each of (A) the 100% Shares, (B) the 110% Shares, and (C) the 115% Shares subject to the Option following December 31, 2000. (iv) The Option may be exercised for an additional twenty percent (20%) of each of (A) the 100% Shares, (B) the 110% Shares, and (C) the 115% Shares subject to the Option following December 31, 2001. (v) The Option may be exercised for an additional twenty percent (20%) of each of (A) the 100% Shares, (B) the 110% Shares, and (C) the 115% Shares subject to the Option following December 31, 2002. Notwithstanding the foregoing, the number of Shares available for exercise as determined under this Paragraph 3(a) shall be rounded down to the nearest whole Share. No Shares subject to the Option shall first become exercisable following the Optionee's termination of employment, except as provided in Paragraph 3(b). (b) Notwithstanding Paragraph 3(a), the Option shall become fully exercisable upon the occurrence of a Change of Control. 4. Contingency Upon Shareholder Approval. (a) The grant of the Option for the Shares listed in Paragraph 4(b), and all rights of the Optionee thereunder are subject to, and conditioned on, the approval of such grant by a majority of the votes cast by the shareholders of the Company at the shareholders' meeting next following the Date of Grant, provided that the total votes cast on the proposal represent over 50% of all votes entitled to be cast on the proposal In the event the shareholders of the Company do not approve the grant of the Options at such meeting, the Options shall be considered to represent, in lieu of options to purchase Shares, stock appreciation rights ("SARs"), subject to the following terms and conditions: (i) The terms of the SARs, including but not limited to restrictions on vesting and exercise and the manner of exercise, will be generally the same as the terms of the Option granted in this Award, but, upon the exercise thereof, Optionee shall not be required to tender any payment, and the Company, rather than issuing Shares, shall pay to the Optionee a cash amount equal to the product of (x) the number of Shares with respect to which the SAR is then deemed to be exercised, multiplied by (y) the excess of the Fair Market Value of a Share as of the day before the Date of Exercise over the applicable Option Price for such Share. (ii) Payment by the Company to the Optionee upon the exercise of an SAR shall be subject to the Company's or Affiliate's right to withhold in accordance with applicable law, any taxes required to be withheld under federal, state or local law as a result of the exercise of the SAR in accordance with Paragraph 14. (b) Following are the Shares subject to the Option that are subject to the conditions described in Paragraph 4(a): (i) 257 of the 100% Shares, 301 of the 110% Shares and 325 of the 115% Shares described in Paragraph 3(a)(i). (ii) 258 of the 100% Shares, 301 of the 110% Shares and 325 of the 115% Shares described in Paragraph 3(a)(ii). (iii) 257 of the 100% Shares, 302 of the 110% Shares and 325 of the 115% Shares described in Paragraph 3(a)(iii). (iv) 258 of the 100% Shares, 301 of the 110% Shares and 325 of the 115% Shares described in Paragraph 3(a)(iv). (v) 257 of the 100% Shares, 301 of the 110% Shares and 325 of the 115% Shares described in Paragraph 3(a)(v). 5. Payment for Shares. Full payment for Shares purchased upon the exercise of an Option shall be made in cash or, at the election of the Optionee and as the Committee may, in its sole discretion, approve, by surrendering Common Shares with an aggregate Fair Market Value equal to the aggregate Option Price, or by delivering such combination of Common Shares and cash as the Committee may, in its sole discretion, approve. 6. Manner of Exercise. The Option shall be exercised by giving written notice of exercise to: Brandywine Realty Trust 16 Campus Boulevard Suite 150 Newtown Square, PA 19073 Attention: Chief Financial Officer All notices under this agreement shall be deemed to have been given when hand-delivered, telecopied or mailed, first class postage prepaid, and shall be irrevocable once given. 7. Nontransferability of Option. The Option may not be transferred or assigned by the Optionee otherwise than as and to the extent permitted by Section 5(e) of the Plan; and any attempt at assignment or transfer contrary to the provisions of the Plan or the levy of any execution, attachment or similar process upon the Option shall be null and void and without effect. Any exercise of the Option by a person other than the Optionee shall be accompanied by appropriate proofs of the right of such person to exercise the Option. 8. Securities Laws. The Committee may from time to time impose any conditions on the exercise of the Option as it deems necessary or appropriate to comply with the then-existing requirements of the Securities Act of 1933, as amended, or of the Securities Exchange Act of 1934, as amended, including Rule 16b-3 (or any similar rule) of the Securities and Exchange Commission. If the listing, registration or qualification of Shares issuable on the exercise of the Option upon any securities exchange or under any federal or state law, or the consent or approval of any governmental regulatory body is necessary as a condition of or in connection with the purchase of such Shares, the Company shall not be obligated to issue or deliver the certificates representing the Shares otherwise issuable on the exercise of the Option unless and until such listing, registration, qualification, consent or approval shall have been effected or obtained. If registration is considered unnecessary by the Company or its counsel, the Company may cause a legend to be placed on such Shares calling attention to the fact that they have been acquired for investment and have not been registered. 9. Issuance of Certificate at Closing; Payment of Cash. Subject to the provisions of this Paragraph 9, the Closing Date shall occur as promptly as is feasible after the exercise of the Option. Subject to the provisions of Paragraphs 8 and 10 hereof, a certificate for the Shares issuable on the exercise of the Option shall be delivered to the Optionee or to his personal representative, heir or legatee at the Closing, provided that no certificates for Shares will be delivered to the Optionee or to his personal representative, heir or legatee unless the Option Price has been paid in full. 10. Rights Prior to Exercise. The Optionee shall not have any right as a shareholder with respect to any Shares subject to his Options until the Option shall have been exercised in accordance with the terms of the Plan and this Award and the Optionee shall have paid the full purchase price for the number of Shares in respect of which the Option was exercised, provided that in the event that the Optionee's employment with the Company is terminated for Cause, upon a determination by the Committee, the Optionee shall automatically forfeit all Shares otherwise subject to delivery upon exercise of an Option but for which the Company has not yet delivered the Share certificates, upon refund by the Company of the Option Price. 11. Status of Option; Interpretation. 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 Code. The Option is not intended to qualify as an incentive stock option within the meaning of section 422 of the Code. The interpretation and construction of any provision of this Option or the Plan made by the Committee shall be final and conclusive and, insofar as possible, shall be consistent with the intention expressed in this Paragraph 11. 12. Option Not to Affect Employment. The Option granted hereunder shall not confer upon the Optionee any right to continue in the employment of the Company or any Subsidiary. 13. Miscellaneous. (a) The address for the Optionee to which notice, demands and other communications to be given or delivered under or by reason of the provisions hereof shall be the address contained in the Company's personnel records. (b) This Award and all questions relating to its validity, interpretation, performance, and enforcement shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania. 14. Withholding of Taxes. Whenever the Company proposes or is required to deliver or transfer Shares in connection with the exercise of the Option, or in connection with the grant or payment upon the exercise of an SAR, 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 Shares or (b) take whatever action it deems necessary to protect its interests with respect to tax liabilities. IN WITNESS WHEREOF, the Company has granted this Award on the day and year first above written. BRANDYWINE REALTY TRUST BY: ______________________________ TITLE:____________________________ EX-21.1 14 SUBSIDIARIES OF THE COMPANY Exhibit 21.1 EXHIBIT D Subsidiaries of the Company Brandywine Operating Partnership, a Delaware limited partnership Witmer Operating Partnership I, L.P., a Delaware limited partnership Fifteen Horsham, L.P., a Pennsylvania limited partnership C/N Oaklands Limited Partnership I, a Pennsylvania limited partnership Newtech IV Limited Partnership, a Pennsylvania limited partnership Newtech III Limited Partnership, a Pennsylvania limited partnership LC/N Keith Valley Limited Partnership I, a Pennsylvania limited partnership LC/N Horsham Limited Partnership, a Pennsylvania limited partnership Nichols Lansdale Limited Partnership III, a Pennsylvania limited partnership C/N Leedom Limited Partnership II, a Pennsylvania limited partnership C/N Oaklands Limited Partnership III, a Pennsylvania limited partnership Iron Run Limited Partnership V, a Pennsylvania limited partnership C/N Iron Run Limited Partnership III, a Pennsylvania limited partnership Brandywine TB I, L.P., a Pennsylvania limited partnership Brandywine TB II, L.P., a Pennsylvania limited partnership Brandywine TB III, L.P., a Pennsylvania limited partnership Brandywine Dominion, L.P., a Pennsylvania limited partnership Brandywine P.M., L.P., a Pennsylvania limited partnership Brandywine I.S., L.P., a Pennsylvania limited partnership Brandywine F.C., L.P., a Pennsylvania limited partnership Brandywine Norriton, L.P., a Pennsylvania limited partnership Brandywine Realty Partners, a Pennsylvania general partnership Brandywine Holdings I, Inc., a Pennsylvania corporation Brandywine Holdings II, Inc., a Pennsylvania corporation Brandywine Holdings III, Inc., a Pennsylvania corporation Brandywine Realty Services Corporation, a Pennsylvania corporation Brandywine Main Street, LLC, a Delaware limited liability company Brandywine Acquisitions, LLC, a Delaware limited liability company 1100 Brandywine, LLC, a Delaware limited liability company Brandywine Leasing, LLC, a Delaware limited liability company Brandywine Trenton Urban Renewal, LLC, a Delaware limited liability company Brandywine New Brunswick Urban Renewal, LLC, a Delaware limited liability company Brandywine TB I, LLC, a Pennsylvania limited liability company Brandywine TB II, LLC, a Pennsylvania limited liability company Brandywine TB III, LLC, a Pennsylvania limited liability company Brandywine Witmer, LLC, a Pennsylvania limited liability company Brandywine Dominion, LLC, a Pennsylvania limited liability company Brandywine P.M., LLC, a Pennsylvania limited liability company Brandywine I.S., LLC, a Pennsylvania limited liability company Brandywine F.C., LLC, a Pennsylvania limited liability company Brandywine Norriton, LLC, a Pennsylvania limited liability company Christiana Center Operating Company I, LLC, a Delaware limited liability company Christiana Center Operating II, LLC, a Delaware limited liability company Four Tower Bridge Associates, a Pennsylvania limited partnership Five Tower Bridge Associates, a Pennsylvania limited partnership Plymouth Meeting General Partnership, a Pennsylvania general partnership 1000 Chesterbrook Boulevard Partnership, a Pennsylvania general partnership Interstate 202 General Partnership, a Pennsylvania general partnership EX-23.1 15 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 included in this Form 10-K, into the Company's previously filed Registration Statements on Forms S-3 (File No. 333-20999, File No. 333-39155 and File No. 333-46647) and Forms S-8 (File No. 333-14243 and File No. 333-28427). ARTHUR ANDERSEN LLP Philadelphia, PA March 30, 1998 EX-27 16 FINANCIAL DATA SCHEDULE
5 1,000 U.S. DOLLARS YEAR DEC-31-1997 JAN-01-1997 DEC-31-1997 1 29,442 0 3,689 0 0 33,343 586,414 22,857 621,481 17,612 163,964 0 0 241 425,287 621,481 0 61,060 0 45,772 0 0 7,079 14,502 0 14,502 0 0 0 14,502 0.96 0.95
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