-----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, FhIhZM4usQJrnrM1JDgEpAcbB05OyiFB2sadHj2qADQXAytSreCZk5Cm3zORIYqj YYUdnF3VMpmHfF+L3ps7Kw== 0000950116-99-000656.txt : 19990409 0000950116-99-000656.hdr.sgml : 19990409 ACCESSION NUMBER: 0000950116-99-000656 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 18 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990331 DATE AS OF CHANGE: 19990408 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BRANDYWINE REALTY TRUST CENTRAL INDEX KEY: 0000790816 STANDARD INDUSTRIAL CLASSIFICATION: 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: 99584329 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 FORM 10-K 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, 1998 ------------------------------------------------- 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 14 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. [X] The aggregate market value of the voting shares held by non-affiliates of the registrant was approximately $628.9 million as of March 15, 1999. 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 38,011,655 Common Shares of Beneficial Interest were outstanding as of March 15, 1999. Documents Incorporated By Reference None -2- TABLE OF CONTENTS FORM 10-K
Page ---- PART I...................................................................................................4 Item 1. Business.................................................................................4 Item 2. Properties..............................................................................18 Item 3. Legal Proceedings.......................................................................31 Item 4. Submission of Matters to a Vote of Security Holders.....................................32 PART II.................................................................................................32 Item 5. Market for Registrant's Common Equity and Related Shareholder Matters...................32 Item 6. Selected Financial Data.................................................................34 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations...34 Item 7A. Quantitative and Qualitative Disclosure About Market Risk...............................41 Item 8. Financial Statements and Supplementary Data.............................................41 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure....41 PART III................................................................................................41 Item 10. Trustees and Executive Officers of the Registrant.......................................41 Item 11. Executive Compensation..................................................................45 Item 12. Security Ownership of Certain Beneficial Owners and Management..........................51 Item 13. Certain Relationships and Related Transactions..........................................53 PART IV.................................................................................................56 Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.........................56
-3- PART I Item 1. Business General Brandywine Realty Trust (collectively with its subsidiaries, the "Company") is a self-administered and self-managed real estate investment trust ("REIT") active in acquiring, developing, redeveloping, leasing and managing office and industrial properties. As of December 31, 1998, the Company owned a portfolio of 201 office properties, 70 industrial facilities and one mixed use property (the "Properties") that contained an aggregate of approximately 18.8 million net rentable square feet. As of December 31, 1998, the Properties (excluding two properties under development or redevelopment) were approximately 93.6% leased to 1,357 tenants and had an average age of approximately 14.6 years. As of December 31, 1998, 183 of the 272 Properties (approximately 62.8% 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. As of December 31, 1998, 11 tenants individually represented more than 1.0% of the Company's annualized minimum rent, none of which represent 10%. The Company's 11 largest tenants accounted for approximately 20.8% of annualized minimum rent for the year ended December 31, 1998. As of December 31, 1998, the Company also owned or held options to purchase approximately 457.0 acres of land for future development. As of December 31, 1998, the Company owned economic interests, ranging from 35% to 65%, in nine office development joint ventures (the "Real Estate Ventures"). Three of the Real Estate Ventures own three suburban office buildings that contain an aggregate of approximately 323,000 net rentable square feet. Two other Real Estate Ventures are currently redeveloping or developing two suburban office buildings that are expected to contain an aggregate of approximately 243,000 net rentable square feet upon completion in 1999. As of December 31, 1998, the Real Estate Ventures also owned or held options to purchase approximately 46.8 acres of land for future development. As of December 31, 1998, the Company had invested or committed to invest a total of approximately $27.9 million in the Real Estate Ventures. The Company's business objectives are to: o maximize cash flow through leasing strategies designed to capture potential rental growth as rental rates increase and as below-market leases are renewed; o ensure a high tenant retention rate through an aggressive tenant services program responsive to the varying needs of the Company's diverse tenant base; o broaden its geographic and economic diversification while maximizing economies of scale; o acquire high-quality office and industrial properties and portfolios of such properties at attractive yields in selected submarkets within the Mid-Atlantic region (including Delaware, Maryland, New Jersey, New York, Pennsylvania, Virginia and the District of Columbia), which management expects will experience economic growth; o capitalize on management's redevelopment expertise to selectively acquire, redevelop and reposition underperforming properties in desirable locations; -4- o acquire 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; o enhance 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 o execute an investment strategy that effectively balances creating long-term growth opportunities with the Company's public market valuation. In pursuit of its business objectives, the Company has recently experienced rapid growth. Between January 1, 1997 and March 15, 1999, the Company acquired 168 office properties containing approximately 12.9 million net rentable square feet, 67 industrial facilities containing approximately 3.9 million net rentable square feet and one mixed use property containing approximately 167,760 net rentable square feet and, together with the Real Estate Ventures, acquired ownership of, or rights to acquire, approximately 503.8 acres of undeveloped land. The aggregate purchase price for the 236 Properties acquired by the Company between January 1, 1997 and March 15, 1999 was approximately $1.7 billion. During this period, the Company also sold one office property containing approximately 156,175 net rentable square feet for a net sales price of approximately $14.7 million. During such period, the Company also completed the development or redevelopment of three office properties and one industrial facility containing an aggregate of approximately 388,000 net rentable square feet for aggregate development costs, including the cost of acquiring land, of approximately $28.6 million. 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, utility availability, infrastructure limitations, development moratoriums and limited developable land) will create supply constraints on office and industrial space; (ii) current market rents and absorption statistics justify limited new construction activity; (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. The Company's executive offices are located at 14 Campus Boulevard, Suite 100, 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 Maryland real estate investment trust. 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, 1998, the Company's ownership interest in the Operating Partnership was approximately 88.5% and the Company was entitled to 94.6% of the Operating Partnership's income after distributions by the Operating Partnership to holders of its preferred units. The structure of the Company as an "UPREIT" is designed, in part, to permit persons 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." Equity Offerings Since January 1, 1998, the Company has consummated four underwritten public offerings pursuant to which the Company issued an aggregate of 13,267,741 Common Shares and raised aggregate net proceeds of approximately $301.0 million. The Company contributed the net proceeds from these offerings to the Operating Partnership. -5- 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. On April 21, 1998, the Company consummated an underwritten public offering of 625,000 Common Shares at a price to the public of $24.00 per share. Proceeds to the Company were used to repay indebtedness. In addition, both the Company and the Operating Partnership have issued their securities as part of the acquisition consideration for certain properties. On March 31, 1998, the Operating Partnership issued 153,036 Class A Units of limited partnership interest ("Class A Units"), which are redeemable for an equal number of Common Shares, to acquire a portfolio of six office and industrial properties. On May 8, 1998, the Operating Partnership issued 390,364 Class A Units to acquire a portfolio of 11 office and industrial properties. On September 29, 1998, the Operating Partnership issued 1,550,000 Series B Preferred Units of limited partnership interest ("Series B Preferred Units") and the Company issued 750,000 Series A Preferred Shares to acquire a portfolio of 67 office and industrial properties. On October 6, 1998, the Operating Partnership issued 1,127,895 Class A Units to acquire a portfolio of 26 office and industrial properties. On December 31, 1998, the Operating Partnership issued 83,468 Class A Units to acquire an office property. Credit Facility At December 31, 1997, the Company maintained a $150.0 million secured credit facility (the "1997 Credit Facility") which bore interest at LIBOR plus 175 basis points. During the first quarter of 1998, the Company replaced the 1997 Credit Facility with a $330.0 million unsecured credit facility (the "1998 Credit Facility"). The 1998 Credit Facility bore interest 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 based on the Company's leverage and debt rate. Alternatively, the Company could have borrowed funds at a base rate equal to the higher of the Prime Rate and Fed Funds Rate plus 50 basis points. During the third quarter of 1998, the Company replaced the 1998 Credit Facility with a new $550.0 million credit facility (the "New 1998 Credit Facility") from NationsBank, N.A. The New 1998 Credit Facility is currently unsecured, but can convert to a secured borrowing if certain leverage requirements are not met by March 31, 1999. The interest rate borne by the New 1998 Credit Facility was LIBOR plus 150 basis points initially, with the spread over LIBOR subject to reductions between 12.5 to -6- 35 basis points and a possible increase of 25 basis points based on the Company's leverage. The spread over LIBOR may also be reduced to either 115 or 100 basis points depending upon the Company's long-term debt rating. The New 1998 Credit Facility matures in September 2001 and requires the Company to maintain ongoing compliance with a number of customary financial and operational covenants including leverage ratios and debt service coverage ratios, limitations on liens and distributions and a minimum net worth requirement. On December 31, 1998, there was approximately $531.3 million of indebtedness outstanding under the New 1998 Credit Facility. Additional Facility During the second quarter of 1998, the Company entered into a $150.0 million unsecured credit facility (the "Additional Facility") to facilitate certain property acquisitions. The Additional Facility bore interest at LIBOR plus 150 basis points or, at the Company's option, the Prime Rate plus 25 basis points. During the third quarter of 1998, the Company replaced the Additional Facility with a new $150.0 million unsecured credit facility (the "New Additional Facility") from NationsBanc Mortgage Capital Corp. The New Additional Facility bore interest at LIBOR plus 200 basis points and was scheduled to mature on March 31, 1999. On December 31, 1998, there was approximately $150.0 million of indebtedness outstanding under the New Additional Facility. During the first quarter of 1999, the Company repaid all amounts outstanding under the New Additional Facility. The Company funded its repayment with a portion of the proceeds of a $119.0 million mortgage loan secured by four properties and a $75.0 million mortgage loan secured by five properties. Mortgage and Certain Other Debt Mortgage and Certain Other Indebtedness. The following table sets forth the Company's mortgage and certain other indebtedness outstanding at December 31, 1998. -7- Property -- Indebtedness
Principal Balance as of Interest Annual December 31, Rate as of Debt 1998 December 31, Service Maturity Prepayment Property / Location (in 000's) 1998 (in 000's)(a) Date Premiums - - ------------------------------------------------------- ------------ ------------ ------------- --------------- ---------- Newtown Square, PA Lots 7, 8 and 9 of Newtown Square Business Campus 819 9.00% 862 2/99 (b) None Lot 13 of Newtown Square Business Campus 5,323 7.07% (c) 6/99 N/A Allentown, PA 7310 Tilghman Street 2,478 9.25% 257 3/00 (d) Reading, PA Green Hills (undeveloped land) 1,000 5.00% 565 8/99 to 8/00 None Marlton, NJ One - Three Greentree Centre (e) 6,964 7.56% 708 1/02 (f) Cherry Hill, NJ 457 Haddonfield Road 8,148 8.00% 814 1/99 (g) (h) Fit up (i) 805 9.25% 74 1/99 (g) None One South Union Place 8,092 6.94% 0 6/99 N/A Mt. Laurel, NJ 1120 Executive Plaza 5,665 9.88% 832 3/02 (j) 1000 Howard Boulevard 5,505 9.25% 803 11/04 (k) Raleigh, NC 5910 - 6090 Six Forks 2,593 7.56% 264 1/02 (l) East Norriton, PA Norriton Office Center 5,625 8.50% 523 10/07 (m) Lawrenceville, NJ 1009 Lenox Drive 15,342 8.75% 1,492 7/03 None Horsham, PA 655 and 755 Business Center Drive 5,862 7.07% 0 6/99 N/A Grande A (n) 72,599 7.48% 1,860 7/27 (o) Grande A (n) 30,000 6.21% 474 7/27 (p) Grande A (n) 20,000 6.04% 309 7/27 (q) Grande B (r) 86,869 7.48% 1,860 7/27 (s) Richmond, Va Arboretum I, II, III & V (t) 25,800 8.00% 516 1/01 Interstate Center 5,700 6.88% 98 3/99 None Interstate Center 1,740 6.40% 55 4/07 None Bucks County, PA Greenwood Square I, II, III (u) 1,221 8.00% 83 12/99 None Camp Hill, PA Corporate Center Drive (v) 1,085 8.00% 48 6/01 None -------- ------- Total Mortgage and Certain Other Indebtedness $319,235 $12,497 ======== =======
(a) "Annual Debt Service" is calculated by annualizing the normal principal and interest amortization. For loans that bear interest at a variable rate, the rates in effect at December 31, 1998 have been assumed to remain constant. Loans with zero Annual Debt Service represent construction loans having no principal or monthly interest payments. (b) As of the date of this Form 10-K, this loan has been repaid in full. (c) Construction loan with no monthly interest or principal payments, all of which becomes due at maturity. (d) Two percent through December 31, 1998, which prepayment penalty is reduced by 1% in 1999. (e) All of these properties secure a single loan. (f) This loan may not be prepaid unless the 5910-6090 Six Forks loan is also prepaid. The prepayment penalty equals the greater of 1% of the principal amount prepaid or a yield maintenance premium. (g) Subsequent to December 31, 1998, these loans have been extended until January 1, 2001 with a floating rate of prime or LIBOR plus 225 basis points. -8- (h) One percent of the amount of the loan prepaid. (i) 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. (j) No payment is permitted until November, 1999, at which time this loan may be prepaid in full (but not in part) along with a penalty equal to the greater of 1% of the principal amount prepaid or a yield maintenance premium. (k) No prepayment is permitted unit March 1999, at which time this loan may be prepaid in full (but not in part) along with a penalty equal to the greater of 1% of the principal amount prepaid or a yield maintenance premium. (l) This loan may be prepaid without prepayment of the loan secured by One-Three Greentree Centre, provided certain loan-to-value ratios and coverage tests with regard to the One-Three Greentree Centre loan are satisfied and upon payment of a premium equal to the greater of 1% of the principal amount prepaid or a yield maintenance premium. (m) No prepayment is permitted until September, 2000, at which time this loan may be prepaid in full together with a yield maintenance premium based upon treasury rates. (n) Consists of 35 Properties, at various locations, acquired on September 28, 1998. (o) No prepayment is permitted until July 11, 2007, at which time this loan may be prepaid in full without penalty. (p) Two percent through July 1999, which prepayment penalty is reduced to 1% through July 2000. After July 2000, there is no prepayment penalty. (q) Two percent through July 1999, which prepayment penalty is reduced to 1% through July 2000. After July 2000, there is no prepayment penalty. (r) Consists of 25 Properties, at various locations, acquired on September 28, 1998. (s) No prepayment is permitted until July 11, 2007, at which time this loan may be prepaid in full without penalty. (t) The Company purchased these properties on September 28, 1998, and received the economic benefits and liabilities of such properties from September 29, 1998, although transfer of title did not occur until March 11, 1999. (u) 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: the first installment of $2.5 million was paid on June 30, 1998; the second installment of $1.3 million is payable 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 interest expense to the date of maturity. (v) The Company incurred unsecured debt in the principal amount of $1.3 million on May 8, 1998 in connection with its acquisition of a property portfolio. The debt is payable in full on June 30, 2001. The Company recorded a $255,000 adjustment to the purchase price and a corresponding reduction in debt to reflect the fair value of the note payable to the seller and will accrue interest expense to the date of maturity. Guaranty. As of March 15, 1999, the Company had guaranteed repayment of an $18.7 million construction loan made to a Real Estate Venture (a portion of which guaranty was in the form of a commitment by the Company to contribute approximately $6.4 million in equity to the Real Estate Venture). -9- 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, 1998, the Management Company was managing properties containing an aggregate of approximately 17.1 million net rentable square feet, of which approximately 16.9 million net rentable square feet related to Properties then owned by the Company or subject to purchase options held by the Company, and approximately 258,695 net rentable square feet related to properties owned by unaffiliated third parties. Through its indirect 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. Because certain executive officers of the Company indirectly own 95% of the voting common stock of the Management Company, the Company does not control the timing or amount of distributions by, or the management and operations of, the Management Company. The Management Company has made no distributions to any executive officers of the Company since its inception. 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. Employees As of December 31, 1998, the Company employed 198 persons, including executive officers. Risk Factors An investment in the Company involves various risks. Our actual results may differ significantly from those expressed or implied by forward-looking statements made by us or on our behalf. These statements are identified by words such as "expect," "anticipate," "should," "pro forma" and words of similar import. Factors that might cause such a difference include the various risks stated below that we believe are material to investors who purchase or own our securities. Prospective investors should carefully consider the following risk factors together with the other reports and documents we file with the Securities and Exchange Commission, which may include additional or more current relevant information. o There can be no assurance that we will effectively manage our rapid growth We have been growing rapidly. Since August 1, 1996, we have acquired or developed 268 of the 272 Properties owned by us on December 31, 1998. We have managed this growth by applying our experience to newly acquired properties and we expect continued success in that effort. No assurances can be given, however, that we will succeed in our integration efforts or that newly acquired properties will perform as we expect. o We depend on the performance of our primary markets, and changes in such markets may adversely affect our financial condition -10- Most of our Properties are currently located in suburban markets in Pennsylvania, New Jersey, New York, Virginia and Delaware. Like other real estate markets, these commercial real estate markets have experienced economic downturns in the past, and future declines in any of these real estate markets could adversely affect our operations or cash flow and ability to make distributions to shareholders. Our financial performance will be particularly sensitive to the economic conditions in these markets. Our revenues and the value of our Properties may be adversely affected by a number of factors, including the economic climate in these markets (which may be adversely impacted by business layoffs, industry slowdowns, changing demographics and other factors) and real estate conditions in these markets (such as oversupply of or reduced demand for office and industrial properties). These factors, when and if they occur in the area in which our Properties are located, would adversely affect our cash flow and ability to make distributions to shareholders. o Our ability to make distributions is subject to various risks We pay regular distributions to our shareholders. Our ability to make distributions in the future will depend upon: o the performance of our Properties; o expenditures with respect to existing and newly acquired properties; o the amount of, and the interest rates on, our debt; o the absence of significant expenditures relating to environmental and other regulatory matters; and o future sales of securities. Certain of these matters are beyond our control and any significant difference between our expectations and actual results could have a material adverse effect on our cash flow and our ability to make or sustain distributions to shareholders. o We may be unable to renew leases or relet space as leases expire If our tenants fail to renew their leases upon expiration, we may be unable to relet the subject space. Even if the tenants do renew their leases or we can relet the space, the terms of renewal or reletting (including the cost of required renovations) may be less favorable than current lease terms. Certain leases grant the tenants an early termination right upon payment of a termination penalty. While we have estimated the necessary expenditures for new and renewal leases for 1999 and 2000, no assurances can be given as to the accuracy of such estimates. o Financially distressed tenants may limit our ability to realize the value of our investments Following a tenant's lease default, we may experience delays in enforcing our rights as a landlord and may incur substantial costs in protecting our investment. In addition, a tenant may seek bankruptcy law protection which could relieve the tenant from its obligation to make lease payments. o We face significant competition from other real estate developers We compete with a number of real estate developers, operators and institutions for tenants and acquisition opportunities. Some of these competitors have significantly greater resources than we do. No assurances can be given that this competition will not adversely affect our cash flow and ability to make distributions to shareholders. -11- o Because real estate is illiquid, we may not be able to sell properties when appropriate Real estate investments generally cannot be sold quickly. We may not be able to vary our portfolio promptly in response to economic or other conditions. In addition, the Internal Revenue Code of 1986 (the "Code") limits our ability to sell properties held for fewer than four years. Purchase options and rights of first refusal held by certain tenants may also limit our ability to sell certain properties. Any of these factors could adversely affect our cash flow and ability to make distributions to shareholders as well as the ability of someone to purchase us, even if a purchase were in our shareholders' best interests. o We have agreed not to sell certain of our properties We have agreed with the sellers of certain of our properties not to sell certain properties for varying periods of time in any transaction that would trigger taxable income, subject to certain exceptions. Some of these agreements are with current trustees of our company. In addition, we may enter into similar agreements with future sellers of properties. These agreements generally provide that we may dispose of the applicable properties in transactions that qualify as tax-free exchanges under Section 1031 of the Code. Therefore, without suffering adverse tax consequences, we may be precluded from selling certain properties other than in transactions that would qualify as tax-free exchanges for federal income tax purposes. o Changes in the law may adversely affect our cash flow Because increases in income and service taxes are generally not passed through to tenants under leases, such increases may adversely affect our cash flow and ability to make expected distributions to shareholders. The Properties are also subject to various regulatory requirements, such as those relating to fire and safety. Our failure to comply with these requirements could result in the imposition of fines and damage awards. While we believe that the Properties are currently in material compliance with all such requirements, there can be no assurance that these requirements will not change or that newly imposed requirements will not require significant unanticipated expenditures. o By holding properties through the Operating Partnership and various joint ventures, we are exposed to certain additional risks We own our Properties and our interests in our real estate ventures through the Operating Partnership. In the future, we expect to continue to participate with other entities in property ownership through joint ventures or partnerships. Partnership or joint venture investments may, under certain circumstances, involve risks not otherwise present in direct investments. Such risks include: o the potential bankruptcy of our partners or co-venturers; o a conflict between our business goals and those of our partners or co-venturers; and o actions taken by our partners or co-venturers contrary to our instructions or objectives, including our policy of maintaining the Company's REIT qualification. We will, however, seek to maintain sufficient control of such partnerships and joint ventures to enable us to achieve our business objectives. Investors should be aware that there is no limitation under our organizational documents as to the amount of funds which we may invest in partnerships or joint ventures. -12- o Future acquisitions may fail to perform in accordance with our expectations and may require development and renovation costs exceeding our estimates We intend to continue operating as a full service, integrated real estate company. These efforts may, under appropriate circumstances, result in the Company acquiring office and industrial properties. Changing market conditions, however, including competition from others, may diminish our opportunities for making attractive acquisitions. Once made, our investments may fail to perform in accordance with our expectations. The estimated renovation and improvement costs incurred in bringing an acquired property up to market standards may exceed our estimates. We anticipate financing future acquisitions and renovations through a combination of advances under lines of credit and other forms of secured or unsecured financing. If new developments are financed through construction loans, there is a risk that, upon completion of construction, permanent financing for newly developed properties may not be available or may be available only on disadvantageous terms. In addition, we periodically develop, redevelop and construct office buildings and other commercial properties. Risks associated with these development, redevelopment and construction activities include: o the unavailability of favorable financing; o the abandonment of such activities prior to completion; o construction costs exceeding original estimates; o construction and lease-up delays resulting in increased debt service and construction costs; and o insufficient occupancy rates and rents at a newly completed property causing a property to be unprofitable. o Our indebtedness subjects us to additional risks Debt Financing and Existing Debt Maturities. We are subject to risks normally associated with debt financing, such as the insufficiency of cash flow to meet required payment obligations and the inability to refinance existing indebtedness. If our debt cannot be paid, refinanced or extended at maturity, in addition to our failure to repay our debt, we may not be able to make distributions to shareholders at expected levels or at all. Furthermore, if any refinancing is done at higher interest rates, the increased interest expense could adversely affect our cash flow and ability to make distributions to shareholders. If we do not meet our mortgage financing obligations, any properties securing such indebtedness could be foreclosed on, which would have a material adverse effect on our cash flow and ability to make distributions and, depending on the number of properties foreclosed on, could threaten our continued viability. Risk of Rising Interest Rates and Variable Rate Debt. Increases in interest rates on variable rate indebtedness would increase our interest expense, which could adversely affect our cash flow and ability to make distributions to shareholders. No Limitation on Debt. Our organizational documents do not contain any limitation on the Company's debt-to-total market capitalization ratio. Accordingly, we could increase our leverage without restriction. The increased debt service could adversely affect our cash flow and ability to make distributions and could increase the risk of default on our indebtedness. -13- o Our status as a REIT is dependent on compliance with federal income tax requirements Our failure to qualify as a REIT would have serious adverse consequences to our shareholders. We believe that since 1986, we have qualified for taxation as a REIT for federal income tax purposes. We plan to continue to meet the requirements for taxation as a REIT. Many of these requirements, however, are highly technical and complex. The determination that we are a REIT requires an analysis of various factual matters and circumstances that may not be totally within our control. For example, to qualify as a REIT, at least 95% of our gross income must come from certain sources that are itemized in the REIT tax laws. We are also required to distribute to shareholders at least 95% of our REIT taxable income (excluding capital gains). The fact that we hold our assets through the Operating Partnership and its subsidiaries further complicates the application of the REIT requirements. Even a technical or inadvertent mistake could jeopardize our REIT status. Furthermore, Congress and the IRS might change the tax laws and regulations, and the courts might issue new rulings that make it more difficult, or impossible, for the Company to remain qualified as a REIT. We do not believe, however, that any pending or proposed tax law changes would jeopardize our REIT status. To maintain REIT status, a REIT may not own more than 10% of the voting stock of any corporation, except for a qualified REIT subsidiary (which must be wholly-owned by the REIT) or another REIT. In order to comply with this rule, the Operating Partnership owns 5% of the voting common stock and all of the non-voting preferred stock of the Management Company. The Internal Revenue Service ("IRS"), however, could contend that the Operating Partnership's ownership of all of the non-voting preferred stock of the Management Company should be viewed as voting stock because of the Operating Partnership's substantial economic position in the Management Company. If successful in such a contention, the Company's status as a REIT would be lost and the Company would be subject to the consequences summarized below. Arthur Andersen LLP, special tax advisor to the Company, has given us an opinion to the effect that, beginning with our taxable year ended December 31, 1986, we have been organized and have operated in conformity with the requirements for qualification and taxation as a REIT under the Code for each of our taxable years and that our current method of organization and operation will enable us to continue to so qualify. The opinion of Arthur Andersen LLP is based on assumptions and factual representations made by us regarding our ability to meet the requirements for qualification as a REIT. Such opinion is not binding on the IRS or any court. Moreover, Arthur Andersen LLP does not review or monitor our compliance with the requirements for REIT qualification on an ongoing basis. We cannot guarantee that we will be qualified and taxed as a REIT, because our qualification and taxation as a REIT will depend upon our ability to meet, on an ongoing basis, the requirements imposed under the Code. If we fail to qualify as a REIT, we would be subject to federal income tax at regular corporate rates. Also, unless the IRS granted us relief under certain statutory provisions, we would remain disqualified as a REIT for four years following the year we first failed to qualify. If we failed to qualify as a REIT, we would have to pay significant income taxes and would therefore have less money available for investments or for distributions to shareholders. This would likely have a significant adverse affect of the value of our securities. In addition, we would no longer be required to make any distributions to shareholders. In order to make the distributions required to maintain our REIT status, we may need to borrow funds. To obtain the favorable tax treatment associated with REIT qualification, we generally will be required to distribute to shareholders at least 95% of our annual REIT taxable income (excluding net capital gain). In addition, we will be subject to tax on our undistributed net taxable income and net capital gain and a 4% nondeductible excise tax on the amount, if any, by which certain distributions paid by us with respect to any calendar year are less than the sum of 85% of our ordinary income plus 95% of our capital gain net income for the calendar year, plus certain undistributed amounts from prior years. -14- We intend to make distributions to shareholders to comply with the distribution provisions of the Code and to avoid income and other taxes. Our income will consist primarily of our share of the income of the Operating Partnership and our cash flow will consist primarily of our share of distributions from the Operating Partnership. Differences in timing between the receipt of income and the payment of expenses in arriving at taxable income (of the Company or the Operating Partnership) and the effect of required debt amortization payments could require us to borrow funds on a short-term basis or liquidate funds on adverse terms to meet the REIT qualification distribution requirements. The failure of the Operating Partnership (or a subsidiary partnership) to be treated as a partnership would have serious adverse consequences to our shareholders. If the IRS were to successfully challenge the tax status of the Operating Partnership or any of its subsidiary partnerships for federal income tax purposes, the Operating Partnership or the affected subsidiary partnership would be taxable as a corporation. In such event, we would cease to qualify as a REIT and the imposition of a corporate tax on the Operating Partnership or a subsidiary partnership would reduce the amount of cash available for distribution from such partnership to us and our shareholders. We do pay some taxes. Even if we qualify as a REIT, we are required to pay certain federal, state and local taxes on our income and property. In addition, the Management Company is subject to federal, state and local income tax at regular corporate rates on its net taxable income derived from its management, leasing and related service business. If we have net income from a prohibited transaction, such income will be subject to a 100% tax. We own a subsidiary REIT. One of our subsidiaries, Atlantic American Properties Trust ("AAPT"), that indirectly holds approximately 35 of the Properties, elected to be taxed as a REIT for the year ended December 31, 1997. So long as we seek to maintain AAPT's REIT status, AAPT will be subject to all the requirements and risks associated with maintaining REIT status summarized above, including the limitation on the ownership of more than 10% of the voting securities of any corporation (other than a qualified REIT subsidiary or another REIT). AAPT indirectly owns non-voting common stock issued by a corporation which is neither a qualified REIT subsidiary nor a REIT. o Environmental problems are possible and may be costly Federal, state and local laws, ordinances and regulations may require a current or previous owner or operator of real estate to investigate and clean up hazardous or toxic substances or releases at such property. The owner or operator may be forced to pay for property damage and for investigation and clean-up costs incurred by others in connection with environmental contamination. Such laws typically impose clean-up responsibility and liability without regard to whether the owner or operator knew of or caused the presence of the contaminants. Even if more than one person may have been responsible for the contamination, each person covered by the environmental laws may be held responsible for all of the clean-up costs incurred. In addition, third parties may sue the owner or operator of a site for damages and costs resulting from environmental contamination emanating from that site. These costs may be substantial and the presence of such substances may adversely affect the owner's ability to sell or rent such property or to borrow using such property as collateral. Independent environmental consultants have conducted a standard Phase I or similar general environmental site assessment ("ESA") of each of our Properties to identify potential sources of environmental contamination and assess environmental regulatory compliance. For a number of the Properties, the Phase I ESA either referenced a prior Phase II ESA obtained on such Property or prompted us to have a Phase II ESA of such Property conducted. A Phase II ESA generally involves invasive procedures, such as soil sampling and testing or the installation and monitoring of groundwater wells. While the ESAs conducted have identified environmental contamination on a few of the Properties, they have not revealed any environmental contamination, liability or compliance concern that we believe would have a material adverse effect on our cash flow or ability to make distributions to shareholders. -15- It is possible that the existing ESAs relating to the Properties do not reveal all environmental contaminations, liabilities or compliance concerns which currently exist. In addition, future properties which we acquire may be subject to environmental conditions. o Some potential losses are not covered by insurance We carry comprehensive liability, fire, extended coverage and rental loss insurance on all of our Properties. We believe the policy specifications and insured limits of these policies are adequate and appropriate. There are, however, certain types of losses, such as lease and other contract claims that generally are not insured. Should an uninsured loss or a loss in excess of insured limits occur, we could lose all or a portion of the capital we have invested in a property, as well as the anticipated future revenue from the property. In such an event, we might nevertheless remain obligated for any mortgage debt or other financial obligations related to the property. o We do not control the Management Company While we own substantially all (95%) of the economic interest in the Management Company, to maintain our REIT qualification, certain of the executive officers of the Company indirectly hold 95% of the voting common stock of the Management Company. Therefore, we do not control the timing or amount of distributions by, or the management and operation of, the Management Company. As a result, decisions relating to the payment of distributions by, and the business policies and operations of, the Management Company could be adverse to our interests. o We are dependent upon our key personnel We are dependent upon the efforts of our executive officers, particularly Anthony A. Nichols, Sr. and Gerard H. Sweeney. The loss of their services could have an adverse affect on our operations. Although we have employment agreements with Messrs. Nichols and Sweeney, such agreements do not restrict their ability to become employed by a competitor following the termination of their employment with us. o Certain limitations exist with respect to a third party's ability to acquire us or effectuate a change in control Limitations imposed to protect our REIT status. In order to protect us against loss of our REIT status, our Declaration of Trust limits any shareholder from owning more than 9.8% in value of our outstanding shares, subject to certain exceptions. If you or anyone else acquires shares in excess of the ownership limit, we may: o consider the transfer to be null and void; o not reflect the transaction on our books; o institute legal action to stop the transaction; o not pay dividends or other distributions with respect to those shares; o not recognize any voting rights for those shares; and o consider the shares held in trust for the benefit of a person to whom such shares may be transferred. Limitation due to our ability to issue preferred shares. Our Declaration of Trust authorizes the Board of Trustees to issue preferred shares. The Board of Trustees may establish the preferences and rights -16- of any preferred shares issued which could have the effect of delaying or preventing someone from taking control of us, even if a change in control were in our shareholders' best interests. Limitations imposed by the Business Combination Law. The Maryland General Corporation Law (the "MGCL"), as applicable to Maryland real estate investment trusts, establishes special restrictions against "business combinations" between a Maryland real estate investment trust and "interested shareholders" or their affiliates unless an exemption is applicable. An interested shareholder includes a person who beneficially owns, and an affiliate or associate of the trust who, at any time within the two-year period prior to the date in question, was the beneficial owner of, ten percent or more of the voting power of our then-outstanding voting shares. Among other things, the law prohibits (for a period of five years) a merger and certain other transactions between the trust and an interested shareholder unless the board of trustees approved the transaction before the party became an interested shareholder. The five-year period runs from the most recent date on which the interested shareholder became an interested shareholder. Thereafter, any such business combination must be recommended by the board of trustees and approved by two super-majority shareholder votes unless, among other conditions, the trust's common shareholders receive a minimum price for their shares and the consideration is received in cash or in the same form as previously paid by the interested shareholder for its shares or unless the board of trustees approved the transaction before the party in question became an interested shareholder. The business combination statute could have the effect of discouraging offers to acquire us and of increasing the difficulty of consummating any such offers, even if our acquisition would be in our shareholders' best interests. We have exempted any business combination involving Safeguard Scientific, Inc. ("SSI"), The Nichols Company ("TNC"), the Commonwealth of Pennsylvania State Employees' Retirement System ("SERS") and a voting trust established for its benefit (the "SERS Voting Trust"), Morgan Stanley Asset Management Inc. and two funds (the "Morgan Stanley Funds") managed by it, Lazard Freres Real Estate Investors, L.L.C. ("Lazard"), Gerard H. Sweeney (the Company's President and Chief Executive Officer) and any of their respective affiliates or associates. Limitations imposed by the Maryland Control Share Statute. The Maryland General Corporation Law provides that "control shares" of a Maryland real estate investment trust acquired in a "control share acquisition" have no voting rights except to the extent approved by a vote of two-thirds of the votes entitled to be cast on the matter, excluding shares of beneficial interest owned by the acquiror, by officers or by trustees who are employees of the trust. If voting rights are not approved at a meeting of shareholders or if the acquiring person does not deliver an acquiring person statement as required by the statute, then, subject to certain conditions and limitations, the trust may redeem any or all of the control shares (except those for which voting rights have previously been approved) for fair value. If voting rights for control shares are approved at a shareholders meeting and the acquiror becomes entitled to vote a majority of the shares entitled to vote, all other shareholders may exercise appraisal rights. The control share statute could have the effect of discouraging offers to acquire us and of increasing the difficulty of consummating any such offers, even if our acquisition would be in our shareholders' best interests. We have exempted acquisitions by SSI, TNC, SERS, the SERS Voting Trust, Morgan Stanley Asset Management Inc., the Morgan Stanley Funds and any current or future affiliates or associates of theirs from the control shares statute. As a result, these entities will be able to possess voting power not generally available to other persons. o The issuance of preferred shares may adversely affect the rights of holders of Common Shares Because the Board of Trustees has the power to establish the preferences and rights of each class or series of preferred shares, it may afford the holders in any series or class of preferred shares preferences, distributions, powers and rights, voting or otherwise, senior to the rights of holders of Common Shares. -17- Item 2. Properties Properties As of December 31, 1998, the Company owned a portfolio of 201 office properties, 70 industrial facilities and one mixed-use property that contained an aggregate of approximately 18.8 million net rentable square feet. As of December 31, 1998, 183 of the Properties (approximately 62.8% of the Company's portfolio based on net rentable square feet) were located in the Suburban Philadelphia Office and Industrial Market. As of December 31, 1998, the Properties (excluding two Properties under development or redevelopment) were approximately 93.6% leased to 1,357 tenants. The office Properties are primarily one to three story suburban office buildings containing an average of approximately 72,000 net rentable square feet. The industrial Properties accommodate a variety of tenant uses including light manufacturing, assembly, distribution and warehousing. 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. -18- The following table sets forth certain information with respect to the Properties at December 31, 1998:
Net Percentage Rentable Leased as of Year Square December Property Name Location State Built Feet 31, 1998 (a) - - ---------------------------------- --------- ----- ------ -------- ------------ 600 East Main Street Richmond VA 1986 423,062 63.2% 100-300 Gundy Drive Reading PA 1970 416,830 99.9% 301 North Walnut Street Wilmington DE 1989 321,511 100.0% 201 North Walnut Street Wilmington DE 1988 311,286 100.0% 50 East State Street Trenton NJ 1989 305,699 93.6% Park 80 West Plaza II Saddlebrook NJ 1988 266,173 87.5% Park 80 West Plaza I Saddlebrook NJ 1970 217,016 98.8% Arboretum III Richmond VA 1988 214,282 98.6% Masons Mill Bryn Mawr PA 1984 211,753 48.5% Bowman Plains Industrial Park Frederick MD 1998 208,774 100.0% 1970 Chainbridge Road Vienna VA 1982 203,084 100.0% 1009 Lenox Drive Lawrenceville NJ 1989 183,342 94.6% 256-263 Chapman Road (d) Newark DE 1983 181,607 90.4% 1200 Highland Drive Westhampton NJ 1998 181,127 44.0% 10000 Midlantic Drive Mt. Laurel NJ 1990 175,573 95.8% 300 Corporate Center Drive Camp Hill PA 1989 175,289 100.0% 111 Presidential Boulevard Bala Cynwyd PA 1997 173,079 89.9% 1880 Campus Commons Drive Reston VA 1985 172,448 100.0% 33 West State Street Trenton NJ 1988 168,216 99.7% Philadelphia Marine Center (g) Philadelphia PA Various 167,760 100.0% 3329 Street Road -Greenwood Square Bensalem PA 1985 165,929 99.4% 3331 Street Road -Greenwood Square Bensalem PA 1986 - (e) - 3333 Street Road -Greenwood Square Bensalem PA 1988 - (e) - Main Street - Plaza 1000 Voorhees NJ 1988 162,364 99.7% 751-761 Fifth Avenue King Of Prussia PA 1967 158,000 100.0% 7055 Ambassador Drive Allentown PA 1991 153,600 100.0% 1510 Gehman Road Lansdale PA 1990 152,625 100.0% Greenwood Center Fairfax VA 1985 150,358 99.1% 55 U.S. Avenue Gibbsboro NJ 1982 138,700 59.1% 100 Katchel Blvd Reading PA 1970 133,424 98.2% 2511 Brittons Hill Road Richmond VA 1987 132,103 90.4% 640 Freedom Business Center (g) King Of Prussia PA 1991 132,000 100.0% 52 Swedesford Square East Whiteland Twp. PA 1988 131,017 100.0% 1760 Market Square Philadelphia PA 1981 130,416 91.4% Oakwood Center Fairfax VA 1985 128,383 99.4% 7535 Windsor Drive Allentown PA 1988 128,351 98.1% 500 Highland Drive Westhampton NJ 1990 127,340 100.0% 2100-2108 West Laburnam Richmond VA 1976 127,327 82.4% 300 Highland Drive Westhampton NJ 1990 126,905 100.0%
(RESTUBBED TABLE)
Average Tenants Leasing 10% Total Base Rent Annualized or More of Rentable for the Twelve Rental Rate Square Footage per Months Ended as of Property as of December 31, December December 31, 1998 and Property Name 1998 (b) (000's) 31, 1998 (c) Lease Expiration Date - - -------------------------------------- ---------------- ------------ ---------------------------------------------------- 600 East Main Street 1,869 23.79 Bell Atlantic VA (20%) - 11/03 Nations Bank (19%) - 6/00 100-300 Gundy Drive 6,376 15.04 Parsons Corporation (48%) - 3/5 Penske Truck Leasing (32%) - 12/05 301 North Walnut Street 3,568 17.00 Beneficial Corporation (76%) - 12/10 First USA Bank (17%) - 6/10 201 North Walnut Street 4,160 18.88 First USA Bank (88%) - 1/12 50 East State Street 3,848 22.27 State of N.J. Dept. of Human Services (73%) - 9/09 Park 80 West Plaza II 5,209 22.68 Vornado Realty Trust (12%) - 4/02 Lexington Management Corp. (10%) - 8/03 Park 80 West Plaza I 4,276 22.03 New York Life Insurance Co. (12%) - 10/04 Arboretum III 869 15.68 The Travelers (61%) - 1/00 & 1/04 Masons Mill 507 14.37 Bowman Plains Industrial Park 94 5.50 GE Capital, Inc. (100%) - 12/07 1970 Chainbridge Road 1,097 22.58 GRC International (82%) - 5/09 1009 Lenox Drive 2,417 22.68 N.J. State Medical Underwriters (15%) - 5/01 Uniform Code Council, Inc. (11%) - 10/08 256-263 Chapman Road (d) 2,127 13.44 Delaware Dept. of Admin Services (28%) - 10/99 - 9/02 1200 Highland Drive 64 3.95 International Paper (44%) - 10/08 10000 Midlantic Drive 2,535 21.29 QAD, Inc. (37%) - 8/01 Deutsche Financial Services (13%) - 1/00 300 Corporate Center Drive 2,069 18.22 International Business Machines (83%) - 8/99 Medical Services Associates (17%) - 5/99 111 Presidential Boulevard 3,770 24.58 American Business Financial (36%) - 7/03 1880 Campus Commons Drive 594 13.25 Bell Atlantic Video Systems (100%) - 4/01 33 West State Street 2,236 25.07 The State of New Jersey (95%) - 7/00 & 8/08 Philadelphia Marine Center (g) 220 4.35 Dave & Busters of Pennsylvania, Inc. (88%) - 2/14 Meiji-En Restaurant (11%) - 12/00 3329 Street Road -Greenwood Square 2,561 16.77 Nextell Communications (18%) - 7/02 3331 Street Road -Greenwood Square (e) (e) FPA Corporation (10%) - 12/01 3333 Street Road -Greenwood Square (e) (e) Main Street - Plaza 1000 2,814 18.45 Credit Lenders (13%) - 12/01 Dean Witter (11%) - 9/04 AMC (10%) - 12/99 751-761 Fifth Avenue 421 3.10 Lockheed Martin Corp. (100%) - 9/02 7055 Ambassador Drive 160 4.72 Catepillar Logist (100%) - 12/00 1510 Gehman Road 719 8.12 Accupac, Inc. (65%) - 1/01 SKF, USA, Inc. (35%) - 6/08 Greenwood Center 803 19.70 Mantech (35%) - 5/07 Logicon Geodynamic (13%) - 6/07 Aerotek (13%) - 7/03 Walcoff & Associates (13%) - 5/00 55 U.S. Avenue 574 7.00 Micro Warehouse, Inc. (59%) - 8/02 100 Katchel Blvd 2,757 20.32 Penske Truck Leasing (56%) - 12/05 UGI Utilities, Inc. (33%) - 3/03 2511 Brittons Hill Road 137 3.70 Circuit City Stores, Inc. (44%) - 6/00 Colortree, Inc. (34%) - 7/02 Lucent Technologies, Inc. (12%) - 12/98 640 Freedom Business Center (g) 2,122 19.53 General Electric Company (100%) - 9/01 52 Swedesford Square 513 19.07 Bell Atlantic (38%) - 7/00 The Vanguard Group (35%) - 7/06 Decision One Corporation (27%) - 6/03 1760 Market Square 602 19.81 Oakwood Center 733 16.24 Versatility (31%) - 12/04 Logicon Geodynamic (27%) - 6/00 & 6/07 7535 Windsor Drive 432 15.04 Air Products (47%) - 11/01 Cadence Design Systems, Inc. (16%) - 11/01 Rosenbluth International (14%) - 4/99 500 Highland Drive 484 4.83 PFS - Pepsico (100%) - 12/99 2100-2108 West Laburnam 425 14.81 Chesapeake Packaging Corp. (12%) -12/00 300 Highland Drive 523 4.50 Walpole (40%) - 10/02 U.S. Postal Service (32%) - 4/09 Griffis Trucking, Inc. (16%) - 9/99 Fautless Casters (12%) - 5/00
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Net Percentage Rentable Leased as of Year Square December Property Name Location State Built Feet 31, 1998 (a) - - -------------------------------- ----------------- ----- ------ ------- ------------ 6755 Snowdrift Way Allentown PA 1988 125,000 100.0% 201/221 King Manor Drive King Of Prussia PA 1964 124,960 100.0% 1957 Westmoreland Street Richmond VA 1975 121,815 100.0% 457 Haddonfield Road Cherry Hill NJ 1990 121,737 85.5% 2000 Midlantic Drive Mt. Laurel NJ 1989 121,658 97.9% 700 East Gate Drive Mt. Laurel NJ 1984 121,114 97.6% 100 West Road Towson MD 1988 120,234 92.5% 4667 Somerton Road (d) Trevose PA 1974 118,000 83.1% 7000 Geerdes Boulevard King Of Prussia PA 1988 112,905 100.0% 7350 Tilghman Street Allentown PA 1987 111,500 82.0% 993 Lenox Drive Lawrenceville NJ 1985 111,137 92.3% 501 Office Center Drive Fort Washington PA 1974 110,514 94.2% 50 Swedesford Square East Whiteland Twp. PA 1986 109,800 100.0% 300 Berwyn Park Berwyn PA 1989 107,919 100.0% 1111 Old Eagle School Road Valley Forge PA 1962 107,000 100.0% 640-660 Allendale Road King Of Prussia PA 1962 106,635 100.0% 1000 Howard Boulevard Mt. Laurel NJ 1988 105,312 99.6% 4550 New Linden Hill Road Wilmington DE 1974 105,000 98.5% One Righter Parkway (g) Talleyville DE 1989 104,828 100.0% 920 Harvest Drive Blue Bell PA 1990 104,505 100.0% 500 Office Center Drive Fort Washington PA 1974 100,447 37.7% 7450 Tilghman Street Allentown PA 1986 100,000 69.3% One South Union Place Cherry Hill NJ 1982 99,573 100.0% 997 Lenox Drive Lawrenceville NJ 1987 97,277 96.2% 1000 Atrium Way Mt. Laurel NJ 1989 96,660 94.3% EM - Venture II - Keystone Park Bristol PA 1985 96,000 100.0% 1120 Executive Boulevard Marlton NJ 1987 95,124 98.1% 3 Paragon Drive (f) Montvale NJ 1988 93,060 0.0% 6845 Snowdrift Way Allentown PA 1975 93,000 100.0% 500 North Gulph Road King Of Prussia PA 1979 92,851 99.9% 55 Ames Court Plainview NY 1961 90,000 58.5%
(RESTUBBED TABLE)
Average Tenants Leasing 10% Total Base Rent Annualized or More of Rentable for the Twelve Rental Rate Square Footage per Months Ended as of Property as of December 31, December December 31, 1998 and Property Name 1998 (b) (000's) 31, 1998 (c) Lease Expiration Date - - ----------------------------------- ---------------- ------------ ---------------------------------------------------- 6755 Snowdrift Way 126 4.72 Day Timers , Inc. (100%) - 2/00 201/221 King Manor Drive 493 5.00 Reber - Friel Company (28%) - 6/01 Country Fresh Batter (28%) - 6/03 Central Sprinkler (16%) - 4/99 Dillon Moving, Inc. (13%) - 6/99 1957 Westmoreland Street 152 4.05 Capital One Bank (100%) - 1/00 457 Haddonfield Road 1,797 21.19 PHP Healthcare Corporation (31%) - 1/08 Montgomery McCracken (13%) - 2/05 Dilworth, Paxson (10%) - 5/04 2000 Midlantic Drive 1,447 17.31 Lockheed Martin Corporation (47%) - 5/99, 6/02,10/04 Computer Associates International (26%) - 12/02 Axiom, Inc. (13%) - 4/08 Moore Business Forms (12%) - 4/00 700 East Gate Drive 546 18.35 Copelco (47%) - 3/05 HBO & Company (21%) - 8/99 LMC Properties (13%) - 5/00 100 West Road 2,152 20.29 Towson Telephone (13%) - 8/99 Atlantic Federal Savings Bank (12%) - 11/99 4667 Somerton Road (d) 1,869 5.89 American Home Patient, 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 7000 Geerdes Boulevard 1,460 13.15 Martin Marietta Corp. (100%) - 12/98 7350 Tilghman Street 420 16.25 The Hartford Group (82%) - 5/99 & 12/07 993 Lenox Drive 1,698 19.71 Stark & Stark, Inc. (57%) - 8/04 Office Concierge, Inc. (18%) - 4/04 Peterson Consulting, LLC (12%) - 6/00 501 Office Center Drive 1,014 17.89 50 Swedesford Square 490 15.83 Decision One Corporation (100%) - 12/05 300 Berwyn Park 1,987 20.89 Delaware Valley Financial (53%) - 1/00 and 3/04 Vertex Incorporated (12%) - 12/98 G.G.I. Systems, Inc. (11%) - 8/99 and 4/04 1111 Old Eagle School Road 1,017 9.50 PECO (100%) - 6/00 640-660 Allendale Road 395 4.34 Telespectrum Worldwide, Inc. (100%) - 8/02 1000 Howard Boulevard 2,226 21.85 Conrail (66%) - 6/10 Lincoln Technical Institute (25%) - 11/09 4550 New Linden Hill Road 1,550 15.25 Associates Credit Card Services (51%) - 5/99 The Whitaker Corporation (23%) - 8/02 One Righter Parkway (g) 2,280 20.77 Kimberly Clark (89 %) - 12/05 Zeneca, Inc. (10%) -12/05 920 Harvest Drive 1,286 16.63 Aetna Life Insurance (100%) - 6/02 500 Office Center Drive 930 18.68 Access Services, Inc. (10%) - 8/03 7450 Tilghman Street 352 16.24 The Hartford Group (67%) - 12/07 One South Union Place 565 12.05 Vlasic Foods International, Inc. (100%) - 7/08 997 Lenox Drive 1,432 20.60 Fox,Rothschild,O'Brien & Frankel (34%) - 10/01 & 6/03 Dechert Price & Rhoads (25%) - 11/03 Smith Barney, Inc. (10%) - 9/05 1000 Atrium Way 1,547 18.14 IBM (18%) - 3/01 Navistar Financial (17%) - 12/99 Corporate Dynamics (14%) - 2/04 Tri - Star Finance (12%) - 10/02 Janney, Montgomery, Scott (12%) - 9/02 EM - Venture II - Keystone Park 171 8.00 Jones Apparel Group, Inc. (100%) - 7/13 1120 Executive Boulevard 1,220 19.68 Computer Sciences Corporation (63%) - 5/02 & 8/03 Fleercorp (19%) - 4/00 3 Paragon Drive (f) 6845 Snowdrift Way 104 5.02 Rodale Press, Inc. (55%) - 8/02 BMG Music (45%) - 2/03 500 North Gulph Road 1,648 18.27 Transition Software (16%) - 9/00 Nason Cullen Group (15%) - 8/01 Strohl Systems (12%) - 10/99 Ford Motor Credit Corp. (10%) - 10/04 55 Ames Court 201 14.96 Berman Blake Associates (59%) - 6/02
-20-
Net Percentage Rentable Leased as of Year Square December Property Name Location State Built Feet 31, 1998 (a) - - ----------------------------------- ---------------- ----- ------ ------- ------------ 6690 Grant Way Allentown PA 1982 88,000 100.0% 620 Freedom Business Center (g) King Of Prussia PA 1986 86,559 100.0% 630 Freedom Business Center (g) King Of Prussia PA 1989 86,291 99.8% Dabney X Richmond VA 1989 85,844 100.0% 105 Terry Drive Newtown PA 1982 84,730 94.2% 15000 Midlantic Drive Mt. Laurel NJ 1991 84,056 100.0% 245 Old Country Road Melville NY 1978 82,308 100.0% 700 Business Center Drive (b) Horsham PA 1986 82,009 93.4% 800 Business Center Drive (b) Horsham PA 1986 -- 0.0% 2595 Metropolitan Drive (d) Trevose PA 1981 80,000 100.0% One Progress Avenue Horsham PA 1986 79,204 100.0% 323 Norristown Road Lower Gwyned PA 1988 79,083 100.0% 180 Wheeler Court Langhorne PA 1975 78,213 100.0% 1007 Laurel Oak Road Voorhees NJ 1996 78,205 100.0% Maschellmac IV (g) King Of Prussia PA 1987 77,718 94.4% 741 First Avenue King Of Prussia PA 1966 77,184 100.0% 200 Berwyn Park Berwyn PA 1987 76,065 96.3% Maschellmac III (g) King Of Prussia PA 1985 75,488 100.0% Maschellmac II (g) King Of Prussia PA 1984 74,556 100.0% Maschellmac I (g) King Of Prussia PA 1980 74,140 92.8% 160 - 180 West Germantown Pike East Norriton PA 1982 73,750 100.0% 5910 -6090 Six Forks Raleigh NC 1982 73,415 100.0% Arboretum VI Richmond VA 1991 73,195 97.4% 6670 Grant Way Allentown PA 1979 72,885 100.0% 780 Third Avenue King Of Prussia PA 1967 72,000 83.3% 91 North Industry Court Deer Park NY 1965 71,000 100.0% 2560 Metropolitan Drive Trevose PA 1983 70,000 99.9% Three Greentree Centre Marlton NJ 1984 69,101 93.8% 14 Campus Boulevard Newtown Square PA 1998 69,000 87.0% 1105 Berkshire Boulevard Reading PA 1987 68,984 93.8% 400 Highland Drive Westhampton NJ 1990 68,660 100.0% 500 Enterprise Road Horsham PA 1990 67,800 98.5% 9000 Midlantic Drive Mt. Laurel NJ 1989 67,299 100.0%
Average Tenants Leasing 10% Total Base Rent Annualized or More of Rentable for the Twelve Rental Rate Square Footage per Months Ended as of Property as of December 31, December December 31, 1998 and Property Name 1998 (b) (000's) 31, 1998 (c) Lease Expiration Date - - ----------------------------------- ---------------- ------------ ---------------------------------------------------- 6690 Grant Way 103 5.47 AJ Oster Company (52%) - 12/99 Batesville Casket (48%) - 4/99 620 Freedom Business Center (g) 1,833 21.07 Reliance Insurance Company (80%) - 10/02 Sun Microsystems, Inc. (18%) - 2/01 630 Freedom Business Center (g) 1,612 21.57 Eastern Telelogic Corporation (24%) - 12/00 HQ King of Prussia, Inc. (17%) - 7/04 Proctor & Gamble Distributing Co. (12%) - 9/99 Garden State Tanning, Inc. (10%) - 10/99 Dabney X 135 6.77 Earth Tech (35%) - 3/04 CMS Automation (20%) - 1/99 Contract Specifix (15%) - 8/99 Micro View (14%) -2/01 105 Terry Drive 1,276 13.46 Media Management Services, Inc. (22%) - 8/99 Parmaceutical Marketing Services (20%) - 10/00 Medco 15000 Midlantic Drive 1,329 17.91 New Jersey Bell Telephone (89%) - 7/06 Gallagher Bassett Services, Inc. (11%) - 11/02 245 Old Country Road 137 6.95 Citicorp Custom Credit, Inc. (100%) - 1/11 700 Business Center Drive (b) 1,172 15.28 Metpath (35%) - 1/12 800 Business Center Drive (b) -- 0.00 Macro (19%) - 4/01 KWS & P (17%) - 4/02 Arrow Electronics (13%) - 8/01 Fleet Credit Card (10%) - 6/99 2595 Metropolitan Drive (d) -- 0.00 Northtec LLC (100 %) - 6/06 One Progress Avenue 782 9.80 Reed Technology (100%) - 6/11 323 Norristown Road 1,418 16.92 Bisys Plan Services (62%) - 7/02 Siemans Energy (20%) - 1/01 180 Wheeler Court 237 4.50 Lainiere De Picardie, Inc. (59%) - 12/01 West Coast Entertainment Corp. (41%) - 8/00 1007 Laurel Oak Road 621 7.94 R.F. Power Products, Inc. (100%) - 10/06 Maschellmac IV (g) 386 19.18 Finova Capital (30%) - 1/04 Centeon Management (27%) - 10/02 Apogee, Inc. (24%) - 8/00 Artemis Management (11%) - 5/01 741 First Avenue 465 7.75 Tozour - Trane, Incorporated (100%) - 4/05 200 Berwyn Park 1,532 23.69 Devon Direct Marketing & Advertising (52%) - 12/01 and 4/02 VHA East Corporation (14%) - 11/99 Bucks Consultants (12%) - 8/01 Maschellmac III (g) 367 18.08 The Travelers (64%) - 2/99 Cortech Consulting (36%) - 9/01 and 6/04 Maschellmac II (g) 348 17.38 Centeon Management (100%) - 10/02 Maschellmac I (g) 418 22.29 First USA, Incorporated (27%) - 9/02 Elf Atochem (22%) - 3/06 Centeon Mangement (21%) - 1/03 Finova Capital (13%) - 1/04 160 - 180 West Germantown Pike 907 15.99 5910 -6090 Six Forks 1,081 15.56 Arboretum VI 427 16.41 Primeco Personal Communications (24%) - 7/05 6670 Grant Way 76 4.62 The Resource Group (100%) - 1/05 780 Third Avenue 188 4.20 Telespectrum Worldwide, Inc. (83%) - 12/98 91 North Industry Court 71 5.30 Windowrama Warehousing, Inc. (100%) 2560 Metropolitan Drive -- 0.00 Picker International (48%) - 9/02 Delta Lighting Products, Inc. (19%) - 5/01 Nextel Communications (18%) - 3/03 Precicontact, Inc. (15%) - 12/99 Three Greentree Centre 1,017 17.31 Parker McCay (43%) - 5/01 Surety Title Company (15%) - 12/03 National City Mortgage Company (12%) - 12%) - 7/00 Olde Discount (12%) - 3/00 14 Campus Boulevard 158 19.64 Catholic Health East (37%) - 9/08 Brandywine Realty Trust (28%) - 10/03 Naviant Technology Solutions, Inc. (22%) - 9/08 1105 Berkshire Boulevard 897 13.57 The Travelers Indemnity Company (68%) - 2/02 Spicer Systems (14%) - 11/01 400 Highland Drive 216 3.00 MBO Binder & Company (100%) - 1/02 500 Enterprise Road 718 14.44 Conti Mortgage (80%) - 4/01 Pioneer Technologies (19%) - 10/00 9000 Midlantic Drive 684 18.08 Automotive Rentals (100%) - 8/00
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Net Percentage Rentable Leased as of Year Square December Property Name Location State Built Feet 31, 1998 (a) - - -------------------------------------- -------------- ----- ------ ------- ------------ 104 Windsor Center Drive East Windsor NJ 1987 66,855 76.5% 6 East Clementon Road Gibbsboro NJ 1980 66,236 93.9% 600 Highland Drive Westhampton NJ 1990 65,862 82.5% 16 Campus Boulevard Newtown Square PA 1990 65,463 100.0% King & Harvard (f) Cherry Hill NJ 1974 65,223 13.6% 100 Commerce Drive Newark DE 1989 63,898 99.2% 925 Harvest Drive Blue Bell PA 1990 63,556 100.0% 610 Freedom Business Center (g) King Of Prussia PA 1985 63,031 96.9% 1974 Sproul Road Broomall PA 1995 62,934 99.6% 2200 Cabot Boulevard Langhorne PA 1979 62,481 98.5% 4805 Lake Brooke Drive Glen Allen VA 1996 61,632 100.0% 701 East Gate Drive Mt. Laurel NJ 1986 61,434 98.0% 426 Lancaster Avenue Devon PA 1990 61,102 100.0% 321 Norristown Road Lower Gwyned PA 1988 60,384 87.9% 4000/5000 West Lincoln Drive Marlton NJ 1982 60,010 95.8% 1000/2000 West Lincoln Drive Marlton NJ 1982 60,001 98.3% 200 Corporate Center Drive Camp Hill PA 1989 60,000 100.0% 2575 Metropolitan Drive (d) Trevose PA 1981 60,000 81.3% 308 Harper Drive Mt. Laurel NJ 1976 59,500 100.0% 1000 Axinn Avenue Garden City NY 1965 59,000 100.0% 100 Berwyn Park Berwyn PA 1986 58,612 97.0% Arboretum I Richmond VA 1988 58,167 97.9% 835 New Durham Road Edison NJ 1974 58,095 100.0% 300 Welsh Road Horsham PA 1980 57,793 100.0% Westpark South Alston Avenue Durham NC 1985 56,601 100.0% 820 Third Avenue King Of Prussia PA 1970 56,200 100.0% 2812 Emerywood Parkway Henrico VA 1980 56,076 100.0% Two Greentree Centre Marlton NJ 1983 56,075 91.9% One Greentree Centre Marlton NJ 1982 55,838 93.8% 305 Fellowship Drive Mt. Laurel NJ 1980 55,511 96.1%
(RESTUBBED TABLE)
Average Tenants Leasing 10% Total Base Rent Annualized or More of Rentable for the Twelve Rental Rate Square Footage per Months Ended as of Property as of December 31, December December 31, 1998 and Property Name 1998 (b) (000's) 31, 1998 (c) Lease Expiration Date - - -------------------------------------- ---------------- ------------ ---------------------------------------------------- 104 Windsor Center Drive 514 18.50 I-STAT Corporation (56%) - 9/03 Green Tree Learning Centers, Inc. (20%) - 9/02 6 East Clementon Road 899 16.46 West Jersey Healtrh Systems (30%) - 3/01 Insurance Marketing Services (18%) - 12/04 Equifax Credit Information Services (15%) - 12/99 Premium Bank (12%) - 9/00 600 Highland Drive 371 7.63 Excel Corporation (40%) - 7/01 Key Food Beerage (14%) - 9/02 Philadelphia Newspapers (12%) - 1/00 16 Campus Boulevard 691 15.10 Creative Financial (49%) - 5/06 Atlantic Employees Credit Union (35%) - 1/06 King & Harvard (f) 152 17.15 General Services Administration (14%) - 7/01 100 Commerce Drive 898 14.00 The Travelers Bank (75%) - 12/01 Blaze Systems Corporations (12%) - 9/00 925 Harvest Drive 605 17.08 610 Freedom Business Center (g) 1,178 24.70 The Hartford Steam Boiler Co. (55%) - 8/00 UNUM Life Insurance Company (20%) - 7/02 UB Networks, Incorporated (11%) - 12/01 1974 Sproul Road 875 15.42 Franklin Mint Credit Union (30%) - 5/02 Main Line Book Company (22%) - 1/00 Allan Coullautt Associates (20 %) - 2/03 TMR, Incorporated (11%) - 10/02 2200 Cabot Boulevard 263 5.79 Nobel Printing Ink (43%) - 8/05 Hussman Corporation (34%) - 3/99 McCaffrey Management (21%) - 8/00 4805 Lake Brooke Drive 267 16.20 Kemper Insurance (51%) - 10/10 Target (34%) - 2/03 J. Sargeant Reynolds (11%) - 9/01 701 East Gate Drive 288 18.86 Lockheed Martin Corporation (51%) - 4/02 Digital Equipment (16%) - 6/00 American International (11%) - 1/00 426 Lancaster Avenue 1,157 17.71 GE Transport International Pool (100%) - 9/03 321 Norristown Road 1,011 17.66 Navisys (24%) - 12/02 Bisys Plan Services (20%) - 7/02 Bradford White Corporation (19%) - 12/01 4000/5000 West Lincoln Drive 743 13.57 Vilro Corporation (18%) - 5/01 1000/2000 West Lincoln Drive 751 13.58 Kaytes - Cooperman (10%) - 3/00 & 6/00 Occupational Training Center (10%) - 7/02 200 Corporate Center Drive 715 18.00 Highmark, Incorporated (100%) - 4/01 2575 Metropolitan Drive (d) -- 0.00 Northtec LLC (65%) - 6/06 Town & Country Van Lines (17%) - 12/98 308 Harper Drive 300 18.85 Harleysville Insurance Company (70%) - 4/03 Cisco Systems (25%) - 8/03 1000 Axinn Avenue 68 4.86 Fortunoff Fine Jewelry & Silverware, Inc. (10%) - 1/02 100 Berwyn Park 1,070 24.09 Shared Medical Systems (49%) - 3/04 Funds Associates, Ltd. (29%) - 1/02 New York Currency Exchange (10%) - 9/02 Arboretum I 228 15.59 New York Life Insurance Co. (15%) - 3/99 Columbia HCA (13%) - 6/01 Reliance Insurance Company (11%) - 2/00 835 New Durham Road 75 5.44 Western Union International, Inc. (100%) - 2/05 300 Welsh Road 918 17.62 Digital Cable Radio (31%) - 9/03 American Meter Company - (30%) - 7/99 A.G. Edwards & Sons, Inc. (14%) - 12/03 Abington OB/GYN (11%) - 10/01 Westpark South Alston Avenue 263 18.29 Cato Research (70%) - 7/01 Sandler & Recht (25%) - 7/00 820 Third Avenue 193 4.47 SmithKline Beecham Corporation (100%) - 10/00 2812 Emerywood Parkway 143 10.43 American Home Funding (100%) - 1/03 Two Greentree Centre 795 18.24 Merrill, Lynch, Pierce, Fenner (26%) - 12/99 & 11/05 IBS Interactive (12%) - 12/03 Chubb Institute (10%) - 12/00 One Greentree Centre 930 18.04 American Executive Services (30%) - 1/06 Temple University (18%) - 12/02 West Jersey Health (15%) - 4/01 305 Fellowship Drive 238 17.25 Golder Associates (35%) - 10/99 Paychex (24%) - 4/00 Retail Publications (15%) - 2/00 Metro Commercial Real Estate (11%) - 8/99
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Net Percentage Rentable Leased as of Year Square December Property Name Location State Built Feet 31, 1998 (a) - - ---------------------------------- ------------- ----- ------ ------- ------------ 309 Fellowship Drive Mt. Laurel NJ 1982 55,351 91.1% 307 Fellowship Drive Mt. Laurel NJ 1981 55,286 70.4% 8000 Lincoln Drive Marlton NJ 1997 54,923 100.0% 6810 Snowdrift Way Allentown PA 1975 54,844 100.0% 303 Fellowship Drive Mt. Laurel NJ 1979 53,848 82.1% 2010 Cabot Boulevard Langhorne PA 1985 53,421 98.9% 680 Allendale Road King Of Prussia PA 1962 52,528 100.0% 2240/50 Butler Pike Plymouth Meeting PA 1984 52,183 99.4% 650 Park Avenue King Of Prussia PA 1968 51,711 2.1% 486 Thomas Jones Way Exton PA 1990 51,500 99.2% 1155 Business Center Drive Horsham PA 1990 51,388 97.4% 25 Phillips Parkway Montvale NJ 1988 51,155 100.0% 2 Foster Avenue Gibbsboro NJ 1974 50,761 94.6% 855 Springdale Drive Exton PA 1986 50,750 100.0% Dabney VI Richmond VA 1986 50,400 100.0% 875 First Avenue King Of Prussia PA 1966 50,000 100.0% 630 Clark Avenue King Of Prussia PA 1960 50,000 100.0% 620 Allendale Road King Of Prussia PA 1961 50,000 100.0% 650 Clark Avenue King Of Prussia PA 1965 50,000 100.0% 741 Third Avenue King Of Prussia PA 1962 50,000 100.0% 44 National Road Edison NJ 1967 50,000 100.0% 102 Chestnut Ridge Road Montvale NJ 1979 49,671 100.0% Arboretum II Richmond VA 1988 49,642 99.8% 7150 Windsor Drive Allentown PA 1988 49,420 100.0% 837 New Durham Road Edison NJ 1977 48,200 100.0% 520 Virginia Drive Fort Washington PA 1987 48,122 100.0% Arboretum V Richmond VA 1988 47,943 96.1% 456 Creamery Way Exton PA 1987 47,604 100.0% 4000 Midlantic Drive Mt. Laurel NJ 1998 46,945 100.0% 220 Commerce Drive Fort Washington PA 1985 46,366 100.0% 6575 Snowdrift Road Allentown PA 1988 46,250 100.0%
(RESTUBBED TABLE)
Average Tenants Leasing 10% Total Base Rent Annualized or More of Rentable for the Twelve Rental Rate Square Footage per Months Ended as of Property as of December 31, December December 31, 1998 and Property Name 1998 (b) (000's) 31, 1998 (c) Lease Expiration Date - - ---------------------------------- ---------------- ------------ ---------------------------------------------------- 309 Fellowship Drive 195 17.03 HQ Mount Laurel, Inc. (20%) - 4/08 Allied Bond & Collection (18%) - 7/01 PSE & G (14%) - 7/00 Merchants Mutual Insurance (13%) - 6/01 General Accident Insurance (11%) - 4/99 307 Fellowship Drive 192 17.87 PRC, Incorporated (10%) - 12/98 8000 Lincoln Drive 960 17.65 Computer Sciences Corporation (67%) - 11/01 Blue Cross (33%) - 5/07 6810 Snowdrift Way 66 4.27 Air Products & Chemical (73%) - 8/01 Herr Foods, Inc. (27%) - 7/02 303 Fellowship Drive 196 17.88 Star Enterprises (33%) - 1/00 The Prudential Insurance Company (28%) - 2/99 Larami / Hasbro (22%) - 12/99 2010 Cabot Boulevard 387 9.63 Computer Hardware Maintenance (55%) - 1/03 DiMark, Inc. (32%) - 9/99 Digital Descriptor Systems (11%) - 6/00 680 Allendale Road 294 10.14 Immunization Products, Ltd. (100%) - 9/00 2240/50 Butler Pike 678 18.12 First Union Bank (58%) - 4/06 TWA Marketing (33%) - 10/99 650 Park Avenue 835 16.50 486 Thomas Jones Way 616 17.12 First American Real Estate Tax Service (24%) - 1/04 Toshiba American Medical Systems (12%) - 6/02 Cape Environmental (12%) - 7/02 ICI America's, Inc. (12%) - 11/00 J. Reckner Associates, Inc. (10%) - 9/03 1155 Business Center Drive 659 18.27 IMS (84%) - 3/06 Motorola Products (14%) - 2/99 25 Phillips Parkway 285 25.85 Volvo North America Corporation (100%) - 3/01 2 Foster Avenue 189 4.10 Harbor Laundry, Inc. (95%) - 8/00 855 Springdale Drive 776 15.00 Environmental Resources (100%) - 7/01 Dabney VI 64 5.15 KPA, Inc. (33%) - 2/01 Cort Furniture Rental (25%) - 2/02 West Home Health (25%) - 7/01 Goodall Rubber Company (17%) - 5/01 875 First Avenue 262 6.38 Centennial Printing Corporation (100%) - 6/02 630 Clark Avenue 262 5.67 Metro Fiber Systems of Philadelphia (100%) - 9/12 620 Allendale Road 371 10.76 Executone Information Systems, Inc. - 50 %) - 9/01 Proconex, Inc. (50%) - 6/00 650 Clark Avenue 152 5.38 Eastern Telelogic Corporation (50%) - 8/09 PPG Industries (36%) - 3/00 Republic Builders Products (14%) - 7/00 741 Third Avenue 218 6.69 United States Postal Service (75%) - 4/01 44 National Road 43 3.57 Sawdust Pencil Company (100%) - 5/00 102 Chestnut Ridge Road 258 20.66 Geotek Communications, Inc. (100%) - 11/06 Arboretum II 141 11.07 Commonwealth Propane (29%) - 6/05 Chippenham / Johnston Willis (23%) - 7/00 Lanier Worldwide, Inc. (11%) - 1/00 Rogers American (10%) - 1/00 Virginia Multispecialty Services (10%) - 3/03 7150 Windsor Drive 116 11.22 Bell Atlantic PA (35%) - 10/99 ICT Group (20%) - 2/01 Monsanto Company (20%) - 2/99 Interior Workplace Solutions (15%) - 5/99 Linden Optical (11%) - 3/01 837 New Durham Road 39 4.17 TLC Warehouse Corporation (50%) -11/01 Lex Associates, Inc. (50%) - 12/02 520 Virginia Drive 642 13.42 The Vandeveer Group (100%) - 8/00 Arboretum V 157 12.78 Alan Bradley Corporation (25%) - 11/99 U.S. Marine Corps (17%) - 6/01 Land America Financial Group (17%) - 1/00 Virginia Multispecialty Services (15%) - 3/03 Whiting turner Contracting Co. (11%) - 12/00 456 Creamery Way 354 7.68 Neutronics (100%) - 1/03 4000 Midlantic Drive 579 17.25 Axiom (100%) - 4/08 220 Commerce Drive 743 16.46 U.S. Physicians, Inc. (29%) - 6/02 Temple University (25%) - 4/01 6575 Snowdrift Road 331 9.78 Corning Packaging (100%) - 2/00
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Net Percentage Rentable Leased as of Year Square December Property Name Location State Built Feet 31, 1998 (a) - - ------------------------------ ------------------ ----- ----- -------- ------------- Five Eves Drive Marlton NJ 1986 45,889 85.3% Dabney V Richmond VA 1985 45,353 100.0% Dabney XI Richmond VA 1994 45,250 100.0% 2201 Dabney Street Richmond VA 1962 45,000 100.0% 500 Scarborough Drive Egg Harbor Twp. NJ 1987 44,750 83.5% 501 Scarborough Drive Egg Harbor Twp. NJ 1987 44,750 100.0% 140 Terry Drive Newtown PA 1982 43,929 100.0% 9000 West Lincoln Drive Marlton NJ 1983 43,719 97.8% 110 Summit Drive Exton PA 1985 43,660 100.0% 336 South Service Road Melville NY 1965 43,600 100.0% 7248 Tilghman Street Allentown PA 1987 42,863 97.5% 2535 Metropolitan Drive (d) Trevose PA 1974 42,000 100.0% Dabney II Richmond VA 1983 42,000 100.0% Dabney IV Richmond VA 1985 41,550 100.0% Main Street - Piazza Voorhees NJ 1990 41,400 100.0% 7020 Snowdrift Way Allentown PA 1975 41,390 100.0% 20 East Clementon Road Gibbsboro NJ 1986 40,755 78.1% 1000 East Lincoln Drive Marlton NJ 1981 40,600 100.0% 7310 Tilghman Street Allentown PA 1985 40,000 54.5% 2510 Metropolitan Drive (d) Trevose PA 1981 40,000 100.0% 2250 Cabot Boulevard Langhorne PA 1982 40,000 100.0% 2000 Cabot Boulevard Langhorne PA 1985 39,969 77.5% 150 Corporate Center Drive Camp Hill PA 1987 39,401 85.6% 600 Park Avenue King Of Prussia PA 1964 39,000 100.0% 1336 Enterprise Drive West Goshen PA 1989 38,470 100.0% 755 Business Center Drive Horsham PA 1998 38,050 100.0% 18 Campus Boulevard Newtown Square PA 1990 37,700 99.1% Two Eves Drive Marlton NJ 1987 37,668 99.6%
Average Tenants Leasing 10% Total Base Rent Annualized or More of Rentable for the Twelve Rental Rate Square Footage per Months Ended as of Property as of December 31, December December 31, 1998 and Property Name 1998 (b) (000's) 31, 1998 (c) Lease Expiration Date - - ------------------------------ ---------------- ------------- ---------------------------------------------------- Five Eves Drive 570 16.55 ADP Financial Information (36%) - 12/98 Samaritan Hospice (25%) - 2/04 McCay Corporation (18%) - 10/00 Dabney V 74 5.65 Carriage House (40%) - 3/03 Office Masters (12%) - 4/02 Alkat Electrical (11%) - 7/99 Dabney XI 78 6.51 Ademco Distribution (31%) - 4/04 Thulman Eastern (24%) - 7/00 Dal Tile Corporation (16%) - 9/04 Information Integration (16%) - 6/99 DHL Airways (14%) - 7/99 2201 Dabney Street 44 3.65 Morton Marks (100%) - 6/99 500 Scarborough Drive 619 20.73 Raytheon Services (16%) - 9/02 The Mitre Corporation ( 16) - 12/00 NYMA, Inc. (13%) - 10/99 501 Scarborough Drive 845 18.37 TMA (34%) - 3/02 Computer Sciences Corporation (33%) - 10/00 Lockheed Martin Corporation (33%) - 1/01 140 Terry Drive Dept. of General Services (31%) - 12/00 Media Marketplace (23%) - 4/03 Bellevue Avenue Mgmt Corp. (16%) - 7/99 9000 West Lincoln Drive 563 14.53 Counseling Program (18%) - 1/00 110 Summit Drive 353 11.40 Maris Equipment (49%) - 4/99 Pall Trincor (30%) - 3/02 DGH Technology (12%) - 9/99 336 South Service Road 83 8.32 Nikon, Inc. (100%) - 4/01 7248 Tilghman Street 439 15.91 Ohio Casualty (46%) - 7/01 IDS Financial Services (29%) - 7/01 2535 Metropolitan Drive (d) - 0.00 Larson - Juhl (100%) - 10/03 Dabney II 54 5.00 Wynne Guild (30%) - 1/01 Mirror Company (30%) - 9/99 Cavalier Flooring Systems, Inc. (20%) - 4/03 Dominion Restoration (10%) - 7/00 Unit Instruments (10%) - 6/02 Dabney IV 50 5.46 United Power Corporation (30%) - 4/02 Virginia Donuts (29%) - 9/08 Dillard Paper Company (20%) - 11/01 KCI Therapeutics (10%) - 6/00 Scherr's Refrigeration (10%) - 4/03 Main Street - Piazza 566 13.82 Cooper Hospital (41%) - 2/01 & 7/01 Lincoln Investments (20%) - 8/03 Chamber of Commerce (10%) - 8/01 South N.J. Medical (10%) - 3/00 7020 Snowdrift Way 40 4.67 Air Products & Chemical (72%) - 8/01 Interior Solutions (28%) - 4/99 20 East Clementon Road 598 18.39 Serco, Inc. (15%) - 12/05 R.Randle Scarborough, Inc. (15%) - 12/00 Medaquist Receivables Mgmt Co. (14%) - 4/03 The State of New Jersey (13%) - 8/07 1000 East Lincoln Drive 150 5.45 Packquisition Corporation (75%) - 2/01 Allison Andrews Corporation (25%) - 10/99 7310 Tilghman Street 235 14.49 Lucent Technologies (15%) - 7/03 PECO Hyperion Telecommunications (12%) - 10/03 The Donnelley Directory (10%) - 7/99 2510 Metropolitan Drive (d) - 0.00 Philadelphia Choice Television (100%) - 6/99 2250 Cabot Boulevard 176 5.78 Bucks County Nut (100%) - 7/04 2000 Cabot Boulevard 269 10.47 Ecogen, Inc. (37%) - 3/00 Rom - Tec, Inc. (28%) - 9/02 AGIE, Ltd. (13%) - 1/01 150 Corporate Center Drive 390 17.59 Highmark, Incorporated (37%) - 12/00 The Prudential Insurance Company (15%) - 7/00 Handler, Gerber, Johnston, Aronson (12%) - 12/99 600 Park Avenue 404 13.26 Smithkline Beecham Corporation (100%) - 5/02 1336 Enterprise Drive 452 13.66 CFM Technologies, Inc. (100%) - 11/00 755 Business Center Drive - 19.63 Scirex Corporation (100%) - 1/09 18 Campus Boulevard 451 19.12 Emax Solution Partners (48%) - 6/03 LR, Incorporated (20%) - 8/03 Marshall Dennehey (17%) - 10/01 ING N.American Insurance Holdings (15%) - 6/99 Two Eves Drive 449 17.23 Basco Associates (24%) - 2/01 Acceptance Risk Management (18%) - 4/00
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Net Percentage Rentable Leased as of Year Square December Property Name Location State Built Feet 31, 1998 (a) - - ------------------------------- -------------------- ----- ------ ------- ------------ 1255 Broad Street Bloomfield NJ 1981 37,478 97.4% 2512 Metropolitan Drive Trevose PA 1981 37,000 100.0% 3000 West Lincoln Drive Marlton NJ 1982 36,070 88.1% 645 Stewart Avenue Garden City NY 1962 35,552 100.0% 3000 Cabot Boulevard Langhorne PA 1986 34,693 100.0% Dabney I Richmond VA 1982 33,600 100.0% Dabney VII Richmond VA 1987 33,419 99.0% Dabney A-2 Richmond VA 1993 33,050 100.0% 7010 Snowdrift Way Allentown PA 1991 33,029 100.0% 168 Franklin Corner Drive Lawrenceville NJ 1976 32,000 60.0% 2260 Butler Pike Plymouth Meeting PA 1984 31,892 100.0% Main Street - Promenade Voorhees NJ 1988 31,445 94.4% Arboretum VII Richmond VA 1991 30,791 79.4% 120 West Germantown Pike Plymouth Meeting PA 1984 30,546 100.0% Dabney IX Richmond VA 1989 30,263 93.0% 650 Dresher Road Horsham PA 1984 30,138 100.0% 655 Business Center Drive Horsham PA 1997 30,000 95.5% Dabney VIII Richmond VA 1988 29,700 100.0% 2260/70 Cabot Boulevard Langhorne PA 1984 29,638 87.7% 304 Harper Drive Mt. Laurel NJ 1975 29,537 86.9% 2407 Park Drive Harrisburg PA 1985 29,228 94.2% 468 Creamery Way Exton PA 1990 28,934 100.0% 80 Sky;ine Drive Plainview NY 1961 28,822 100.0% 120 Express Street Plainview NY 1962 27,729 100.0% Four B Eves Drive Marlton NJ 1987 27,038 99.9% 1150 Berkshire Boulevard Reading PA 1979 26,821 94.6% 140 West Germantown Pike Plymouth Meeting PA 1984 25,947 70.0%
Average Tenants Leasing 10% Total Base Rent Annualized or More of Rentable for the Twelve Rental Rate Square Footage per Months Ended as of Property as of December 31, December December 31, 1998 and Property Name 1998 (b) (000's) 31, 1998 (c) Lease Expiration Date - - ------------------------------- ---------------- ------------ ---------------------------------------------------- 1255 Broad Street 138 19.91 Charles M. Cummins & Elliot Shack (75%) - 2/06 Menno Travel Services (14%) - 10/03 2512 Metropolitan Drive - 0.00 Bucks County Midweek, Inc. (40%) - 6/03 William Adams II, Inc. (30%) - 5/99 Philadelphia Newspapers, Inc. (17%) - 10/00 Stolarik Donohue Associates, Inc. (14%) - 3/00 3000 West Lincoln Drive 388 14.14 Abo, Uris & Allenburger (20%) - 1/99 645 Stewart Avenue 34 9.93 Hearst Business Communications (100%) - 12/03 3000 Cabot Boulevard 543 17.52 Geraghty & Miller (27%) - 4/03 Fidelity Bond & Mortgage Co. (15%) - 10/01 Luigi Bormioli Company (15%) - 7/04 Dabney I 45 5.45 Media Post (25%) - 1/00 Visual Aids (25%) - 5/01 Ellis Flooring (23%) - 1/07 Durfee Thurber (15%) - 5/99 Unisource Worldwide, Inc. (13%) - 6/99 Dabney VII 56 7.40 Delmar Communications (22%) - 7/02 McKinney & Company (20%) - 9/99 Canning Corporation (15%) - 12/01 Xerox Corporation (15%) - 6/02 Pharmaco International (14%) - 1/04 & 8/04 Suitable for Framing 914%) - 8/01 Dabney A-2 54 8.57 Pharmaco LSR International, Inc. (100%) - 8/04 7010 Snowdrift Way 103 14.43 Vitalink Pharmacy (61%) - 11/02 Anderson BDG Corporation (39%) - 6/03 168 Franklin Corner Drive 227 14.85 Pennsbury Family Medical (16%) - 1/00 Crawford & Company (14%) - 11/99 Dr. Belden (12%) - 5/01 2260 Butler Pike 428 18.59 Information Resources (66%) - 12/00 Ostroff, Fair & Company P.C. (25%) - 7/04 Alarmex Distributors (10%) - 8/99 Main Street - Promenade 360 12.96 West Jersey Hospital (25%) - 3/00 Morgenstern (14%) - 5/99 First Union Bank (10%) - 2/99 Arboretum VII 112 12.79 Bell Industries (50 %) - 12/02 B.F. Saul Mortgage Company (20%) - 8/99 Jess Duboy Advertising (10%) - 2/02 120 West Germantown Pike 387 18.34 Clair Odell Insurance Agency (82%) - 7/01 Kleinert's, Inc. (13%) - 10/01 Dabney IX 64 8.13 First Image Management (28%) - 7/01 A&J Telephone Systems (21%) - 11/02 Business Equipment (14%) - 7/01 650 Dresher Road 369 16.19 GMAC (100%) - 5/03 655 Business Center Drive 319 18.48 Letven, Diccicco & Battista, Inc. (54%) - 9/07 Paccar Financial Corporation (22%) - 6/02 Legg Mason Wood Walker (14%) - 5/04 Dabney VIII 52 6.33 United Power Corporation (100%) - 4/02 2260/70 Cabot Boulevard 274 13.53 Sager Electrical (14%) - 10/99 Manufacturers Survey (13%) - 12/01 Terminix International (13%) - 10/02 Pronet Incorporated (10%) - 3/02 304 Harper Drive 114 17.09 Semcor (23%) - 12/99 Legg Mason Wood Walker (20%) - 6/02 Pro - Tech Resource (17%) - 5/99 Tab Products (11%) - 5/99 Costanza Spector Clauser Architects (10%) - 9/01 2407 Park Drive 210 6.87 Barakos-Landino, Inc. (49%) - 10/00 AGIS Security Insurance Company (45%) - 10/00 468 Creamery Way 292 14.76 Franciscan Health Systems (82%) - 6/99 American Day Treatment (18%) - 6/00 80 Sky;ine Drive 69 10.74 Automated Financial System (68%) - 1/99 Chester County District Court - (32%) - 1/99 120 Express Street 40 9.42 Tyz - All Plastics, Inc. (55%) - 11/08 Henderson & Bodwell (45%) - 9/02 Four B Eves Drive 310 15.49 ISO Commercial Risk (66%) - 6/00 Global Industries, Inc. (17%) - 7/00 Banc One Financial (16%) - 4/01 1150 Berkshire Boulevard 395 15.10 Berks Cardiologists, Ltd. (20%) - 12/98 Ervin Levin, D.D.S. (12%) - 3/03 Jessee L. Pleet, Esq. (10%) - 6/00 Berkshire Psychiatric & Behavioral Health (10%) - 4/99 140 West Germantown Pike 315 18.17 Healthcare, Inc. (46%) - 9/99 National Health Equity (20%) - 5/99
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Net Percentage Rentable Leased as of Year Square December Property Name Location State Built Feet 31, 1998 (a) - - ---------------------------------------------------------- ----- ------ ------- ------------ 110 Voice Road Carle Place NY 1963 25,920 100.0% 815 East Gate Drive Mt. Laurel NJ 1986 25,500 87.0% 2405 Park Drive Harrisburg PA 1985 25,495 89.6% 817 East Gate Drive Mt. Laurel NJ 1986 25,351 100.0% 100 Voice Road Carle Place NY 1963 25,000 100.0% 800 Corporate Circle Drive Harrisburg PA 1979 24,779 92.5% Four A Eves Drive Marlton NJ 1987 24,631 80.8% 1 Foster Avenue Gibbsboro NJ 1972 24,255 100.0% Dabney III Richmond VA 1986 23,850 100.0% 180 Central Ave. / 2 Engineers Ln. Farmingdale NY 1960 23,715 91.5% 4 Foster Avenue Gibbsboro NJ 1974 23,372 100.0% EM - Venture I - Keystone Park Bristol PA 1985 22,500 0.0% 10 Skyline Drive Plainview NY 1960 22,200 93.4% 2005 Cabot Boulevard Langhorne PA 1985 22,000 100.0% 7 Foster Avenue Gibbsboro NJ 1983 21,843 90.2% 2490 Boulevard of the Generals King Of Prussia PA 1975 20,600 100.0% 10 Foster Avenue Gibbsboro NJ 1983 18,941 98.5% 111 Ames Court Plainview NY 1959 18,000 97.1% 600 Corporate Circle Drive Harrisburg PA 1978 17,858 100.0% 11 Commercial Street Plainview NY 1961 17,548 100.0% 500 Nationwide Drive Harrisburg PA 1977 16,015 100.0% 1720 Walton Road Blue Bell PA 1968 15,918 39.6% 2110 Tomlynn Street Richmond VA 1965 15,910 100.0% Dabney A-1 Richmond VA 1984 15,389 100.0% 8 Engineers Lane Farmingdale NY 1963 15,000 100.0% 305 Harper Drive Mt. Laurel NJ 1979 14,980 100.0% 748 Springdale Drive Exton PA 1986 13,844 100.0% 2404 Park Drive Harrisburg PA 1983 11,000 100.0% 2401 Park Drive Harrisburg PA 1984 10,074 100.0% 19 Engineers Lane Farmingdale NY 1962 10,000 100.0% 5 U.S. Avenue Gibbsboro NJ 1987 5,000 100.0% 50 East Clementon Road Gibbsboro NJ 1986 3,080 100.0% 200 Nationwide Drive Harrisburg PA 1978 2,500 100.0% 5 Foster Avenue Gibbsboro NJ 1968 2,000 50.0% TOTAL ALL PROPERTIES / WEIGHTED AVG. 18,833,986 93.6% ========== ======
Average Tenants Leasing 10% Total Base Rent Annualized or More of Rentable for the Twelve Rental Rate Square Footage per Months Ended as of Property as of December 31, December December 31, 1998 and Property Name 1998 (b) (000's) 31, 1998 (c) Lease Expiration Date - - ----------------------------------- ---------------- ------------ ---------------------------------------------------- 110 Voice Road 35 7.92 Scales Air Compressor Corp. (100%) - 12/01 815 East Gate Drive 67 13.73 Semcor (54%) - 1/00 Wyle Laboratories (33%) - 11/01 2405 Park Drive 224 15.39 Consolidated Rail Corporation (34%) - 9/01 R.H. Ho;sberg & Company (11%) - 8/02 United of Omaha Life Insurance Co. (10%) - 10/02 817 East Gate Drive 80 10.40 Landress Co. - Emtec (62%) - 3/01 Concentra (38%) - 5/04 100 Voice Road 50 10.51 First Lafayette Acquisition (100%) - 12/00 800 Corporate Circle Drive 196 13.92 Dame Media Incorporated (28%) - 8/02 Andrews, Sacunas & Saline Office (22%) - 7/02 Leukemia Society of America (13%) - 9/01 The Harrisburg Symphony (11%) - 6/03 Four A Eves Drive 210 14.86 Advanced Systems (23%) - 4/99 Eastern American (18%) - 9/02 Benefit Resources (17%) - 2/99 HIP Health Plan of New Jersey (13%) - 6/99 Columbia Investment Builders (10%) - 1/99 1 Foster Avenue 105 4.32 West Jersey Health System (100%) - 3/03 Dabney III 37 5.89 United Power Corporation (42%) - 8/01 Unijax (30%) - 1/00 Swinging Door (15%) - 10/03 Graphic Productions (14%) - 10/03 180 Central Ave. / 2 Engineers Ln. 32 6.06 Yaleet, Inc. (92%) - 6/05 4 Foster Avenue 179 8.25 Harbor Laundry, Inc. (62%) - 8/00 Medical Data Exchange, Inc. (27%) - 2/99 Mr. William Feinberg (11%) - 2/00 EM - Venture I - Keystone Park -- 10 Skyline Drive 37 7.46 Cohr, Inc. (40%) - 10/03 Cold Spring Harbor Laboratories (28%) - 5/00 MML Group, Inc. & Ross Printing Co., Inc. (26%) - 1/00 2005 Cabot Boulevard 215 10.84 Ecogen (100%) - 3/00 7 Foster Avenue 309 15.50 West Jersey Health System (45%) - 1/00 Choice Point Services (35%) - 4/01 2490 Boulevard of the Generals 295 14.65 Commonwealth of Pennsylvania (100%) - 6/01 10 Foster Avenue 249 14.82 Dolphin, Inc. (35%) - 6/99 Ruttland Homes of New Jersey (29%) - 5/99 111 Ames Court 31 8.21 Centroid, Inc. (45%) - 4/05 Alarmguard, Inc. (41%) - 12/00 TitleServ, Inc. (11%) - 7/99 600 Corporate Circle Drive 173 14.94 Dame Media, Incorporated (100%) - 7/02 11 Commercial Street 33 9.74 Shore Pharmeceutical Providers, Inc. (100%) - 6/05 500 Nationwide Drive 133 13.02 Conrad M. Siegel, Incorporated (79%) - 12/99 David M. Griffith & Associates (21%) - 8/99 1720 Walton Road 38 18.80 Inkine Pharmaceutical (24%) - 1/01 CIC Systems (16%) - 2/01 2110 Tomlynn Street 19 4.50 Reynolds Metals (100%) - 2/00 Dabney A-1 45 10.87 PDD Pharmaco, Inc. (55%) - 8/04 Conquest Communications (45%) - 5/02 8 Engineers Lane 26 8.26 Fonar Corporation (100%) - 2/99 305 Harper Drive 25 7.29 The Jerome Group (100%) - 9/02 748 Springdale Drive 216 16.51 Automated Financial System (68%) - 1/99 Chester County District Court - (32%) - 1/99 2404 Park Drive 83 12.40 Tracking Systems Corporation (65%) - 3/04 Rogers - American Co., Inc. (35%) - 8/00 2401 Park Drive 93 14.17 Federal Deposit Insurance Company (46%) - 6/00 Moore Business Forms, Inc. (44%) - 6/99 Judy Carhart, M.D. (10%) - 10/01 19 Engineers Lane 17 6.50 First Commercial Asset Management (100%) - 1/03 5 U.S. Avenue 18 3.60 Mcfadden Catering, Inc. (100%) - 12/03 50 East Clementon Road 121 39.17 Corestates Financial Corporation (100%) - 10/02 200 Nationwide Drive 39 24.00 Fulton Bank (100 %) - 8/03 5 Foster Avenue - 0.00 Borough of Gibbsboro - Police Station (50%) - 11/02 TOTAL ALL PROPERTIES / WEIGHTED AVG. 162,610 $14.30 ======= =====
-26- (a) Calculated by dividing net rentable square feet included in leases signed on or before December 31, 1998 at the property by the aggregate net rentable square feet of the Property. (b) "Total Base Rent" for the twelve months ended December 31, 1998 represents base rents received during such period, excluding tenant reimbursements, calculated in accordance with generally accepted accounting principles (GAAP) determined on a straight-line basis. Tenant reimbursements generally include payment of real estate taxes, operating expenses and common area maintenance and utility charges. (c) "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, 1998 (without giving effect to free rent or scheduled rent increases that would be taken into account under GAAP) plus the 1998 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, 1998. In both cases the annualized rental rate is divided by the total square footage leased as of December 31, 1998 without giving effect to free rent or scheduled rent increases that would be taken into account under GAAP. (d) The data reflected for these properties are presented on a consolidated basis. (e) The net rentable square feet for these properties is presented on a consolidated basis. (f) These properties are under redevelopment and are excluded from the percentages for Weighted Average Percentage Leased and Average Annualized Rental Rate information. (g) This property is subject to a ground lease. -27- The table set forth below shows certain information regarding rental rates and lease expirations for the Properties at December 31, 1998, assuming none of the tenants exercises 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 (a) Leases Leases Total - - --------------------- ---------- -------------- ------------ ------------- -------------- ----------- 1999 485 2,846,524 $ 34,633,485 $ 12.17 14.0% 14.0% 2000 313 2,456,451 30,135,284 12.27 12.2% 26.2% 2001 326 2,822,726 39,112,947 13.86 15.8% 42.0% 2002 225 2,448,062 32,683,703 13.35 13.2% 55.2% 2003 200 1,529,785 24,890,904 16.27 10.1% 65.2% 2004 61 755,774 13,411,960 17.75 5.4% 70.7% 2005 52 1,188,875 20,123,516 16.93 8.1% 78.8% 2006 21 588,277 7,695,712 13.08 3.1% 81.9% 2007 17 532,415 8,109,527 15.23 3.3% 85.2% 2008 16 575,855 8,939,694 15.52 3.6% 88.8% 2009 and thereafter 65 1,715,911 27,771,495 16.18 11.2% 100.0% ---------- -------------- ------------- ------------- -------------- 1,781 17,460,655 $ 247,508,227 $ 14.18 100.0% ========== ============== ============== ============= ==============
(a) "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. At December 31, 1998, the Properties were leased to 1,357 tenants that are engaged in a variety of businesses. The following table sets forth information regarding leases at the Properties with the 20 largest tenants based upon Annualized Escalated Rent from the Properties as of December 31, 1998: -28-
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 - - -------------------------------------------- ------- ------ ------ ----------- -------------- ------------ State of New Jersey 3 (c) 383,616 2.2% $ 9,954 3.5% First USA Bank 26 (d) 348,133 2.0% 7,324 2.6% Bell Atlantic 9 (e) 393,948 2.3% 7,129 2.5% General Electric 4 (f) 402,867 2.3% 5,616 2.0% Lockheed Martin 8 (g) 389,508 2.2% 4,793 1.7% Travelers 8 (h) 274,010 1.6% 4,731 1.7% GRC International 1 124 166,597 1.0% 4,343 1.5% Beneficial Corporation 22 (i) 244,080 1.4% 4,330 1.5% Penske Truck Leasing 12 84 206,634 1.2% 3,820 1.3% Parsons Corporation 4 75 200,000 1.1% 3,677 1.3% IBM Corporation 5 (j) 167,811 1.0% 3,404 1.2% The Hartford 4 (k) 158,961 0.9% 2,902 1.0% Decision One 2 (l) 145,768 0.8% 2,789 1.0% Nations Bank 6 17 82,394 0.5% 2,513 0.9% Computer Sciences, Corporation 4 (m) 111,733 0.6% 2,322 0.8% Centeon Management 3 (n) 110,736 0.6% 2,279 0.8% Kimberly Clark Corporation (Scott Paper) 1 84 93,014 0.5% 2,136 0.7% Aetna Life Insurance Company 1 42 104,505 0.6% 1,947 0.7% Consolidated Rail Corporation (Conrail) 2 (o) 78,210 0.4% 1,894 0.7% Reliance Insurance Company 6 (p) 83,979 0.5% 1,845 0.6% ------- ---------- ---------- ------------- -------------- ------------- Consolidated Total/Weighted Average 131 72 4,146,504 23.7% $ 79,748 28.0% ======= ========== ========== ============= ============== =============
(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, 1998 multiplied by 12. Escalated Rent represents fixed base rental amounts plus pass-throughs of operating expenses, including electricity costs. The Company estimates operating expenses pass-throughs based on historical amounts and comparable market data. (c) Consists of three leases: a lease representing 222,987 net rentable square feet that expires in September 2009, a lease representing 117,428 net rentable square feet that expires in August 2008 and a lease representing 43,201 net rentable square feet that expires in September 2002. (d) Consists of twenty six leases: twenty three leases representing 274,531 net rentable square feet that expire in January 2012, two leases representing 53,894 net rentable square feet that expire in June 2010 and a lease representing 19,708 net rentable square feet that expires in September 2002. (e) Consists of nine leases: three leases representing 49,593 net rentable square feet that expire in July 2000, a lease representing 172,448 net rentable square feet that expires in April 2001, a lease representing 74,728 net rentable square feet that expires in July 2006, a lease representing 17,179 net rentable square feet that expires in October 1999, two leases representing 80,000 net rentable square feet that expire in November 2003 and a roof lease that expires in February 2001. (f) Consists of four leases: a lease representing 132,000 net rentable square feet that expires in September 2001, a lease representing 61,102 net rentable square feet that expires in September 2003, a lease representing 208,774 net rentable square feet that expires in December 2007 and a lease representing 991 net rentable square feet that expires in June 1999. (g) Consists of eight leases: a lease representing 158,000 net rentable square feet that expires in September 2002, a lease representing 112,905 net rentable square feet that expired in January 1999, 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, a lease representing 12,498 net rentable square feet that expires in June 2002, a lease representing 16,041 net rentable square feet that expires in May 2000 and a lease representing 31,078 net rentable square feet that expires in April 2002. (h) Consists of eight leases: a lease representing 47,067 net rentable square feet that expires in February 2002, a lease representing 59,844 net rentable square feet that expired in January 1999, three leases that represent 47,988 net rentable square feet that expire in December 2001, a lease representing 71,312 net rentable square feet that expires in January 2004 and two leases representing 47,799 net rentable square feet that expired in February 1999. (i) Consists of twenty two leases: twenty one leases that represent 238,028 net rentable square feet in the aggregate that expire in January 2010 and a lease representing 6,052 net rentable square feet that expired in January 1999. -29- (j) Consists of five leases: a lease representing 17,110 net rentable square feet that expires in March 2001, two leases representing 5,692 net rentable square feet in the aggregate that expire in October 1999, and two leases representing 145,009 net rentable square feet in the aggregate that expire in August 1999. (k) Consists of four leases: a lease that represents 67,481 net rentable square feet that expires in December 2004, two leases that represent 76,480 net rentable square feet that expire in December 2007 and a lease that represents 15,000 net rentable square feet that expires in May 1999. (l) Consists of two leases: a lease representing 109,800 net rentable square feet that expires in December 2005 and a lease representing 35,968 net rentable square feet that expires in June 2003. (m) Consists of four leases: a lease representing 47,176 net rentable square feet that expires in May 2002, a lease representing 36,830 net rentable square feet that expires in November 2001, a lease representing 15,000 net rentable square feet that expires in October 2000 and a lease representing 12,727 net rentable square feet that expires in August 2003. (n) Consists of three leases: two leases that represent 95,361 net rentable square feet that expire in October 2002 and a lease that represents 15,375 net rentable square feet that expires in December 2003. (o) Consists of two leases: a lease representing 69,511 net rentable square feet that expires in June 2000 and a lease representing 8,699 net rentable square feet that expires in September 2001. (p) Consists of six leases: two leases representing 68,841 net rentable square feet that expire in October 2002, two leases representing 4,907 net rentable square feet that expire in January 2003, a lease that represents 3,848 net rentable square feet that expires in June 2002, and a lease that represents 6,383 net rentable square feet that expires in February 2000. Real Estate Ventures Since January 1, 1997, the Company, through the Operating Partnership and subsidiaries wholly-owned by the Operating Partnership, has entered into nine Real Estate Ventures. On September 19, 1997, the Company acquired a 50% interest in a newly-formed limited liability company that developed a three-story office property in Newark, Delaware containing approximately 150,000 net rentable square feet. Development of this property was completed in May 1998 and Computer Sciences, Corporation has leased the entire facility through May 31, 2007. The Company's equity contribution to this company was approximately $2.0 million. Total project costs were approximately $17.0 million. Project costs have been financed primarily through a $13.1 million institutional loan. On September 19, 1997, the Company also acquired a 50% membership interest in a newly-formed limited liability 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 Company'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 Company acquired a 65% general partner interest in a newly-formed limited partnership that completed development of an approximately 86,000 net rentable square foot, four-story office building in West Conshohocken, Pennsylvania during the fourth quarter of 1998. Total project costs were approximately $17.0 million. The Company's equity contribution to this partnership was approximately of $5.8 million. Project costs have been financed primarily through an $11.0 million institutional loan. On November 4, 1997, the Company also acquired a 65% general partner interest in a newly-formed limited partnership that holds an option to purchase approximately 9.3 acres of undeveloped land in West Conshohocken, Pennsylvania for approximately $3.2 million. The Company believes this land can accommodate an office building containing approximately 210,000 net rentable square feet. The term of -30- the option expires on November 2, 1999. The Company's equity contributions to this partnership through December 31, 1998 were approximately $1.3 million, $348,000 of which was used by the limited partnership to acquire the above referenced option. As part of the November 4, 1997 transactions, the Company also acquired the right to become a 35% general partner in an existing limited partnership that owns a four-story office property containing approximately 83,000 net rentable square feet in Conshohocken, Pennsylvania. On May 11, 1998, the Company acquired such 35% interest for approximately $2.7 million. As of December 31, 1998, this property was fully leased to five tenants. On December 31, 1997, the Company acquired a 50% general partner interest in a newly-formed general 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. Redevelopment of the office building was completed in the first quarter of 1999 for a total cost of approximately $4.8 million. The Company's equity contribution to this partnership was approximately $2.6 million. Project costs have been financed primarily through a $6.0 million institutional loan. On February 3, 1998, the Company 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 210,000 net rentable square feet. The Company acquired its interest through a loan and equity contribution aggregating approximately $4.2 million. Architectural plans for the development of the land have been substantially 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 February 25, 1998, the Company acquired a 50% general partner interest in a newly-formed general 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 $37.0 million. The Company has agreed to contribute approximately $5.4 million to the partnership upon receipt of a construction loan. Architectural plans for the development of the land have been substantially completed and final land development approval has been received. Development of the land is subject to receipt of a construction loan. On November 30, 1998, the Company acquired a 65% general partnership interest in a newly-formed limited partnership that intends to develop a four-story office property in Conshohocken, Pennsylvania. The Company expects this property to contain approximately 112,000 net rentable square feet upon completion. The Company has committed to make an equity investment of $6.4 million to the partnership. Total project costs, which the partnership is financing through a construction loan, are estimated to be approximately $18.7 million, with construction scheduled to be completed during the first quarter of 2000. The Company has guaranteed repayment of that portion of the construction loan in excess of its equity commitment. Item 3. Legal Proceedings The Company is involved from time to time in litigation on various matters, which include disputes with tenants and disputes arising out of agreements to purchase properties. Given the nature of the Company's business activities, these lawsuits are considered routine to the conduct of its business. The result of any particular lawsuit cannot be predicted, because of the very nature of litigation, the litigation process and its adversarial nature, and the jury system. As of the date of this filing, the Company is a defendant in case in which the plaintiffs allege that the Company breached its obligation to purchase a portfolio of properties for approximately $83.0 million. The plaintiffs' allegations assert claims for reformation, breach of contract, breach of duty of good faith -31- and fair dealing, fraud, violation of the New Jersey Consumer Fraud Statute and unjust enrichment. The Company intends to oppose the litigation vigorously. The Company believes that plaintiff failed to satisfy the conditions precedent to the Company's obligation to close under the agreement and has moved to dismiss all of the plaintiff's claims. As of the date of this filing, the court has not ruled on the Company's motion to dismiss plaintiffs' claims, and discovery has not commenced. 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, 1998. 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 23, 1999, there were approximately 317 holders of record of the Common Shares. On March 23, 1999, the last reported sale price of the Common Shares on the NYSE was $16 5/8. 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. Share Price Share Price Distributions High Low Declared For Quarter ---- --- -------------------- 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 First Quarter 1998 $26 3/8 $23 1/16 $0.37 Second Quarter 1998 $24 5/16 $21 1/16 $0.38 Third Quarter 1998 $23 1/8 $16 1/4 $0.38 Fourth Quarter 1998 $19 $16 1/4 $0.39 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 and such other factors as the Board of Trustees deems relevant. Summarized below is information regarding the sale by the Company of securities during 1998 and through the date of this Annual Report on Form 10-K that were not registered under the Securities Act of 1933. During 1998, the Company issued an aggregate of 303,821 Common Shares upon the redemption of 303,821 Class A Units: January 1, 1998 (252,387 Common Shares); June 22, 1998 (50,000 Common Shares); and June 30, 1998 (1,434 Common Shares). The redemptions were effected by the Company in accordance with the Amended and Restated Agreement of Limited Partnership of the Operating Partnership, as amended (the "Partnership Agreement"), and no cash proceeds were received by the Company in connection with such redemptions. -32- On May 20, 1998, the Company issued an aggregate of 1,248 Common Shares to three members of the Company's Board of Trustees in payment of one-half of the annual trustee fee payable to non-employee Trustees of the Company. On September 28, 1998, the Company issued 750,000 shares of the Company's 7.25% Series A Cumulative Convertible Preferred Shares of Beneficial Interest ("Series A Preferred Shares"), which are currently convertible into 1,339,285 Common Shares, as part of the acquisition price for the Lazard Portfolio. As partial consideration for the purchase price of certain property acquisitions on the following dates during 1998, the Operating Partnership issued an aggregate of 1,754,763 Class A Units which are exchangeable for an equal number of Common Shares: March 31, 1998 (153,036 Class A Units); May 8, 1998 (390,364 Class A Units); October 6, 1998 (1,127,895 Class A Units); and December 31, 1998 (83,468 Class A Units). On September 28, 1998, the Operating Partnership issued an aggregate of 1,550,000 Series B Preferred Units which after September 27, 1999 will be convertible into 2,767,857 Common Shares as part of the acquisition for the Lazard Portfolio. If the market price of the Common Shares does not exceed $23.00 during the 60-day trading day period ending on December 31, 2002, then the Series A Preferred Shares and Series B Preferred Units, if not previously converted, will become convertible into an aggregate of 1,415,094 and 2,924,528 Common Shares, respectively. 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 transactions not involving public offerings. -33- Item 6. Selected Financial Data (in thousands, except per Common Share data and number of properties)
Year Ended December 31, 1998 1997 1996 1995 1994 ----------------------------------------------------------------------------- Operating Results Total revenue $ 192,861 $ 61,060 $ 10,030 $ 3,666 $ 4,192 Income (loss) from continuing operations 33,025 15,001 (162) (824) (1,841) Income (loss) from continuing operations - Per Common Share-Basic 0.90 0.96 (0.44) (1.33) (0.64) Income (loss) from continuing operations - Per Common Share-Diluted 0.89 0.95 (0.44) (1.33) (0.64) Cash distributions declared per Common Share 1.52 1.44 0.82 1.65 4.71 Balance Sheet Data Real estate investments, net of accumulated depreciation $ 1,840,618 $ 563,557 $ 151,901 $ 13,709 $ 13,948 Total assets 1,911,680 621,481 178,326 17,105 17,873 Total indebtedness 1,000,560 163,964 36,644 8,931 6,899 Total liabilities 1,040,828 181,576 43,558 9,761 8,684 Minority interest 127,198 14,377 6,398 - - Convertible preferred shares 37,500 - 26,444 - - Beneficiaries' equity 706,154 425,528 101,926 7,344 9,189 Other Data Funds from Operations $ 84,569 $ 30,035 $ 2,589 $ 537 $ (533) Cash flows provided by (used in): Operating activities 69,241 33,572 2,568 497 (628) Investing activities (898,337) (418,256) (35,401) (701) 9,559 Financing activities 812,729 395,847 50,272 (722) (9,635) Property Data Number of properties owned at period end 272 117 37 4 4
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, 1998, 1997 and 1996. This Annual Report on Form 10-K contains forward-looking statements for purposes of the Securities Act of 1933 and the Securities Exchange Act of 1934 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. 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 transactions structured to increase cash available for distribution and maximize shareholder value. -34- The Company continued its growth in 1998 by purchasing 153 office, industrial and mixed-use properties containing approximately 11.6 million net rentable square feet for an aggregate purchase price of approximately $1.3 billion. The 1998 acquisitions expanded the Company's market share in the Suburban Philadelphia Office and Industrial Market and expanded the Company's market presence into several other markets within the Mid-Atlantic Region. The acquisitions occurred throughout the year through 12 separate transactions. Three of the 12 transactions aggregated approximately $966.0 million of the $1.3 billion aggregate purchase price of all the 1998 acquisitions. The first of the three transactions, which closed on January 5, 1998, was a $229.1 million portfolio purchase of 23 properties containing approximately 2.0 million net rentable square feet. The portfolio strengthened the Company's market share in the Philadelphia suburbs and established operating platforms in Northern New Jersey, Delaware and Maryland. The second major portfolio acquisition closed on March 31, 1998. This portfolio, which was acquired for $137.8 million, contained six properties containing approximately 933,000 net rentable square feet and established the Company's market presence in Central New Jersey. The third major portfolio acquisition closed on September 28, 1998 and significantly broadened the Company's holdings by adding 66 properties, containing approximately 5.5 million square feet, located in the Philadelphia suburbs; southern New Jersey; Allentown, Pennsylvania; Richmond, Virginia; and Northern Virginia. The aggregate purchase price was approximately $599.1 million. The remainder of the 1998 acquisitions increased the Company's market share in suburban Philadelphia and expanded the Company's presence in the Wilmington, Delaware; Harrisburg, Pennsylvania; Northern New Jersey; and Long Island, New York markets. The Company completed the development of three properties in 1998 containing approximately 288,177 net rentable square feet. The Company also sold an office property located in Ohio containing approximately 156,175 net rentable square feet for a net sales price of approximately $14.7 million. As of December 31, 1998, the Company's portfolio consisted of 201 office properties, 70 industrial properties and one mixed use property totaling approximately 18.8 million net rentable square feet. The 1998 acquisitions were financed through a combination of: proceeds received from four public offerings of an aggregate of approximately 13.3 million Common Shares which raised net proceeds of approximately $301.0 million; borrowings under the Company's credit facilities; the issuance of approximately 1.8 million Class A Units in the Operating Partnership valued at approximately $41.0 million; the issuance of 1,550,000 Series B Preferred Units with an aggregate stated value of $77.5 million; and the issuance of 750,000 Series A Preferred Shares with an aggregate stated value of $37.5 million. 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 rent increases in its current portfolio, as well as from additional acquisitions. RESULTS OF OPERATIONS Comparison of the Year Ended December 31, 1998 to the Year Ended December 31, 1997 Net income before extraordinary item for the year ended December 31, 1998 was $35.0 million compared with net income before extraordinary item of $15.0 million for the corresponding period in 1997. The increase in net income was primarily attributable to the operating results contributed by the 235 properties acquired from January 1, 1997 through December 31, 1998. -35- Revenues, which include rental income, recoveries from tenants and other income, increased from $61.1 million for the year ended December 31, 1997 to $192.9 million for the corresponding period in 1998. The increase was primarily a result of property acquisitions and, to a lesser extent, increased occupancy. The impact of straight-line rent adjustments increased revenues by $6.3 million for the year ended December 31, 1998 and $1.7 million for the year ended December 31, 1997. Property operating expenses, depreciation and amortization and management fees increased from $38.0 million for the year ended December 31, 1997 to $117.2 million for the corresponding period in 1998. The increase was primarily a result of property acquisitions. Property level operating income for the 117 properties owned as of December 31, 1997 increased from $38.6 million for the year ended December 31, 1997 to $40.6 million for the corresponding period in 1998, an increase of 5.2%. Occupancy for these 117 properties increased from 91% to 95% driving revenue growth of 5.0% and causing expenses to increase by 4.7%. During the year ended December 31, 1998, 91 leases representing 516,652 square feet of office and industrial space commenced at an average rate per square foot of $15.47, which was 13.8% higher than the average rate per square foot on the expired leases. Interest expense increased from $7.1 million for the year ended December 31, 1997 to $36.9 million for the corresponding period in 1998. The increase in interest expense was primarily a result of additional indebtedness incurred to finance certain of the Company's acquisitions. Administrative expenses increased from $0.7 million for the year ended December 31, 1997 to $1.7 million for the corresponding period in 1998. This increase was primarily a result of management and staffing additions to support the Company's growth. Minority interest primarily represents the portion of the Operating Partnership which is not owned by the Company. 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 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. 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. LIQUIDITY AND CAPITAL RESOURCES Cash Flows During the year ended December 31, 1998, the Company generated $69.2 million in cash flow from operating activities. Other sources of cash flow consisted of (i) $566.0 million in net additional borrowings under the Company's credit facilities, (ii) $301.0 million in net proceeds from share issuances, (iii) $14.7 million from a property sale and (iv) $19.3 million in additional mortgage notes payable. During the year ended December 31, 1998, the Company used its cash to (i) finance the cash portion ($878.5 million) of the acquisition cost of 153 properties, (ii) repay borrowings under its credit facilities of $808.4 million, (iii) invest $5.0 million in unconsolidated real estate ventures, (iv) fund capital expenditures and leasing commissions of $26.3 million, (v) pay distributions to shareholders and minority -36- partners in the Operating Partnership totaling $52.4 million, (vi) repay mortgage notes payable of $14.7 million, (vii) pay other debt costs of $4.9 million and (viii) repurchase Common Shares for $1.7 million. Capitalization During the first quarter of 1998, the Company refinanced its $150.0 million secured credit facility ("1997 Credit Facility") with a $330.0 million unsecured credit facility (the "1998 Credit Facility"). The interest rate was reduced by 37.5 to 60 basis points depending on the Company's degree of leverage. Approximately $858,000 of unamortized deferred financing costs related to the 1997 Credit Facility were expensed in the first quarter of 1998 and were classified as an extraordinary item on the statement of operations. During the second quarter of 1998, the Company entered into an additional $150.0 million unsecured credit facility (the "Additional Facility") to facilitate certain of the Company's property acquisitions. The interest rate on the Additional Facility was equal to LIBOR plus 150 basis points or, at the Company's option, the Prime Rate plus 25 basis points. Amounts repaid under the Company's Additional Facility were not subject to reborrowing. During the third quarter of 1998, the Company replaced the 1998 Credit Facility with a $550.0 million unsecured credit facility (the "New 1998 Credit Facility"). The interest rate borne on the New 1998 Credit Facility was LIBOR plus 150 basis points initially, subject to certain adjustments based on the Company's leverage. The New 1998 Credit Facility matures in September 2001. Approximately $1.1 million of unamortized deferred financing costs related to the 1998 Credit Facility were expensed in the third quarter of 1998 and were classified as an extraordinary item on the statement of operations. Also during the third quarter of 1998, the Company replaced the Additional Facility with the New Additional Facility with a borrowing capacity of $150.0 million. The New Additional Facility bears interest at LIBOR plus 200 basis points and is payable in full on March 31, 1999. As of December 31, 1998, the Company had approximately $1.0 billion of debt outstanding, consisting of mortgage loans totaling $319.2 million and borrowings under the New 1998 Credit Facility and the New Additional Facility totaling $681.3 million. The mortgage loans mature between January 1999 and July 2027. As of December 31, 1998, the Company had $18.7 million of availability remaining under the New 1998 Credit Facility and had no remaining availability under the New Additional Facility. For the year ended December 31, 1998, the weighted average interest rate under the Company's credit facilities was 7.05%, and the weighted average interest rate for borrowings under mortgage notes payable was 7.63%. In January 1999, the Company obtained a $119.0 million, five year loan from two financial institutions. The loans have a fixed interest rate of 7.18% and are secured by four properties. The proceeds were used to reduce the New Additional Facility by $80.0 million and to fund working capital. In March 1999, the Company obtained a $75.0 million, three year loan. The loan has a floating interest rate of LIBOR plus 250 basis points and is secured by five properties. The net proceeds were primarily used to repay the remaining $70.0 million borrowed under the New Additional Facility. As of December 31, 1998, the Company's debt to market capitalization ratio was 54.8%. As a general policy, the Company intends, but is not obligated, to adhere to a policy of maintaining a long-term average debt to market capitalization ratio of no more than 50%. The Company expects to reduce its current leverage through a combination of asset sales, formation of joint venture transactions and the issuance of preferred securities in the next six to twelve months. -37- During the year ended December 31, 1998, the Company sold an aggregate 13.3 million Common Shares for net proceeds of approximately $301.0 million pursuant to four public offerings. The proceeds were contributed to the Operating Partnership in exchange for 13.3 million units of general partnership interest in the Operating Partnership. During the third quarter of 1998, the Company's Board of Trustees authorized a share repurchase program allowing the Company to repurchase up to 2,000,000 of its outstanding Common Shares. No time limit has been placed on the duration of the share repurchase program. During the third quarter of 1998, the Company repurchased 86,744 of its Common Shares from the public at share prices ranging from $17.75 per share to $20.125 per share for a total purchase price of approximately $1.7 million. The repurchased shares remain authorized, but are no longer issued and outstanding. During the year ended December 31, 1998, as consideration for certain of the Company's property acquisitions, (i) the Operating Partnership issued 1,550,000 Series B Preferred Units with a stated value of $77.5 million, (ii) the Operating Partnership issued 1,754,763 Class A Units with an aggregate value of approximately $41.0 million and (iii) the Company issued 750,000 Series A Preferred Shares with a stated value of $37.5 million, the proceeds of which were contributed by the Company to the Operating Partnership in exchange for 750,000 Series A Preferred Mirror Units. Short and Long Term Liquidity The Company believes that its cash flow from operations and current financing alternatives are adequate to fund its short-term liquidity requirements for 1999. 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. During the first quarter of 1999, the Company used the net proceeds from two secured financings to repay the balance of the New Additional Facility and for other working capital requirements. On December 18, 1998, the Board of Trustees declared a quarterly dividend distribution of $0.39 per share, paid on January 15, 1999 to shareholders of record as of December 28, 1998. The increase from $0.38 to $0.39 in the fourth quarter was the seventh increase during the past ten quarters. Total distributions for 1998 were $1.52 per share compared to $1.44 in 1997, representing an increase of over 5.6%. As of December 31, 1998, the Company had entered into guaranties, and agreements contemplating the provision of guaranties, for the benefit of unconsolidated real estate ventures, aggregating approximately $16.8 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 acquisition, development, investments in unconsolidated real estate ventures, scheduled debt maturities, renovations, expansions and other non-recurring capital improvements, through borrowings under the New 1998 Credit Facility and other long-term secured and unsecured indebtedness and the issuance of additional Class A Units and other equity securities. Funds from Operations Management generally considers Funds from Operations ("FFO") as one measure of REIT performance. FFO is calculated as net income (loss) adjusted for depreciation expense attributable to real property, amortization expense attributable to -38- capitalized leasing costs, gains on sales of real estate investments and extraordinary and nonrecurring items and comparable adjustments for real estate ventures accounted for using the equity method. Management believes that FFO is a useful disclosure in the real estate industry, however, the Company's disclosure may not be comparable to other REIT's. FFO should not be considered an alternative to net income as an indication of the Company's operating performance or to operating cash flows as a measure of liquidity. FFO for the years ended December 31, 1998 and 1997 is summarized in the following table (in thousands, except share data).
Year ended December 31, ----------------------------------- 1998 1997 ---------------- ---------------- Income before gains on sale, minority interest and extraordinary item $ 37,246 $ 15,377 Add (Deduct): Depreciation attributable to real property 45,032 13,966 Amortization attributable to leasing costs 2,036 708 Depreciation attributable to real estate ventures 255 (16) ---------------- ---------------- Funds from Operations before minority interest $ 84,569 $ 30,035 ================ ================ Weighted average Common Shares (including common share equivalents) and Operating Partnership units 38,340,594 16,175,258 ================ ================
Year 2000 Compliance The Year 2000 compliance issue concerns the inability of computerized information systems to accurately calculate, store or use a date after 1999. This could result in a system failure or miscalculations causing disruptions of operations. The Year 2000 issue affects virtually all companies and all organizations. The Company recognizes the importance of ensuring that its business operations are not disrupted as a result of Year 2000 related computer system and software issues. The Company is currently upgrading its internal computer information systems as a normal part of its business. During this conversion, the Company will assess the new hardware and software systems for Year 2000 compliance. The Company expects to complete its conversion by June 30, 1999 at an estimated cost of $250,000. The planned conversion was not accelerated, nor were incremental costs incurred as a result of the Year 2000 issue. The Company is currently evaluating and assessing those computer systems that do not relate to information technology (such as systems designed to operate a building, which typically include embedded technology), including, without limitation, its telecommunication systems, security systems (such as card-access door lock systems), energy management systems, sprinkler systems and elevator systems. The Company's Year 2000 compliance program is being centrally coordinated, but involves all property management personnel. For each of the Company's properties, compliance letters have been sent to the manufacturers of key operational systems, third-party service providers and vendors. In the event a satisfactory response is not received, the Company intends to consider changing service providers, testing systems for compliance, replacing systems, or pursuing alternative measures to ensure Year 2000 compliance. This assessment is approximately 50% complete for properties owned by the Company as of December 31, 1998. The total cost of bringing these internal systems and equipment into Year 2000 compliance has not been quantified. The Company is unable to determine, based on available information, whether these costs will have a material adverse effect on its business, financial condition or results of operations. The Company expects to be Year 2000 compliant by June 30, 1999. The Company is currently evaluating the consequences of a potential failure to remediate these matters on time and is in the process of developing contingency plans regarding these matters. The Company expects to have such contingency -39- plans in place by June 30, 1999. Under a most reasonably likely worst case scenario, until systems became operational, the Company would resort to a combination of temporary hiring, operational system repair or replacement and alternative software to process normal accounts and financial information. Further, no estimates have been made as to any potential adverse impact resulting from the failure of third-party service providers (including, without limitation, its banks, its payroll processor and its telecommunications providers) vendors and tenants to prepare for the Year 2000. The Company is attempting to identify those risks that could have a material impact on the Company's operations by June 30, 1999 and is also attempting to receive compliance certificates from all third-parties that could have a material impact on the Company's operations by June 30, 1999. Although the Company is in the process of working with such third-parties in order to attempt to eliminate its Year 2000 concerns the cost to the Company of the third-party Year 2000 compliance has not been quantified. The Company would consider changing to third-party service providers and vendors who are Year 2000 compliant before incurring any significant additional costs. To date, the Company has not expended significant funds to assess its Year 2000 issues, as the Company's evaluation of its Year 2000 concerns has been conducted by its own personnel at routine staffing levels and without any out-of-pocket expenses for consultants. The Company's evaluation has not been subject to any independent verification or review process. 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. Interest Rate Risk and Sensitivity Analysis The analysis below presents the sensitivity of the market value of the Company's financial instruments to selected changes in market rates. The range of changes chosen reflects the Company's view of changes which are reasonably possible over a one-year period. Market values are the present value of projected future cash flows based on the market rates chosen. The Company's financial instruments consist of both fixed and variable rate debt. As of December 31, 1998, the Company's consolidated debt portfolio consists of $241.7 million fixed rate mortgages with maturities through 2027, $77.5 million in floating rate mortgage notes, and $681.3 million borrowed under its credit facilities. All financial instruments entered into for other than trading purposes and the net market value of these financial instruments is referred to as the net financial position. Changes in interest rates have different impacts on the fixed and variable rate portions of the Company's debt portfolio. A change in interest rates on the fixed portion of the debt portfolio impacts the net financial instrument position but has no impact on interest incurred or cash flows. A change in interest rates on the variable portion of the debt portfolio impacts the interest incurred and cash flows but does not impact the net financial instrument position. The sensitivity analysis related to the fixed portion of the Company's debt portfolio assumes an instantaneous 100 basis point move in interest rates from their actual levels at December 31, 1998 with all other variables held constant. As of December 31, 1998, a 100 basis point increase in market interest rates would result in a decrease in the net financial instrument position of $22.3 million and a 100 basis point decrease in market interest rates would result in an increase in the net financial instrument position of $11.7 million. -40- Based on the variable-rate debt included in the Company's debt portfolio on December 31, 1998, a 100 basis point increase in interest rates would result in an additional $7.6 million in interest incurred per year and a 100 basis point decline would reduce interest incurred by $7.6 million per year. Item 7A. Quantitative and Qualitative Disclosure About Market Risk See discussion in Management's Discussion and Analysis included in Item 7 herein. 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. 59 Chairman of the Board and Trustee Gerard H. Sweeney 42 President, Chief Executive Officer and Trustee Jeffrey F. Rogatz 37 Senior Vice President and Chief Financial Officer Anthony S. Rimikis 50 Senior Vice President--Development and Construction John M. Adderly, Jr. 38 Senior Vice President--Operations Brad A. Molotsky 34 General Counsel and Secretary Barbara L. Yamarick 46 Vice President--Tenant Services and Property Mgmt. H. Jeffrey DeVuono 33 Vice President--Operations Mark W. Hamer 34 Vice President--Operations Anthony A. Nichols, Jr. 32 Vice President--Operations George D. Sowa 39 Vice President--Operations Donald E. Axinn 69 Trustee Walter D'Alessio 65 Trustee Murry N. Gunty 30 Trustee Warren V. Musser 72 Trustee Charles P. Pizzi 48 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 ("TNC"), through a corporate joint venture with Safeguard Scientifics, Inc. ("SSI") and was President and Chief Executive Officer of TNC from 1982 through August 22, 1996. From 1968 to -41- 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"). 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. In addition to his role with the Company, 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"). Jeffrey F. Rogatz, Senior Vice President and Chief Financial Officer. Mr. Rogatz became Senior Vice President and Chief Financial Officer of the Company on January 19, 1999. Prior to joining the Company, Mr. Rogatz was employed for over 11 years as an investment banker with Legg Mason Wood Walker, Inc. ("Legg Mason") and most recently served as a managing director in the corporate finance group. Mr. Rogatz served as the lead investment banker from Legg Mason in advising Brandywine on capital markets transactions including seven public offerings which raised in excess of $650 million. Mr. Rogatz is a member of NAREIT, the International Council of Shopping Centers and the Urban Land Institute, and currently serves on the Board of Governors at Goodwill Industries of the Chesapeake. 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. Brad A. Molotsky, General Counsel and Corporate 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, Vice President--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. -42- 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. During Mr. DeVuono's employment at LCOR, he was responsible for asset management and marketing for LCOR's western Philadelphia suburban properties. Mark W. Hamer, Vice President--Operations. Mr. Hamer became an officer of the Company on October 6, 1998. Prior to joining the Company, he was President and Chief Operating Officer of Donald E. Axinn Companies, a Long Island-based real estate company. Previously from 1991 to 1996, Mr. Hamer served as Vice President for the North Fork Bank in Melville, N.Y. At North Fork Bank, he assisted in forming and managing the special asset department. From 1989 to 1991, Mr. Hamer was employed at Nations Bank, N.A. Mr. Hamer also serves as a trustee of the Nature Conservancy - Long Island Chapter. 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. George D. Sowa, Vice President--Operations. Mr. Sowa became an officer of the Company on April 13, 1998. Mr. Sowa was employed by Keating Development Company from 1997 to 1998 as a Development Manager where he was responsible for the development and financing of a $51 million redevelopment project in Central New Jersey. Mr. Sowa was employed by LCOR, Incorporated as Director of Development / Operations from 1989 to 1997. At LCOR, Mr. Sowa was responsible for development, leasing and operations of LCOR's Central New Jersey office retail portfolio. Mr. Sowa is a member of the Society of College and University Planners, NAIOP and the Middlesex Somerset Mercer (MSM) Regional Council. Donald E. Axinn, Trustee. Mr. Axinn was elected a Trustee on October 6, 1998. Mr. Axinn was the founder and chairman of the Donald E. Axinn Companies, developers of office and industrial parks throughout the New York 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, Philadelphia Beltline Railroad, the Philadelphia Private Industry Council and the Greater Philadelphia Chamber of Commerce. Murry N. Gunty, Trustee. Mr. Gunty was elected a Trustee on September 28, 1998. Mr. Gunty serves as principal and member of the senior investment team of Lazard Freres Real Estate Investors, L.L.C. ("LFREI) and a manager of realty investment funds. Mr. Gunty also serves on the Board of Directors of ARV Assisted Living, Atria Senior Quarters, Cliveden plc, the Fortress Group, Inc., Konover Property Trust, Intown Suites, Inc., and the Rubenstein Company. 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 -43- 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. 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 1999 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. Mr. Gunty was initially elected to the Board of Trustees as a nominee of LFREI in connection with the Company's acquisition of the Lazard Portfolio in September 1998. LFREI has a right to maintain a designee on the Board until the earlier of a change of control of the Company and the date when LFREI ceases to own at least 60% in value of the securities that it acquired in the September 1998 transaction. Mr. Axinn was initially elected to the Board of Trustees in connection with the Company's acquisition of the Axinn Portfolio in October 1998. 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, Pizzi and Axinn. 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, Pizzi and Gunty. The Compensation Committee is authorized to determine compensation for the Company's executive officers, although formal action on compensation matters during 1998 was taken by the full Board (with interested members of the Board abstaining). Executive Committee. The executive committee of the Board of Trustees (the "Executive Committee") currently consists of Messrs. Nichols, Sr., Sweeney and D'Alessio. The Executive Committee has been delegated all powers of the Board of Trustees except the power to: (i) declare dividends on Common Shares; (ii) issue Common 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. -44- Section 16(a) Beneficial Ownership Reporting Compliance Section 16(a) of the Securities Exchange Act of 1934 requires the Company's officers, Trustees and persons who own more than 10% of the Common 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, 1998, all Section 16(a) filing requirements applicable to its officers, Trustees and greater than 10% shareholders were complied with. 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, 1998, 1997 and 1996: (i) to the Company's President and Chief Executive Officer and (ii) to each of the other four most highly compensated executive officers (the "Named Executive Officers") of the Company, having a combined salary and bonus during the year ended December 31, 1998 exceeding $100,000.
Annual Compensation Long-Term Compensation -------------------------- -------------------------------- Securities Restricted Underlying Share Awards Options/SARs(#) ------------- --------------- Name and Principal Position Year Salary Bonus (4) (9) (10) - - ---------------------------- ---- ------ --------- --- ---- Anthony A. Nichols, Sr. 1998 $ 250,000 $ 228,313 (5) $ 4,000,000 678,958 Chairman of the Board 1997 $ 200,000 $ 250,000 -- -- 1996 (1) $ 49,000 $ 30,000 -- 40,000 Gerard H. Sweeney 1998 $ 300,000 $ 273,976 (6) $ 6,000,000 1,018,489 President and Chief Executive Officer 1997 $ 200,000 $ 250,000 -- -- 1996 $ 134,000 $ 30,000 -- 100,000 John M. Adderly, Jr. 1998 $ 125,000 $ 65,000 (7) $ 533,000 90,644 Senior Vice President - Operations 1997 $ 102,885 $ 35,000 -- -- 1996 $ 66,100 $ 15,000 -- 10,000 Anthony S. Rimikis 1998 $ 100,000 $ 50,000 (8) -- 25,000 Senior Vice President - Development & Construction 1997 (2) -- -- -- -- 1996 -- -- -- -- Mark S. Kripke 1998 $ 150,000 $ -- $ 133,400 22,609 Chief Financial Officer 1997 (3) $ 98,654 $ 40,000 -- -- 1996 -- -- -- --
(1) Mr. Nichols, Sr. became an employee of the Company on August 22, 1996. See "Employment Agreements" below. -45- (2) Mr. Rimikis became an employee of the Company on October 13, 1997. (3) Mr. Kripke became an employee of the Company on April 7, 1997. Mr. Kripke resigned from his position with the Company effective December 31, 1998. (4) 1998 bonus amounts, which were approved by the Board of Trustees in accordance with the Company's executive compensation guidelines, were paid as follows: (i) 25% in Common Shares valued at $17.88 per share (the closing price of a Common Share on December 31, 1998) and (ii) 75%, at the election of the applicable executive officer, in any combination of cash and Common Shares valued at $15.19 per share (85% of the closing price of a Common Share on December 31, 1998). Of the Common Shares elected to be received in satisfaction of the 75% portion of the bonus ("Bonus Shares"), the portion of such Common Shares received as a result of the discounted purchase price is subject to certain transfer restrictions until December 31, 2000. Common Shares issued to the recipients were acquired by the Company through open market purchases. (5) Paid as follows: (a) 25% portion, 2,332 Common Shares and (b) 75% portion $144,928 in cash and 2,745 Bonus Shares. The bonus amount shown above excludes an additional $50,000 bonus awarded in March 1999 on account of 1998 performance. (6) Paid as follows: (a) 25% portion, 2,799 Common Shares and (b) 75% portion, $173,901 in cash and 3,294 Bonus Shares. The bonus amount shown above excludes an additional $80,000 bonus awarded in March 1999 on account of 1998 performance. (7) Paid as follows: (a) 25% portion, 909 Common Shares and (b) 75% portion, $32,500 in cash and 1,070 Bonus Shares. (8) Paid as follows: (a) 25% portion, 699 Common Shares and (b) 75% portion, 2,469 Bonus Shares. (9) The number of restricted shares awarded to each of the executives was equal to the dollar value specified above divided by the closing price of the Common Shares on January 2, 1998 ($25.25). (10) The options awarded in 1996 are evidenced by certificates denominated as "warrants" and were vested and exercisable on the date of grant. The options awarded in 1998 vest ratably over five years. -46- Stock Options Granted to Executive Officers During Last Fiscal Year Summarized in the following table is information concerning options awarded to the President and Chief Executive Officer and each of the other Named Executive Officers of the Company for the year ended December 31, 1998.
% of Total Number of Options/SARs Common Shares Granted to Grant Date Underlying Option Employees in Exercise Expiration Present Value Name Granted(#)(a) Fiscal Year Price($/sh) Date $(b) - - -------------------------------------------------- ----------------- ----------- ----------- ---------- ------------- 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 $ 789,318 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 Anthony S. Rimikis 12,500 $ 27.78 1/2/08 $ 26,750 Senior Vice President - Development & Construction 12,500 1.2% $ 29.04 1/2/08 $ 24,225 Mark S. Kripke 6,587 $ 25.25 1/2/08 $ 17,528 Chief Financial Officer (c) 7,708 $ 27.78 1/2/08 $ 16,495 8,314 1.1% $ 29.04 1/2/08 $ 16,113
(a) Options vest ratably over five years, subject to acceleration of vesting under certain circumstances, such as upon a change in control of the Company. Upon a change of control, unexercised options convert to 79,208, 118,812 and 10,575 Common Shares for Mr. Nichols, Mr. Sweeney and Mr. Adderly, respectively. The number of Common Shares issuable upon a change of control is subject to a proportional reduction in the event of any prior option exercise. (b) 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. (c) Mr. Kripke's options terminate by their terms on March 31, 1999, the ninetieth day following termination of his employment. With respect to the options granted to John M. Adderly, Jr., 72,933 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 Mr. Adderly will not qualify as performance-based compensation under Section 162(m). -47- 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 $1.0 million limit on compensation deductible by the Company for compensation to each of Mr. Nichols, Sr. and Sweeney for such year. Stock Options Held by Executive Officers at December 31, 1998 The following table sets forth certain information regarding options for the purchase of Common Shares that were held by: (a) the Company's President and Chief Executive Officer and (b) each of the other Named Executive Officers of the Company at December 31, 1998. No options for the purchase of Common Shares were exercised by such persons during the fiscal year ended December 31, 1998. -48- Aggregated Option/SAR Exercises in Last Fiscal Year and Fiscal Year End Option/SAR Values
Number of Value of Securities Unexercised In- Underlying the-Money Unexercised Options at FY Shares Options/SAR at FY- End($) Acquired on Value End (#) Exercisable/ Exercisable/ Name Exercise Realized Unexercisable Unexercisable - - ------------------------------------------------------- ------------- ---------- --------------------- ------------- Anthony A. Nichols, Sr. Chairman of the Board N/A N/A 124,870 / 594,088 $0 / $0 Gerard H. Sweeney President and Chief Executive Officer N/A N/A 273,978 / 891,178 $274,364 / $0 John M. Adderly, Jr. Senior Vice President - Operations N/A N/A 28,129 / 100,644 $0 / $0 Anthony S. Rimikis Senior Vice President - Development & Construction N/A N/A 5,000 / 20,000 $0 / $0 Mark S. Kripke Chief Financial Officer N/A N/A 4,522 / 18,087 $0 / $0
Employment Agreements On January 2, 1998, each of Messrs. Nichols, Sr. and Sweeney entered into a five-year employment agreement with the Company. In December 1998, the Company extended the term of each such agreement for an additional one year. The 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." Severance Agreements On December 17, 1998, each of John M. Adderly, Jr. and Anthony S. Rimikis entered into severance agreements with the Company. These agreements provide that, if such executive's employment is terminated (or constructively terminated) within one year following the effective date of a change of control of the Company, such executive will be entitled to salary continuation for a period of one and a half years, with respect to Mr. Adderly, and one year, with respect to Mr. Rimikis, from the effective date of such executive's termination. The Company has entered into a similar agreement with Jeffrey F. Rogatz, who became a Senior Vice President and Chief Financial Officer of the Company in January 1999, and has entered into similar agreements with five other non-executive officers of the Company. -49- 401(k) Plan 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, Walter D'Alessio and Murry N. Gunty. No executive officer of the Company serves on the Compensation Committee. 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 three of the four public offerings of Common Shares consummated by the Company between January 1, 1998 and the date of this Annual Report. On December 31, 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. On September 28, 1998, the Company consummated a transaction (the "Lazard Transaction") in which it acquired a portfolio of 67 office, industrial and mixed use properties from LREI and its affiliates. Murry N. Gunty, one of the principals of LFREI, became a member of the Board of Trustees on September 28, 1998. In connection with the Lazard Transaction, the Company agreed to acquire an additional office property known as 8260 Greensboro Drive, McLean, Virginia for $20.0 million payable through the issuance of Series B Preferred Units of the Operating Partnership. In connection with the Lazard Transaction, the Company also obtained an option to acquire an office property known as 1676 International Drive, McLean, Virginia and currently under construction for $68 million in cash. In the Lazard Transaction, an LFREI affiliate acquired Series B Preferred Units having a stated value of $3.0 million in exchange for a $3.0 million promissory note that bears interest at 7.25% and matures on September 30, 1999. The Company may elect to use this note to pay a portion of the exercise price for 1676 International Drive, should the Company exercise its purchase option. -50- Compensation of Trustees During 1998, 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 $20,000 (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. Item 12. Security Ownership of Certain Beneficial Owners and Management The following table sets forth certain information as of March 15, 1999 (except as indicated in Note 3) regarding the beneficial ownership of Common Shares (and Common Shares for which Class A 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.
Number of Common Percentage of Name and Business Address of Beneficial Owner (a) Shares Common Shares (b) - - ------------------------------------------------- ---------- ----------------- Morgan Stanley Dean Witter & Co. (c) 2,478,755 6.5% Murry N. Gunty (d) 1,339,285 3.4% Gerard H. Sweeney (e) 633,840 1.6% Anthony A. Nichols, Sr. (f) 505,978 1.3% Donald E. Axinn (g) 101,000 * John M. Adderly, Jr. (h) 66,618 * Mark S. Kripke (i) 1,500 * Anthony S. Rimikis (j) 11,507 * Warren V. Musser (k) 5,545 * Walter D'Alessio (l) 972 * Charles P. Pizzi (m) 672 * All Trustees and Executive Officers as a Group (10 persons) (n) 2,666,214 6.7%
*Less than one percent. (a) Unless indicated otherwise, the business address of each person listed is 14 Campus Boulevard, Suite 100, Newtown Square, Pennsylvania 19073. (b) Assumes that all Class A 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 Class A Units eligible for redemption held by other named persons or entities are redeemed for Common Shares. (c) Based on a Schedule 13G dated February 9, 1999, and filed for the year ended December 31, 1998. Morgan Stanley Dean Witter & Co. has a business address at 1585 Broadway, New York, New York 10036. Of this amount, 1,488,329 (or 60%) of the Common Shares are owned by investment advisory clients of Morgan Stanley Dean Witter Asset Management Inc., a wholly-owned subsidiary of Morgan Stanley Dean Witter & Co. (d) Represents Common Shares issuable upon conversion, at $28.00 per Common Share, of 750,000 issued and outstanding Series A Preferred Shares having an aggregate stated value of $37.5 million which are held by Prometheus AAPT Holdings, L.L.C ("Prometheus"). Excludes an aggregate of 3,482,142 Common Shares issuable upon redemption of Class A Units (issuable upon redemption or conversion of Series B Preferred Units held by entities controlled by LFREI) which are generally not subject to redemption until September 28, 1999. Mr. Gunty is a principal of LFREI, which is a general partner of LR Strategic Investors L.P., which is the sole member of Prometheus. Mr. Gunty disclaims beneficial ownership of all such Common Shares, except to the extent of his pro rata interests in such Common Shares. Mr. Gunty has a business address at 30 Rockefeller Plaza, 63rd Floor, New York, New York 10020. -51- (e) Includes (a) 283,477 Common Shares and (b) 350,363 Common Shares issuable upon the exercise of options and warrants that are currently exercisable or that become exercisable within 60 days of March 15, 1999. (f) Includes (a) 269,596 Common Shares, (b) 192,564 Common Shares issuable upon exercise of warrants that are currently exercisable or that become exercisable within 60 days of March 15, 1999, and (c) 43,818 Common Shares issuable upon conversion of Class A 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 TNC. The foregoing includes 16,773 Common Shares and warrants to purchase an additional 21,696 Common Shares which Mr. Nichols owns jointly with his wife. (g) Includes (a) 1,000 Common Shares and (b) 100,000 Common shares issuable upon the exercise of options that are currently exercisable. Excludes an aggregate of 928,651 Common Shares issuable upon redemption of Class A Units which are generally not subject to redemption until October 6, 1999. Mr. Axinn has a business address at 131 Jericho Turnpike, Jericho, NY 11743. (h) Includes (a) 38,490 Common Shares and (b) 28,128 Common Shares issuable upon the exercise of options and warrants that are currently exercisable or that become exercisable within 60 days of March 15, 1999. (i) Excludes 4,521 Common Shares issuable upon the exercise of options which terminated on March 31, 1999. Mr. Kripke resigned from his position within the Company effective December 31, 1998. (j) Includes (a) 6,507 Common Shares and (b) 5,000 Common Shares issuable upon the exercise of options that become exercisable within 60 days of March 15, 1999. (k) Mr. Musser has a business address at 800 The Safeguard Building, 435 Devon Park Drive, Wayne, Pennsylvania 19087. (l) Mr. D'Alessio has a business address at 1735 Market Street, Philadelphia, Pennsylvania 19103. (m) Mr. Pizzi has a business address at 200 South Broad, Philadelphia, Pennsylvania 19103 (n) Includes 1,339,285 Common Shares beneficially owned by Prometheus. Mr. Gunty disclaims beneficial ownership of all such Common Shares, except to the extent of his pro rata interest in such Common Shares. -52- 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 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") on August 22, 1996, 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 Class A Units for cash, at a per Class A 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). 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 Operating Partnership exercised the first of the two extensions resulting in a one year extension to August 22, 1999. 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, 1998 aggregated $21.2 million. 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. 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 Class A Units transferred to the Company equaled the Payment Amount divided by the then market value of the number of Common Shares into which such transferred Class A Units were then redeemable. -53- 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 three of the four public offerings of Common Shares consummated by the Company between January 1, 1998 and the date of this Annual Report. Interests in Sellers On March 7, 1997, the Company acquired a 6.763 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. On July 29, 1998, the Company acquired approximately 23 acres of undeveloped land in Horsham Township, Montgomery County, Pennsylvania for approximately $3.5 million. The seller was LC/N Keith Valley Partnership II. The purchase price was paid in cash. 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% indirect interest in the seller. Lazard Transaction On September 28, 1998, the Company consummated a transaction (the "Lazard Transaction") in which it acquired a portfolio of 67 office, industrial and mixed use properties from LREI and its affiliates. Murry N. Gunty, one of the principals of LFREI, became a member of the Board of Trustees on September 28, 1998. In connection with the Lazard Transaction, the Company agreed to acquire an additional office property known as 8260 Greensboro Drive, McLean, Virginia for $20.0 million payable through the issuance of Series B Preferred Units of the Operating Partnership. In connection with the Lazard Transaction, the Company also obtained an option to acquire an office property known as 1676 International Drive, McLean, Virginia and currently under construction for $68.0 million in cash. In the Lazard Transaction, an LFREI affiliate acquired Series B Preferred Units having a stated value of $3.0 million in exchange for a $3.0 million promissory note that bears interest at 7.25% and matures on September 30, 1999. The Company may elect to use this note to pay a portion of the exercise price for 1676 International Drive, should the Company exercise its purchase option. Axinn Transaction On October 6, 1998, the Company consummated a transaction (the "Axinn Transaction") in which it acquired a portfolio of 22 office and industrial properties from the Donald E. Axinn Companies and affiliates. Mr. Axinn became a member of the Board of Trustees on October 6, 1998. In connection with the Axinn Transaction, the Company agreed to acquire an additional six office properties containing an aggregate of approximately 983,053 net rentable square feet for an aggregate purchase price of $63.1 million, upon satisfaction of certain conditions. On December 28, 1998, the Company acquired one of these properties, known as 3 Paragon Drive, Montvale, New Jersey, for $11.0 million in cash. -54- Share Purchase Loans On October 20, 1998, following Board authorization of Company loans aggregating up to $5.0 million to enable employees of the Company to purchase Common Shares on the open market, the Operating Partnership loaned executive officers of Brandywine an aggregate of $1,399,792, as follows: Mr. Nichols, Sr. ($499,995), Mr. Sweeney ($599,786), Mr. Adderly ($250,006), and Mr. Rimikis ($50,005). Proceeds of these loans were used solely to enable these executive officers to purchase Common Shares. The loans have a five-year term, are full recourse and are secured by the Common Shares purchased. Interest accrues on the loans at the lower of the interest rate borne on borrowings under Brandywine's New 1998 Credit Facility (6.49% as of February 16, 1999) and a rate based on the dividend payments on the Common Shares (8.6 % based on the $0.39 fourth quarter 1998 dividend) and is payable quarterly. The principal of the loans is payable at the earlier of October 20, 2001 and 90 days following termination of the applicable executive's employment with Brandywine. In connection with the hiring by the Company of Mr. Rogatz as Senior Vice President and Chief Financial Officer of the Company, the Company agreed to loan Mr. Rogatz up to $200,000 to acquire Common Shares on the same terms as the foregoing loan. In January 1999, the Operating Partnership agreed to loan executive officers of Brandywine an aggregate of $81,107, as follows: Mr. Nichols, Sr. ($26,897), Mr. Sweeney ($32,276), Mr. Adderly ($11,521) and Mr. Rimikis ($10,413). Proceeds of these loans funded tax withholding payments due in connection with certain year-end bonuses. These loans mature on December 31, 1999, are full recourse and accrue interest at the short-term applicable federal rate as of January 1, 1999 (4.5%). -55- 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, 1998 and December 31, 1997........................F-2 Consolidated Statements of Operations for the Years Ended December 31, 1998, 1997 and 1996..................................................................................F-3 Consolidated Statements of Beneficiaries' Equity for the Years Ended December 31, 1998, 1997 and 1996..................................................................................F-4 Consolidated Statements of Cash Flows for the Years Ended December 31, 1998, 1997 and 1996..................................................................................F-5 Notes to Financial Statements....................................................................F-6 Schedule II - Valuation and Qualifying Accounts.................................................F-21 Schedule III - Real Estate and Accumulated Depreciation..........................................F-22
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) 3.1.3 Articles of Amendment to Declaration of Trust of the Company (No. 2). (4) 3.1.4 Articles Supplementary to Declaration of Trust of the Company (September 28, 1998) 3.1.5 Articles of Amendment to Declaration of Trust of the Company (March 19, 1999) (5) 3.2 Amended and Restated Bylaws of the Company. (6) 10.01 Brandywine Realty Partners General Partnership Agreement. (6) 10.02 Second Amended and Restated Partnership Agreement of Brandywine Realty Services Partnership. (7) 10.03 Amendment to Brandywine Realty Partners General Partnership Agreement. (8) 10.04 Third Amendment to Brandywine Realty Partners General Partnership Agreement. (8) 10.05 Form of Warrant issued to Executive Officers. ** (8) 10.06 Environmental Indemnity Agreement between the Company and SSI. (8) 10.07 Articles of Incorporation of Brandywine Realty Services Corporation, as amended. (9) 10.08 Amended and Restated Agreement of Limited Partnership of Brandywine Operating Partnership, L.P. (the "Operating Partnership"). (9) 10.09 Amendment No. 1 to Amended and Restated Agreement of Limited Partnership of the Operating Partnership.
-56- (9) 10.10 First Amendment to Amended and Restated Agreement of Limited Partnership of the Operating Partnership (9) 10.11 Tax Indemnification Agreement - PWCC (9) 10.12 Tax Indemnification Agreement - Laurel Oak (9) 10.13 Tax Indemnification Agreement - English Creek (10) 10.14 Second Amendment, dated March 31, 1998, to the Amended and Restated Agreement of Limited Partnership Agreement of Brandywine Operating Partnership, L.P. (10) 10.15 Tax Indemnification Agreement, dated March 31, 1998, by and between Brandywine Operating Partnership, L.P. and Brookstone Investors, L.L.C. (10) 10.16 Tax Indemnification Agreement, dated March 31, 1998, by and between Brandywine Operating Partnership, L.P. and Brookstone Holdings of Del. -4, L.L.C. (10) 10.17 Tax Indemnification Agreement, dated March 31, 1998, by and between Brandywine Operating Partnership, L.P. and Brookstone Holdings of Del. -5, L.L.C. (10) 10.18 Tax Indemnification Agreement, dated March 31, 1998, by and between Brandywine Operating Partnership, L.P. and Brookstone Holdings of Del. -6, L.L.C. (11) 10.19 Contribution Agreement, dated April 7, 1998, by and between the entities listed on Schedule thereto and Brandywine Operating Partnership, L.P. (11) 10.20 First Amendment to Contribution Agreement dated May 8, 1998. (11) 10.21 Third Amendment, dated May 8, 1998, to the Amended and Restated Agreement of Limited Partnership of Brandywine Operating Partnership, L. P. (11) 10.22 Tax Indemnification Agreement dated May 8, 1998, by and between Brandywine Operating Partnership, L.P. and the parties identified on the signature page. (12) 10.23 Contribution Agreement (Axinn) (12) 10.24 Form of Axinn Options ** (12) 10.26 Form of Hamer Options ** (4) 10.27 Second Amended and Restated Credit Agreement (4) 10.28 Pledge Agreement (4) 10.29 Credit Agreement (4) 10.30 Fourth Amendment to the Amended and Restated Agreement of Limited Partnership of the Operating Partnership creating the Series A Preferred Mirror Units. (4) 10.31 Fifth Amendment to the Amended and Restated Agreement of Limited Partnership of the Operating Partnership creating the Series B Preferred Units. (4) 10.32 Sixth Amendment to the Amended and Restated Agreement of Limited Partnership of the Operating Partnership (4) 10.33 First Amendment to Contribution Agreement (Axinn) (13) 10.34 Contribution and Purchase Agreement (Lazard) (13) 10.35 Form of Board of Trustees Designation Letter 10.36 Amended and Restated Employment Agreement of Anthony A. Nichols, Sr.** 10.37 Amended and Restated Employment Agreement of Gerard H. Sweeney ** 10.38 Amended and Restated Non-Qualified Stock Option Award to Anthony A. Nichols, Sr. ** 10.39 Amended and Restated Non-Qualified Stock Option Award to Gerard H. Sweeney ** 10.40 Amended and Restated Non-Qualified Stock Option Award to John M. Adderly, Jr.** 10.41 Non-Qualified Stock Option Award to Jeffrey F. Rogatz** (14) 10.42 Restricted Share Award to Anthony A. Nichols, Sr.** (14) 10.43 Restricted Share Award to Gerard H. Sweeney** (14) 10.44 Restricted Share Award to John M. Adderly, Jr.** 10.45 Long-Term Performance Award for Anthony A. Nichols, Sr. ** 10.46 Long-Term Performance Award for Gerard H. Sweeney** 10.47 Long-Term Performance Award for John M. Adderly, Jr. ** 10.48 Long-Term Performance Award for Anthony S. Rimikis** 10.49 Severance Agreement (Jeffrey F. Rogatz) ** 10.50 Severance Agreement (John M. Adderly, Jr.) ** 10.51 Severance Agreement (Anthony S. Rimikis) **
-57- 21.1 List of Subsidiaries of the Company. 23.1 Consent of Arthur Andersen LLP. 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 8-K dated June 3, 1998 and incorporated herein by reference. (4) Previously filed as an exhibit to the Company's Form 8-K dated October 13, 1998 and incorporated herein by reference. (5) Previously filed as an exhibit to the Company's Form 8-K dated December 31, 1996 and incorporated herein by reference. (6) Previously filed as an exhibit to the Company's Registration statement of Form S-11 (File No. 33-4175) and incorporated herein by reference. (7) 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. (8) Previously filed as an exhibit to the Company's Form 8-K dated August 22, 1996 and incorporated herein by reference. (9) Previously filed as an exhibit to the Company's Form 8-K dated December 17, 1997 and incorporated herein by reference. (10) Previously filed as an exhibit to the Company's Form 8-K dated April 13, 1998 and incorporated herein by reference. (11) Previously filed as an exhibit to the Company's Form 8-K dated May 14, 1998 and incorporated herein by reference. (12) Previously filed as an exhibit to the Company's Form 8-K dated July 30, 1998 and incorporated herein by reference. (13) Previously filed as an exhibit to the Company's Form 8-K dated August 13, 1998 and incorporated herein by reference. (14) Previously filed as an exhibit to the Company's Form 10-K for the fiscal year ended December 31, 1997 and incorporated herein by reference. ** Management contract or compensatory plan or arrangement. (b) Reports on Form 8-K During the fourth quarter of the year ended December 31, 1998, the Company filed two Current Reports on Form 8-K. On October 13, 1998, the Company filed a Current Report on Form 8-K (reporting under Items 2, 5 and 7). On October 21, 1998, the Company filed a Current Report on Form 8-K (reporting under Item 7). This Current Report included an audited statement of revenues and certain operating expenses of the Lazard Properties for the year ended December 31, 1997 and the unaudited statement of revenue and certain operating expenses for the six months ended June 30, 1998. This Current Report also included an audited statement of revenues and certain operating expense of the Axinn Properties for the year ended December 31, 1997 and the unaudited statement of revenue and certain operating expenses for the six months ended June 30, 1998. This Current Report also included an audited statement of revenues and certain operating expenses of the Axinn Properties for the year ended December 31, 1997 and the unaudited statement of revenue and certain operating expenses for the six months ended June 30, 1998. This Current Report also included pro forma financial information for the six months ended June 30, 1998 and for the year ended December 31, 1997. -58- 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 31, 1999 - - ---------------------------------------- Anthony A. Nichols, Sr. /s/ Gerard H. Sweeney President, Chief Executive Officer and Trustee March 31, 1999 - - ---------------------------------------- (Principal Executive Officer) Gerard H. Sweeney /s/ Jeffrey F. Rogatz Chief Financial Officer -- (Principal Financial March 31, 1999 - - ---------------------------------------- and Accounting Officer) Jeffrey F. Rogatz /s/ Warren V. Musser Trustee March 31, 1999 - - ---------------------------------------- Warren V. Musser /s/ Walter D'Alessio Trustee March 31, 1999 - - ---------------------------------------- Walter D'Alessio /s/ Charles P. Pizzi Trustee March 31, 1999 - - ---------------------------------------- Charles P. Pizzi /s/ Murry N. Gunty Trustee March 31, 1999 - - ---------------------------------------- Murry N. Gunty /s/ Donald E. Axinn Trustee March 31, 1999 - - ---------------------------------------- Donald E. Axinn
-59- Exhibit Index
Exhibit - - ------- 3.1.5 Articles of Amendment to Declaration of Trust of the Company (March 19, 1999) 10.36 Amended and Restated Employment Agreement of Anthony A. Nichols, Sr.** 10.37 Amended and Restated Employment Agreement of Gerard H. Sweeney ** 10.38 Amended and Restated Non-Qualified Stock Option Award to Anthony A. Nichols, Sr. ** 10.39 Amended and Restated Non-Qualified Stock Option Award to Gerard H. Sweeney ** 10.40 Amended and Restated Non-Qualified Stock Option Award to John M. Adderly, Jr.** 10.41 Non-Qualified Stock Option Award to Jeffrey F. Rogatz** 10.45 Long-Term Performance Award for Anthony A. Nichols, Sr. ** 10.46 Long-Term Performance Award for Gerard H. Sweeney** 10.47 Long-Term Performance Award for John M. Adderly, Jr. ** 10.48 Long-Term Performance Award for Anthony S. Rimikis** 10.49 Severance Agreement (Jeffrey F. Rogatz) ** 10.50 Severance Agreement (John M. Adderly, Jr.) ** 10.51 Severance Agreement (Anthony S. Rimikis) ** 21.1 List of Subsidiaries of the Company. 23.1 Consent of Arthur Andersen LLP. 27.1 Financial Data Schedule.
- - ----------------- *Indicates management contract or compensatory plan or arrangement. 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, 1998 and 1997, and the related consolidated statements of operations, beneficiaries' equity and cash flows for each of the three years in the period ended December 31, 1998. These consolidated financial statements and the schedules referred to below are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements and schedules 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, 1998 and 1997, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1998, in conformity with generally accepted accounting principles. Our audit was made for the purpose of forming an opinion on the basic financial statements taken as a whole. The schedules listed on the index of financial statement schedules on Item 14 are presented for purposes of complying with the Securities and Exchange Commission's rules and are not a required part of the basic financial statements. These schedules have been subjected to the auditing procedures applied in the audit of the basic financial statements and in our opinion fairly state in all material respects the financial data required to be set forth therein to the basic financial statements taken as a whole. ARTHUR ANDERSEN LLP Philadelphia, Pennsylvania March 2, 1999 (except with respect to the matter discussed in Note 15, as to which the date is March 26, 1999) F-1 BRANDYWINE REALTY TRUST CONSOLIDATED BALANCE SHEETS (in thousands)
December 31, December 31, 1998 1997 ------------ ------------ ASSETS Real estate investments: Operating properties $ 1,908,095 $ 586,414 Accumulated depreciation (67,477) (22,857) ----------- --------- 1,840,618 563,557 Cash and cash equivalents 13,075 29,442 Escrowed cash 3,489 212 Accounts receivable, net 10,769 3,689 Due from affiliates 10,186 214 Investment in management company 148 74 Investment in real estate ventures, at equity 10,603 5,480 Deferred costs, net 10,787 6,680 Other Assets 12,005 12,133 ----------- --------- Total assets $ 1,911,680 $ 621,481 =========== ========= LIABILITIES AND BENEFICIARIES' EQUITY Mortgage notes payable $ 319,235 $ 48,731 Borrowings under credit facilities 681,325 115,233 Accounts payable and accrued expenses 10,295 3,234 Distributions payable 17,850 8,843 Tenant security deposits and deferred rents 12,123 5,535 ----------- --------- Total liabilities 1,040,828 181,576 ----------- --------- Minority interest 127,198 14,377 ----------- --------- Preferred Shares, $0.01 par value, 5,000,000 shares authorized, 750,000 convertible preferred shares issued and outstanding at December 31, 1998 37,500 - ----------- --------- Commitments and Contingencies (Note 14) Beneficiaries' equity: Common Shares of beneficial interest, $0.01 par value, 100,000,000 common shares authorized, 37,573,381 and 24,087,315 shares issued and outstanding at December 31, 1998 and 1997, respectively 376 241 Additional paid-in capital 751,889 446,054 Share warrants 962 962 Cumulative earnings 44,076 11,753 Cumulative distributions (91,149) (33,482) ----------- --------- Total beneficiaries' equity 706,154 425,528 ----------- --------- Total liabilities and beneficiaries' equity $ 1,911,680 $ 621,481 =========== =========
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, ---------------------------------------- 1998 1997 1996 --------- -------- ------- Revenue: Rents $ 163,865 $ 49,928 $ 8,462 Tenant reimbursements 24,140 9,396 1,372 Other 4,856 1,736 196 --------- -------- ------- Total revenue 192,861 61,060 10,030 --------- -------- ------- Operating Expenses: Interest 36,886 7,079 2,751 Depreciation and amortization 48,002 15,589 2,836 Amortization of deferred compensation costs 1,488 - - Property operating expenses 60,824 20,144 3,403 Management fees 6,922 2,301 306 Administrative expenses 1,711 659 825 --------- -------- ------- Total operating expenses 155,833 45,772 10,121 --------- -------- ------- Income (loss) before equity in income (loss) of management company, equity in income of real estate ventures, gains on sales, minority interest and extraordinary items 37,028 15,288 (91) Equity in income (loss) of management company 74 89 (26) Equity in income of real estate ventures 144 - - --------- -------- ------- Income (loss) before gains on sales, minority interest and extraordinary items 37,246 15,377 (117) Gains on sale of interests in real estate 209 - - --------- -------- ------- Income (loss) before minority interest and extraordinary items 37,455 15,377 (117) Minority interest (2,427) (376) (45) --------- -------- ------- Income (loss) before extraordinary items 35,028 15,001 (162) Extraordinary items (2,003) - - --------- -------- ------- Net Income (loss) 33,025 15,001 (162) Income allocated to Preferred Shares (702) (499) (401) --------- -------- ------- Income (loss) allocated to Common Shares $ 32,323 $ 14,502 $ (563) ========= ======== ======= Basic earnings per Common Share before extraordinary item $ 0.95 $ 0.96 $ (0.44) ========= ======== ======= Diluted earnings per Common Share before extraordinary item $ 0.95 $ 0.95 $ (0.44) ========= ======== ======= Basic earnings per Common Share after extraordinary item $ 0.90 $ 0.96 $ (0.44) ========= ======== ======= Diluted earnings per Common Share after extraordinary item $ 0.89 $ 0.95 $ (0.44) ========= ======== =======
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, 1998, 1997 AND 1996 (in thousands, except number of shares)
Common Capital Cumulative Common Shares of Shares Par in Excess Share Earnings Cumulative Beneficial Interest Value of Par Value Warrants (Deficit) Distributions ------------------- ----- ------------ -------- --------- ------------- BALANCE, JANUARY 1, 1996 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) Issuance of Common Shares 13,572,810 136 307,491 - - - Repurchase of Common Shares (86,744) (1) (1,656) - - - Net income - - - - 33,025 - Preferred Share Distributions - - - - (702) - Distributions ($1.52 per share) - - - - - (57,667) ---------- ----- --------- ----- -------- --------- BALANCE, December 31, 1998 37,573,381 $ 376 $ 751,889 $ 962 $ 44,076 $ (91,149) =========== ===== ========= ===== ======== =========
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, ---------------------------------------------------- 1998 1997 1996 -------- -------- -------- Cash flows from operating activities: Net income $ 33,025 $ 15,001 $ (162) Adjustments to reconcile net income to net cash provided by operating activities: Minority interest 2,427 376 45 Depreciation and amortization 48,002 15,589 2,836 Equity in income of management company (74) (89) 26 Equity in income of real estate ventures (144) - - Amortization of deferred compensation costs 1,488 - - Issuance of shares to trustees 29 - - Amortization of discounted notes payable 229 334 32 Gain on sale of interests in real estate (209) - - Extraordinary items 2,003 - - Changes in assets and liabilities: (Increase) decrease in accounts receivable (7,080) (2,323) (493) (Increase) decrease in affiliate receivable (9,972) 303 (517) (Increase) decrease in prepaid assets and deferred costs (14,775) (1,303) (45) Increase (decrease) in accounts payable and accrued expenses 7,704 1,473 589 Increase (decrease) in other liabilities 6,588 4,211 257 -------- -------- -------- Net cash provided by operating activites 69,241 33,572 2,568 -------- -------- -------- Cash flows from investing actitivies: Acquisition of properties (878,484) (406,871) (33,918) Sales of properties 14,704 Investment in real estate ventures (4,979) (5,480) - Decrease (increase) in escrowed cash (3,277) 1,832 600 Capital expenditures paid (26,301) (7,737) (2,083) -------- -------- -------- Net cash used in investing activities (898,337) (418,256) (35,401) -------- -------- -------- Cash flows from financing activities: Proceeds from issuance of shares, net 301,023 305,055 91,297 Repurchases of Common Shares (1,657) - - Distributions paid to shareholders (51,440) (18,069) (510) Distributions paid to minority partners (981) (448) (9) Proceeds from note payable to shareholder - - 1,392 Proceeds from mortgage notes payable 19,277 388 9,896 Repayment of mortgage notes payable (14,669) (4,485) (50,873) Proceeds from notes payable, Credit Facility 1,374,467 293,208 - Repayment of notes payable, Credit Facility (808,375) (177,975) - Purchase of minority interests - (531) - Other debt costs (4,916) (1,296) (921) -------- -------- -------- Net cash provided by financing activities 812,729 395,847 50,272 -------- -------- -------- (Decrease) increase in cash and cash equivalents (16,367) 11,163 17,439 Cash and cash equivalents at beginning of period 29,442 18,279 840 -------- -------- -------- Cash and cash equivalents at end of period $ 13,075 $ 29,442 $ 18,279 ======== ======== ========
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 and self-managed 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, 1998, the Company's portfolio included 201 office properties, 70 industrial facilities and one mixed use property (collectively, the "Properties") that contain an aggregate of approximately 18.8 million net rentable square feet. As of December 31, 1998, the Company also held economic interests in nine office real estate ventures (the "Real Estate Ventures"). The Company's interest in the Properties and the Real Estate Ventures 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, 1998, the Company held approximately 88.5% interest in the Operating Partnership and was entitled to 94.6% of the Operating Partnership's income after distributions to holders of Series B Preferred Units. 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, 1998, the Management Company was managing and leasing properties containing an aggregate of approximately 17.1 million net rentable square feet, of which 16.9 million net rentable square feet related to properties owned by the Company or subject to purchase options held by the Company, and approximately 259,000 net rentable square feet related to properties owned by unaffiliated 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 mitigate the types of market risks 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 transactions have been eliminated in consolidation. The Company internally evaluates all properties as one segment and accordingly does not report segment information. Management's Use of Estimates - - ----------------------------- 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 are presented net of accumulated amortization totaling $3.7 million, $2.0 million and $729,000 as of December 31, 1998, 1997, and 1996, respectively. The Company has capitalized interest expense related to the development of certain Properties and land holdings. During the years ended December 31, 1998, 1997 and 1996, capitalized interest totaled $1.2 million, $62,000 and none, respectively. F-6 Real estate investments - - ----------------------- Real estate investments are carried at cost, less accumulated depreciation. It is the Company's policy to review the carrying amounts 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 loss is based on the 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 1998, 1997 or 1996. 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. Accounts Receivable - - ------------------- Accounts receivable is presented net of allowance for doubtful accounts of $3.2 million and $582,000 as of December 31, 1998 and 1997, respectively, and includes straight-line rents receivable of $8.5 million and $2.2 million as of December 31, 1998 and 1997, respectively. 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. In management's opinion, the requirements to maintain this election are being met. 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. 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 1998, 1997 or 1996. The Management Company is subject to Federal and state income taxes. The operating results of the Management Company include a provision for income taxes of approximately $83,000 and $21,000 for 1998 and 1997, respectively. 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. The impact of the straight-line rent adjustment increased revenues by approximately $6.3 million, $1.7 million and $337,000 during the years ended December 31, 1998, 1997 and 1996, 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 1998, 1997 or 1996. 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. Reclassifications - - ----------------- Certain amounts have been reclassified to conform to the current year presentation. Newly Issued Accounting Standards - - --------------------------------- Comprehensive Income In June 1997, the Financial Accounting Standards Board ("FASB") issued SFAS No. 130, "Reporting Comprehensive Income". The standard establishes additional disclosure for the elements of comprehensive income and a total comprehensive income calculation. Net income as reported by the Company reflects total comprehensive income for the years ended December 31, 1998, 1997 and 1996. Accounting for Derivative Instruments and Hedging Activities Statement of Financial Accounting Standards No. 133 ("SFAS 133") "Accounting for Derivative Instruments and Hedging Activities" is effective for all fiscal years beginning after June 15, 1999, although earlier application is encouraged. SFAS 133 established accounting and reporting standards related to financial activities with respect to derivative instruments and hedging. The Company has not engaged in the practice of using financial derivative instruments and hedging activities. The Company does not believe that the implementation of SFAS 133 will have a material impact on the Company's financial position or results of operations. 3. MINORITY INTEREST: ------------------ Minority interest relates to interests in the Operating Partnership that are not owned by the Company. Income allocated to the Minority Interest is based on the percentage ownership of the Operating Partnership held by third parties throughout the year. Minority interest is comprised of Class A Units of limited partnership interest ("Class A Units") and Series B Preferred Units of limited partnership ("Series B Preferred Units"). The Operating Partnership issued these interests to persons that contributed assets to the Operating Partnership. The Operating Partnership will, at the request of a holder, be obligated to redeem each Class A Unit held by such holder, at the option of the Company, for cash or one Common Share. Each Series B Preferred Unit has a stated value of $50.00 and is convertible, at the option of the holder, into Class A Units at a conversion price of $28.00. The conversion price is subject to a reduction to $26.50 if the average trading price of the Common Shares during the 60-day period ending December 31, 2003 is $23.00 or lower. The Series B Preferred Units bear a preferred distribution of 7.25% per annum, subject to an increase in the event quarterly distributions paid to holders of Common Shares exceed $0.51 per share. The distributions for the Series B Preferred Units during 1998 were approximately $1.5 million. As of December 31, 1998, there were 2,158,368 outstanding Class A Units held by holders other than the Company and 1,550,000 outstanding Series B Preferred Units, all held by third party investors. 4. ACQUISITIONS AND DISPOSITIONS OF REAL ESTATE INVESTMENTS: --------------------------------------------------------- The Company continued its growth in 1998 by purchasing 153 office, industrial and mixed-use properties containing approximately 11.6 million net rentable square feet for an aggregate purchase price of approximately $1.3 billion. The 1998 acquisitions expanded the Company's market share in the F-8 suburban Philadelphia office and industrial market and expanded the Company's market presence into several other markets within the Mid-Atlantic Region. The acquisitions occurred throughout the year through 12 separate transactions. Three of the 12 transactions aggregated approximately $966.0 million of the $1.3 billion aggregate purchase price of all the 1998 acquisitions. The first of the three transactions, which closed on January 5, 1998, was a $229.1 million portfolio purchase of 23 properties containing approximately 2.0 million feet. The portfolio strengthened the Company's market share in the Philadelphia suburbs and established operating platforms in Northern New Jersey, Delaware and Maryland. The second major portfolio acquisition closed on March 31, 1998. This portfolio contained six properties containing approximately 933,000 square feet for a purchase price of $137.8 million, and established a market presence in Central New Jersey. The third major portfolio acquisition closed on September 28, 1998 and significantly broadened the Company's holdings by adding 66 properties, containing approximately 5.5 million square feet, located in the Philadelphia suburbs; southern New Jersey; Allentown, Pennsylvania; Richmond, Virginia; and Northern Virginia. The aggregate purchase price was approximately $599.1 million. The remainder of the 1998 acquisitions combined to increase market share in suburban Philadelphia and to expand into Wilmington, Delaware; Harrisburg, Pennsylvania; Northern New Jersey; and Long Island, New York. The 1998 acquisitions were financed through a combination of: proceeds received from four public offerings of an aggregate of approximately 13.3 million Common Shares which raised net proceeds of approximately $301.0 million; borrowings under the Company's credit facilities; the issuance of approximately 1.8 million Class A Units in the Operating Partnership valued at approximately $41.0 million; the issuance of 1,550,000 Series B Preferred Units with a stated value of $77.5 million; and the issuance of 750,000 Series A Preferred Shares with a stated value of $37.5 million. The Company completed the development of three properties in 1998 containing approximately 288,177 net rentable square feet. The Company also sold an office property located in Ohio containing approximately 156,175 net rentable square feet for a net sales price of approximately $14.7 million. The Company's acquisitions were accounted for by the purchase method. The results of operations for each of the acquired properties have been included from the respective purchase dates. All pro forma financial information presented herein 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. The following unaudited pro forma financial information of the Company for the years ended December 31, 1998 and 1997 gives effect to the properties acquired and the Common Share, Class A Unit, Series B Preferred Unit and Preferred Share issuances during 1998 as if the purchases and issuances had occurred on January 1, 1997.
Year Ended December 31, ----------------------- 1998 1997 --------- ---------- (Unaudited and in thousands, except per share data) Pro forma total revenues $ 266,462 $ 246,792 Pro forma net income before extraordinary items allocated to Common Shares $ 25,272 $ 18,338 Pro forma net income allocated after extraordinary items allocated to Common Shares $ 23,269 $ 18,338 Pro forma net income per Common Share before extraordinary items (diluted) $ 0.67 $ 0.50 Pro forma net income per Common Share after extraordinary items (diluted) $ 0.62 $ 0.50
F-9 1997 - - ---- During 1997, the Company acquired 80 properties (61 office properties and 19 industrial facilities) containing 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, debt assumption of $15.9 million and $9.5 million in Class A Units. 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 and Common Share issuances had occurred on January 1, 1996.
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 three industrial facilities) containing 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, debt assumption of $63.6 million and $39.5 million in Class A Units, Common Shares and warrants. 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, 1995.
Year Ended December 31, ----------------------- 1996 1995 ------- -------- (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)
5. 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. Investment in the Management Company is accounted for using the equity method. 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 $6.7 million during 1998, $2.3 million 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 $5.3 million during 1998, $1.9 million during 1997 and $147,000 for the period from August 22, 1996 to December 31, 1996. F-10 Summarized unaudited financial information for the Management Company as of December 31, 1998, 1997 and 1996, for the years ended December 31, 1998 and December 31, 1997 and for the period from August 22, 1996 to December 31, 1996 is as follows:
Year Ended December 31, ----------------------------------------------- 1998 1997 1996 -------- -------- -------- (Unaudited and in thousands) Total assets $ 1,763 $ 924 $ 345 Total revenue $ 13,011 $ 5,077 $ 301 Net income (loss) $ 77 $ 93 $ (42) Company's share of net income (loss) $ 74 $ 89 $ (26)
6. INVESTMENT IN UNCONSOLIDATED REAL ESTATE VENTURES ------------------------------------------------- The Company accounts for its non-controlling interests in Real Estate Ventures using the equity method of accounting. Non-controlling ownership interests range from 35% to 65%. These investments are recorded initially at the Company's cost and subsequently adjusted for the Company's net equity in income or loss and cash contributions and distributions.
Company's Share Real Estate of Venture Income Carrying Venture For the Year Ended Percent Amount Debt at 100% December 31, 1998 Ownership (in thousands) (in thousands) (in thousands) --------- -------------- -------------- -------------- Two Tower Bridge Associates 35% $ 2,784 $ 7,711 $ 61 Four Tower Bridge Associates 65% 438 14,002 - Six Tower Bridge Associates 50% 441 - - Christiana Center Operating Company I, LLC 50% 2,098 13,036 83 Christiana Center Operating Company II, LLC 50% 1,066 - - Interstate 202, G.P. 50% 2,733 1,750 - 1000 Chesterbrook Boulevard Partnership 50% 1,043 - - -------- -------- ----- $ 10,603 $ 36,499 $ 144 ======== ======== =====
As of December 31, 1998, the Company intends on making equity contributions to Real Estate Ventures under development totaling approximately $13.9 million of which $4.2 million was contributed as of December 31, 1998. The Company had guaranteed repayment of an aggregate of approximaely $17.3 million of consruction loans made to two Real Estate Ventures (a portion of which guaranty was in the form of a commitment to contribute approximately $6.8 million in equity to the borrower). Payment under these guaranties would constitute loan obligations of, or preferred equity positions in, the applicable Real Estate Venture. The Company has advanced approximately $4.3 million to a Real Estate Venture. The loan bears interest at 10%. The Company has an option to convert this loan into a capital contribution after certain conditions have been met. 7. INDEBTEDNESS ------------ Borrowings under Credit Facilities -- 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. At December 31, 1997, the Company had a $150.0 million secured credit facility (the "1997 Credit 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. F-11 During the first quarter of 1998, the Company replaced the 1997 Credit Facility with a $330.0 million unsecured revolving credit facility (the "1998 Credit Facility"). The Company wrote off $858,000 of unamortized deferred financing costs relating to the 1997 Credit Facility which has been accounted for as an extraordinary item in the statement of operations. The 1998 Credit Facility enabled 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 could have borrowed funds at a base rate equal to the higher of the Prime Rate or the Fed Funds Rate plus 50 basis points. During the second quarter of 1998, the Company entered into a $150.0 million unsecured credit facility (the "Additional Facility") to finance certain of the Company's property acquisitions. Amounts repaid by the Company under the Additional Facility were not subject to reborrowing. During the third quarter of 1998, the Company replaced the 1998 Credit Facility with a new revolving credit facility of $550.0 million (the "New 1998 Credit Facility"). The New 1998 Credit Facility is currently unsecured, but will convert to a secured facility if certain leverage requirements are not met by March 31, 1999. The Company wrote off approximately $1.1 million of unamortized deferred financing costs related to the 1998 Credit Facility which has been accounted for as an extraordinary item in the statement of operations. The interest rate borne by the New 1998 Credit Facility was LIBOR plus 150 basis points initially, with the spread over LIBOR subject to reductions of from 12.5 to 35 basis points and a possible increase of 25 basis points based on the Company's leverage. The spread over LIBOR may also be reduced to either 115 or 100 basis points depending on the Company's long term debt rating. The New 1998 Credit Facility matures in September 2001 and requires the Company to maintain ongoing compliance with a number of customary financial and other covenants, including leverage ratios and debt service coverage ratios, limitations on liens and distributions and a minimum net worth requirement. At December 31, 1998, the Company had approximately $531.3 million of indebtedness outstanding under the New 1998 Credit Facility. During the third quarter of 1998, the Company also replaced the Additional Facility with a new $150.0 million unsecured credit facility (the "New Additional Facility") which bears interest at LIBOR plus 200 basis points and is payable in full on March 31, 1999. Amounts repaid under the New Additional Facility are not subject to reborrowing. The New Additional Facility contains financial and other covenants that are identical to those applicable to the New 1998 Credit Facility. At December 31, 1998, the Company had approximately $150.0 million of indebtedness outstanding under the New Additional Facility. Borrowings under the New 1998 Credit Facility and the New Additional Facility were primarily used to fund the costs of acquiring properties. For the year ended December 31, 1998, the weighted average interest rate for borrowings under the Company's credit facilities was 7.05%. In January 1999, the Company obtained a $119.0 million, five year loan from two financial institutions. The loans have a fixed interest rate of 7.18% and are secured by four properties. The proceeds were used to reduce the New Additional Facility by $80.0 million and to fund working capital. Mortgage Notes Payable -- Mortgage loans encumbered 84, 20 and 18 of the Properties as of December 31, 1998, 1997 and 1996, respectively. Additionally, as of December 31, 1998, 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 7.6%, 8.3% and 8.4% during 1998, 1997 and 1996 respectively. Included in mortgage notes payable are non-interest bearing loans which have an imputed 8% interest rate. On December 31, 1998, 1997 and 1996, these loans totaled $2.3 million, $3.8 million and $4.8 million, respectively, with unamortized discounts of $280,000, $254,000 and $587,000, respectively. Amortization of the discounts aggregated $234,000, $333,000 and $63,000 during 1998, 1997 and 1996, respectively. F-12 Aggregate principal payments on mortgage notes payable and credit facilities at December 31, 1998 are due as follows:
Mortgage Notes Credit Payable Facilities Total ------------- ------------ -------------- 1999 $ 40,781,000 150,000,000 190,781,000 2000 7,364,000 - 7,364,000 2001 31,829,000 531,325,000 563,154,000 2002 16,797,000 - 16,797,000 2003 3,494,000 - 3,494,000 2004 and thereafter 218,970,000 - 218,970,000 ------------- ----------- ------------- $ 319,235,000 681,325,000 1,000,560,000 ------------- ----------- -------------
As of December 31, 1998, the Company was in compliance with all debt covenants. During the years ended December 31, 1998, 1997, and 1996, interest paid totaled $35.0 million, $6.1 million and $2.8 million respectively. The carrying values of the Company's debt at December 31, 1998 exceeded their respective fair values by approximately $6.5 million, as determined by using year end interest rates and market conditions. F-13 8. SHARES, WARRANTS AND OPTIONS: ----------------------------- The following table summarizes the Company's activity relative to Common Shares, warrants and options:
Number of Number of Date of Common Share options/ Exercise Proceeds (in Type of issuance Investor issuance Shares (a) Price warrants Price thousands)(b) - - -------------------------- ----------------- --------- ---------- ------ ------------ -------- ------------- 1998 Activity - - --------------------------------------------- Expiration of options SERS (g) 11/1/98 (133,333)(c) - - Repurchases (d) (86,744) (d) - - - Trustee Fees (f) Trustees 5/8/98 1,248 $ - - - - Share Offering Public 4/21/98 625,000 $ 24.00 - - 14,250 Share Offering Public 3/6/98 1,000,000 $ 24.00 - - 22,770 Share Offering Public 2/27/98 629,921 $ 23.81 - - 14,325 Share Offering Public 2/18/98 1,012,820 $ 24.06 - - 23,152 Share Offering Public 2/4/98 10,000,000 $ 24.00 - - 227,700 Unit redemption Various 6/30/98 1,434 - - - - Unit redemption Scarborough 6/22/98 50,000 - - - - Unit redemption Safeguard Scientifics 1/6/98 252,387 - - - - Employee share awards Company employees 1/2/98 438,274 - - - - Employee share options Company employees 1/2/98 - - 748,874 $ 29.04 - Employee share options Company employees 1/2/98 - - 740,796 $ 27.78 - Employee share options Company employees 1/2/98 - - 554,034 $ 25.25 - ---------- --------- --------- 13,924,340 1,910,371 $ 302,197 ---------- --------- ========= 1997 Activity: - - --------------------------------------------- Share offering Public 3/4/97 2,200,000 $ 20.63 - - $ 42,999 Share offering (e) 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 (e) Public 8/20/97 1,500,000 $ 20.75 - - 29,490 Trustee fees (f) 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 (g) Various 1,606,060 (h) - - - - Unit redemptions (i) Various Various 53,122 - - - - ---------- --------- --------- 17,074,075 - $ 306,866 ---------- --------- ========= 1996 Activity: - - --------------------------------------------- Share offering RMO (j) 6/21/96 19,983 $ 16.89 (k) 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 (j) 8/23/96 14,135 $ 16.89 (k) 14,135 $ 19.50 239 Preferred share offering SERS (g) 11/14/96 - (h) $ 16.50 133,333 $ 25.50 26,500 Share offering RMO (j) 11/15/96 46,321 $ 16.89 (k) 46,321 $ 19.50 782 Share offering Morgan Stanley 12/2/96 709,090 $ 16.50 - - 11,700 Share offering SERS (g) 12/2/96 636,363 $ 16.50 - - 10,500 Share offering Public 12/2/96 4,000,000 $ 16.50 - - 61,880 Share offering (e) Public 12/13/96 600,000 $ 16.50 - - 9,282 Unit Redemptions (i) 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, 1998 38,011,655 2,672,476 ========== =========
(a) 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. (b) Proceeds are net of underwriter's discounts and before deducting other expenses, if any. (c) In November 1998, 133,333 options granted to SERS expired. (d) Pursuant to the share repurchase plan approved by the Board during 1998, permitting the Company to purchase up to 2,000,000 Common Shares, the Company repurchased 86,744 of its Common Shares on the open market between August 11, 1998 and September 2, 1998 for prices ranging from $17.75 per share and $20.125 per share. (e) These offerings were pursuant to the exercise of underwriters' over-allotment options. (f) The Company issued Common Shares as partial payment of annual fees to non-employee Trustees. (g) SERS represents the Commonwealth of Pennsylvania State Employees' Retirement System. (h) 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. (i) Unit Redemptions represent Common Shares issued upon redemption of Units. (j) RMO represents an investment fund controlled by Richard M. Osborne, a former Trustee of the Company. (k) Indicated price represents the aggregate per share value of the Common Shares and warrants issued. F-14 As of December 31, 1998, 750,000 Preferred Shares of the Company were outstanding. Each Preferred Share has a stated value of $50.00 and is convertible at the option of the holder into Common Shares at a conversion price of $28.00. The conversion price is subject to reduction to $26.50 if the trading price of the Common Shares during the 60-day period ending December 31, 2003 is $23.00 or lower. The Preferred Shares bear a preferred distribution of 7.25% per annum, subject to an increase in the event quarterly distributions paid to holders of Common Shares exceeds $0.51 per share. At December 31, 1998, the Company had "restricted" Common Shares in aggregate of 438,274 to five of the Company's executives. These restricted shares vest over five to eight year periods and were valued at approximately $11.1 million at the date of issuance (based on the closing price of Common Shares on January 2, 1998). The Company has reserved, as of December 31, 1998, 2,672,476 Common Shares for issuance upon the exercise of share options and warrants described above. At December 31, 1998, 1,056,287 options and warrants were exercisable. With the exception of options issued to Company executives in 1998, all options and warrants were granted with an exercise price equal to the fair market value on the date of grant. The 1998 options to Company executives were issued with exercise prices ranging from fair market value on the date of grant to 115% of fair market value on the date of grant. At December 31, 1998, outstanding options and warrants had a weighted average remaining contractual life of 7.8 years, an average exercise price of $25.53 per share and an aggregate purchase price of $68.2 million. 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 other employees during 1996 and 1998 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, --------------------------------------------------- 1998 1997 1996 ---- ---- ---- (unaudited and in thousands, except per share data) Net income (loss): As reported $ 32,323 $ 14,502 $ (563) Pro forma $ 31,676 $ 14,502 $ (894) Earnings (loss) per common share: As reported Basic $ 0.90 $ 0.96 $ (0.44) Diluted $ 0.89 $ 0.95 $ (0.44) Pro forma Basic $ 0.88 $ 0.96 $ (0.69) Diluted $ 0.88 $ 0.95 $ (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. F-15 The weighted average fair value of each option issued in 1998 and the assumptions used in estimating the fair value on the grant date using the Black-Scholes option pricing model are as follows:
Other Executive officers employees ----------------------------- ---------- Exercise Price $ 25.25 $ 27.78 $29.04 $ 27.78 Fair Value of Options $ 2.66 $ 2.14 $ 1.94 $ 2.14 Expected life in years 10 10 10 10 Risk-free interest rate 5.8% 5.8% 5.8% 5.8% Volatility 18.7% 18.7% 18.7% 18.7% Dividend yield 6.8% 6.8% 6.8% 6.8%
The weighted average fair value of each option issued in 1996 and the assumptions used in estimating the fair value on the grant date using the Black-Scholes option pricing model are as follows: Executive Other officers employees --------- --------- Exercise Price $ 19.50 $ 19.50 Fair Value of the Options $ 1.38 $ 1.13 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% 9. NET INCOME (LOSS) PER COMMON 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 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 common share and per common share data).
For the year ended December 31, - - ----------------------------------------------------------------------------------------------------------------------------------- 1998 1997 1996 ------------------------- -------------------------- ------------------------ Basic Diluted Basic Diluted Basic Diluted ----------- ----------- ----------- ----------- ---------- ---------- Net income (loss) $ 33,025 $ 33,025 $ 15,001 $ 15,001 $ (162) $ (162) Income allocated to Preferred Shares (702) (702) (499) - (401) (401) ----------- ----------- ----------- ----------- ---------- ---------- Income (loss) available to common shareholders $ 32,323 $ 32,323 $ 14,502 $ 15,001 $ (563) $ (563) ----------- ----------- ----------- ----------- ---------- ---------- Weighted average shares outstanding 36,073,773 36,073,773 15,030,002 15,030,002 1,289,704 1,289,704 Preferred Shares - - - 686,214 - - Options and warrants - 63,580 - 77,113 - - ----------- ----------- ----------- ----------- ---------- ---------- Total weighted average shares outstanding 36,073,773 36,137,353 15,030,002 15,793,329 1,289,704 1,289,704 ----------- ----------- ----------- ----------- ---------- ---------- Earnings (loss) per share $ 0.90 $ 0.89 $ 0.96 $ 0.95 $ (0.44) $ (0.44) =========== =========== =========== =========== ========== ==========
F-16 10. DISTRIBUTIONS: --------------
1998 1997 1996 --------- --------- --------- Common Share Distributions: - - --------------------------- Distributions declared - per share $ 1.52 $ 1.44 $ 0.82 Percentage classified as ordinary income 100.0% 82.0% 11.5% Percentage classified as return of capital 0.0% 18.0% 88.5% Classified as ordinary income - per share $ 1.52 $ 1.18 $ 0.09 Classified as return of capital - per share $ - $ 0.26 $ 0.73 Preferred Share Distributions: - - ------------------------------ Distributions declared $702,095 $499,000 $401,000
11. 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. 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. 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 Operating Partnership exercised the first of the two extensions resulting in a one year extension to August 22, 1999. 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, 1998 aggregated $21.2 million). 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. 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 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 three of the four public offerings of Common Shares consummated by the Company between January 1, 1998 and the date of this Annual Report. 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. F-17 On July 29, 1998, the Company acquired approximately 23 acres of undeveloped land in Horsham Township, Montgomery County, Pennsylvania for approximately $3.5 million. The seller was LC/N Keith Valley Partnership II. The purchase price was paid in cash. The purchase price for the property was determined by negotiation between the Company and the seller. Mr. Nichols, Sr., the Company's chairman, holds approximately a 25% indirect interest in the seller. On September 28, 1998, the Company consummated a transaction (the "Lazard Transaction") in which it acquired a portfolio of 67 office, industrial and mixed use properties from LFREI and its affiliates. The Company had effective control over four of the properties acquired, and actual title is expected to be transferred by the end of the first quarter. Murry N. Gunty, one of the principals of LFREI, became a member of the Board of Trustees on September 28, 1998. In connection with the Lazard Transaction, the Company agreed to acquire an additional office property for $20.0 million payable through the issuance of Series B Preferred Units of the Operating Partnership. In connection with the Lazard Transaction, the Company also obtained an option to acquire an office property currently under construction for $68.0 million in cash. In the Lazard Transaction, an LFREI affiliate acquired Series B Preferred Units having a stated value of $3.0 million in exchange for a $3.0 million promissory note that bears interest at 7.25% and matures on September 30, 1999. The Company may elect to use this note to pay a portion of the exercise price for a property in which the Company holds a purchase option. On October 6, 1998, the Company consummated a transaction (the "Axinn Transaction") in which it acquired a portfolio of 22 office and industrial properties from the Donald E. Axinn Companies and affiliates. Mr. Axinn became a member of the Board of Trustees on October 6, 1998. In connection with the Axinn Transaction, the Company agreed to acquire an additional six office properties containing an aggregate of approximately 983,053 net rentable square feet for an aggregate purchase price of $63.1 million, upon satisfaction of certain conditions. On December 28, 1998, the Company acquired one of these properties for $11.0 million in cash. On October 20, 1998, the Operating Partnership loaned employees an aggregate of approximately $2.4 million to fund the purchase of 130,428 Common Shares in the open market. The loans are full recourse and mature in five years. The interest on the loans is due quarterly and the rate is based on the lower of the Company's existing interest rate on credit facility borrowings or the Company's dividend yield. In January 1999, the Operating Partnership agreed to loan executive officers of the Company an aggregate of approximately $81,107 to fund tax withholding payments due in connection with certain year-end bonuses. These loans are full recourse, bear interest at approximately 5% and mature on December 31, 1999. F-18 12. OPERATING LEASES: ----------------- The Company leases its properties to tenants under operating leases with various expiration dates extending to the year 2017. At December 31, 1998, leases covering approximately 2.1 million square feet or 11% of the net leasable space were scheduled to expire during 1999. Gross minimum future rentals and accrued rental income on noncancelable leases at December 31, 1998 are as follows (in thousands):
Total Cash Accrued accrual basis Year rentals rental income rental income ---- ------- ------------- ------------- 1999 209,869 6,721 216,590 2000 187,267 2,725 189,992 2001 154,992 633 155,625 2002 122,204 (651) 121,553 2003 93,235 (2,061) 91,174 2004 and thereafter 309,545 (15,859) 293,686 ----------- -------- ----------- $ 1,077,112 $ (8,492) $ 1,068,620 =========== ======== ===========
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. 13. 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 1998 1998 1998 1998 ---- ---- ---- ---- Total revenue $ 33,102 $ 43,130 $ 47,256 $ 69,373 Net income before extraordinary item 8,803 10,422 9,559 6,244 Basic $ 0.28 $ 0.28 $ 0.25 $ 0.15 Diluted $ 0.28 $ 0.28 $ 0.25 $ 0.15 Net income after extraordinary item 7,945 10,422 8,414 6,244 Basic $ 0.25 $ 0.28 $ 0.22 $ 0.15 Diluted $ 0.25 $ 0.28 $ 0.22 $ 0.15 Earnings before interest, depreciation and amortization(a) 21,405 27,943 30,199 44,075 Income allocated to Common Shares 7,945 10,422 8,392 5,564 1st 2nd 3rd 4th quarter quarter quarter quarter 1997 1997 1997 1997 ---- ---- ---- ---- Total revenue $ 8,598 $ 12,120 $ 18,121 $ 22,221 Net income 2,050 1,658 4,748 6,545 Basic net income per Common Share $ 0.20 $ 0.17 $ 0.25 $ 0.28 Diluted net income per Common Share $ 0.20 $ 0.15 $ 0.25 $ 0.28 Earnings before interest, depreciation and amortization(a) 5,429 7,287 10,945 14,384 Income allocated to Common Shares 1,551 1,658 4,748 6,545
(a) Earnings before interest, depreciation and amortization excludes gains on sale of interests in real estate, minority interest and extraodinary items. The summation of quarterly earnings per share amounts do not necessarily equal year to date amounts. F-19 14. SUMMARY OF COMMITMENTS AND CONTINGENCIES: ----------------------------------------- Legal Proceedings The Company is involved from time to time in litigation on various matters, which include disputes with tenants and disputes arising out of agreements to purchase properties. Given the nature of the Company's business activities, these lawsuits are considered routine to the conduct of its business. The result of any particular lawsuit cannot be predicted, because of the very nature of litigation, the litigation process and its adversarial nature, and the jury system. As of the date of this filing, the Company is a defendant in case in which the plaintiffs allege that the Company breached its obligation to purchase a portfolio of properties for approximately $83.0 million. The plaintiffs' allegations assert claims for reformation, breach of contract, breach of duty of good faith and fair dealing, fraud, violation of the New Jersey Consumer Fraud Statute and unjust enrichment. The Company believes that the plaintiff failed to satisfy the conditions precedent to the Company's obligation to close under the agreement and has moved to dismiss all of the plaintiff's claims. As of the date of this filing, the court has not ruled on the Company's motion to dismiss plaintiffs' claims, and discovery has not commenced. As of December 31, 1998, the Company also owned or held options to purchase approximately 457.0 acres of land for future development. Letters of Credit and Other Commitments In connection with certain mortgages, the Company is required to maintain leasing and capital reserve accounts with the mortgage lender through letters of credit which totaled $12.1 million at December 31, 1998. The Company is also required to maintain escrow accounts for taxes, insurance and tenant security deposits which amounted to $3.5 million at December 31, 1998. The related tenant rents are deposited into the loan servicer's depository accounts, which are used to fund debt service, operating expenses, capital expenditures and the escrow and reserve accounts as necessary. The excess cash is included in cash and cash equivalents on the accompanying balance sheet at December 31, 1998. As of December 31, 1998, the Company also owned or held options to purchase approximately 457.0 acres of land for future development. 15. SUBSEQUENT EVENT: ---------------- On March 26, 1999, the Company obtained a $75.0 million, three year loan. The loan has a floating interest rate of LIBOR plus 250 basis points and is secured by five properties. The net proceeds were primarily used to repay the remaining $70.0 million borrowed under the New Additional Facility. F-20 Brandywine Realty Trust Schedule II Valuation and Qualifying Accounts (in thousands)
Additions Balance at ----------- Balance Beginning Charged to at End Description of Period expense Deductions of Period - - ----------------------------------- ----------- ---------- ----------- ---------- Allowance for possible losses: Year ended December 31, 1998 $ 582 $ 2,710 $ 120 $ 3,172 ===== ======= ===== ======= Year ended December 31, 1997 $ 40 $ 542 $ - $ 582 ===== ======= ===== ======= Year ended December 31, 1996 $ - $ 40 $ - $ 40 ===== ======= ===== =======
F-21 BRANDYWINE REALTY TRUST Real Estate and Accumulated Depreciation - December 31, 1998 (in thousands)
Initial Cost ----------------------------------------- Net Improvements (Retirements) Encumberances at Building and Since Property Name City State December 31, 1998 Land Improvements Acquisition - - ------------------------------------- ---------------- ------- -------------------- ---------- ------------- -------------- Three Greentree Centre Marlton NJ $ 9,558 (c) $ 323 $ 6,024 $ 188 Two Greentree Centre Marlton NJ - (c) 264 4,693 55 One Greentree Centre Marlton NJ - (c) 345 4,440 60 5910 -6090 Six Forks Raleigh NC - (c) 2,194 3,324 318 700 Business Center Drive Horsham PA - 550 2,201 139 800 Business Center Drive Horsham PA - 896 3,585 62 One Progress Avenue Horsham PA - 1,404 5,629 114 500 Enterprise Road Horsham PA - 1,303 5,188 8 1155 Business Center Drive Horsham PA - 1,029 4,124 (28) 650 Dresher Road Horsham PA - 636 2,501 67 2240/50 Butler Pike Plymouth Meeting PA - 1,104 4,627 76 2260 Butler Pike Plymouth Meeting PA - 661 2,727 85 120 West Germantown Pike Plymouth Meeting PA - 685 2,773 67 140 West Germantown Pike Plymouth Meeting PA - 481 1,976 111 33 Street Road - Greenwood Square I Bensalem PA 1,221 (d) 851 3,407 350 33 Street Road - Greenwood Square II Bensalem PA - (d) 1,126 4,511 916 33 Street Road - Greenwood Square III Bensalem PA - (d) 350 1,401 285 3000 Cabot Boulevard Langhorne PA - (d) 485 1,940 270 2260/70 Cabot Boulevard Langhorne PA - (d) 415 1,661 81 486 Thomas Jones Way Exton PA - 806 3,256 517 456 Creamery Way Exton PA - 635 2,548 4 110 Summit Drive Exton PA - 403 1,647 163 468 Creamery Way Exton PA - 527 2,112 12 16 Campus Boulevard Newtown Square PA - 1,153 4,627 80 18 Campus Boulevard Newtown Square PA - 786 3,312 44 500 North Gulph Road King of Prussia PA - 1,299 5,201 438 6575 Snowdrift Road Allentown PA - 601 2,411 4 7248 Tilghman Street Allentown PA - 731 2,969 31 7310 Tilghman Street Allentown PA 2,478 553 2,246 75 8000 Lincoln Drive Marlton NJ - 606 2,887 804 457 Haddonfield Road Cherry Hill NJ 8,952 2,142 9,120 552 168 Franklin Corner Drive Lawrenceville NJ - 398 1,597 58 One Righter Parkway Talleyville DE - 2,545 10,195 105 2200 Cabot Boulevard Langhorne PA - 770 3,117 403 2250 Cabot Boulevard Langhorne PA - 559 2,240 - 1510 Gehman Road Lansdale PA - 1,204 4,846 1,130 300 Welsh Road Horsham PA - 1,290 5,157 299 655 Business Center Drive Horsham PA 2,799 544 2,529 588 501 Office Center Drive Ft. Washington PA - 1,796 7,192 707 500 Office Center Drive Ft. Washington PA - 1,617 6,480 433 323 Norristown Road Lower Gwyned PA - 1,685 6,751 64 321 Norristown Road Lower Gwyned PA - 1,286 5,176 195 220 Commerce Drive Ft. Washington PA - 1,086 4,338 58 2010 Cabot Boulevard Langhorne PA - (d) 760 3,091 - 2000 Cabot Boulevard Langhorne PA - (d) 569 2,281 33 2005 Cabot Boulevard Langhorne PA - (d) 313 1,257 - 855 Springdale Drive Exton PA - 838 3,370 26 1336 Enterprise Drive West Goshen PA - 731 2,946 27 748 Springdale Drive Exton PA - 231 931 8 300 Berwyn Park Berwyn PA - 3,415 13,422 92 200 Berwyn Park Berwyn PA - 2,364 9,460 18 Campus Boulevard - Lot 7, 8 & 9 Newtown Square PA 819 3,064 68 - 1974 Sproul Road Broomall PA - 841 3,368 168 100 Berwyn Park Berwyn PA - 1,823 7,290 246 7000 Geerdes Boulevard King of Prussia PA - 2,664 10,670 1 1111 Old Eagle School Road Valley Forge PA - 2,005 7,721 19 111 Presidential Boulevard Bala Cynwyd PA - 5,419 21,612 315 100-300 Gundy Drive Reading PA 1,000 6,412 25,180 708
(RESTUBBED TABLE)
Gross Amount at Which Carried December 31, 1998 ------------------------------------------------------ Accumulated Depreciation at Building and December 31, Date of Date Depreciable Property Name Land Improvements Total (a) 1998 (b) Construction Acquired Life - - ------------------------------------- ---------- -------------- ------------ ------------- ------------ --------- ----------- Three Greentree Centre $ 323 $ 6,211 $ 6,535 $ 3,139 1984 1986 25 Two Greentree Centre 264 4,748 5,012 2,458 1983 1986 25 One Greentree Centre 345 4,500 4,845 2,276 1982 1986 25 5910 -6090 Six Forks 2,194 3,642 5,836 1,796 1982 1986 25 700 Business Center Drive 550 2,339 2,890 196 1986 1996 25 800 Business Center Drive 896 3,647 4,543 347 1986 1996 25 One Progress Avenue 1,404 5,744 7,147 545 1986 1996 25 500 Enterprise Road 1,303 5,196 6,499 887 1990 1996 25 1155 Business Center Drive 1,029 4,096 5,125 766 1990 1996 25 650 Dresher Road 636 2,568 3,204 332 1984 1996 25 2240/50 Butler Pike 1,104 4,703 5,807 688 1984 1996 25 2260 Butler Pike 661 2,811 3,473 380 1984 1996 25 120 West Germantown Pike 685 2,840 3,525 323 1984 1996 25 140 West Germantown Pike 481 2,087 2,568 305 1984 1996 25 33 Street Road - Greenwood Square I 851 3,758 4,608 410 1985 1996 25 33 Street Road - Greenwood Square II 1,126 5,426 6,553 546 1985 1996 25 33 Street Road - Greenwood Square III 350 1,687 2,036 189 1985 1996 25 3000 Cabot Boulevard 485 2,211 2,695 211 1986 1996 25 2260/70 Cabot Boulevard 415 1,742 2,157 171 1984 1996 25 486 Thomas Jones Way 806 3,773 4,579 744 1990 1996 25 456 Creamery Way 635 2,552 3,187 285 1987 1996 25 110 Summit Drive 403 1,811 2,213 230 1985 1996 25 468 Creamery Way 527 2,125 2,651 294 1990 1996 25 16 Campus Boulevard 1,153 4,707 5,860 628 1990 1996 25 18 Campus Boulevard 786 3,356 4,142 603 1990 1996 25 500 North Gulph Road 1,299 5,639 6,938 610 1979 1996 25 6575 Snowdrift Road 601 2,415 3,016 400 1988 1996 25 7248 Tilghman Street 731 3,000 3,731 369 1987 1996 25 7310 Tilghman Street 553 2,320 2,874 303 1985 1996 25 8000 Lincoln Drive 606 3,691 4,297 737 1983 1996 25 457 Haddonfield Road 2,142 9,671 11,814 983 1990 1996 31.5 168 Franklin Corner Drive 398 1,656 2,053 160 1976 1996 25 One Righter Parkway 2,545 10,300 12,845 858 1989 1996 25 2200 Cabot Boulevard 770 3,519 4,290 350 1985 1996 25 2250 Cabot Boulevard 559 2,241 2,799 190 1985 1996 25 1510 Gehman Road 1,204 5,977 7,180 608 1990 1996 25 300 Welsh Road 1,290 5,456 6,746 245 1985 1997 25 655 Business Center Drive 544 3,117 3,661 327 1997 1997 31.5 501 Office Center Drive 1,796 7,900 9,695 505 1974 1997 25 500 Office Center Drive 1,617 6,913 8,530 385 1974 1997 25 323 Norristown Road 1,685 6,815 8,500 446 1988 1997 25 321 Norristown Road 1,286 5,371 6,657 365 1972 1997 25 220 Commerce Drive 1,086 4,397 5,482 208 1985 1997 25 2010 Cabot Boulevard 760 3,091 3,851 210 1985 1997 25 2000 Cabot Boulevard 569 2,314 2,883 166 1985 1997 25 2005 Cabot Boulevard 313 1,258 1,570 81 1985 1997 25 855 Springdale Drive 838 3,395 4,234 214 1986 1997 25 1336 Enterprise Drive 731 2,974 3,704 216 1989 1997 25 748 Springdale Drive 231 938 1,170 62 1986 1997 25 300 Berwyn Park 3,415 13,514 16,929 770 1989 1997 25 200 Berwyn Park 2,364 9,478 11,842 541 1987 1997 25 Campus Boulevard - Lot 7, 8 & 9 3,064 68 3,132 1 1997 1974 Sproul Road 841 3,537 4,377 238 1972 1997 25 100 Berwyn Park 1,823 7,536 9,359 459 1986 1997 25 7000 Geerdes Boulevard 2,664 10,671 13,335 678 1988 1997 25 1111 Old Eagle School Road 2,005 7,741 9,745 340 1962 1997 25 111 Presidential Boulevard 5,419 21,927 27,346 983 1974 1997 25 100-300 Gundy Drive 6,412 25,889 32,300 1,547 1970 1997 25
F-22
Initial Cost ----------------------------------------- Net Improvements (Retirements) Encumberances at Building and Since Property Name City State December 31, 1998 Land Improvements Acquisition - - ------------------------------------- ---------------- ------- -------------------- ---------- ------------- -------------- 100 Katchel Blvd Reading PA - 1,854 7,423 64 10000 Midlantic Drive Mt. Laurel NJ - 3,206 12,857 537 2000 Midlantic Drive Mt. Laurel NJ - 2,202 8,823 45 1000 Howard Boulevard Mt. Laurel NJ 5,505 2,297 9,288 429 1000 Atrium Way Mt. Laurel NJ - 2,061 8,180 231 1120 Executive Boulevard Mt. Laurel NJ 5,665 2,074 8,415 522 15000 Midlantic Drive Mt. Laurel NJ - 3,061 12,254 104 9000 Midlantic Drive Mt. Laurel NJ - 1,472 5,895 8 4000/5000 West Lincoln Drive Marlton NJ - 877 3,526 117 1000/2000 West Lincoln Drive Marlton NJ - 888 3,568 66 4000 Midlantic Drive Mt. Laurel NJ - 714 5,085 89 Five Eves Drive Marlton NJ - 703 2,819 162 9000 West Lincoln Drive Marlton NJ - 610 2,422 103 Two Eves Drive Marlton NJ - 818 3,461 72 3000 West Lincoln Drive Marlton NJ - 569 2,293 65 Four B Eves Drive Marlton NJ - 588 2,369 44 Four A Eves Drive Marlton NJ - 539 2,168 20 Main Street - Plaza 1000 Voorhees NJ - 2,729 10,931 145 Main Street- CAM Voorhees NJ - 3 11 - One South Union Place Cherry Hill NJ 8,091 452 8,047 915 1007 Laurel Oak Road Voorhees NJ - 1,560 6,241 16 6 East Clementon Road Gibbsboro NJ - 1,342 5,366 113 King & Harvard Cherry Hill NJ - 299 1,069 1,056 Main Street - Piazza Voorhees NJ - 696 2,802 41 20 East Clementon Road Gibbsboro NJ - 763 3,055 120 Main Street - Promenade Voorhees NJ - 531 2,052 3 7 Foster Avenue Gibbsboro NJ - 230 921 7 10 Foster Avenue Gibbsboro NJ - 243 971 38 50 East Clementon Road Gibbsboro NJ - 241 964 5 5 Foster Avenue Gibbsboro NJ - 8 32 3 500 Scarborough Drive Egg Harbor NJ - 744 2,977 99 501 Scarborough Drive Egg Harbor NJ - 744 2,977 15 100 Commerce Drive Newark DE - 1,160 4,633 58 2510 Metropolitan Drive Trevose PA - 3,311 13,218 867 201/221 King Manor Drive King of Prussia PA - 712 2,898 1 500 Highland Drive Westhampton NJ - 1,062 4,265 4 300 Highland Drive Westhampton NJ - 1,063 4,247 29 400 Highland Drive Westhampton NJ - 573 2,299 - 600 Highland Drive Westhampton NJ - 549 2,205 - 1000 East Lincoln Drive Marlton NJ - 263 1,059 11 2 Foster Avenue Gibbsboro NJ - 182 730 12 1 Foster Avenue Gibbsboro NJ - 92 364 10 4 Foster Avenue Gibbsboro NJ - 181 726 7 55 U.S. Avenue Gibbsboro NJ - 1,109 4,435 29 5 U.S. Avenue Gibbsboro NJ - 20 81 3 Keith Valley Lots 2, 4, 5 Horsham PA 3,573 - - 755 Business Center Drive Horsham PA 3,063 1,360 2,334 270 Masons Mill Bryn Athyn PA 122,598 (e) 2,476 9,982 94 920 Harvest Drive Blue Bell PA - 2,433 9,738 (121) 925 Harvest Drive Blue Bell PA - 1,671 6,606 52 160-180 West Germantown Pike East Norriton PA 5,624 1,603 6,418 - 520 Virginia Drive Ft. Washington PA - 845 3,455 2 1720 Walton Road Blue Bell PA - 380 1,489 48 EM-Venture I - Keystone Park Bristol PA - (e) 371 1,442 36 EM-Venture II - Keystone Park Bristol PA - (e) 1,712 9,142 - 105 / 140 Terry Drive Newtown PA - 2,299 8,238 1,133 426 Lancaster Avenue Devon PA - 1,689 6,756 - 14 Campus Boulevard / Lot 13 Newtown Square PA 5,323 2,113 4,217 188 610 Freedom Business Center King of Prussia PA - 2,017 8,070 47
(RESTUBBED TABLE)
Gross Amount at Which Carried December 31, 1998 ------------------------------------------------------ Accumulated Depreciation at Building and December 31, Date of Date Depreciable Property Name Land Improvements Total (a) 1998 (b) Construction Acquired Life - - ------------------------------------- ---------- -------------- ------------ ------------- ------------ --------- ----- 100 Katchel Blvd 1,854 7,486 9,341 442 1970 1997 25 10000 Midlantic Drive 3,206 13,394 16,600 910 1990 1997 25 2000 Midlantic Drive 2,202 8,868 11,070 564 1989 1997 25 1000 Howard Boulevard 2,297 9,718 12,014 938 1988 1997 25 1000 Atrium Way 2,061 8,411 10,472 441 1989 1997 25 1120 Executive Boulevard 2,074 8,937 11,011 822 1987 1997 25 15000 Midlantic Drive 3,061 12,359 15,419 804 1991 1997 25 9000 Midlantic Drive 1,472 5,903 7,375 375 1989 1997 25 4000/5000 West Lincoln Drive 877 3,643 4,520 275 1982 1997 25 1000/2000 West Lincoln Drive 888 3,635 4,522 293 1982 1997 25 4000 Midlantic Drive 714 5,174 5,888 471 1981 1997 25 Five Eves Drive 703 2,981 3,684 227 1986 1997 25 9000 West Lincoln Drive 610 2,524 3,135 197 1983 1997 25 Two Eves Drive 818 3,533 4,351 380 1987 1997 25 3000 West Lincoln Drive 569 2,358 2,927 171 1982 1997 25 Four B Eves Drive 588 2,413 3,001 206 1987 1997 25 Four A Eves Drive 539 2,188 2,727 173 1987 1997 25 Main Street - Plaza 1000 2,729 11,076 13,805 813 1988 1997 25 Main Street- CAM 3 11 14 4 1997 25 One South Union Place 452 8,962 9,414 518 1997 25 1007 Laurel Oak Road 1,560 6,257 7,817 261 1996 1997 25 6 East Clementon Road 1,342 5,479 6,821 243 1980 1997 25 King & Harvard 299 2,125 2,424 56 1997 25 Main Street - Piazza 696 2,843 3,539 216 1990 1997 25 20 East Clementon Road 763 3,175 3,938 177 1986 1997 25 Main Street - Promenade 531 2,055 2,586 150 1988 1997 25 7 Foster Avenue 230 928 1,158 39 1983 1997 25 10 Foster Avenue 243 1,009 1,252 43 1983 1997 25 50 East Clementon Road 241 969 1,210 44 1986 1997 25 5 Foster Avenue 8 35 43 2 1968 1997 25 500 Scarborough Drive 744 3,076 3,820 141 1987 1997 25 501 Scarborough Drive 744 2,992 3,736 131 1987 1997 25 100 Commerce Drive 1,160 4,691 5,851 241 1989 1997 25 2510 Metropolitan Drive 3,311 14,086 17,396 755 1981 1997 25 201/221 King Manor Drive 712 2,898 3,611 202 1964 1997 25 500 Highland Drive 1,062 4,269 5,331 275 1990 1997 25 300 Highland Drive 1,063 4,276 5,339 282 1990 1997 25 400 Highland Drive 573 2,299 2,872 148 1990 1997 25 600 Highland Drive 549 2,206 2,754 142 1990 1997 25 1000 East Lincoln Drive 263 1,069 1,333 44 1981 1997 25 2 Foster Avenue 182 742 924 33 1974 1997 25 1 Foster Avenue 92 374 466 17 1972 1997 25 4 Foster Avenue 181 733 914 31 1974 1997 25 55 U.S. Avenue 1,109 4,464 5,573 186 1982 1997 25 5 U.S. Avenue 20 84 104 4 1987 1997 25 Keith Valley Lots 2, 4, 5 3,573 - 3,573 1998 755 Business Center Drive 1,360 2,604 3,964 39 1998 1998 31.5 Masons Mill 2,476 10,075 12,552 106 1984 1998 25 920 Harvest Drive 2,433 9,617 12,050 291 1990 1998 25 925 Harvest Drive 1,671 6,658 8,329 139 1990 1998 25 160-180 West Germantown Pike 1,603 6,418 8,021 201 1982 1998 25 520 Virginia Drive 845 3,457 4,302 141 1987 1998 25 1720 Walton Road 380 1,537 1,917 16 1968 1998 25 EM-Venture I - Keystone Park 371 1,478 1,849 15 1985 1998 25 EM-Venture II - Keystone Park 1,712 9,143 10,854 71 1985 1998 25 105 / 140 Terry Drive 2,299 9,371 11,670 383 1982 1998 25 426 Lancaster Avenue 1,689 6,756 8,445 267 1990 1998 25 14 Campus Boulevard / Lot 13 2,113 4,405 6,518 169 1998 1998 25 610 Freedom Business Center 2,017 8,117 10,134 324 1985 1998 25
F-23
Initial Cost ----------------------------------------- Net Improvements (Retirements) Encumberances at Building and Since Property Name City State December 31, 1998 Land Improvements Acquisition - - ------------------------------------- ---------------- ------- -------------------- ---------- ------------- -------------- 620 Freedom Business Center King of Prussia PA - 2,770 11,014 73 630 Freedom Business Center King of Prussia PA - 2,773 11,144 113 640 Freedom Business Center King of Prussia PA - 4,222 16,891 49 751-761 Fifth Avenue King of Prussia PA - 1,097 4,391 - 741 First Avenue King of Prussia PA - 1,287 5,151 - 680 Allendale Road King of Prussia PA - 689 2,756 - 650 Park Avenue King of Prussia PA - 1,104 4,378 - 875 First Avenue King of Prussia PA - 618 2,473 - 630 Clark Avenue King of Prussia PA - 547 2,190 - 620 Allendale Road King of Prussia PA - 1,020 3,839 - 600 Park Avenue King of Prussia PA - 1,012 4,048 - 2490 Boulevard of the Generals King of Prussia PA - 348 1,394 - Maschellmac I King of Prussia PA - (e) 2,780 10,968 253 Maschellmac II King of Prussia PA - (e) 2,175 8,601 197 Maschellmac III King of Prussia PA - (e) 2,869 11,315 260 Maschellmac IV King of Prussia PA - (e) 2,720 10,985 155 50 Swedesford Square Frazer PA - (e) 3,914 15,300 354 52 Swedesford Square Frazer PA - (e) 4,254 16,629 385 922 Swedesford Road Frazer PA - 215 1 0 150 Corporate Center Drive Camp Hill PA - 964 3,871 - 200 Corporate Center Drive Camp Hill PA - 1,647 6,606 243 300 Corporate Center Drive Camp Hill PA 1,086 4,823 19,301 10 600 Corporate Circle Drive Harrisburg PA - 363 1,452 - 800 Corporate Circle Drive Harrisburg PA - 414 1,653 - 200 Nationwide Drive Harrisburg PA - 100 403 - 500 Nationwide Drive Harrisburg PA - 208 850 - 2401 Park Drive Harrisburg PA - 182 728 (1) 2404 Park Drive Harrisburg PA - 167 668 73 2405 Park Drive Harrisburg PA - 424 1,697 61 2407 Park Drive Harrisburg PA - 464 1,864 9 7350 Tilghman Street Allentown PA - 3,439 13,755 736 7450 Tilghman Street Allentown PA - (e) 2,875 11,664 667 7150 Windsor Drive Allentown PA - (e) 1,037 4,231 - 7535 Windsor Drive Allentown PA - (e) 3,384 13,439 328 7010 Snowdrift Way Allentown PA - (e) 820 3,333 (1) Iron Run Land Allentown PA (e) 7,419 - - 1105 Berkshire Boulevard Reading PA - 1,115 4,510 70 1150 Berkshire Boulevard Reading PA - 435 1,748 71 700 East Gate Drive Mt. Laurel NJ - (e) 3,575 14,478 (49) 701 East Gate Drive Mt. Laurel NJ - (e) 1,741 6,897 159 815 East Gate Drive Mt. Laurel NJ - (e) 638 2,592 1 817 East Gate Drive Mt. Laurel NJ - (e) 613 2,434 57 East Gate Land Mt. Laurel NJ (e) 2,666 - - 304 Harper Drive Mt. Laurel NJ - (e) 659 2,682 (1) 305 Harper Drive Mt. Laurel NJ - (e) 223 916 - 308 Harper Drive Mt. Laurel NJ - (e) 1,648 6,682 2 303 Fellowship Drive Mt. Laurel NJ - (e) 1,498 6,072 9 305 Fellowship Drive Mt. Laurel NJ - (e) 1,426 5,785 (1) 307 Fellowship Drive Mt. Laurel NJ - (e) 1,569 6,360 29 309 Fellowship Drive Mt. Laurel NJ - (e) 1,522 6,172 - 50 East State Street Trenton NJ - 8,926 35,735 51 33 West State Street Trenton NJ - 6,016 24,091 36 993 Lenox Drive Lawrenceville NJ - 2,811 17,996 (1) 997 Lenox Drive Lawrenceville NJ 2,410 9,700 1 1009 Lenox Drive Lawrenceville NJ 15,342 5,190 19,284 655 104 Windsor Center Drive East Windsor NJ - 977 3,918 967 102 Chestnut Ridge Road Montvale NJ - 1,609 6,437 - 25 Phillips Parkway Montvale NJ - 1,950 7,799 - 3 Paragon Drive Montvale NJ - 2,021 8,757 325
(RESTUBBED TABLE)
Gross Amount at Which Carried December 31, 1998 ------------------------------------------------------ Accumulated Depreciation at Building and December 31, Date of Date Depreciable Property Name Land Improvements Total (a) 1998 (b) Construction Acquired Life - - ------------------------------------- ---------- -------------- ------------ ------------- ------------ --------- ----------- 620 Freedom Business Center 2,770 11,086 13,857 444 1986 1998 25 630 Freedom Business Center 2,773 11,257 14,030 453 1989 1998 25 640 Freedom Business Center 4,222 16,940 21,162 670 1991 1998 25 751-761 Fifth Avenue 1,097 4,391 5,488 68 1967 1998 25 741 First Avenue 1,287 5,151 6,438 178 1966 1998 25 680 Allendale Road 689 2,756 3,445 95 1962 1998 25 650 Park Avenue 1,104 4,378 5,482 151 1968 1998 25 875 First Avenue 618 2,473 3,091 85 1966 1998 25 630 Clark Avenue 547 2,190 2,737 76 1960 1998 25 620 Allendale Road 1,020 3,839 4,859 133 1961 1998 25 600 Park Avenue 1,012 4,048 5,060 140 1964 1998 25 2490 Boulevard of the Generals 348 1,394 1,742 55 1975 1998 25 Maschellmac I 2,780 11,221 14,001 115 1980 1998 25 Maschellmac II 2,175 8,798 10,973 90 1984 1998 25 Maschellmac III 2,869 11,575 14,444 118 1985 1998 25 Maschellmac IV 2,720 11,141 13,860 119 1987 1998 25 50 Swedesford Square 3,914 15,654 19,568 161 1988 1998 25 52 Swedesford Square 4,254 17,014 21,268 175 1986 1998 25 922 Swedesford Road 215 1 216 - 1986 1998 25 150 Corporate Center Drive 964 3,871 4,835 103 1987 1998 25 200 Corporate Center Drive 1,647 6,850 8,496 224 1989 1998 25 300 Corporate Center Drive 4,823 19,311 24,134 504 1989 1998 25 600 Corporate Circle Drive 363 1,452 1,815 38 1978 1998 25 800 Corporate Circle Drive 414 1,653 2,067 39 1979 1998 25 200 Nationwide Drive 100 403 503 10 1978 1998 25 500 Nationwide Drive 208 850 1,058 22 1977 1998 25 2401 Park Drive 182 728 909 19 1984 1998 25 2404 Park Drive 167 741 908 27 1983 1998 25 2405 Park Drive 424 1,757 2,182 58 1985 1998 25 2407 Park Drive 464 1,873 2,337 49 1985 1998 25 7350 Tilghman Street 3,439 14,490 17,930 162 1987 1998 25 7450 Tilghman Street 2,875 12,332 15,206 136 1986 1998 25 7150 Windsor Drive 1,037 4,231 5,268 42 1988 1998 25 7535 Windsor Drive 3,384 13,767 17,151 142 1988 1998 25 7010 Snowdrift Way 820 3,333 4,152 33 1991 1998 25 Iron Run Land 7,419 - 7,419 1998 1105 Berkshire Boulevard 1,115 4,580 5,695 181 1987 1998 25 1150 Berkshire Boulevard 435 1,820 2,254 90 1979 1998 25 700 East Gate Drive 3,575 14,429 18,004 147 1984 1998 25 701 East Gate Drive 1,741 7,057 8,797 72 1986 1998 25 815 East Gate Drive 638 2,592 3,231 26 1986 1998 25 817 East Gate Drive 613 2,491 3,104 25 1986 1998 25 East Gate Land 2,666 - 2,666 1998 304 Harper Drive 659 2,682 3,340 28 1975 1998 25 305 Harper Drive 223 916 1,139 9 1979 1998 25 308 Harper Drive 1,648 6,682 8,332 68 1976 1998 25 303 Fellowship Drive 1,498 6,080 7,579 62 1979 1998 25 305 Fellowship Drive 1,426 5,785 7,210 59 1980 1998 25 307 Fellowship Drive 1,569 6,388 7,958 66 1981 1998 25 309 Fellowship Drive 1,522 6,172 7,694 63 1982 1998 25 50 East State Street 8,926 35,786 44,712 1,086 1989 1998 25 33 West State Street 6,016 24,126 30,143 727 1988 1998 25 993 Lenox Drive 2,811 17,996 20,806 334 1985 1998 25 997 Lenox Drive 2,410 9,700 12,111 297 1987 1998 25 1009 Lenox Drive 5,190 19,939 25,129 603 1989 1998 25 104 Windsor Center Drive 977 4,885 5,862 164 1987 1998 25 102 Chestnut Ridge Road 1,609 6,437 8,046 70 1979 1998 25 25 Phillips Parkway 1,950 7,799 9,749 85 1988 1998 25 3 Paragon Drive 2,021 9,082 11,103 7 1988 1998 25
F-24
Initial Cost ----------------------------------------- Net Improvements (Retirements) Encumberances at Building and Since Property Name City State December 31, 1998 Land Improvements Acquisition - - ------------------------------------- ---------------- ------- -------------------- ---------- ------------- -------------- 1255 Broad Street Bloomfield NJ - 987 3,947 - Park 80 West Plaza I Saddlebrook NJ - 6,242 26,938 2,472 Park 80 West Plaza II Saddlebrook NJ - 7,668 30,533 995 201 North Walnut Street Wilmington DE - 10,359 41,509 135 301 North Walnut Street Wilmington DE - 8,495 34,016 91 256-263 Chapman Road / Cambridge Newark DE - 292 1,185 - 256-263 Chapman Road / Bellevue Newark DE - 374 1,547 - 256-263 Chapman Road / Commonwealth Newark DE - 351 1,421 15 256-263 Chapman Road / Oxford Newark DE - 410 1,663 118 256-263 Chapman Road / Chopin Newark DE - 484 1,958 18 256-263 Chapman Road / Stockton Newark DE - 291 1,176 - 256-263 Chapman Road / CAM Newark DE - - - 4550 New Linden Hill Road Wilmington DE - 1,998 7,995 223 Arboretum I Richmond VA 25,800 (f) 1,366 5,505 2 Arboretum II Richmond VA - (f) 987 3,985 1 Arboretum III Richmond VA - (f) 5,465 22,016 29 Arboretum V Richmond VA - (f) 1,113 4,487 1 Arboretum VI Richmond VA 86,869 (g) 1,862 7,724 156 Arboretum VII Richmond VA - (g) 583 2,440 (1) Dabney A-2 Richmond VA - (g) 552 2,209 - Greater Dabney Richmond VA (g) 3,497 - - 600 East Main Street Richmond VA - (e) 9,842 38,470 1,074 4805 Lake Brooke Drive Glen Allen VA - (g) 1,645 6,586 - 2812 Emerywood Parkway Henrico VA - (g) 1,072 4,294 - 2100-2108 West Laburnum Richmond VA 7,442 2,486 8,862 (1) 1970 Chainbridge Road Vienna VA - (g) 7,364 29,455 - 1880 Campus Commons Drive Reston VA - (g) 5,724 22,895 - Greenwood Center Fairfax VA - (g) 5,414 21,687 - Oakwood Center Fairfax VA - (g) 3,626 14,511 1 245 Old Country Road Mellville NY - 1,226 4,903 - Westpark South Alston Avenue Durham NC - (e) 1,643 6,438 149 Westpark Land Durham NC 2,031 - 1760 Market Street Philadelphia PA - (e) 3,029 12,246 1 Bowman Plains Industrial Park Frederick MD - 3,356 13,220 1 100 West Road Towson MD - 3,432 13,760 106 180 Wheeler Court Langhorne PA - 608 2,436 - 640-660 Allendale Road King of Prussia PA - 3,671 3,343 - 780 Third Avenue King of Prussia PA - 568 2,273 - 820 Third Avenue King of Prussia PA - 487 1,948 - 650 Clark Avenue King of Prussia PA - 448 1,800 - 741 Third Avenue King of Prussia PA - 436 1,746 25 7055 Ambassador Drive Allentown PA - (e) 1,340 5,489 122 6755 Snowdrift Way Allentown PA - (e) 1,125 4,604 102 6845 Snowdrift Way Allentown PA - (e) 884 3,690 - 6690 Grant Way Allentown PA - (e) 808 3,303 74 6670 Grant Way Allentown PA - (e) 638 2,614 58 6810 Tilghman Street Allentown PA - (e) 453 1,902 - 7020 Snowdrift Way Allentown PA - (e) 319 1,344 - 1200 Highland Drive Westhampton NJ - 68 5,440 - 44 National Road Edison NJ - 322 1,288 - 835 New Durham Road Edison NJ - 701 2,553 - 837 New Durham Road Edison NJ - 296 1,184 - 111 Ames Court Plainview NY - 176 671 - 55 Ames Court Plainview NY - 814 3,259 - 10 Skyline Drive Plainview NY - 238 951 - 11 Commercial Street Plainview NY - 236 942 - 80 Skyline Drive Plainview NY - 482 1,937 - 120 Express Street Plainview NY - 402 1,591 - 336 South Service Road Melville NY - 703 2,812 -
(RESTUBBED TABLE0
Gross Amount at Which Carried December 31, 1998 ------------------------------------------------------ Accumulated Depreciation at Building and December 31, Date of Date Depreciable Property Name Land Improvements Total (a) 1998 (b) Construction Acquired Life - - ------------------------------------- ---------- -------------- ------------ ------------- ------------ --------- ----------- 1255 Broad Street 987 3,947 4,934 43 1981 1998 25 Park 80 West Plaza I 6,242 29,410 35,652 1,347 1988 1998 25 Park 80 West Plaza II 7,668 31,528 39,196 1,298 1970 1998 25 201 North Walnut Street 10,359 41,645 52,003 1,403 1988 1998 25 301 North Walnut Street 8,495 34,106 42,602 873 1989 1998 25 256-263 Chapman Road / Cambridge 292 1,185 1,477 47 1983 1998 25 256-263 Chapman Road / Bellevue 374 1,547 1,921 69 1983 1998 25 256-263 Chapman Road / Commonwealth 351 1,436 1,787 61 1983 1998 25 256-263 Chapman Road / Oxford 410 1,782 2,191 74 1983 1998 25 256-263 Chapman Road / Chopin 484 1,977 2,460 79 1983 1998 25 256-263 Chapman Road / Stockton 291 1,176 1,467 47 1983 1998 25 256-263 Chapman Road / CAM - - - 1983 1998 25 4550 New Linden Hill Road 1,998 8,218 10,216 330 1974 1998 25 Arboretum I 1,366 5,507 6,873 57 1988 1998 25 Arboretum II 987 3,985 4,973 40 1988 1998 25 Arboretum III 5,465 22,045 27,510 225 1988 1998 25 Arboretum V 1,113 4,487 5,601 46 1988 1998 25 Arboretum VI 1,862 7,880 9,742 90 1991 1998 25 Arboretum VII 583 2,440 3,022 24 1991 1998 25 Dabney A-2 552 2,209 2,761 23 1993 1998 25 Greater Dabney 3,497 - 3,497 1998 25 600 East Main Street 9,842 39,544 49,386 411 1986 1998 25 4805 Lake Brooke Drive 1,645 6,586 8,231 68 1996 1998 25 2812 Emerywood Parkway 1,072 4,294 5,366 43 1980 1998 25 2100-2108 West Laburnum 2,486 8,862 11,347 63 1976 1998 25 1970 Chainbridge Road 7,364 29,455 36,819 303 1982 1998 25 1880 Campus Commons Drive 5,724 22,895 28,619 236 1985 1998 25 Greenwood Center 5,414 21,687 27,101 223 1985 1998 25 Oakwood Center 3,626 14,511 18,138 150 1985 1998 25 245 Old Country Road 1,226 4,903 6,129 53 1978 1998 25 Westpark South Alston Avenue 1,643 6,587 8,230 68 1985 1998 25 Westpark Land 2,031 - 2,031 1998 1760 Market Street 3,029 12,247 15,276 125 1981 1998 25 Bowman Plains Industrial Park 3,356 13,220 16,577 29 1998 1998 25 100 West Road 3,432 13,866 17,298 563 1988 1998 25 180 Wheeler Court 608 2,436 3,044 84 1975 1998 25 640-660 Allendale Road 3,671 3,343 7,014 115 1962 1998 25 780 Third Avenue 568 2,273 2,841 78 1967 1998 25 820 Third Avenue 487 1,948 2,435 67 1970 1998 25 650 Clark Avenue 448 1,800 2,248 62 1965 1998 25 741 Third Avenue 436 1,771 2,207 63 1962 1998 25 7055 Ambassador Drive 1,340 5,611 6,951 55 1991 1998 25 6755 Snowdrift Way 1,125 4,706 5,831 46 1988 1998 25 6845 Snowdrift Way 884 3,690 4,574 36 1975 1998 25 6690 Grant Way 808 3,377 4,185 33 1982 1998 25 6670 Grant Way 638 2,671 3,310 27 1979 1998 25 6810 Tilghman Street 453 1,902 2,355 19 1975 1998 25 7020 Snowdrift Way 319 1,344 1,663 13 1975 1998 25 1200 Highland Drive 68 5,440 5,508 36 1998 1998 25 44 National Road 322 1,288 1,610 14 1967 1998 25 835 New Durham Road 701 2,553 3,254 30 1974 1998 25 837 New Durham Road 296 1,184 1,480 13 1977 1998 25 111 Ames Court 176 671 847 7 1959 1998 25 55 Ames Court 814 3,259 4,073 35 1961 1998 25 10 Skyline Drive 238 951 1,189 10 1960 1998 25 11 Commercial Street 236 942 1,178 10 1961 1998 25 80 Skyline Drive 482 1,937 2,419 23 1961 1998 25 120 Express Street 402 1,591 1,993 17 1962 1998 25 336 South Service Road 703 2,812 3,515 31 1965 1998 25
F-25
Initial Cost ----------------------------------------- Net Improvements (Retirements) Encumberances at Building and Since Property Name City State December 31, 1998 Land Improvements Acquisition - - ------------------------------------- ---------------- ------- -------------------- ---------- ------------- -------------- 180 Central Ave / 2 Engineers Lane Farmingdale NY - 220 882 - 8 Engineers Lane Farmingdale NY - 193 774 - 19 Engineers Lane Farmingdale NY - 114 452 - 91 North Industry Court Deer Park NY - 547 2,191 - 100 Voice Road Carle Place NY - 398 1,594 - 110 Voice Road Carle Place NY - 255 1,018 - 1000 Axinn Avenue Garden City NY - 543 2,171 - 645 Stewart Avenue Garden City NY - 412 1,648 - Dabney I Richmond VA - (g) 357 1,431 - Dabney II Richmond VA - (g) 388 1,557 1 Dabney III Richmond VA - (g) 281 1,128 26 Dabney IV Richmond VA - (g) 424 1,700 - Dabney V Richmond VA - (g) 504 2,020 - Dabney VI Richmond VA - (g) 509 2,040 - Dabney VII Richmond VA - (g) 456 1,827 (1) Dabney VIII Richmond VA - (g) 354 1,420 - Dabney IX Richmond VA - (g) 513 2,055 - Dabney X Richmond VA - (g) 1,018 4,079 - Danbney XI Richmond VA - (g) 531 2,129 - 2511 Brittons Hill Road Richmond VA - (g) 1,205 4,834 - 1957 Westmoreland Street Richmond VA - (g) 1,065 4,253 112 2201 Dabney Street Richmond VA - (g) 368 1,475 - 2110 Tomlynn Street Richmond VA - (g) 159 638 (1) Dabney A-1 Richmond VA - (g) 265 1,062 (1) Philadelphia Marine Center Philadelphia PA - (e) 533 2,202 - Grand Total - All Properties $ 319,235 $ 390,993 $ 1,484,971 $ 32,131 ========= ========= =========== ========
(RESTUBBED TABLE)
Gross Amount at Which Carried December 31, 1998 ------------------------------------------------------ Accumulated Depreciation at Building and December 31, Date of Date Depreciable Property Name Land Improvements Total (a) 1998 (b) Construction Acquired Life - - ------------------------------------- ---------- -------------- ------------ ------------- ------------ --------- ----------- 180 Central Ave / 2 Engineers Lane 220 882 1,102 10 1960 1998 25 8 Engineers Lane 193 774 967 8 1963 1998 25 19 Engineers Lane 114 452 566 5 1962 1998 25 91 North Industry Court 547 2,191 2,738 24 1965 1998 25 100 Voice Road 398 1,594 1,992 17 1963 1998 25 110 Voice Road 255 1,018 1,273 11 1963 1998 25 1000 Axinn Avenue 543 2,171 2,714 24 1965 1998 25 645 Stewart Avenue 412 1,648 2,060 18 1962 1998 25 Dabney I 357 1,431 1,788 15 1982 1998 25 Dabney II 388 1,557 1,946 16 1983 1998 25 Dabney III 281 1,154 1,435 12 1986 1998 25 Dabney IV 424 1,700 2,124 18 1985 1998 25 Dabney V 504 2,020 2,524 21 1985 1998 25 Dabney VI 509 2,040 2,549 21 1986 1998 25 Dabney VII 456 1,827 2,282 19 1987 1998 25 Dabney VIII 354 1,420 1,774 15 1988 1998 25 Dabney IX 513 2,055 2,568 21 1989 1998 25 Dabney X 1,018 4,079 5,097 42 1989 1998 25 Danbney XI 531 2,129 2,660 22 1994 1998 25 2511 Brittons Hill Road 1,205 4,834 6,039 49 1987 1998 25 1957 Westmoreland Street 1,065 4,365 5,430 43 1975 1998 25 2201 Dabney Street 368 1,475 1,843 15 1962 1998 25 2110 Tomlynn Street 159 638 796 7 1965 1998 25 Dabney A-1 265 1,062 1,326 11 1984 1998 25 Philadelphia Marine Center 533 2,202 2,735 22 1998 25 Grand Total - All Properties $ 390,993 $ 1,517,111 $1,908,095 $ 67,477 ========= =========== ========== ========
(a) Reconciliation of Real Estate: The following table reconciles the real estate investments from January 1, 1998 to December 31, 1998(in thousands): Balance at beginning of year $ 586,414 Additions during year: Acquisitions 1,295,615 Capital expenditures 26,301 Deletions during year: Retirements (235) =========== Balance at end of year $ 1,908,095 =========== (b) Reconciliation of Accumulated Depreciation: The following table reconciles the accumulated depreciation on real estate investments from January 1, 1998 to December 31, 1998 (in thousands) Balance at beginning of year $ 22,857 Additions during year: Depreciation expense 45,040 Deletions during year: Retirements (420) =========== Balance at end of year $ 67,477 =========== (c) At December 31, 1998, the two mortgage loans total $7.0 million and $2.6 million receptively. The loans are cross-collateralized and are secured by first mortgages on each property. (d) Unsecured debt in connection with the Company's acquisition of a property portfolio containing eight properties. (e) The loan is cross-collateralized and is secured by mortgages on 36 properties. (f) The loan is cross-collateralized and is secured by mortgages on 4 properties. (g) The loan is cross-collateralized and is secured by mortgages on 26 properties. F-26 EX-3.1.5 2 ARTICLES OF AMENDMENT EXHIBIT 3.1.5 BRANDYWINE REALTY TRUST ARTICLES OF AMENDMENT THIS IS TO CERTIFY THAT: FIRST: Section 6.1 of the Declaration of Trust of Brandywine Realty Trust, a Maryland real estate investment trust (the "Trust"), is hereby amended by increasing from 105,000,000 to 110,000,000 the total number of shares of beneficial interest which the Trust is authorized to issue and from 5,000,000 to 10,000,000 the number of Preferred Shares which the Trust is authorized to issue. SECOND: Pursuant to Section 8-203(a)(7) of the Corporations and Associations Article of the Annotated Code of Maryland, the amendment to the Declaration of Trust of the Trust as hereinabove set forth has been duly approved by the Board of Trustees of the Trust. THIRD: The total number of shares of beneficial interest which the Trust had authority to issue immediately prior to this amendment was 105,000,000 shares of beneficial interest, consisting of 100,000,000 common shares of beneficial interest, $.0l par value per share, and 5,000,000 preferred shares of beneficial interest, $.0l par value per share. The aggregate par value of all shares of beneficial interest having par value was $1,050,000. The total number of shares of beneficial interest which the Trust has authority to issue pursuant to the amendment described herein is 110,000,000 shares of beneficial interest, consisting of 100,000,000 common shares of beneficial interest, $.0l par value per share, and 10,000,000 preferred shares of beneficial interest, $.0l par value per share. The aggregate par value of all shares of beneficial interest having par value is $1,100,000. FOURTH: The undersigned President acknowledges these Articles of Amendment to be the trust act of the Trust and, as to all matters or facts required to be verified under oath, the undersigned President acknowledges that to the best of his knowledge, information and belief, these matters and facts are true in all material respects and that this statement is made under the penalties for perjury. IN WITNESS WHEREOF, the Trust has caused these Articles of Amendment to be signed in its name and on its behalf by its President and attested to by its Secretary on this 19th day of March, 1999. ATTEST: BRANDYWINE REALTY TRUST /s/ Brad A. Molotsky By: /s/ Gerard H. Sweeney (SEAL) - - ---------------------- ------------------------------ Brad A. Molotsky Gerard H. Sweeney Secretary President and Chief Executive Officer EX-10 3 EXHIBIT 10.36 EXHIBIT 10.36 AMENDED AND RESTATED EMPLOYMENT AGREEMENT This Amended and Restated Employment Agreement (the "Agreement") is made as of December 17, 1998 and amends and restates in its entirety the Employment Agreement made and entered into as of January 2, 1998, as amended and restated as of February 11, 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. -1- 3. Term. Unless sooner terminated as hereinafter provided, the term of Employee's employment shall extend through December 31, 2003 (the "Term"). 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. -2- 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; -3- (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 -4- 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, the Company shall make a cash lump sum payment to Employee equal to the sum of (x) the greater of the amount described in (i) or (ii) below, plus (y) the "Gross-Up Payment," as defined and more fully provided for in Section 18(g). (i) 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; or -5- (ii) 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. (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. (g) "Gross-Up Payment." (i) For purposes of this Agreement, the term "Gross-Up Payment" means an amount such that the net amount retained by Employee, after deduction of the excise tax imposed under section 4999 of the Internal Revenue Code of 1986, as amended (the "Code") or any successor provision of law ("Excise Tax"), on the "Total Payments" (as hereinafter defined) and any federal, state and local income tax, employment tax and Excise Tax upon the payment provided for by this Section 18(g), shall be equal to the excess of the Total Payments (including the payment provided for in clause (y) of Section 18(d) and in this Section 18(g)) over the payment provided for by this Section 18(g). (ii) For purposes of determining whether any of the Total Payments will be subject to Excise Tax and the amount of such Excise Tax, (A) any payments or benefits received or to be received by Employee in connection with a Change of Control or Employee's termination of employment (whether pursuant to the terms of this Agreement or any other plan, arrangement or agreement with the Company or a Subsidiary, any person whose actions result in a Change of Control or any person affiliated with the Company or such person (the "Total Payments")) shall be treated as "parachute payments" (within the meaning of section 280G(b)(2) of the Code) unless, in the opinion of a tax advisor selected by the Company's independent auditors and reasonably acceptable to Employee, such payments or benefits (in whole or in part) do not constitute parachute payments, including by reason of section 280G(b)(4)(A) of the Code, and all "excess parachute payments" (within the meaning of section 280G(b)(1) of the Code) shall be treated as -6- subject to Excise Tax unless, in the opinion of such tax counsel, such excess parachute payments (in whole or in part) represent reasonable compensation for services actually rendered (within the meaning of section 280G(b)(4)(B) of the Code), or are otherwise not subject to Excise Tax; and (B) the value of any noncash benefits or deferred payment or benefit shall be determined by the Company's independent auditors in accordance with the principles of sections 280G(d)(3) and (4) of the Code. For purposes of determining the amount of the Gross-Up Payment, Employee shall be deemed to pay federal income tax at the highest marginal rate of federal income taxation in the calendar year in which the Gross-Up Payment is to be made and state and local income taxes at the highest marginal rate of taxation in the state and locality of Employee's residence on the date of Employee's termination of employment (or such other time as is hereinafter described), net of the maximum reduction in federal income taxes which could be obtained from the deduction of such state and local taxes. (iii) Notwithstanding the foregoing, if the Excise Tax is subsequently determined to be less than the amount taken into account hereunder at the time of termination of Employee's employment, Employee shall repay to the Company, at the time that the amount of such reduction in Excise Tax is finally determined, the portion of the Gross-Up Payment attributable to such reduction (plus that portion of the Gross-Up Payment attributable to the Excise Tax and federal, state and local income tax imposed on the Gross-Up Payment being repaid by Employee to the extent that such repayment results in a reduction in Excise Tax or a federal, state or local income tax deduction), plus interest on the amount of such repayment at the rate provided in section 1274(b)(2)(B) of the Code. If the Excise Tax is subsequently determined to exceed the amount taken into account hereunder at the time of termination of Employee's employment (including by reason of any payment the existence or amount of which cannot be determined at the time of the Gross-Up Payment), the Company shall make an additional Gross- Up Payment in respect of such excess (plus any interest, penalties or additions payable by Employee with respect to such excess) at the time that the amount of such excess is finally determined. Employee and the Company shall each reasonably cooperate with the other in connection with any administrative or judicial proceedings concerning the existence or amount of liability for Excise Tax with respect to the Total Payments. Such additional payment shall be made within 30 days following the date Employee notifies the Company that he is subject to the Excise Tax. (iv) The Company shall promptly pay in advance or reimburse Employee for all reasonable legal fees and expenses incurred in good faith by Employee in connection with any tax audit or proceeding to the extent attributable to the application of section 4999 of the Code to any payment or benefit provided hereunder. 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 -7- 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. -8- 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. -9- (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 --------------------------------------- Title: President and Chief Executive Officer EMPLOYEE /s/ Anthony A. Nichols, Sr. --------------------------------------- Anthony A. Nichols, Sr. -10- 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 -11- EX-10 4 EXHIBIT 10.37 EXHIBIT 10.37 AMENDED AND RESTATED EMPLOYMENT AGREEMENT This Amended and Restated Employment Agreement (the "Agreement") is made as of December 17, 1998 and amends and restates in its entirety the Employment Agreement made and entered into as of January 2, 1998, as amended and restated as of February 11, 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. -1- 3. Term. Unless sooner terminated as hereinafter provided, the term of Employee's employment shall extend through December 31, 2003 (the "Term"). 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 -2- 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: -3- (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. -4- (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, the Company shall make a cash lump sum payment to Employee equal to the sum of (x) the greater of the amount described in (i) or (ii) below, plus (y) the "Gross-Up Payment," as defined and more fully provided for in Section 18(g). (i) 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) -5- 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; or (ii) 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. (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. (g) "Gross-Up Payment." (i) For purposes of this Agreement, the term "Gross-Up Payment" means an amount such that the net amount retained by Employee, after deduction of the excise tax imposed under section 4999 of the Internal Revenue Code of 1986, as amended (the "Code") or any successor provision of law ("Excise Tax"), on the "Total Payments" (as hereinafter defined) and any federal, state and local income tax, employment tax and Excise Tax upon the payment provided for by this Section 18(g), shall be equal to the excess of the Total Payments (including the payment provided for in clause (y) of Section 18(d) and in this Section 18(g)) over the payment provided for by this Section 18(g). (ii) For purposes of determining whether any of the Total Payments will be subject to Excise Tax and the amount of such Excise Tax, (A) any payments or benefits received or to be received by Employee in connection with a Change of Control or Employee's termination of employment (whether pursuant to the terms of this Agreement or any other plan, arrangement or agreement with the Company or a Subsidiary, any person whose actions result in a Change of Control or any person affiliated with the Company or such person (the "Total Payments")) shall be treated as "parachute payments" (within the meaning of section 280G(b)(2) of the Code) unless, in the -6- opinion of a tax advisor selected by the Company's independent auditors and reasonably acceptable to Employee, such payments or benefits (in whole or in part) do not constitute parachute payments, including by reason of section 280G(b)(4)(A) of the Code, and all "excess parachute payments" (within the meaning of section 280G(b)(1) of the Code) shall be treated as subject to Excise Tax unless, in the opinion of such tax counsel, such excess parachute payments (in whole or in part) represent reasonable compensation for services actually rendered (within the meaning of section 280G(b)(4)(B) of the Code), or are otherwise not subject to Excise Tax; and (B) the value of any noncash benefits or deferred payment or benefit shall be determined by the Company's independent auditors in accordance with the principles of sections 280G(d)(3) and (4) of the Code. For purposes of determining the amount of the Gross-Up Payment, Employee shall be deemed to pay federal income tax at the highest marginal rate of federal income taxation in the calendar year in which the Gross-Up Payment is to be made and state and local income taxes at the highest marginal rate of taxation in the state and locality of Employee's residence on the date of Employee's termination of employment (or such other time as is hereinafter described), net of the maximum reduction in federal income taxes which could be obtained from the deduction of such state and local taxes. (iii) Notwithstanding the foregoing, if the Excise Tax is subsequently determined to be less than the amount taken into account hereunder at the time of termination of Employee's employment, Employee shall repay to the Company, at the time that the amount of such reduction in Excise Tax is finally determined, the portion of the Gross-Up Payment attributable to such reduction (plus that portion of the Gross-Up Payment attributable to the Excise Tax and federal, state and local income tax imposed on the Gross-Up Payment being repaid by Employee to the extent that such repayment results in a reduction in Excise Tax or a federal, state or local income tax deduction), plus interest on the amount of such repayment at the rate provided in section 1274(b)(2)(B) of the Code. If the Excise Tax is subsequently determined to exceed the amount taken into account hereunder at the time of termination of Employee's employment (including by reason of any payment the existence or amount of which cannot be determined at the time of the Gross-Up Payment), the Company shall make an additional Gross- Up Payment in respect of such excess (plus any interest, penalties or additions payable by Employee with respect to such excess) at the time that the amount of such excess is finally determined. Employee and the Company shall each reasonably cooperate with the other in connection with any administrative or judicial proceedings concerning the existence or amount of liability for Excise Tax with respect to the Total Payments. Such additional payment shall be made within 30 days following the date Employee notifies the Company that he is subject to the Excise Tax. (iv) The Company shall promptly pay in advance or reimburse Employee for all reasonable legal fees and expenses incurred in good faith by Employee in connection with any tax audit or proceeding to the extent attributable to the application of section 4999 of the Code to any payment or benefit provided hereunder. -7- 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 -8- 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. -9- (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/ Anthony A. Nichols, Sr. --------------------------------- Title: Chairman of the Board EMPLOYEE /s/ Gerard H. Sweeney --------------------------------- Gerard H. Sweeney -10- 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/ Anthony A. Nichols, Sr. ----------------------- Anthony A. Nichols, Sr. Chairman of the Board -11- EX-10 5 EXHIBIT 10.38 EXHIBIT 10.38 AMENDED AND RESTATED BRANDYWINE REALTY TRUST NON-QUALIFIED OPTION This is an amendment and restatement of the 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"). This amendment and restatement is dated as of January 6, 1999 and restates in its entirety the Award. 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. -1- (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; (vi) The time provided for in Section 4 hereof. (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). -2- (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. -3- 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; -4- (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. Conversion of Option. In the event that the Option remains Outstanding upon the occurrence of a Change of Control and Optionee does not exercise the Option within one business day of the occurrence of the Change of Control, then the Option shall automatically terminate and Optionee's right to acquire Common Shares hereunder shall terminate absolutely and, upon such termination, the Company shall provide for the issuance or delivery to Optionee, for no consideration, of 79,208 Common Shares, which number shall be subject to equitable and proportionate adjustment in the event of (i) any prior partial exercise of the Option or (ii) any split or combination of the Common Shares or any dividend payable on the Common Shares in the form of Common Shares. 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 -5- 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. -6- 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 conversion of the Option, the Company shall have the right to (a) require the Optionee to remit to the Company an amount sufficient to satisfy any federal, state and/or local withholding tax requirements prior to the delivery or transfer of any certificate or certificates for such 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: /s/ Gerard H. Sweeney -------------------------------------- Title: President and Chief Executive Officer Accepted: /s/ Anthony A. Nichols, Sr. - - ----------------------------------- Anthony A. Nichols, Sr. -7- EX-10 6 EXHIBIT 10.39 EXHIBIT 10.39 AMENDED AND RESTATED BRANDYWINE REALTY TRUST NON-QUALIFIED OPTION This is an amendment and restatement of the 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"). This amendment and restatement is dated as of January 6, 1999 and restates in its entirety the Award. 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. -1- (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; (vi) The time provided for in Section 4 hereof. (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). -2- (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. -3- 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; -4- (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. Conversion of Option. In the event that the Option remains Outstanding upon the occurrence of a Change of Control and Optionee does not exercise the Option within one business day of the occurrence of the Change of Control, then the Option shall automatically terminate and Optionee's right to acquire Common Shares hereunder shall terminate absolutely and, upon such termination, the Company shall provide for the issuance or delivery to Optionee, for no consideration, of 118,812 Common Shares, which number shall be subject to equitable and proportionate adjustment in the event of (i) any prior partial exercise of the Option or (ii) any split or combination of the Common Shares or any dividend payable on the Common Shares in the form of Common Shares. 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 -5- 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. -6- 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 conversion of the Option, the Company shall have the right to (a) require the Optionee to remit to the Company an amount sufficient to satisfy any federal, state and/or local withholding tax requirements prior to the delivery or transfer of any certificate or certificates for such 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: /s/ Anthony A. Nichols, Sr. ------------------------------- Title: Chairman of the Board Accepted: /s/ Gerard H. Sweeney - - ------------------------------- Gerard H. Sweeney -7- EX-10 7 EXHIBIT 10.40 EXHIBIT 10.40 AMENDED AND RESTATED BRANDYWINE REALTY TRUST NON-QUALIFIED OPTION This is an amendment and restatement of the 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"). This amendment and restatement is dated as of January 6, 1999 and restates in its entirety the Award. 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. -1- (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; (vi) The time provided for in Section 4 hereof. (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(s)(i). (o) "110% Shares" means the 30,902 Shares subject to the Option and described in Paragraph 1(s)(ii). (p) "115% Shares" means the 33,333 Shares subject to the Option and described in Paragraph 1(s)(iii). (q) "Option" means the option to purchase Shares hereby granted. -2- (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. 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 -3- 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. Conversion of Option. In the event that the Option remains Outstanding upon the occurrence of a Change of Control and Optionee does not exercise the Option within one business day of the occurrence of the Change of Control, then the Option shall automatically terminate and Optionee's right to acquire Common Shares hereunder shall terminate absolutely and, upon such termination, the Company shall provide for the issuance or delivery to Optionee, for no consideration, of 10,575 Common Shares, which number shall be subject to equitable and proportionate adjustment in the event of (i) any prior partial exercise of the Option or (ii) any split or combination of the Common Shares or any dividend payable on the Common Shares in the form of Common Shares. 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. -4- 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 -5- 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 conversion of the Option, the Company shall have the right to (a) require the Optionee to remit to the Company an amount sufficient to satisfy any federal, state and/or local withholding tax requirements prior to the delivery or transfer of any certificate or certificates for such Shares or (b) take whatever action it deems necessary to protect its interests with respect to tax liabilities. -6- IN WITNESS WHEREOF, the Company has granted this Award on the day and year first above written. BRANDYWINE REALTY TRUST By: /s/ Gerard H. Sweeney -------------------------------------- Title: President and Chief Executive Officer Accepted: /s/ John M. Adderly, Jr. - - ---------------------------------- John M. Adderly, Jr. -7- EX-10 8 EXHIBIT 10.41 EXHIBIT 10.41 BRANDYWINE REALTY TRUST NON-QUALIFIED OPTION This is a Non-Qualified Stock Option Award dated January 19, 1999 (the "Award") from Brandywine Realty Trust, a Maryland real estate investment trust (the "Company") to Jeffrey F. Rogatz ("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 the date of this Award set forth above. (k) "Disability" means "Disability" as defined in the Plan. (l) "Expiration Date" means the earliest of the following: -1- (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 ninth anniversary of the Date of Grant; (vi) The time provided for in Section 4 hereof. (m) "Fair Market Value" means the Fair Market Value of a Share, as determined pursuant to the Plan. (n) "100% Shares" means the 16,485 Shares subject to the Option and described in Paragraph 1(s)(i). (o) "110% Shares" means the 19,290 Shares subject to the Option and described in Paragraph 1(s)(ii). (p) "115% Shares" means the 20,807 Shares subject to the Option and described in Paragraph 1(s)(iii). (q) "Option" means the option to purchase Shares hereby granted. (r) "Option Price" means: -2- (i) with respect to 16,485 Shares subject to the Option, $25.25; and (ii) with respect to 19,290 Shares subject to the Option, $27.78; and (iii) with respect to 20,807 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 56,582 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. 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 an additional twenty five percent (25%) of each of (A) the 100% Shares, (B) the 110% Shares, and (C) the 115% Shares subject to the Option following December 31, 1999. (ii) The Option may be exercised for an additional twenty five percent (25%) of each of (A) the 100% Shares, (B) the 110% Shares, and (C) the 115% Shares subject to the Option following December 31, 2000. -3- (iii) The Option may be exercised for an additional twenty five percent (25%) of each of (A) the 100% Shares, (B) the 110% Shares, and (C) the 115% Shares subject to the Option following December 31, 2001. (iv) The Option may be exercised for an additional twenty five percent (25%) 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. Conversion of Option. In the event that the Option remains Outstanding upon the occurrence of a Change of Control and Optionee does not exercise the Option within one business day of the occurrence of the Change of Control, then the Option shall automatically terminate and Optionee's right to acquire Common Shares hereunder shall terminate absolutely and, upon such termination, the Company shall provide for the issuance or delivery to Optionee, for no consideration, of 6,601 Common Shares, which number shall be subject to equitable and proportionate adjustment in the event of (i) any prior partial exercise of the Option or (ii) any split or combination of the Common Shares or any dividend payable on the Common Shares in the form of Common Shares. 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. -4- 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 Executive 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 -5- 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 conversion of the Option, the Company shall have the right to (a) require the Optionee to remit to the Company an amount sufficient to satisfy any federal, state and/or local withholding tax requirements prior to the delivery or transfer of any certificate or certificates for such Shares or (b) take whatever action it deems necessary to protect its interests with respect to tax liabilities. -6- IN WITNESS WHEREOF, the Company has granted this Award on the day and year first above written. BRANDYWINE REALTY TRUST By: /s/ Gerard H. Sweeney -------------------------------------- Title: President and Chief Executive Officer Accepted: /s/ Jeffrey F. Rogatz - - -------------------------------------- Jeffrey F. Rogatz -7- EX-10.45 9 EXHIBIT 10.45 BRANDYWINE REALTY TRUST LONG-TERM PERFORMANCE AWARD --------------------------- This is a Long-Term Performance Award dated December 31, 1998 (the "Effective Date") 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 Long-Term Performance Award hereby granted. (b) "Board" means the Board of Trustees of the Company, as constituted from time to time. (c) "Change of Control" means "Change of Control" as defined in the Plan; provided that if the Grantee has entered into an employment agreement with the Company that includes the term "Change of Control", then the term "Change of Control" as used herein shall include both the definition in the Plan and in the employment agreement. (d) "Code" means the Internal Revenue Code of 1986, as amended from time to time, and any successor thereto. (e) "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 of the Plan, or if such a committee is not in existence at the time of reference, "Committee" means the Board. (f) "Elective Shares" means the Shares described in Paragraph 3(b) hereof. (g) "Employer" means the Company or the Subsidiary for which Grantee is performing services on the applicable Vesting Date. (h) "Mandatory Shares" means the Shares described in Paragraph 3(a) hereof. (i) "Plan Year" means the calendar year in which the Effective Date occurs. (j) "Restricted Period" means, with respect to each Restricted Share issued upon satisfaction of the applicable performance criteria, the period beginning on the date such Restricted Shares are issued and ending on the Vesting Date. (k) "Restricted Shares" means the Shares described in Paragraph 3(c) hereof. (l) "Rule 16b-3" means Rule 16b-3 promulgated under the Exchange Act, as in effect from time to time. (m) "Share" means a common share of beneficial interest, $.01 par value per share, of the Company, subject to substitution or adjustment as provided in Paragraph 3(c) of the Plan. (n) "Subsidiary" means, with respect to the Company or parent, a subsidiary company, whether now or hereafter existing, as defined in section 424(f) and (g) of the Code, and any other entity 50% or more of the economic interests in which are owned, directly or indirectly, by the Company. (o) "Vesting Date" means December 31, 2000. 2. Amount of Award. (a) In General. Subject to the terms and conditions set forth herein and in the Plan, the Company hereby grants to Grantee the right to receive an Award, the amount of which shall be a percentage of such Grantee's base salary, based on the attainment of the performance criteria specified on Attachment A hereto. (b) Condition to Payment of Award. Except as specified in Paragraph 2(c) hereof, in order to be eligible for payment under the terms of the Award, the Grantee must be employed by the Company or a Subsidiary on the last day of the Plan Year. (c) Partial Year Employment. (i) If the Grantee's employment with the Company or a Subsidiary terminates prior to the last day of the Plan Year other than due to death, Disability or Retirement, the Award shall be forfeited immediately upon such termination. (ii) If the Grantee's employment terminates prior to the last day of the Plan Year due to death, Disability or Retirement, the Grantee shall be eligible to receive a portion of the Award, determined by multiplying the Award, as determined after the close of the Plan Year, by a fraction, the numerator of which is the Grantee's full and partial months of employment during the Plan Year and the denominator of which is twelve (12). -2- 3. Form and Time of Payment. (a) Mandatory Shares. A minimum of twenty-five percent (25%) of the Award shall be paid in the form of Mandatory Shares, the number of which shall be determined as the quotient obtained by dividing (x) 25% of the Award by (y) the Fair Market Value per Share determined as of the last day of the Plan Year. Except as otherwise provided in Paragraph 3(b), the remainder of the Award shall be paid in the form of a cash lump sum. Both the Mandatory Shares and the cash lump sum portions of the Award shall be issued or paid, as applicable, as soon as reasonably practicable after the close of the Plan Year. (b) Elective Shares. If the Grantee so indicates on the Election contained in Attachment B hereto, an additional percentage of the Award may be paid in the form of Elective Shares, the number of which shall be determined as the quotient obtained by dividing (x) the percentage of the Award elected by the Grantee by (y) the Fair Market Value per Share determined as of the last day of the Plan Year; provided that such Election is submitted to the Company by the end of the Plan Year. Except as otherwise provided in Paragraph 6 hereof, until the Vesting Date, Elective Shares shall be held by the Company in escrow. (c) Restricted Shares. Subject to the restrictions set forth in Paragraph 4 hereof, if the Grantee elects to receive Elective Shares, the Grantee shall receive an additional grant of Restricted Shares, the number of which shall be determined as the quotient obtained by dividing (i) the dollar amount of the portion of the Award that is payable in Elective Shares, as computed pursuant to Paragraph 3(b) hereof, by (ii) eighty-five percent (85%) of the Fair Market Value per Share determined as of the last day of the Plan Year, over (y) the number of Elective Shares, computed pursuant to Paragraph 3(b) hereof. (d) Termination of Employment. Notwithstanding Paragraphs 3(a) through 3(c) hereof, if the Grantee terminates employment prior to the end of the Plan Year due to death, Disability, or Retirement, payment of the entire Award, as determined pursuant to Paragraph 2(c), shall be made in the form of a cash lump sum as soon as reasonably practicable after the close of the Plan Year. 4. Restrictions on Restricted Shares. 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 be held in escrow by the Company and bear a legend in substantially the following form: -3- 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. 5. Lapse of Restrictions. (a) Subject to the terms and conditions set forth herein and in the Plan, the restrictions set forth in Paragraph 4 on each Restricted Share that has not been forfeited shall lapse on the Vesting Date. (b) Notwithstanding Paragraph 5(a), a Vesting Date for all Restricted Shares subject to the Award shall occur upon the occurrence of a Change of Control or upon the Grantee's death before the Vesting Date, and the Restricted Shares, to the extent not previously vested, shall thereupon vest in full. 6. Forfeiture of Restricted Shares. Subject to the terms and conditions set forth herein, the Grantee may withdraw Elective Shares from the Company's escrow at any time before the Vesting Date by providing notice to the Committee. If the Grantee withdraws Elective Shares from the Company's escrow at any time before the Vesting Date, the Grantee shall forfeit all of the Restricted Shares. 7. 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. 8. Notices. Any notice to the Company under this Award shall be made to: Brandywine Realty Trust 14 Campus Boulevard Newtown Square, PA 19073 Attention: President and Chief Executive 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. -4- 9. 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. 10. Withholding. At the time of payment of the Award, the Grantee shall pay to the Company, or make arrangements satisfactory to the Company regarding the payment of, any Federal, state or local taxes of any kind required by law to be withheld with respect to such amount. Unless otherwise determined by the Board at the time of payment, the minimum required withholding obligations may be settled with Shares, including Shares that are part of the Award that gives rise to the withholding requirement. The obligations of the Company under the Plan shall be conditional on such payment or arrangements and the Company shall, to the extent permitted by law, have the right to deduct any such taxes from any payment of any kind otherwise due to the Grantee. 11. 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 9, 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. 12. 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. 13. 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. -5- (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 Maryland. BRANDYWINE REALTY TRUST BY: /s/ Gerard H. Sweeney --------------------------------- Gerard H. Sweeney TITLE: President and Chief Executive Officer -6- EX-10.46 10 EXHIBIT 10.46 BRANDYWINE REALTY TRUST LONG-TERM PERFORMANCE AWARD --------------------------- This is a Long-Term Performance Award dated December 31, 1998 (the "Effective Date") 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 Long-Term Performance Award hereby granted. (b) "Board" means the Board of Trustees of the Company, as constituted from time to time. (c) "Change of Control" means "Change of Control" as defined in the Plan; provided that if the Grantee has entered into an employment agreement with the Company that includes the term "Change of Control", then the term "Change of Control" as used herein shall include both the definition in the Plan and in the employment agreement. (d) "Code" means the Internal Revenue Code of 1986, as amended from time to time, and any successor thereto. (e) "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 of the Plan, or if such a committee is not in existence at the time of reference, "Committee" means the Board. (f) "Elective Shares" means the Shares described in Paragraph 3(b) hereof. (g) "Employer" means the Company or the Subsidiary for which Grantee is performing services on the applicable Vesting Date. (h) "Mandatory Shares" means the Shares described in Paragraph 3(a) hereof. (i) "Plan Year" means the calendar year in which the Effective Date occurs. (j) "Restricted Period" means, with respect to each Restricted Share issued upon satisfaction of the applicable performance criteria, the period beginning on the date such Restricted Shares are issued and ending on the Vesting Date. (k) "Restricted Shares" means the Shares described in Paragraph 3(c) hereof. (l) "Rule 16b-3" means Rule 16b-3 promulgated under the Exchange Act, as in effect from time to time. (m) "Share" means a common share of beneficial interest, $.01 par value per share, of the Company, subject to substitution or adjustment as provided in Paragraph 3(c) of the Plan. (n) "Subsidiary" means, with respect to the Company or parent, a subsidiary company, whether now or hereafter existing, as defined in section 424(f) and (g) of the Code, and any other entity 50% or more of the economic interests in which are owned, directly or indirectly, by the Company. (o) "Vesting Date" means December 31, 2000. 2. Amount of Award. (a) In General. Subject to the terms and conditions set forth herein and in the Plan, the Company hereby grants to Grantee the right to receive an Award, the amount of which shall be a percentage of such Grantee's base salary, based on the attainment of the performance criteria specified on Attachment A hereto. (b) Condition to Payment of Award. Except as specified in Paragraph 2(c) hereof, in order to be eligible for payment under the terms of the Award, the Grantee must be employed by the Company or a Subsidiary on the last day of the Plan Year. (c) Partial Year Employment. (i) If the Grantee's employment with the Company or a Subsidiary terminates prior to the last day of the Plan Year other than due to death, Disability or Retirement, the Award shall be forfeited immediately upon such termination. (ii) If the Grantee's employment terminates prior to the last day of the Plan Year due to death, Disability or Retirement, the Grantee shall be eligible to receive a portion of the Award, determined by multiplying the Award, as determined after the close of the Plan Year, by a fraction, the numerator of which is the Grantee's full and partial months of employment during the Plan Year and the denominator of which is twelve (12). -2- 3. Form and Time of Payment. (a) Mandatory Shares. A minimum of twenty-five percent (25%) of the Award shall be paid in the form of Mandatory Shares, the number of which shall be determined as the quotient obtained by dividing (x) 25% of the Award by (y) the Fair Market Value per Share determined as of the last day of the Plan Year. Except as otherwise provided in Paragraph 3(b), the remainder of the Award shall be paid in the form of a cash lump sum. Both the Mandatory Shares and the cash lump sum portions of the Award shall be issued or paid, as applicable, as soon as reasonably practicable after the close of the Plan Year. (b) Elective Shares. If the Grantee so indicates on the Election contained in Attachment B hereto, an additional percentage of the Award may be paid in the form of Elective Shares, the number of which shall be determined as the quotient obtained by dividing (x) the percentage of the Award elected by the Grantee by (y) the Fair Market Value per Share determined as of the last day of the Plan Year; provided that such Election is submitted to the Company by the end of the Plan Year. Except as otherwise provided in Paragraph 6 hereof, until the Vesting Date, Elective Shares shall be held by the Company in escrow. (c) Restricted Shares. Subject to the restrictions set forth in Paragraph 4 hereof, if the Grantee elects to receive Elective Shares, the Grantee shall receive an additional grant of Restricted Shares, the number of which shall be determined as the quotient obtained by dividing (i) the dollar amount of the portion of the Award that is payable in Elective Shares, as computed pursuant to Paragraph 3(b) hereof, by (ii) eighty-five percent (85%) of the Fair Market Value per Share determined as of the last day of the Plan Year, over (y) the number of Elective Shares, computed pursuant to Paragraph 3(b) hereof. (d) Termination of Employment. Notwithstanding Paragraphs 3(a) through 3(c) hereof, if the Grantee terminates employment prior to the end of the Plan Year due to death, Disability, or Retirement, payment of the entire Award, as determined pursuant to Paragraph 2(c), shall be made in the form of a cash lump sum as soon as reasonably practicable after the close of the Plan Year. 4. Restrictions on Restricted Shares. 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 be held in escrow by the Company and bear a legend in substantially the following form: -3- 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. 5. Lapse of Restrictions. (a) Subject to the terms and conditions set forth herein and in the Plan, the restrictions set forth in Paragraph 4 on each Restricted Share that has not been forfeited shall lapse on the Vesting Date. (b) Notwithstanding Paragraph 5(a), a Vesting Date for all Restricted Shares subject to the Award shall occur upon the occurrence of a Change of Control or upon the Grantee's death before the Vesting Date, and the Restricted Shares, to the extent not previously vested, shall thereupon vest in full. 6. Forfeiture of Restricted Shares. Subject to the terms and conditions set forth herein, the Grantee may withdraw Elective Shares from the Company's escrow at any time before the Vesting Date by providing notice to the Committee. If the Grantee withdraws Elective Shares from the Company's escrow at any time before the Vesting Date, the Grantee shall forfeit all of the Restricted Shares. 7. 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. 8. Notices. Any notice to the Company under this Award shall be made to: Brandywine Realty Trust 14 Campus Boulevard Newtown Square, PA 19073 Attention: President and Chief Executive 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. -4- 9. 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. 10. Withholding. At the time of payment of the Award, the Grantee shall pay to the Company, or make arrangements satisfactory to the Company regarding the payment of, any Federal, state or local taxes of any kind required by law to be withheld with respect to such amount. Unless otherwise determined by the Board at the time of payment, the minimum required withholding obligations may be settled with Shares, including Shares that are part of the Award that gives rise to the withholding requirement. The obligations of the Company under the Plan shall be conditional on such payment or arrangements and the Company shall, to the extent permitted by law, have the right to deduct any such taxes from any payment of any kind otherwise due to the Grantee. 11. 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 9, 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. 12. 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. 13. 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. -5- (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 Maryland. BRANDYWINE REALTY TRUST BY: /s/ Gerard H. Sweeney ----------------------------------- Gerard H. Sweeney TITLE: President and Chief Executive Officer -6- EX-10.47 11 EXHIBIT 10.47 BRANDYWINE REALTY TRUST LONG-TERM PERFORMANCE AWARD --------------------------- This is a Long-Term Performance Award dated December 31, 1998 (the "Effective Date") 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 Long-Term Performance Award hereby granted. (b) "Board" means the Board of Trustees of the Company, as constituted from time to time. (c) "Change of Control" means "Change of Control" as defined in the Plan; provided that if the Grantee has entered into an employment agreement with the Company that includes the term "Change of Control", then the term "Change of Control" as used herein shall include both the definition in the Plan and in the employment agreement. (d) "Code" means the Internal Revenue Code of 1986, as amended from time to time, and any successor thereto. (e) "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 of the Plan, or if such a committee is not in existence at the time of reference, "Committee" means the Board. (f) "Elective Shares" means the Shares described in Paragraph 3(b) hereof. (g) "Employer" means the Company or the Subsidiary for which Grantee is performing services on the applicable Vesting Date. (h) "Mandatory Shares" means the Shares described in Paragraph 3(a) hereof. (i) "Plan Year" means the calendar year in which the Effective Date occurs. (j) "Restricted Period" means, with respect to each Restricted Share issued upon satisfaction of the applicable performance criteria, the period beginning on the date such Restricted Shares are issued and ending on the Vesting Date. (k) "Restricted Shares" means the Shares described in Paragraph 3(c) hereof. (l) "Rule 16b-3" means Rule 16b-3 promulgated under the Exchange Act, as in effect from time to time. (m) "Share" means a common share of beneficial interest, $.01 par value per share, of the Company, subject to substitution or adjustment as provided in Paragraph 3(c) of the Plan. (n) "Subsidiary" means, with respect to the Company or parent, a subsidiary company, whether now or hereafter existing, as defined in section 424(f) and (g) of the Code, and any other entity 50% or more of the economic interests in which are owned, directly or indirectly, by the Company. (o) "Vesting Date" means December 31, 2000. 2. Amount of Award. (a) In General. Subject to the terms and conditions set forth herein and in the Plan, the Company hereby grants to Grantee the right to receive an Award, the amount of which shall be a percentage of such Grantee's base salary, based on the attainment of the performance criteria specified on Attachment A hereto. (b) Condition to Payment of Award. Except as specified in Paragraph 2(c) hereof, in order to be eligible for payment under the terms of the Award, the Grantee must be employed by the Company or a Subsidiary on the last day of the Plan Year. (c) Partial Year Employment. (i) If the Grantee's employment with the Company or a Subsidiary terminates prior to the last day of the Plan Year other than due to death, Disability or Retirement, the Award shall be forfeited immediately upon such termination. (ii) If the Grantee's employment terminates prior to the last day of the Plan Year due to death, Disability or Retirement, the Grantee shall be eligible to receive a portion of the Award, determined by multiplying the Award, as determined after the close of the Plan Year, by a fraction, the numerator of which is the Grantee's full and partial months of employment during the Plan Year and the denominator of which is twelve (12). -2- 3. Form and Time of Payment. (a) Mandatory Shares. A minimum of twenty-five percent (25%) of the Award shall be paid in the form of Mandatory Shares, the number of which shall be determined as the quotient obtained by dividing (x) 25% of the Award by (y) the Fair Market Value per Share determined as of the last day of the Plan Year. Except as otherwise provided in Paragraph 3(b), the remainder of the Award shall be paid in the form of a cash lump sum. Both the Mandatory Shares and the cash lump sum portions of the Award shall be issued or paid, as applicable, as soon as reasonably practicable after the close of the Plan Year. (b) Elective Shares. If the Grantee so indicates on the Election contained in Attachment B hereto, an additional percentage of the Award may be paid in the form of Elective Shares, the number of which shall be determined as the quotient obtained by dividing (x) the percentage of the Award elected by the Grantee by (y) the Fair Market Value per Share determined as of the last day of the Plan Year; provided that such Election is submitted to the Company by the end of the Plan Year. Except as otherwise provided in Paragraph 6 hereof, until the Vesting Date, Elective Shares shall be held by the Company in escrow. (c) Restricted Shares. Subject to the restrictions set forth in Paragraph 4 hereof, if the Grantee elects to receive Elective Shares, the Grantee shall receive an additional grant of Restricted Shares, the number of which shall be determined as the quotient obtained by dividing (i) the dollar amount of the portion of the Award that is payable in Elective Shares, as computed pursuant to Paragraph 3(b) hereof, by (ii) eighty-five percent (85%) of the Fair Market Value per Share determined as of the last day of the Plan Year, over (y) the number of Elective Shares, computed pursuant to Paragraph 3(b) hereof. (d) Termination of Employment. Notwithstanding Paragraphs 3(a) through 3(c) hereof, if the Grantee terminates employment prior to the end of the Plan Year due to death, Disability, or Retirement, payment of the entire Award, as determined pursuant to Paragraph 2(c), shall be made in the form of a cash lump sum as soon as reasonably practicable after the close of the Plan Year. 4. Restrictions on Restricted Shares. 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 be held in escrow by the Company and bear a legend in substantially the following form: -3- 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. 5. Lapse of Restrictions. (a) Subject to the terms and conditions set forth herein and in the Plan, the restrictions set forth in Paragraph 4 on each Restricted Share that has not been forfeited shall lapse on the Vesting Date. (b) Notwithstanding Paragraph 5(a), a Vesting Date for all Restricted Shares subject to the Award shall occur upon the occurrence of a Change of Control or upon the Grantee's death before the Vesting Date, and the Restricted Shares, to the extent not previously vested, shall thereupon vest in full. 6. Forfeiture of Restricted Shares. Subject to the terms and conditions set forth herein, the Grantee may withdraw Elective Shares from the Company's escrow at any time before the Vesting Date by providing notice to the Committee. If the Grantee withdraws Elective Shares from the Company's escrow at any time before the Vesting Date, the Grantee shall forfeit all of the Restricted Shares. 7. 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. 8. Notices. Any notice to the Company under this Award shall be made to: Brandywine Realty Trust 14 Campus Boulevard Newtown Square, PA 19073 Attention: President and Chief Executive 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. -4- 9. 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. 10. Withholding. At the time of payment of the Award, the Grantee shall pay to the Company, or make arrangements satisfactory to the Company regarding the payment of, any Federal, state or local taxes of any kind required by law to be withheld with respect to such amount. Unless otherwise determined by the Board at the time of payment, the minimum required withholding obligations may be settled with Shares, including Shares that are part of the Award that gives rise to the withholding requirement. The obligations of the Company under the Plan shall be conditional on such payment or arrangements and the Company shall, to the extent permitted by law, have the right to deduct any such taxes from any payment of any kind otherwise due to the Grantee. 11. 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 9, 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. 12. 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. 13. 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. -5- (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 Maryland. BRANDYWINE REALTY TRUST BY: /s/ Gerard H. Sweeney ----------------------------------- Gerard H. Sweeney TITLE: President and Chief Executive Officer -6- EX-10.48 12 EXHIBIT 10.48 BRANDYWINE REALTY TRUST LONG-TERM PERFORMANCE AWARD This is a Long-Term Performance Award dated December 31, 1998 (the "Effective Date") from Brandywine Realty Trust, a Maryland real estate investment trust (the "Company") to Anthony S. Rimikis ("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 Long-Term Performance Award hereby granted. (b) "Board" means the Board of Trustees of the Company, as constituted from time to time. (c) "Change of Control" means "Change of Control" as defined in the Plan; provided that if the Grantee has entered into an employment agreement with the Company that includes the term "Change of Control", then the term "Change of Control" as used herein shall include both the definition in the Plan and in the employment agreement. (d) "Code" means the Internal Revenue Code of 1986, as amended from time to time, and any successor thereto. (e) "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 of the Plan, or if such a committee is not in existence at the time of reference, "Committee" means the Board. (f) "Elective Shares" means the Shares described in Paragraph 3(b) hereof. (g) "Employer" means the Company or the Subsidiary for which Grantee is performing services on the applicable Vesting Date. (h) "Mandatory Shares" means the Shares described in Paragraph 3(a) hereof. (i) "Plan Year" means the calendar year in which the Effective Date occurs. -1- (j) "Restricted Period" means, with respect to each Restricted Share issued upon satisfaction of the applicable performance criteria, the period beginning on the date such Restricted Shares are issued and ending on the Vesting Date. (k) "Restricted Shares" means the Shares described in Paragraph 3(c) hereof. (l) "Rule 16b-3" means Rule 16b-3 promulgated under the Exchange Act, as in effect from time to time. (m) "Share" means a common share of beneficial interest, $.01 par value per share, of the Company, subject to substitution or adjustment as provided in Paragraph 3(c) of the Plan. (n) "Subsidiary" means, with respect to the Company or parent, a subsidiary company, whether now or hereafter existing, as defined in section 424(f) and (g) of the Code, and any other entity 50% or more of the economic interests in which are owned, directly or indirectly, by the Company. (o) "Vesting Date" means December 31, 2000. 2. Amount of Award. (a) In General. Subject to the terms and conditions set forth herein and in the Plan, the Company hereby grants to Grantee the right to receive an Award, the amount of which shall be a percentage of such Grantee's base salary, based on the attainment of the performance criteria specified on Attachment A hereto. (b) Condition to Payment of Award. Except as specified in Paragraph 2(c) hereof, in order to be eligible for payment under the terms of the Award, the Grantee must be employed by the Company or a Subsidiary on the last day of the Plan Year. (c) Partial Year Employment. (i) If the Grantee's employment with the Company or a Subsidiary terminates prior to the last day of the Plan Year other than due to death, Disability or Retirement, the Award shall be forfeited immediately upon such termination. (ii) If the Grantee's employment terminates prior to the last day of the Plan Year due to death, Disability or Retirement, the Grantee shall be eligible to receive a portion of the Award, determined by multiplying the Award, as determined after the close of the Plan Year, by a fraction, the numerator of which is the Grantee's full and partial months of employment during the Plan Year and the denominator of which is twelve (12). -2- 3. Form and Time of Payment. (a) Mandatory Shares. A minimum of twenty-five percent (25%) of the Award shall be paid in the form of Mandatory Shares, the number of which shall be determined as the quotient obtained by dividing (x) 25% of the Award by (y) the Fair Market Value per Share determined as of the last day of the Plan Year. Except as otherwise provided in Paragraph 3(b), the remainder of the Award shall be paid in the form of a cash lump sum. Both the Mandatory Shares and the cash lump sum portions of the Award shall be issued or paid, as applicable, as soon as reasonably practicable after the close of the Plan Year. (b) Elective Shares. If the Grantee so indicates on the Election contained in Attachment B hereto, an additional percentage of the Award may be paid in the form of Elective Shares, the number of which shall be determined as the quotient obtained by dividing (x) the percentage of the Award elected by the Grantee by (y) the Fair Market Value per Share determined as of the last day of the Plan Year; provided that such Election is submitted to the Company by the end of the Plan Year. Except as otherwise provided in Paragraph 6 hereof, until the Vesting Date, Elective Shares shall be held by the Company in escrow. (c) Restricted Shares. Subject to the restrictions set forth in Paragraph 4 hereof, if the Grantee elects to receive Elective Shares, the Grantee shall receive an additional grant of Restricted Shares, the number of which shall be determined as the quotient obtained by dividing (i) the dollar amount of the portion of the Award that is payable in Elective Shares, as computed pursuant to Paragraph 3(b) hereof, by (ii) eighty-five percent (85%) of the Fair Market Value per Share determined as of the last day of the Plan Year, over (y) the number of Elective Shares, computed pursuant to Paragraph 3(b) hereof. (d) Termination of Employment. Notwithstanding Paragraphs 3(a) through 3(c) hereof, if the Grantee terminates employment prior to the end of the Plan Year due to death, Disability, or Retirement, payment of the entire Award, as determined pursuant to Paragraph 2(c), shall be made in the form of a cash lump sum as soon as reasonably practicable after the close of the Plan Year. 4. Restrictions on Restricted Shares. 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 be held in escrow by the Company and bear a legend in substantially the following form: -3- 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. 5. Lapse of Restrictions. (a) Subject to the terms and conditions set forth herein and in the Plan, the restrictions set forth in Paragraph 4 on each Restricted Share that has not been forfeited shall lapse on the Vesting Date. (b) Notwithstanding Paragraph 5(a), a Vesting Date for all Restricted Shares subject to the Award shall occur upon the occurrence of a Change of Control or upon the Grantee's death before the Vesting Date, and the Restricted Shares, to the extent not previously vested, shall thereupon vest in full. 6. Forfeiture of Restricted Shares. Subject to the terms and conditions set forth herein, the Grantee may withdraw Elective Shares from the Company's escrow at any time before the Vesting Date by providing notice to the Committee. If the Grantee withdraws Elective Shares from the Company's escrow at any time before the Vesting Date, the Grantee shall forfeit all of the Restricted Shares. 7. 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. 8. Notices. Any notice to the Company under this Award shall be made to: Brandywine Realty Trust 14 Campus Boulevard Newtown Square, PA 19073 Attention: President and Chief Executive 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. -4- 9. 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. 10. Withholding. At the time of payment of the Award, the Grantee shall pay to the Company, or make arrangements satisfactory to the Company regarding the payment of, any Federal, state or local taxes of any kind required by law to be withheld with respect to such amount. Unless otherwise determined by the Board at the time of payment, the minimum required withholding obligations may be settled with Shares, including Shares that are part of the Award that gives rise to the withholding requirement. The obligations of the Company under the Plan shall be conditional on such payment or arrangements and the Company shall, to the extent permitted by law, have the right to deduct any such taxes from any payment of any kind otherwise due to the Grantee. 11. 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 9, 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. 12. 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. 13. 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. -5- (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 Maryland. BRANDYWINE REALTY TRUST BY: /s/ Gerard H. Sweeney -------------------------- Gerard H. Sweeney TITLE: President and Chief Executive Officer -6- EX-10.49 13 EXHIBIT-10.49 AGREEMENT THIS AGREEMENT is entered into as of the 19th day of January, 1999 by and between Jeff F. Rogatz ("Executive") and Brandywine Realty Trust (the "Company"). WHEREAS, Executive is currently employed by the Company and/or a Subsidiary (as defined below) of the Company; WHEREAS, in order to encourage Executive to remain an employee of the Company and/or a Subsidiary, the Company is entering into this Agreement with Executive. NOW, THEREFORE, the parties hereto, intending to be legally bound, hereby agree as follows: 1. Payment Obligation. The Company agrees that if (i) a Change of Control (as defined below) of the Company occurs at a time when Executive is then an employee of the Company and/or a Subsidiary of the Company and (ii) within one year of the occurrence of the Change of Control either (a) the Company or the purchaser or successor thereto (the "Purchaser") terminates the employment of Executive other than for Cause (as defined below) or (b) Executive resigns for Good Reason (as defined below), then the Company or Purchaser will be obligated to continue to pay to Executive an amount equal to his base salary as in effect at the time of the Change of Control for a period expiring 547 days after the effective date of Executive's termination of employment. 2. No Right to Employment. This Agreement shall not confer upon Executive any right to remain an employee of the Company or a Subsidiary of the Company, and shall only entitle Executive to the salary continuation payments in the limited circumstances set forth in Paragraph 1 above. 3. Certain Definitions. As used herein: (i) the terms "Change of Control" and "Subsidiary" shall have the respective meanings assigned to them in the Company's 1997 Long-Term Incentive Plan, as amended (the "Plan"), (ii) the term "Cause" shall have the meaning assigned to it in the Plan (except that references in such Plan definition to "Company" shall be interpreted to mean the Company or Purchaser, as applicable) and (iii) the term "Good Reason" shall mean any of (a) a reduction in Executive's base salary as in effect at the time of the Change of Control, (b) a significant adverse alteration in the nature or status of Executive's responsibilities from those in effect at the time of the Change of Control or (c) relocation of the place where Executive performs his day-to-day responsibilities at the time of the Change of Control by more than 30 miles. 4. Tax Withholding, etc. All compensation payable under this Agreement shall be subject to customary withholding taxes and other employment taxes as required with respect to compensation paid by an employer to an employee and the amount of compensation payable hereunder shall be reduced appropriately to reflect the amount of any required witholding. The Company shall have no obligation to make any payments to the Executive or make the Executive whole for the amount of any required taxes. 5. "Gross-Up Payment." If Executive is employed by the Company or a Subsidiary at the time of a Change of Control and Executive's employment by the Company or a Subsidiary is terminated under circumstances that entitle Executive to a payment described in Paragraph 1 of this Agreement, the Company shall pay Executive the Gross-Up Payment, computed as provided in this Paragraph 5. a. For purposes of this Agreement, the term "Gross-Up Payment" means an amount such that the net amount retained by Executive, after deduction of the excise tax imposed under section 4999 of the Internal Revenue Code of 1986, as amended (the "Code") or any successor provision of law ("Excise Tax"), if any, on the "Total Payments" (as hereinafter defined) and any federal state and local income tax, employment tax and Excise Tax upon the payment provided for by this Section 5, shall be equal to the excess of the Total Payments (including the payment provided for in this Section 5) over the payment provided for by this Section 5. b. For purposes of determining whether any of the Total Payments will be subject to Excise Tax and the amount of such Excise Tax. (1) any payments or benefits received or to be received by Executive in connection with a Change of Control or Executive's termination of employment (whether pursuant to the terms of this Agreement or any other plan, arrangement or agreement with the Company or a Subsidiary, any person whose actions result in a Change of Control or any person affiliated with the Company or such person (the "Total Payments")) shall be treated as "parachute payments" (within the meaning of section 280G(b)(2) of the Code) unless, in the opinion of a tax advisor selected by the Company's independent auditors and reasonably acceptable to Executive, such payments or benefits (in whole or in part) do not constitute parachute payments, including by reason of section 280G(b)(4)(A) of the Code, and all "excess parachute payments" (within the meaning of section 280G(b)(1) of the Code) shall be treated as subject to Excise Tax unless, in the opinion of such tax counsel, such excess parachute payments (in whole or in part) represent reasonable compensation for services actually rendered (within the meaning of section 280G(b)(4)(B) of the Code), or are otherwise not subject to Excise Tax; and (2) the value of any noncash benefits or deferred payment or benefit shall be determined by the Company's independent auditors in accordance with the principles of sections 280G(d)(3) and (4) of the Code. For purposes of determining the amount of the Gross-Up Payment, Executive shall be deemed to pay federal income tax at the highest marginal rate of federal income taxation in -2- the calendar year in which the Gross-Up Payment is to be made and state and local income taxes at the highest marginal rate of taxation in the state and locality of Executive's residence on the date of Executive's termination of employment (or such other time as is hereinafter described), net of the maximum reduction in federal income taxes which could be obtained from the deduction of such state and local taxes. c. Notwithstanding the foregoing, if the Excise Tax is subsequently determined to be less than the amount taken into account hereunder at the time of termination of Executive's employment, Executive shall repay to the Company, at the time that the amount of such reduction in Excise Tax is finally determined, the portion of the Gross-Up Payment attributable to such reduction (plus that portion of the Gross-Up Payment attributable to the Excise Tax and federal, state and local income tax imposed on the Gross-Up Payment being repaid by Executive to the extent that such repayment results in a reduction in Excise Tax or a federal, state or local income tax deduction), plus interest on the amount of such repayment at the rate provided in section 1274(b)(2)(B) of the Code. If the Excise Tax is subsequently determined to exceed the amount taken into account hereunder at the time of termination of Executive's employment (including by reason of any payment the existence or amount of which cannot be determined at the time of the Gross-Up Payment), the Company shall make an additional Gross-Up Payment in respect of such excess (plus any interest, penalties or additions payable by Executive with respect to such excess) at the time that the amount of such excess is finally determined. Executive and the Company shall each reasonably cooperate with the other in connection with any administrative or judicial proceedings concerning the existence or amount of liability for Excise Tax with respect to the Total Payments. Such additional payment shall be made within 30 days following the date Executive notifies the Company that he is subject to the Excise Tax. d. The Company shall promptly pay in advance or reimburse Executive for all reasonable legal fees and expenses incurred in good faith by Executive in connection with any tax audit or proceeding to the extent attributable to the application of section 4999 of the Code to any payment or benefit provided hereunder. 6. 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. 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. -3- This Agreement may not be modified or amended other than by an agreement in writing. c. 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 Executive. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. BRANDYWINE REALTY TRUST By: /s/ Gerald H. Sweeney ----------------------------------------- President and Chief Executive Officer /s/ Jeff F. Rogatz ----------------------------------------- Jeff F. Rogatz -4- EX-10.50 14 EXHIBIT-10.50 AGREEMENT THIS AGREEMENT is entered into as of the 4th day of January, 1999 by and between John M. Adderly, Jr. ("Executive") and Brandywine Realty Trust (the "Company"). WHEREAS, Executive is currently employed by the Company and/or a Subsidiary (as defined below) of the Company; WHEREAS, in order to encourage Executive to remain an employee of the Company and/or a Subsidiary, the Company is entering into this Agreement with Executive. NOW, THEREFORE, the parties hereto, intending to be legally bound, hereby agree as follows: 1. Payment Obligation. The Company agrees that if (i) a Change of Control (as defined below) of the Company occurs at a time when Executive is then an employee of the Company and/or a Subsidiary of the Company and (ii) within one year of the occurrence of the Change of Control either (a) the Company or the purchaser or successor thereto (the "Purchaser") terminates the employment of Executive other than for Cause (as defined below) or (b) Executive resigns for Good Reason (as defined below), then the Company or Purchaser will be obligated to continue to pay to Executive an amount equal to his base salary as in effect at the time of the Change of Control for a period expiring 547 days after the effective date of Executive's termination of employment. 2. No Right to Employment. This Agreement shall not confer upon Executive any right to remain an employee of the Company or a Subsidiary of the Company, and shall only entitle Executive to the salary continuation payments in the limited circumstances set forth in Paragraph 1 above. 3. Certain Definitions. As used herein: (i) the terms "Change of Control" and "Subsidiary" shall have the respective meanings assigned to them in the Company's 1997 Long-Term Incentive Plan, as amended (the "Plan"), (ii) the term "Cause" shall have the meaning assigned to it in the Plan (except that references in such Plan definition to "Company" shall be interpreted to mean the Company or Purchaser, as applicable) and (iii) the term "Good Reason" shall mean any of (a) a reduction in Executive's base salary as in effect at the time of the Change of Control, (b) a significant adverse alteration in the nature or status of Executive's responsibilities from those in effect at the time of the Change of Control or (c) relocation of the place where Executive performs his day-to-day responsibilities at the time of the Change of Control by more than 30 miles. 4. Tax Withholding, etc. All compensation payable under this Agreement shall be subject to customary withholding taxes and other employment taxes as required with respect to compensation paid by an employer to an employee and the amount of compensation payable hereunder shall be reduced appropriately to reflect the amount of any required witholding. The Company shall have no obligation to make any payments to the Executive or make the Executive whole for the amount of any required taxes. 5. "Gross-Up Payment." If Executive is employed by the Company or a Subsidiary at the time of a Change of Control and Executive's employment by the Company or a Subsidiary is terminated under circumstances that entitle Executive to a payment described in Paragraph 1 of this Agreement, the Company shall pay Executive the Gross-Up Payment, computed as provided in this Paragraph 5. a. For purposes of this Agreement, the term "Gross-Up Payment" means an amount such that the net amount retained by Executive, after deduction of the excise tax imposed under section 4999 of the Internal Revenue Code of 1986, as amended (the "Code") or any successor provision of law ("Excise Tax"), if any, on the "Total Payments" (as hereinafter defined) and any federal state and local income tax, employment tax and Excise Tax upon the payment provided for by this Section 5, shall be equal to the excess of the Total Payments (including the payment provided for in this Section 5) over the payment provided for by this Section 5. b. For purposes of determining whether any of the Total Payments will be subject to Excise Tax and the amount of such Excise Tax. (1) any payments or benefits received or to be received by Executive in connection with a Change of Control or Executive's termination of employment (whether pursuant to the terms of this Agreement or any other plan, arrangement or agreement with the Company or a Subsidiary, any person whose actions result in a Change of Control or any person affiliated with the Company or such person (the "Total Payments")) shall be treated as "parachute payments" (within the meaning of section 280G(b)(2) of the Code) unless, in the opinion of a tax advisor selected by the Company's independent auditors and reasonably acceptable to Executive, such payments or benefits (in whole or in part) do not constitute parachute payments, including by reason of section 280G(b)(4)(A) of the Code, and all "excess parachute payments" (within the meaning of section 280G(b)(1) of the Code) shall be treated as subject to Excise Tax unless, in the opinion of such tax counsel, such excess parachute payments (in whole or in part) represent reasonable compensation for services actually rendered (within the meaning of section 280G(b)(4)(B) of the Code), or are otherwise not subject to Excise Tax; and (2) the value of any noncash benefits or deferred payment or benefit shall be determined by the Company's independent auditors in accordance with the principles of sections 280G(d)(3) and (4) of the Code. For purposes of determining the amount of the Gross-Up Payment, Executive shall be deemed to pay federal income tax at the highest marginal rate of federal income taxation in -2- the calendar year in which the Gross-Up Payment is to be made and state and local income taxes at the highest marginal rate of taxation in the state and locality of Executive's residence on the date of Executive's termination of employment (or such other time as is hereinafter described), net of the maximum reduction in federal income taxes which could be obtained from the deduction of such state and local taxes. c. Notwithstanding the foregoing, if the Excise Tax is subsequently determined to be less than the amount taken into account hereunder at the time of termination of Executive's employment, Executive shall repay to the Company, at the time that the amount of such reduction in Excise Tax is finally determined, the portion of the Gross-Up Payment attributable to such reduction (plus that portion of the Gross-Up Payment attributable to the Excise Tax and federal, state and local income tax imposed on the Gross-Up Payment being repaid by Executive to the extent that such repayment results in a reduction in Excise Tax or a federal, state or local income tax deduction), plus interest on the amount of such repayment at the rate provided in section 1274(b)(2)(B) of the Code. If the Excise Tax is subsequently determined to exceed the amount taken into account hereunder at the time of termination of Executive's employment (including by reason of any payment the existence or amount of which cannot be determined at the time of the Gross-Up Payment), the Company shall make an additional Gross-Up Payment in respect of such excess (plus any interest, penalties or additions payable by Executive with respect to such excess) at the time that the amount of such excess is finally determined. Executive and the Company shall each reasonably cooperate with the other in connection with any administrative or judicial proceedings concerning the existence or amount of liability for Excise Tax with respect to the Total Payments. Such additional payment shall be made within 30 days following the date Executive notifies the Company that he is subject to the Excise Tax. d. The Company shall promptly pay in advance or reimburse Executive for all reasonable legal fees and expenses incurred in good faith by Executive in connection with any tax audit or proceeding to the extent attributable to the application of section 4999 of the Code to any payment or benefit provided hereunder. 6. 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. 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. -3- This Agreement may not be modified or amended other than by an agreement in writing. c. 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 Executive. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. BRANDYWINE REALTY TRUST By: /s/ Gerald H. Sweeney ----------------------------------------- President and Chief Executive Officer /s/ John M. Adderly, Jr. ----------------------------------------- John M. Adderly, Jr. -4- EX-10.51 15 EXHIBIT-10.51 AGREEMENT THIS AGREEMENT is entered into as of the 4th day of January, 1999 by and between Anthony S. Rimikis ("Executive") and Brandywine Realty Trust (the "Company"). WHEREAS, Executive is currently employed by the Company and/or a Subsidiary (as defined below) of the Company; WHEREAS, in order to encourage Executive to remain an employee of the Company and/or a Subsidiary, the Company is entering into this Agreement with Executive. NOW, THEREFORE, the parties hereto, intending to be legally bound, hereby agree as follows: 1. Payment Obligation. The Company agrees that if (i) a Change of Control (as defined below) of the Company occurs at a time when Executive is then an employee of the Company and/or a Subsidiary of the Company and (ii) within one year of the occurrence of the Change of Control either (a) the Company or the purchaser or successor thereto (the "Purchaser") terminates the employment of Executive other than for Cause (as defined below) or (b) Executive resigns for Good Reason (as defined below), then the Company or Purchaser will be obligated to continue to pay to Executive an amount equal to this base salary as in effect at the time of the Change of Control for a period expiring on the first anniversary of the effective date of Executive's termination of employment. 2. No Right to Employment. This Agreement shall not confer upon Executive any right to remain an employee of the Company or a Subsidiary of the Company, and shall only entitle Executive to the salary continuation payments in the limited circumstances set forth in Paragraph 1 above. 3. Certain Definitions. as used herein: (i) the terms "Change of Control" and "Subsidiary" shall have the respective meanings assigned to them in the Company's 1997 Long-Term Incentive Plan, as amended (the "Plan"), (ii) the term "Cause" shall have the meaning assigned to it in the Plan (except that references in such Plan definition to "Company" shall be interpreted to mean the Company or Purchaser, as applicable) and (iii) the term "Good Reason" shall mean any of (a) a reduction in Executive's base salary as in effect at the time of the Change of Control, (b) a significant adverse alteration in the nature or status of Executive's responsibilities from those in effect at the time of the Change of Control or (c) relocation of the place where Executive performs his day-to-day responsibilities at the time of the Change of Control by more than 30 miles. 4. Tax Withholding, etc. All compensation payable under this Agreement shall be subject to customary withholding taxes and other employment taxes as required with respect to compensation paid by an employer to an employee and the amount of compensation payable hereunder shall be reduced appropriately to reflect the amount of any required witholding. The Company shall have no obligation to make any payments to the Executive or make the Executive whole for the amount of any required taxes. 5. 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. 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. This Agreement may not be modified or amended other than by an agreement in writing. c. 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 of 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 Executive. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. BRANDYWINE REALTY TRUST By: /s/ Gerald H. Sweeney ----------------------------------------- President and Chief Executive Officer /s/ Anthony S. Rimikis ----------------------------------------- Anthony S. Rimikis -2- EX-21.1 16 EXHIBIT 21.1 EXHIBIT 21.1 ------------ AAPOP 1, L.P., a Delaware limited partnership AAPOP 2, L.P., a Delaware limited partnership AAPOP 3, L.P., a Delaware limited partnership AAPOP Umbrella, L.P., a Delaware limited partnership Brandywine Berwyn SPE, L.P. Brandywine Dominion, L.P., a Pennsylvania limited partnership Brandywine F.C., L.P., a Pennsylvania limited partnership Brandywine Grande B, L.P., a Delaware limited partnership Brandywine I.S., L.P., a Pennsylvania limited partnership Brandywine Norriton, L.P., a Pennsylvania limited partnership Brandywine Operating Partnership, L.P., a Delaware limited partnership Brandywine P.M., L.P., a Pennsylvania limited partnership Brandywine Realty Partners, a Pennsylvania general 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 TB VI, L.P., a Pennsylvania limited partnership C/N Iron Run Limited Partnership III, a Pennsylvania limited partnership C/N Leedom Limited Partnership II, a Pennsylvania limited partnership C/N Oaklands Limited Partnership I, a Pennsylvania limited partnership C/N Oaklands Limited Partnership III, a Pennsylvania limited partnership Fifteen Horsham, L.P., a Pennsylvania limited partnership Iron Run Limited Partnership V, a Pennsylvania limited partnership LC/N Horsham Limited Partnership, a Pennsylvania limited partnership LC/N Keith Valley Limited Partnership I, a Pennsylvania limited partnership Newtech III Limited Partnership, a Pennsylvania limited partnership Newtech IV Limited Partnership, a Pennsylvania limited partnership Nichols Lansdale Limited Partnership III, a Pennsylvania limited partnership Witmer Operating Partnership I, L.P., a Delaware limited partnership Brandywine Central, L.P., a Pennsylvania limited partnership Brandywine 3 Paragon Drive Partnership, a New York general partnership Brandywine 55 Ames Court Partnership, a New York general partnership Brandywine Engineers Lane Partnership, a New York general partnership Brandywine National Road Partnership, a New York general partnership Brandywine Phillips Parkway Partnership, a New Jersey general partnership Brandywine Broad Street Partnership, a New York general partnership Brandywine Axinn Avenue Partnership, a New York general partnership Brandywine Durham Partnership, a New Jersey general partnership Interstate Center Associates, a Virginia general partnership Iron Run Venture I, a Pennsylvania general partnership IR Northlight II Associates, a Pennsylvania general partnership Iron Run Venture II, a Pennsylvania general partnership AAP Sub One, Inc., a Delaware corporation AAP Sub Two, Inc., a Delaware corporation AAP Sub Three, Inc., a Delaware corporation AAP Sub Four, Inc., a Delaware corporation Atlantic American Land Development, Inc., a Delaware corporation AAP 1-49, Inc., 49 separate Delaware corporations Atlantic American Properties Management II, Inc., a Delaware corporation Brandywine Grande B Corp., a Delaware corporation 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 SPE Corp., a Pennsylvania corporation 1100 Brandywine, LLC, a Delaware limited liability company Brandywine Acquisitions, LLC, a Delaware limited liability company Brandywine Axinn I, LLC, a Delaware limited liability company Brandywine Axinn II, LLC, a Delaware limited liability company Brandywine Berwyn SPE, L.L.C. Brandywine Chestnut Ridge, L.L.C., a New Jersey limited liability company Brandywine Dabney, L.L.C., a Delaware limited liability company Brandywine Dominion, L.L.C., a Pennsylvania limited liability company Brandywine F.C., L.L.C., a Pennsylvania limited liability company Brandywine I.S., L.L.C., a Pennsylvania limited liability company Brandywine Interstate 50, L.L.C., a Delaware limited liability company Brandywine Leasing, LLC, a Delaware limited liability company Brandywine - Main Street, LLC, a Delaware limited liability company Brandywine Norriton, L.L.C., a Pennsylvania limited liability company Brandywine P.M., L.L.C., a Pennsylvania limited liability company Brandywine Piazza, L.L.C., a New Jersey limited liability company Brandywine Plaza 1000, L.L.C., a New Jersey limited liability company Brandywine Promenade, L.L.C., a New Jersey limited liability company Brandywine TB I, L.L.C., a Pennsylvania limited liability company Brandywine TB II, L.L.C., a Pennsylvania limited liability company Brandywine TB III, L.L.C., a Pennsylvania limited liability company Brandywine TB VI, L.L.C., a Pennsylvania limited liability company Brandywine Trenton Urban Renewal, L.L.C., a Delaware limited liability company Brandywine Tysons, L.L.C., a Delaware limited liability company Brandywine Witmer, L.L.C., a Pennsylvania limited liability company 1000 Chesterbrook Boulevard Partnership, a Pennsylvania general partnership Christiana Center Operating Company I, LLC, a Delaware limited liability company Christiana Center Operating Company II, LLC, a Delaware limited liability company Two Tower Bridge Associates, a Pennsylvania limited partnership Four Tower Bridge Associates, a Pennsylvania limited partnership -2- Five Tower Bridge Associates, a Pennsylvania limited partnership Six Tower Bridge Associates, a Pennsylvania limited partnership Interstate 202 General Partnership, a Pennsylvania general partnership Plymouth Meeting General Partnership, a Pennsylvania general partnership Atlantic American Properties Trust, a Maryland real estate investment trust -3- EX-23.1 17 EXHIBIT 23.1 Exhibit 23.1 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our report dated March 2, 1999 (except with respect to the matter discussed in Note 15 to the consolidated financial statements as to which the date is March 26, 1999) included in this Form 10-K, into the Company's previously filed Registration Statements on Forms S-3 (File No. 333-20999, File No. 333-46647, File No. 333-56237 and File No. 333-69653) and Forms S-8 (File No. 333-14243 and File No. 333-28427). /s/ ARTHUR ANDERSEN LLP Philadelphia, Pennsylvania March 31, 1999 EX-27 18 FINANCIAL DATA SCHEDULE
5 0000790816 BRANDYWINE REALTY TRUST 1,000 YEAR DEC-31-1998 DEC-31-1997 DEC-31-1998 13,075 0 10,769 0 0 27,333 1,908,095 67,477 1,911,680 40,268 1,000,560 0 37,500 376 705,778 1,911,680 0 192,861 0 155,833 0 0 36,886 33,025 0 0 0 (2,003) 0 33,025 0.90 0.89
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