<PAGE>
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. _)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
BRANDYWINE REALTY TRUST
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction
applies:
Common Shares of Beneficial Interest
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(2) Aggregate number of securities to which transaction applies:
- ------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how it
was determined):
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(4) Proposed maximum aggregate value of transaction:
- ------------------------------------------------------------------------------
(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
- ------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the pervious filing by registration
statement number, or the Form or Schedule and the date of its filing.
<PAGE>
(1) Amount Previously Paid:
- ------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
BRANDYWINE REALTY TRUST
16 Campus Boulevard
Newtown Square, PA 19073
(610) 325-5600
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held May 15, 1998
To our Shareholders:
Notice is hereby given that the Annual Meeting of Shareholders of
Brandywine Realty Trust, a Maryland real estate investment trust (the
"Company"), will be held at The Four Seasons Hotel, One Logan Square,
Philadelphia, Pennsylvania on Friday, May 15, 1998, at 10:00 a.m., local time
(the "Meeting"), to consider and take action on the following matters:
1. The election of five Trustees to serve as members of the
Board of Trustees until the next annual meeting of shareholders and until
their successors are elected and qualify.
2. An amendment to the Declaration of Trust of the Company
to clarify that the authority of the Board of Trustees to preserve the
Company's status as a real estate investment trust may not be exercised so as
to preclude settlement of any transaction entered into on the New York Stock
Exchange.
3. An amendment to the Company's 1997 Long-Term Incentive
Plan to increase the number of common shares of beneficial interest reserved
for awards thereunder from 750,000 to 5,000,000.
4. The transaction of such other business as may properly
come before the Meeting or any postponement or adjournment thereof.
The Board of Trustees of the Company has fixed the close of business
on April 8, 1998 as the record date for determination of the shareholders of
the Company entitled to notice of, and to vote at, the Meeting and any
postponement or adjournment thereof.
By order of the Board of Trustees,
Brad A. Molotsky, Secretary
April 13, 1998
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, PLEASE MARK, DATE
AND SIGN YOUR PROXY, AND MAIL IT IN THE STAMPED ENVELOPE ENCLOSED FOR YOUR
CONVENIENCE. IN ORDER TO AVOID THE ADDITIONAL EXPENSE TO THE COMPANY OF
FURTHER SOLICITATION, WE ASK YOUR COOPERATION IN MAILING YOUR PROXY
PROMPTLY. RETURNING THE PROXY DOES NOT AFFECT YOUR RIGHT TO VOTE IN PERSON
ON ALL MATTERS BROUGHT BEFORE THE MEETING, BUT WILL HELP ASSURE A QUORUM IF
YOU DO NOT ATTEND.
<PAGE>
Brandywine Realty Trust
16 Campus Boulevard
Newtown Square, PA 19073
(610) 325-5600
PROXY STATEMENT FOR THE
ANNUAL MEETING OF SHAREHOLDERS
To be held on May 15, 1998
Introduction:
The enclosed proxy is solicited by and on behalf of the Board of
Trustees (the "Board of Trustees" or the "Board") of Brandywine Realty Trust
(the "Company") for use at the Annual Meeting of Shareholders to be held on
Friday, May 15, 1998 at 10:00 a.m., local time, and at any postponement or
adjournment thereof (the "Meeting"). This Proxy Statement and the enclosed
form of proxy are first being mailed to shareholders of the Company on or
about April 13, 1998.
At the Meeting, the shareholders will be asked to consider and take
action on the following matters (collectively, the "Proposals"):
1. The election of five Trustees to serve as members of the
Board of Trustees until the next annual meeting of shareholders and until
their successors are elected and qualify.
2. An amendment to the Declaration of Trust of the Company
to clarify that the authority of the Board of Trustees to preserve the
Company's status as a real estate investment trust may not be exercised so as
to preclude settlement of any transaction on the New York Stock Exchange.
3. An amendment to the Company's 1997 Long-Term Incentive
Plan to increase the number of common shares of beneficial interest ("Common
Shares") of the Company reserved for awards thereunder from 750,000 to
5,000,000.
4. The transaction of such other business as may properly
come before the Meeting or any postponement or adjournment thereof.
The Board of Trustees has unanimously approved each of the Proposals
described herein and recommends that the shareholders vote for each of the
Proposals at the Meeting.
The Board of Trustees knows of no business that will be presented for
consideration at the Meeting other than the matters described in this Proxy
Statement. If any other matter should be presented at the Meeting for action,
the persons named in the accompanying proxy card will vote the proxy in
accordance with their best judgment on such matter.
A shareholder may revoke his or her proxy at any time by executing
and returning another proxy of a later date, by written notice to the Company
(attention: Brad A. Molotsky) at its address above, or by attending the
Meeting and voting in person. Attendance at the Meeting will not by itself
constitute revocation of a proxy.
<PAGE>
In the event that there are not sufficient votes to approve any one
or more of the Proposals, it is expected that the Meeting will be postponed or
adjourned in order to permit further solicitation of proxies by the Company.
The delivery of this Proxy Statement shall not, under any
circumstances, create any implication that the information contained herein is
correct after the date hereof, April 13, 1998.
Record Date, Quorum and Vote Required:
The record date for the determination of shareholders entitled to
notice of and to vote at the Meeting is the close of business on April 8,
1998. The presence, in person or by proxy, of holders of Common Shares
representing a majority of all votes entitled to be cast at the Meeting will
constitute a quorum for the transaction of business at the Meeting. All valid
proxies returned will be included in the determination of whether a quorum is
present at the Meeting. As of the Record Date, 37,426,000 Common Shares were
issued and outstanding. Each Common Share is entitled to one vote on each
matter to be voted on at the Meeting. Shareholders have no cumulative voting
rights.
Assuming in each of the following instances that a quorum is present,
election of Trustees (Proposal No. 1) requires the vote of a plurality of all
votes cast on the matter. Approval of the amendment to the Declaration of
Trust (Proposal No. 2) requires the affirmative vote of the holders of a
majority of the Common Shares outstanding and entitled to vote. Approval of an
amendment to the 1997 Long-Term Incentive Plan (Proposal No. 3) requires the
affirmative vote of the holders of a majority of the votes cast on the
Proposal in person or by proxy.
Regarding the election of Trustees (Proposal No. 1), Common Shares
represented by Proxies marked "For" such Proposal will be counted in favor of
all nominees, except to the extent the Proxy withholds authority to vote for,
or indicates a vote against, a specified nominee. Common Shares represented by
Proxies marked "Abstain" or withholding authority to vote will not be counted
in favor of any nominee. However, because Trustees are elected by a plurality
vote, abstentions will not affect the election of the candidates receiving the
most votes. IN THE ABSENCE OF SPECIFIC DIRECTION, COMMON SHARES REPRESENTED BY
A PROXY WILL BE VOTED "FOR" THE ELECTION OF ALL NOMINEES.
Regarding approval of the amendment to the Declaration of Trust
(Proposal No. 2), Common Shares represented by Proxies marked "For" such
Proposal will be counted in favor of such Proposal. Common Shares represented
by Proxies marked "Abstain" and "broker non-votes" in respect of such Proposal
will not be counted in favor of such Proposal and will have the effect of a
vote "Against" such Proposal. IN THE ABSENCE OF SPECIFIC DIRECTION, COMMON
SHARES REPRESENTED BY A PROXY WILL BE VOTED "FOR" SUCH PROPOSAL.
Regarding approval of an amendment to the 1997 Long-Term Incentive
Plan (Proposal No. 3), Common Shares represented by Proxies marked "For" such
Proposal will be counted in favor of such Proposal. Common Shares represented
by Proxies marked "Abstain" and "broker non-votes" in respect of such Proposal
will not be counted as votes cast on the Proposal and will have no effect on
the result of the vote. IN THE ABSENCE OF SPECIFIC DIRECTION, COMMON SHARES
REPRESENTED BY A PROXY WILL BE VOTED "FOR" SUCH PROPOSAL.
-2-
<PAGE>
PROPOSAL NO. 1 - ELECTION OF TRUSTEES
The Board of Trustees has nominated the following individuals for
election as Trustees at the Meeting: Anthony A. Nichols, Sr., Gerard H.
Sweeney, Warren V. Musser, Walter D'Alessio and Charles P. Pizzi. Mr. Sweeney
was first elected as a Trustee on February 9, 1996. Messrs. Nichols, Musser,
D'Alessio and Pizzi were first elected as Trustees on August 22, 1996. The
Trustees have no reason to believe that any of the foregoing nominees will be
unable or unwilling to be a candidate for election at the time of the Meeting.
If any nominee is unable or unwilling to serve, the persons named in the proxy
will use their best judgment in selecting and voting for a substitute
candidate.
Each individual elected as a Trustee at the Meeting will serve until
the next annual meeting of shareholders and until his successor is duly
elected and qualified.
THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE
FOR THE ELECTION OF EACH OF THE NOMINEES AS TRUSTEES.
Trustees of the Company
The following table sets forth certain information with respect to
the Trustees of the Company, each of whom has been elected to serve for a
one-year term expiring at the 1998 annual meeting of shareholders and until
his successor is duly elected and qualified:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Anthony A. Nichols, Sr........................ 58 Chairman of the Board and Trustee
Gerard H. Sweeney............................. 41 President, Chief Executive Officer and Trustee
Warren V. Musser.............................. 71 Trustee
Walter D'Alessio.............................. 64 Trustee
Charles P. Pizzi.............................. 47 Trustee
</TABLE>
The following are biographical summaries of the Trustees of the
Company:
Anthony A. Nichols, Sr., Chairman of the Board and Trustee. Mr.
Nichols was elected Chairman of the Board on August 22, 1996. Mr. Nichols
founded The Nichols Company, a private real estate development company,
through a corporate joint venture with Safeguard Scientifics, Inc. ("SSI") and
was President and Chief Executive Officer from 1982 through August 22, 1996.
From 1968 to 1982, Mr. Nichols was Senior Vice President of Colonial Mortgage
Service Company (now GMAC Mortgage Corporation), a subsidiary of CoreStates
Bank, N.A. Mr. Nichols has been a member of the National Association of Real
Estate Investment Trusts ("NAREIT"), a member of the Board of Governors of the
Mortgage Banking Association and Chairman of the Income Loan Committee of the
regional Mortgage Bankers Association. Mr. Nichols also serves on the Board of
Directors of CenterCore Inc. and is a member of the National Association of
Industrial and Office Parks ("NAIOP"), the Philadelphia Board of Realtors and
the Urban Land Institute ("ULI").
Gerard H. Sweeney, President, Chief Executive Officer and Trustee.
Mr. Sweeney was elected a Trustee on February 9, 1996. Mr. Sweeney has served
as President and Chief Executive Officer of the Company since August 8, 1994
and as President since November 9, 1989. Prior to August 8, 1994, Mr. Sweeney
served as Vice President of
-3-
<PAGE>
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").
Warren V. Musser, Trustee. Mr. Musser was elected a Trustee on August
22, 1996. He has served as Chairman and Chief Executive Officer of SSI since
1953. Mr. Musser also serves as the Chairman of the Board of Directors of
Cambridge Technology Partners, Inc., and is a director of Coherent
Communications Systems Corporation, CompuCom Systems, Inc. and National Media
Corp. Mr. Musser also serves on a variety of civic, educational, and
charitable Boards of Directors, including the Franklin Institute and the Board
of Overseers of the Wharton School of the University of Pennsylvania. He also
serves as Vice President/Development, Cradle of Liberty Council, Boy Scouts of
America and as Vice Chairman of the Technology Council of the Philadelphia
metropolitan area.
Walter D'Alessio, Trustee. Mr. D'Alessio was elected a Trustee on
August 22, 1996. He has served as President and Chief Executive Officer of
Legg Mason Real Estate Services, Inc., a mortgage banking firm headquartered
in Philadelphia, Pennsylvania since 1982. Previously, Mr. D'Alessio served as
Executive Vice President of the Philadelphia Industrial Development
Corporation and Executive Director of the Philadelphia Redevelopment
Authority. He also serves on the Board of Directors of PECO Energy Company,
Pennsylvania Blue Shield and Independence Blue Cross, the Philadelphia Private
Industry Council and the Greater Philadelphia Chamber of Commerce.
Charles P. Pizzi, Trustee. Mr. Pizzi was elected a Trustee on August
22, 1996. Mr. Pizzi has served as President of the Greater Philadelphia
Chamber of Commerce since 1989. Mr. Pizzi is a director of Vestaur Securities,
Inc. and also serves on a variety of civic, educational and charitable Boards
of Directors, including the American Chamber of Commerce Executives, Boy
Scouts of America (Philadelphia Council), Drexel University, Greater
Philadelphia Chamber of Commerce, Independence Blue Cross, Pennsylvania
Academy of the Fine Arts, Philadelphia Convention & Visitors Bureau, Temple
University School of Business Management, United Way of Southeastern
Pennsylvania, University of Pennsylvania Graduate School of Education Board of
Overseers and the Urban League of Philadelphia.
Messrs. Nichols, Musser and D'Alessio were initially elected to the
Board of Trustees as nominees of Safeguard Scientifics, Inc. ("SSI") and The
Nichols Company ("TNC") in connection with the Company's acquisition of
properties from SSI and TNC in August 1996, and Mr. Pizzi was initially
elected to the Board of Trustees as the joint nominee of SSI, TNC and the
Company in connection with such transaction.
Committees of the Board of Trustees
Audit Committee. The audit committee of the Board of Trustees (the
"Audit Committee") currently consists of Messrs. D'Alessio and Pizzi, neither
of whom is an employee of the Company. The Audit Committee makes
recommendations concerning the engagement of independent public accountants,
reviews with the independent public accountants the plans and results of the
audit engagement, approves professional services provided by the independent
public accountants, reviews the independence of the independent public
accountants, considers the range of audit and non-audit fees and reviews the
adequacy of the Company's internal accounting controls.
Compensation Committee. The compensation committee of the Board of
Trustees (the "Compensation Committee") currently consists of Messrs.
D'Alessio and Pizzi. The Compensation Committee is authorized to determine
compensation for the Company's executive officers, although formal action on
compensation matters during 1997 was taken by the full Board (with interested
members of the Board abstaining).
-4-
<PAGE>
Executive Committee. The executive committee of the Board of Trustees
(the "Executive Committee") currently consists of Messrs. Nichols, the
Chairman of the Executive Committee, Mr. Musser and Mr. Sweeney. The Executive
Committee has been delegated all powers of the Board of Trustees except the
power to: (i) declare dividends on shares of beneficial interest; (ii) issue
shares of beneficial interest (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.
Meetings of Trustees
The Trustees held five meetings in 1997. Each incumbent Trustee
(other than Mr. Musser) attended at least 75% of the meetings of the Board of
Trustees and meetings held by all committees on which such Trustee served. Mr.
Musser attended three of the five meetings of the Board of Trustees in 1997.
One meeting of the Audit Committee was held in 1997 to discuss the 1997 audit
with Arthur Andersen LLP, the Company's independent public accountants. Two
meetings of the Compensation Committee were held in 1997 to discuss
compensation of the Company's executive officers.
Compensation of Trustees
During 1997, the Company paid its Trustees who are not officers of
the Company fees for their services as Trustees. These non-employee Trustees
received annual compensation of $10,000 (of which one-half was paid in Common
Shares and one-half was paid in cash) and a fee of $1,000 for attendance at
each meeting of the Board of Trustees and $500 for participation in each
meeting of a committee of the Board of Trustees. Trustees who are employees of
the Company receive no separate compensation for services as a trustee or
committee member. The annual compensation fee paid to non-employee Trustees
has been increased to $20,000 for 1998.
Company Officers and Significant Employees
The following are biographical summaries of the officers and
significant employees of the Company who are not Trustees of the Company:
Mark S. Kripke, Chief Financial Officer. Mr. Kripke became Chief
Financial Officer of the Company on April 7, 1997. During the preceding
thirteen years, Mr. Kripke was Chief Financial Officer for privately held real
estate investment companies, Stoltz Management (and its predecessor, Cynwyd
Investments) from November 1992 to April 1997 and St. John Group from January
1984 to October 1992. Mr. Kripke is a certified public accountant and had
previously served as a tax manager with Price Waterhouse. Mr. Kripke is a
member of NAREIT, the AICPA and the PICPA.
Anthony S. Rimikis, Senior Vice President--Development and
Construction. Mr. Rimikis became an executive of the Company on October 13,
1997. Mr. Rimikis previously 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. Mr. Rimikis is a certified
Commercial Investment Member of the Realtors National Marketing Institute.
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
-5-
<PAGE>
the Jefferson Bank Advisory Council and is a member of the Board of Directors
of Businesses Committed to Burlington County.
Anthony A. Nichols, Jr., Vice President--Operations. Mr. Nichols
became an officer of the Company on August 22, 1996. Previously Mr. Nichols
was employed at TNC, which he joined in 1989 as a marketing representative. In
1992 Mr. Nichols became an Assistant Vice President--Property Management of
TNC and in 1995 he became Vice President--Marketing. Mr. Nichols is a member
of the Board of Directors for the Eastern Pennsylvania Region of the NAIOP.
Mr. Nichols is the son of Anthony A. Nichols, Sr., the Company's Chairman of
the Board.
H. Jeffrey DeVuono, Vice President--Operations. Mr. DeVuono became an
officer of the Company on January 15, 1997. From January 1993 until that time
he was employed in several capacities by LCOR, Incorporated, a real estate
development firm.
Brad A. Molotsky, General Counsel and Secretary. Mr. Molotsky became
General Counsel of the Company on October 27, 1997 and Secretary of the
Company on November 18, 1997. Prior to joining the Company he was an associate
at Pepper Hamilton LLP, Philadelphia, Pennsylvania where he practiced law
since September 1989. Mr. Molotsky is a member of NAIOP, NAREIT, the American
Society of Corporate Secretaries, the American Bar Association, the New Jersey
Bar Association and the Pennsylvania Bar Association. He also serves on the
Board of Directors of Philadelphia Volunteer Lawyers for the Arts, Triple
Threat Productions, Inc. and Businesses Committed to Burlington County.
Barbara L. Yamarick, Director of Tenant Services and Property
Management. Ms. Yamarick joined the Company on October 20, 1997. Prior to
joining the Company she was a Regional Vice President of Premisys Real Estate
Services, Inc., a subsidiary of Prudential Insurance Company engaged in the
management and leasing of real estate, which she joined in 1991.
David Mackey, Regional Director--Operations and New Markets. Mr.
Mackey joined the Company on October 1, 1997. Prior to joining the Company he
was a Vice President of Premisys Real Estate Services, Inc., a subsidiary of
Prudential Insurance Company engaged in the management and leasing of real
estate, which he joined in November 1993. Prior to joining Premisys, Mr.
Mackey was a partner with The Linpro Company, a real estate development firm,
which he joined in 1986.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's officers, Trustees and persons who own more than 10% of
the Shares to file reports of ownership and changes in ownership with the
Securities and Exchange Commission. Officers, Trustees and greater than 10%
shareholders are required by regulation to furnish the Company with copies of
all Section 16(a) forms they file. Based solely on review of the copies of
such forms furnished to the Company, or written representations that no Annual
Statements of Beneficial Ownership of Securities on Form 5 were required to be
filed, the Company believes that during the fiscal year ended December 31,
1997, all Section 16(a) filing requirements applicable to its officers,
Trustees and greater than 10% shareholders were complied with except for one
filing by Mr. Nichols, Sr. that was related to the transfer by an affiliate of
Mr. Nichols of 28,994 units of limited partnership interest (which were
redeemable for an equal number of Common Shares) to the Company and that was
filed approximately one month late.
-6-
<PAGE>
Cash and Non-Cash Compensation Paid to Executive Officers
The following table sets forth certain information concerning the
compensation paid for the years ended December 31, 1997, 1996 and 1995: (i) to
the Company's President and Chief Executive Officer and (ii) to each of the
other most highly compensated executive officers (the "Named Executive
Officers") of the Company having a combined salary and bonus during the year
ended December 31, 1997 exceeding $100,000.
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Compensation
------------
Annual Compensation Securities
----------------------------------------- Underlying
Options/SARs
------------
Name and Principal Position Year Salary Bonus (#)(4)
- --------------------------- ---- ------ ----- ------
<S> <C> <C> <C>
Anthony A. Nichols, Sr. 1997 $200,000 $250,000 ---
Chairman of the Board(1)......... 1996 $ 49,000 $ 30,000 40,000(5)
1995 --- --- ---
Gerard H. Sweeney, President 1997 $200,000 $250,000 ---
and Chief Executive Officer...... 1996 $134,000 $ 30,000 100,000(5)
1995 $130,000 --- ---
John M. Adderly, Jr. 1997 $102,885 $ 35,000 ---
Senior Vice President - 1996 $ 66,100 $ 15,000 10,000(5)
Operations(2).................... 1995 $ 52,000 --- ---
Mark S. Kripke 1997 $ 98,654 $ 40,000 ---
Chief Financial Officer(3)....... 1996 --- --- ---
1995 --- --- ---
</TABLE>
- ---------------
(1) Mr. Nichols, Sr. became an employee of the Company on August 22,
1996. See "Employment Agreements" below.
(2) Mr. Adderly became an employee of the Company on January 30, 1995.
(3) Mr. Kripke became an employee of the Company on April 7, 1997.
(4) During the years ended December 31, 1995, 1996 and 1997, the Company
did not award "restricted shares" to any of its employees.
Accordingly, the Company is not presenting in the Summary
Compensation Table the column captioned "Restricted Stock Award(s)."
At a meeting held on December 17, 1997, the Board of Trustees of the
Company awarded certain employees of the Company an aggregate of
443,557 "restricted" Common Shares. These awards were effective as of
January 2, 1998 and the number of shares so awarded was based on the
closing price of the Common Shares on January 2, 1998 ($25.25). See
"-- Restricted Share Awards."
-7-
<PAGE>
(5) The options awarded in 1996 are evidenced by certificates denominated
as "warrants" and were vested and exercisable on the date of grant.
Restricted Share Awards
On January 2, 1998, six of the Company's executives were awarded an
aggregate of 443,557 Common Shares, which are subject to certain restrictions.
The number of shares awarded to each of the executives was equal to the dollar
value specified below divided by the closing price of the Common Shares on
January 2, 1998 ($25.25).
Name Number of Shares Dollar Value
---- ---------------- ------------
Gerard H. Sweeney 237,624 $6,000,000
Anthony A. Nichols, Sr. 158, 416 $4,000,000
John M. Adderly, Jr. 21,109 $533,000
Anthony A. Nichols, Jr. 15,842 $400,000
Henry J. DeVuono 5,283 $133,400
Mark S. Kripke 5,283 $133,400
The "restricted" Common Shares awarded to Messrs. Nichols, Sr. and
Sweeney vest over an eight-year period based on continued employment with the
Company, subject to acceleration of vesting upon a change in control of the
Company, death, disability or non-renewal of their employment agreements. The
"restricted" Common Shares awarded to Messrs. Adderly, Nichols, Jr., DeVuono
and Kripke vest over a five-year period based on continued employment with the
Company, subject to acceleration of vesting upon certain conditions, including
a change in control of the Company, death and disability. During the period
the "restricted" Common Shares have not vested, the applicable executive is
entitled to vote the shares and to receive dividends and distributions paid on
Common Shares. Vesting of the "restricted" Common Shares is not subject to
performance-based conditions.
Section 162(m) of the Code provides that a publicly-held company may
not deduct compensation paid to any one of certain specified officers in
excess of $1 million per year unless such compensation qualifies as
"performance-based" compensation within the meaning of that Section. The
"restricted" Common Shares granted by the Company do not qualify as
performance-based compensation under Section 162(m) of the Code. Therefore, if
the aggregate taxable income recognized in any year by the executive officers
of the Company that received the "restricted" Common Shares exceeds $1
million, the excess will not be deductible by the Company.
Stock Options Granted to Executive Officers During Last Fiscal Year
During the year ended December 31, 1997, the Company did not award
options or share appreciation rights to any of its employees. Accordingly, the
Company is not presenting the "Options/SAR Grants in Last Fiscal Year" table
for 1997. At a meeting held on December 17, 1997, the Board of Trustees of the
Company awarded certain employees of the Company options exercisable for an
aggregate of 2,043,704 Common Shares. These option awards were effective as of
January 2, 1998 and the exercise prices of the options were based on the
closing price of the Common Shares on January 2, 1998. Options to purchase
1,737,261 of such Common Shares were granted subject to shareholder approval
and, if not approved by shareholders, convert into share appreciation rights
exercisable for a cash payment from the Company based on the excess, if any,
of the market price of a Common Share on the date of exercise over the
exercise price contained in the option/share appreciation right. Summarized
below is information concerning the January 2 options awards received by the
President and Chief Executive Officer and each of the other Named Executive
Officers of the Company for the year ended December 31, 1997.
-8-
<PAGE>
<TABLE>
<CAPTION>
Number of % of Total
Common Options/
Shares SARs Grant
Underlying Granted to Date
Option Employees Exercise Present
Granted in Price Expiration Value
Name (#)(1) Fiscal Year ($/sh) Date ($)(2)
---- -------- ------------ -------- ------ ------
<S> <C> <C> <C> <C> <C>
Anthony A. Nichols, Chairman of the 197,923 $25.25 1/02/2008 $526,673
Board.................................... 231,597 $27.78 1/02/2008 $495,618
249,438 33.2% $29.04 1/02/2008 $483,411
Gerard H. Sweeney, 296,736 $25.25 1/02/2008 $789,614
President and Chief 347,222 $27.78 1/02/2008 $743,055
Executive Officer........................ 374,531 49.8% $29.04 1/02/2008 $725,841
John M. Adderly, Jr. 26,409 $25.25 1/02/2008 $70,274
Senior Vice President - Operations....... 30,902 $27.78 1/02/2008 $66,130
33,333 4.4% $29.04 1/02/2008 $64,599
Mark S. Kripke 6,587 $25.25 1/02/2008 $17,528
Chief Financial Officer.................. 7,708 $27.78 1/02/2008 $16,495
8,314 1.1% $29.04 1/02/2008 $16,113
</TABLE>
- -------------------------------
(1) Options vest ratably over five years, subject to acceleration of
vesting under certain circumstances, such as upon a change in control
of the Company.
(2) The grant date present values for the options are determined using
the Black-Scholes option pricing model. The assumptions used in
calculating the Black-Scholes present values for the option grants
were as follows: (a) a risk-free interest rate of 5.81% (based on the
yield on a U.S. Treasury security with a maturity of 10 years (the
life of the option); (b) a dividend yield of 6.785% (the Company's
current dividend yield on Common Shares); (c) volatility of the
Common Shares of 18.7% (based on the daily Common Share price for one
year prior to the option grant); and (d) an option term of ten years.
The Black-Scholes option pricing model was developed for use in
estimating the fair value of traded options that have no vesting
restrictions and are fully transferable. The amount realized from an
employee stock option ultimately depends on the market value of the
Common Shares on the date of exercise.
With respect to the options granted to John M. Adderly, Jr. and Mark
S. Kripke, 72,933 and 18,191, respectively, of such options will qualify as
performance-based compensation under Section 162(m) of the Code since the
shares subject to these options have previously been approved for awards by
the Company's shareholders. The balance of the options granted to Messrs.
Adderly, Jr. and Kripke will not qualify as performance-based compensation
under Section 162(m).
With respect to the options granted to Anthony A. Nichols, Sr. and
Gerard H. Sweeney, none of such options will qualify as performance-based
compensation under Section 162(m) of the Code, and the taxable income
recognized in any year with respect to these awards will count toward the $1.0
million limit on compensation deductible by the Company for compensation to
each of Messrs. Nichols, Sr. and Sweeney for such year.
-9-
<PAGE>
Stock Options Held by Executive Officers at December 31, 1997
The following table sets forth certain information regarding options
for the purchase of Common Shares that were held by: (a) the Company's
President and Chief Executive Officer and (b) each of the other Named
Executive Officers of the Company at December 31, 1997. No options for the
purchase of Common Shares were exercised by such persons during the fiscal
year ended December 31, 1997. The table does not reflect the January 2, 1998
award of options discussed above.
-10-
<PAGE>
Aggregated Option/SAR Exercises in Fiscal Year Ended
December 31, 1997 and 1997 Fiscal Year End Option/SAR Values
<TABLE>
<CAPTION>
Number of Securities
Underlying
Unexercised
Options/SAR
at FY-End Value of Unexercised In-
(#) the-Money Options at
Shares Acquired Value Exercisable/ FY-End($) Exercisable/
Name on Exercise(#) Realized($) Unexercisable(1) Unexercisable(1)
- ---- ---------------- ----------- ------------- -------------
<S> <C> <C> <C> <C>
Anthony A. Nichols, Sr.,
Chairman of the Board......... N/A N/A 40,000 $225,000
Gerard H. Sweeney,
President and Chief
Executive Officer............. N/A N/A 146,666 $1,175,190
John M. Adderly, Jr.
Senior Vice President -
Operations.................... N/A N/A 10,000 $56,250
Mark S. Kripke N/A N/A --- ---
Chief Financial Officer.......
</TABLE>
- ---------------
(1) All options are exercisable.
Employment Agreements
On January 2, 1998, each of Messrs. Nichols, Sr. and Sweeney entered
into a five-year employment agreement with the Company. These employment
agreements replaced the two-year employment agreements entered into by each of
them on August 22, 1996. The new employment agreements established annual base
salaries for each of Messrs. Nichols, Sr. and Sweeney of $250,000 and
$300,000, respectively, which compensation may be increased by the Board of
Trustees in its discretion. The employment agreements include a provision
entitling the applicable executive to a payment equal to three times the sum
of his annual salary and bonus: (i) upon termination of the executive's
employment without cause, (ii) upon resignation by the executive "for good
reason" or (iii) upon his death. Resignation by the executive within six
months following a reduction in the executive's salary, an adverse change in
his status or responsibilities, certain changes in the location of the
Company's headquarters or a change in control of the Company would each
constitute a resignation "for good reason."
Separation Agreement
On August 1, 1997, the Company entered into a separation agreement
(the "Separation Agreement") with Brian F. Belcher. Mr. Belcher became an
employee of the Company on August 22, 1996 and served the Company through his
termination date as Executive Vice President - Marketing and Development.
Under the Separation Agreement, Mr. Belcher is entitled to salary continuation
payments in the total amount of $125,000 payable over the period from August
1, 1997 to August 1, 1998. During the year ended December 31, 1997, Mr.
Belcher received total salary payments from the Company equal to $86,538 and
total salary continuation payments from the Company equal to $52,885. During
such year, Mr. Belcher was not paid a bonus and was not awarded any equity
securities of
-11-
<PAGE>
the Company or any options or rights to acquire any equity securities of the
Company. Mr. Belcher retains ownership of warrants awarded to him on August
22, 1996 exercisable for an aggregate of 40,000 Common Shares at a price per
share equal to $19.50. These warrants are currently exercisable and have a
term that expires on August 22, 2002.
401(k) Plan
The Company maintains a Section 401(k) and Profit Sharing Plan (the
"401(k) Plan") covering its eligible employees and other designated
affiliates.
The 401(k) Plan permits eligible employees of the adopting employers
(the "Participating Companies") to defer up to a designated percentage of
their annual compensation, subject to certain limitations imposed by the Code.
The employees' elective deferrals are immediately vested and non-forfeitable
upon contribution to the 401(k) Plan. Each Participating Company reserves the
right to make matching contributions or discretionary profit sharing
contributions in the future.
The 401(k) Plan is designed to qualify under Section 401 of the Code
so that contributions by employees or by the Participating Companies to the
401(k) Plan, and income earned on plan contributions, are not taxable to
employees until withdrawn from the 401(k) Plan, and so that contributions by
the Participating Companies, if any, will be deductible by them when made.
Compensation Committee Interlocks and Insider Participation
The Compensation Committee of the Board of Trustees is currently
comprised of Charles P. Pizzi and Walter D'Alessio. No executive officer of
the Company serves on the Compensation Committee.
Mr. D'Alessio is President of Legg Mason Real Estate Services, Inc.,
a mortgage banking firm and a subsidiary of Legg Mason, Inc. Legg Mason, Inc.
is the parent of Legg Mason Wood Walker, Incorporated, which was an
underwriter in five of the seven public offerings of Common Shares consummated
by the Company between January 1, 1997 and the date of this Proxy Statement.
On December 17, 1997, the Company acquired an office property in
Valley Forge, Montgomery County, Pennsylvania (the "PECO Building") from PECO
Energy Company for a purchase price of $9.5 million. Mr. D'Alessio is a
director of PECO Energy Company. A committee of the Board of Trustees, of
which Mr. D'Alessio was not a participant, made the decision to purchase the
PECO Building and negotiated the terms of the transaction.
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information as of March 15,
1998 (except as indicated in notes 3 and 4) regarding the beneficial ownership
of Common Shares (and Common Shares for which Units may be exchanged) by each
Trustee, by each executive officer, by all Trustees and executive officers as
a group, and by each person known to the Company to be the beneficial owner of
5% or more of the outstanding Common Shares. Except as indicted below, to the
Company's knowledge, all of such Common Shares are owned directly, and the
indicated person has sole voting and investment power.
-12-
<PAGE>
<TABLE>
<CAPTION>
Name and Business Number of
Address of Beneficial Owner(1) Common Percentage of
- ------------------------------ Shares Common Shares(2)
------ ----------------
<S> <C> <C>
Cohen & Steers Capital Management, Inc.(3)................................ 2,860,100 7.64%
Morgan Stanley, Dean Witter, Discover & Co.(4)............................ 2,252,195 6.02%
Anthony A. Nichols, Sr.(5)................................................ 390,984 1.04%
Gerard H. Sweeney(6)...................................................... 384,607 1.02%
John M. Adderly, Jr.(7)................................................... 32,312 *
Mark S. Kripke............................................................ 5,283 *
Warren V. Musser(8)....................................................... 5,129 *
Walter D'Alessio(9)....................................................... 556 *
Charles P. Pizzi(10)...................................................... 256 *
All Trustees and Executive Officers as a Group (8 persons)................ 819,127 2.17%
</TABLE>
- ------------------------
*Less than one percent.
(1) Unless indicated otherwise, the business address of each person listed is
16 Campus Boulevard, Newtown Square, Pennsylvania 19073.
(2) Assumes that all Units eligible for redemption held by each named person
or entity are redeemed for Common Shares. The total number of Common Shares
outstanding used in calculating the percentage of Common Shares assumes that
none of the Units eligible for redemption held by other named persons or
entities are redeemed for Common Shares.
(3) Based on a Schedule 13G dated February 10, 1998, and filed for the year
ended December 31, 1997. Cohen & Steers Capital Management, Inc. maintains its
principal office at 757 Third Avenue, New York, New York 10017.
(4) Based on a Schedule 13G dated February 12, 1998, and filed for the year
ended December 31, 1997. Morgan Stanley, Dean Witter, Discovery & Co.
maintains its principal office at 1585 Broadway, New York, New York 10036. Of
this amount, 1,502,195 (or 67%) of the Common Shares are owned by investment
advisory clients of Morgan Stanley Asset Management Inc., a wholly owned
subsidiary of Morgan Stanley, Dean Witter, Discover & Co. Morgan Stanley, Dean
Witter, Discover & Co. and Morgan Stanley Asset Management Inc.
disclaim beneficial ownership of all of the Common Shares.
(5) Includes (a) 180,112 Common Shares, (b) 56,773 Common Shares issuable upon
exercise of warrants that are currently exercisable or that become exercisable
within 60 days of March 15, 1998, (c) 110,281 Common Shares held by Newtown I,
L.L.C. and (d) 43,818 Common Shares issuable upon conversion of Units
beneficially owned by TNC or issuable to TNC on or before September 1, 1999.
Mr. Nichols shares investment and voting power over the Common Shares
beneficially owned by Newtown I, L.L.C. and TNC. The foregoing includes 21,696
Common Shares and warrants to purchase an additional 16,773 Common Shares
which Mr. Nichols owns jointly with his wife.
(6) Includes (a) 237,941 Common Shares and (b) 146,666 Common Shares issuable
upon the exercise of options and warrants that are currently exercisable or
that become exercisable within 60 days of March 15, 1998.
(7) Includes (a) 22,312 Common Shares and (b) 10,000 Common Shares issuable
upon the exercise of warrants that are currently exercisable or that become
exercisable within 60 days of March 15, 1998.
-13-
<PAGE>
(8) The business address of Mr. Musser is 800 The Safeguard Building, 435
Devon Park Drive, Wayne, Pennsylvania 19087.
(9) The business address of Mr. D'Alessio is 1735 Market Street, Philadelphia,
Pennsylvania 19103.
(10) The business address of Mr. Pizzi is 200 South Broad Street,
Philadelphia, Pennsylvania 19103.
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 Units for
cash, at a per Unit price based on the average closing price of the Common
Shares for the five consecutive trading days prior to such determination (or,
at the option of the Company, Common Shares on a one Common Share per Unit
basis, subject to customary antidilution adjustments). In the Partnership
Agreement, SSI and TNC made customary representations and warranties, on a
several basis, in favor of the Company. The Company also made customary
representations and warranties in favor of SSI and TNC. These representations
survive until August 22, 1998.
Option Properties. At the closing of the SSI/TNC Transaction, the
Operating Partnership acquired an option from an affiliate of TNC entitling it
to acquire, in the Operating Partnership's discretion, four properties
containing an aggregate of approximately 159,000 net rentable square feet
(collectively, the "Option Properties") at any time during the two-year period
ending August 22, 1998 (subject to two extensions of one year each). The
parties have agreed that the purchase price payable by the Operating
Partnership upon exercise of its option will consist of $10.00 in excess of
the mortgage debt encumbering the Option Properties at the time of exercise
(which as of December 31, 1997 aggregated $21.4 million, including accrued
interest). Exercise of the option is subject to a right of first refusal in
favor of, and the consent of, the holder of the mortgage encumbering the
Option Properties. There can be no assurance that the Company will exercise
its option or that the holder of such mortgage will consent to the exercise of
the option.
Lease with SSI Affiliate. Approximately 21,580 square feet of space
is leased by the Company to an affiliate of SSI at an average rental rate of
$9.66 per square foot under a lease that expires in April 1999. The Company
believes that this is the prevailing market rate for comparable space.
Environmental Indemnity. SSI has agreed to indemnify the Operating
Partnership against the cost of remediation that may be required to be
undertaken on account of certain environmental conditions at one of the
Properties acquired in the SSI/TNC Transaction subject to an aggregate maximum
liability of approximately $2.0 million. The term of the SSI indemnity
agreement expires on August 22, 2001.
Repayment of Certain Obligations. On August 21, 1997, the Company
paid an aggregate of approximately $594,384 (the "Payment Amount") to satisfy
obligations of TNC (a company controlled by Mr. Nichols, Sr.)
-14-
<PAGE>
on account of brokerage commissions and tenant improvements. In exchange, TNC
transferred to the Company 28,994 Units. The number of Units transferred to
the Company equaled the Payment Amount divided by the then market value of the
number of Common Shares into which such transferred Units were then
redeemable.
Involvement of Legg Mason. Walter D'Alessio, a member of the
Company's Board of Trustees and Compensation Committee, is President of Legg
Mason Real Estate Services, Inc., a mortgage banking firm and a subsidiary of
Legg Mason, Inc. Legg Mason, Inc. is the parent of Legg Mason Wood Walker,
Incorporated, which was an underwriter in five of the seven public offerings
of Common Shares consummated by the Company between January 1, 1997 and the
date of this Proxy Statement.
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.
Share Performance Graph
The Securities and Exchange Commission requires the Company
to present a chart comparing the cumulative total shareholder return on the
Common Shares with the cumulative total shareholder return of (i) a broad
equity index and (ii) a published industry or peer group index. The following
chart compares the cumulative total shareholder return for the Common Shares
with the cumulative shareholder return of companies on (i) the S&P Composite
Index as provided by the National Association of Real Estate Investment Trusts
and (ii) the NAREIT ALL-REIT Total Return Index as provided by the National
Association of Real Estate Investment Trusts for the period beginning December
31, 1992 and ending December 31, 1997.
-15-
<PAGE>
COMPARISON OF CUMULATIVE SHAREHOLDERS' RETURN
The Company, S&P 500 Index and NAREIT All-REIT Index
[GRAPHIC]
<TABLE>
<CAPTION>
Dec. 92 Dec. 93 Dec. 94 Dec. 95 Dec. 96 Dec. 97
<S> <C> <C> <C> <C> <C> <C>
The Company ......... 100.00 500.09 1304.43 1444.14 2794.46 3844.44
S&P 500 Index ....... 100.00 110.08 111.53 153.45 188.68 251.63
NAREIT All-REIT Index 100.00 118.55 119.51 141.39 191.94 228.14
</TABLE>
-16-
<PAGE>
Report of Non-Employee Trustees on Executive Compensation
The Compensation Committee's compensation policies with respect to
the Company's executive officers are based on the principles that compensation
should, to a significant extent, be reflective of the financial performance of
the Company, and that a significant portion of executive officers'
compensation should provide long-term incentives. The Compensation Committee
seeks to set executive compensation at levels that are sufficiently
competitive so that the Company may attract, retain and motivate high quality
executives to contribute to the Company's financial success. In establishing
compensation for executive officers, the Committee considers industry data
generally, the recommendations of third-party consultants and the Company's
financial performance and industry position. The Committee exercises judgment
and discretion in the information it analyzes and considers.
On January 29, 1997, the Compensation Committee authorized an
increased in the base salaries of each of Messrs. Nichols, Sr. and Sweeney to
$200,000, effective January 1, 1997, and determined that each would be
entitled to receive a minimum bonus for 1997 of $50,000, with the exact
amount, and the form of the pay-out, to be determined in light of the
Company's 1997 performance, industry standards and the objective of providing
long-term incentives.
At a meeting held on December 17, 1997, the Board met to discuss
compensation of the President and Chief Executive Officer and the Chairman of
the Board. Prior to this meeting, the Board had previously reviewed a report
prepared by an independent consulting firm evaluating the Company's executive
compensation. At the meeting, the Board (with the employee-Trustees, Messrs.
Nichols, Sr. and Sweeney, abstaining) approved the following: (i) an increase
in the base salaries of the President and Chief Executive Officer and the
Chairman of the Board to $300,000 and $250,000, respectively; (ii) a year-end
cash bonus to each of the President and Chief Executive Officer and Chairman
of the Board of $250,000; (iii) five-year employment agreements with the
President and Chief Executive Officer and the Chairman of the Board; (iv) the
award on January 2, 1998 to members of senior management of "restricted"
Common Shares having an aggregate value as of January 2 (computed without
regard to the eight and five-year vesting restrictions applicable to such
Common Shares) of $11.2 million ($6.0 million and $4.0 million of which were
awarded to the President and Chief Executive Officer and the Chairman of the
Board, respectively); and (v) the award of options exercisable at varying
exercise prices (none of which were below the market price of the Common
Shares on the date of award) for an aggregate of 2,043,704 Common Shares (of
which 1,018,489 and 678,958 were awarded to the President and Chief Executive
Officer and the Chairman of the Board, respectively).
In taking the foregoing action, the Board considered a number of
factors, including: (i) the growth in the Company's portfolio of properties
(37 at January 1, 1997 compared to 116 at December 17, 1997; (ii) the growth
in the Company's market capitalization (approximately $212.5 million at
January 1, 1997 compared to approximately $759.2 million at December 17, 1997);
(iii) the growth in the Company's funds from operations per share (which was
estimated to have increased over 20% during 1997); (iv) compensation levels of
executives of other office and industrial real estate investment trusts and
the Board's conclusion that the compensation of the President and Chief
Executive Officer and the Chairman of the Board had been at levels
significantly below the compensation levels of their peers; (v) the
desirability of providing a significant portion of the compensation in a form
that would link the economic returns of the executives to the returns of the
shareholders; and (vi) the impact of the compensation arrangements on the
Company's earnings and funds from operations. The Board did not separately
rank the importance of each of these factors and did not follow a formula in
arriving at the compensation arrangements that were approved.
The Chairman of the Board and President and Chief Executive Officer
establish the base salaries for the other executive officers of the Company.
In awarding 1997 bonuses and incentive compensation to these other executive
officers, the Board considered the same factors that it considered in awarding
bonuses and incentive
-17-
<PAGE>
compensation to the Chairman of the Board and President and Chief Executive
Officer, and also considered the recommendations of the Chairman of the Board
and the President and Chief Executive Officer.
This report is made by the undersigned Trustees, none of whom is an
officer or employee of the Company. In May 1997, one of the then three
members of the Compensation Committee (Joseph L. Carboni) died. Because the
Compensation Committee currently consists of only two members (Messrs. Pizzi
and D'Alessio), the action at the December 17, 1997 meeting was taken by all
members of the Board (with the employee-Trustees abstaining), and this Report
constitutes the Report of all such members.
Charles P. Pizzi
Walter D'Alessio
Warren V. Musser
-18-
<PAGE>
PROPOSAL NO. 2 - PROPOSAL TO AMEND THE DECLARATION OF TRUST
In connection with its application to list its Common Shares on the
NYSE, the Company agreed to submit to its shareholders an amendment to its
Declaration of Trust confirming that the authority conferred on the Board of
Trustees to take such action as it deems necessary to preserve the Company's
REIT status will not preclude settlement of any transaction in the Company's
securities entered into through the facilities of the NYSE. Accordingly, the
Board of Trustees has unanimously adopted a resolution declaring that it is
advisable and in the best interests of the Company to amend and restate
Section 6.6(g) and Section 6.6(l) of the Declaration of Trust to read as
follows:
6.6(g) Remedies Not Limited. Subject to Section 6.6(l)
hereof, nothing contained in this Section 6.6 shall limit the
authority of the Board of Trustees to take such other action as it
deems necessary or advisable to protect the Trust and the interests
of its Shareholders by preserving the Trust's REIT status.
6.6(l) New York Stock Exchange Transactions. Nothing in this
Section 6.6 (including without limitation the authority of the Board
contained in Section 6.6(g) hereof) shall preclude the settlement of
any transaction entered into through the facilities of the New York
Stock Exchange, any successor exchange or quotation system thereto,
or any other exchange or quotation system over which the Shares may
be traded from time to time. The fact that the settlement of any
transaction is so permitted shall not negate the effect of any other
provision of this Article 6 and any transferee in such a transaction
shall be subject to all of the provisions and limitations set forth
in this Article 6.
THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS A VOTE FOR THE PROPOSAL
TO AMEND SECTION 6.6(g) AND SECTION 6.6(l) OF THE COMPANY'S DECLARATION OF
TRUST. If this proposal is approved by the shareholders, it will become
effective upon the acceptance for record of Articles of Amendment by the State
Department of Assessments and Taxation of Maryland, which will occur as soon
as soon as reasonably practicable after approval.
-19-
<PAGE>
PROPOSAL NO. 3 - ADOPTION OF AMENDED AND RESTATED 1997
LONG-TERM INCENTIVE PLAN
At the Annual Meeting of Shareholders held on May 12, 1997, the
shareholders, upon the recommendation of the Board of Trustees, approved
adoption of the 1997 Long-Term Incentive Plan (the "Original Incentive Plan").
At the Meeting, the shareholders will be asked to approve the amended and
restated 1997 Long-Term Incentive Plan (the "Restated Incentive Plan"), which
amends and restates the Original Incentive Plan. The term "Incentive Plan," as
used below, means the Original Incentive Plan or the Restated Incentive Plan,
as the context indicates.
On March 17, 1998, the Board of Trustees adopted the Restated
Incentive Plan, subject to shareholder approval, increasing the number of
Shares available for Awards (as defined below) under the Incentive Plan from
750,000 to 5,000,000, and the maximum number of Common Shares for which Awards
may be made to any individual over the term of the Incentive Plan from 250,000
to 3,000,000 Common Shares. The Restated Incentive Plan also permits the
Company to make awards thereunder to employees of subsidiaries of the Company,
including any entity fifty percent (50%) or more of the economic interests of
which are owned by the Company, and confirms the authority of the Board to
issue Common Shares under the Incentive Plan in payment of all or a portion of
the annual Trustee fees. The terms of the Restated Incentive Plan and
information regarding Awards granted thereunder is summarized below, but this
summary is subject to and qualified in its entirety by the full text of the
Restated Incentive Plan, which is attached as Appendix A to this Proxy
Statement.
On January 2, 1998, the Board awarded options to 18 employees that
are exercisable (subject to varying vesting periods) for an aggregate
2,001,204 Common Shares, and awarded six employees 443,557 Restricted Shares,
under the Original Incentive Plan. Because the combined number of Restricted
Shares and Common Shares issuable upon exercise of the options awarded on
January 2 exceeded the 750,000 share limit in the Original Incentive Plan,
options ("Excess Options") to purchase 1,737,261 Common Shares were awarded
subject to shareholder approval of an increase in the Shares available under
the Incentive Plan. If shareholders do not approve the amendments to the
Original Incentive Plan contained in this Proposal 3, then the Excess Options,
by their terms, convert into share appreciation rights exercisable, on a per
share basis, for a cash payment from the Company at the time of exercise equal
to the excess, if any, of the market price of a Common Share at the date of
exercise over the exercise price in the applicable share appreciation right.
See "Proposal No. 1 - Election of Trustees - Stock Options Granted to
Executive Officers During Last Fiscal Year."
If the market price of a Common Share on the date of the Meeting
exceeds $25.25 (the lowest exercise price contained in the Excess Options) the
Company will recognize a charge to earnings whether or not shareholders
approve the Restated Incentive Plan. The amount of the charge, if any, will be
equal to the amount by which the closing sale price of a Common Share on the
Meeting date exceeds the exercise prices contained in the Excess Options,
computed in the aggregate. The amount of the charge, if any, would be
amortized over the period to which the compensation represented by the Excess
Options relates. This period is generally the vesting period. The closing sale
price of a Common Share on March 18, 1998 was $23-9/16. The Company would not
have recognized a charge to income on account of the Excess Options had the
Meeting been held on such date.
The Company registered the 750,000 Common Shares reserved for
issuance under the Original Incentive Plan under the Securities Act of 1933,
as amended, on June 3, 1997. If shareholders approve the Restated Incentive
Plan, the Company intends to register the share increase under the Securities
Act of 1933, as amended, as soon as practicable.
The Incentive Plan is intended to provide the Company flexibility to
adapt the compensation of key employees and Trustees in a changing business
environment. The Incentive Plan permits the granting of any or all of the
following types of awards ("Awards"): (i) Options, including Non-Qualified and
Incentive Stock Options; (ii)
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<PAGE>
Share Appreciation Rights; (iii) Restricted Shares; (iv) Long-Term Performance
Awards; (v) Performance Shares; and (vi) Performance Units. The Board of
Trustees of the Company believes that increasing the number of Common Shares
available for Awards under the Incentive Plan is advisable because it believes
that Awards are an effective method of attracting and retaining valuable
employees and Trustees and also serves to strengthen the identity of interest
between them and the Company.
Trustees, officers and other employees of the Company or its
subsidiaries are eligible to receive Awards under the Incentive Plan. Trustees
who are not employees of the Company or a subsidiary are eligible to be
granted Awards under the Incentive Plan other than Incentive Stock Options.
The Incentive Plan is administered by the Board or by a committee of
the Board (the "Committee"). The Committee selects those persons eligible to
receive Awards from time to time and determines the type, terms and conditions
of Awards. The Committee has the authority to interpret the provisions of the
Incentive Plan.
The Board may generally amend, alter or discontinue the Incentive
Plan at any time, but no amendment, alteration or discontinuation will be made
which would impair the rights of a participant with respect to an Award which
has been made under the Incentive Plan without such participant's consent.
The maximum number of Shares of the Company that may be made the
subject of Awards under the Incentive Plan is 750,000 (5,000,000 if this
Proposal 3 is approved). In the event of any merger, reorganization,
consolidation, recapitalization, share dividend or other change in the
Company's structure affecting the Shares, the Committee will adjust
accordingly the number, type and issuer of Shares reserved for issuance under
the Incentive Plan, the number and option price of Shares subject to
outstanding Options granted under the Incentive Plan and the number and price
of Shares subject to other Awards made under the Incentive Plan. In addition,
the Shares related to the unexercised or undistributed portion of any
terminated, expired or forfeited Award will also be made available for
distribution in connection with future Awards. No individual may receive, over
the term of the Incentive Plan, more than an aggregate of 250,000 Shares under
the Incentive Plan (3,000,000 if this Proposal 3 is approved).
Options. The Incentive Plan permits the Committee to grant to any
participant Non-Qualified Stock Options and, to participants who are also
employees, Incentive Stock Options (collectively, "Options"). The per Share
exercise price of an Option will be determined by the Committee; provided,
however, that the exercise price per Share purchasable under an Incentive
Stock Option will not be less than 100% of the fair market value of the Shares
at the time of grant (and not less than 110% in the case of an Incentive Stock
Option granted to a participant who, at the time the Option is granted, owns
more than 10% of the voting power of all classes of Shares of the Company (a
"10% Owner")). The provisions of Option Awards need not be the same with
respect to each participant.
Subject to the limitations of the Incentive Plan, each Option will be
exercisable at such time or times and in the installments determined by the
Committee. No Option will be exercisable more than ten years after the date it
is granted. An Incentive Stock Option granted to a 10% Owner will not have a
term of more than five years. Incentive Stock Options are subject to
additional restrictions imposed by the Code. Options are not transferable by
the participant other than by will or by the laws of descent and distribution
or pursuant to a qualified domestic relations order, and all Options will be
exercisable, during the participant's lifetime, only by the participant. In
the discretion of the Committee, the purchase price for Shares acquired
pursuant to the exercise of an Option may be paid in cash or Shares. In the
event of a Change of Control (defined below), the Committee may, in its
discretion, cause all outstanding Options to immediately become vested. In
addition, the Committee may require that all or part of the Shares to be
issued pursuant to exercise of an Option take the form of Restricted Shares.
The Committee may also agree to cooperate in a "cashless exercise" of an
Option, which will be effected by the participant delivering to a
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securities broker instructions to sell a sufficient number of Shares to cover
the costs and expenses associated therewith.
If the participant has held the Shares acquired upon exercise of an
Incentive Stock Option for at least two years after the date of grant and for
at least one year after the date of exercise, upon disposition of the Shares
by the participant, the difference, if any, between the sales price of the
Shares and the exercise price of the Option will be treated as long-term
capital gain or loss. If the participant does not satisfy these holding period
requirements, a "disqualifying disposition" occurs and the participant will
recognize ordinary income in the year of the disposition of the Shares in an
amount equal to the excess of the fair market value of the Shares at the time
the Option was exercised over the exercise price of the Option. The balance of
gain realized, if any, will be long-term or short-term capital gain, depending
upon whether or not the Shares were sold more than one year after the Option
was exercised. If the participant sells the Shares prior to the satisfaction
of the holding period requirements but at a price below the fair market value
of the Shares at the time the Option was exercised, the amount of ordinary
income will be limited to the amount realized on the sale in excess of the
exercise price of the Option. The Company and its subsidiaries will generally
be allowed a deduction to the extent the participant recognizes ordinary
income.
In general, a participant to whom a Non-Qualified Stock Option is
granted will recognize no income when the Option is granted. Upon exercise of
a Non-Qualified Stock Option, the participant will recognize ordinary income
equal to the excess of the fair market value of the Shares on the date of
exercise over the exercise price of the Option unless the Shares received are
Restricted Shares, in which case, unless the exercising participant elects to
recognize such income, the income recognition is deferred until the
restrictions lapse or the Restricted Shares becomes transferable. The Company
will generally be entitled to a compensation deduction in the same amount and
at the same time as the participant recognizes ordinary income and will comply
with applicable withholding requirements with respect to such compensation.
There are no tax consequences to a participant or to the Company if
an Option lapses before it is exercised or forfeited.
Share Appreciation Rights. The Incentive Plan permits the grant of
Share Appreciation Rights either alone or in connection with the grant of
Options. A Share Appreciation Right or the applicable portion thereof granted
in connection with a given Option will generally terminate and no longer be
exercisable upon the termination or exercise of the related Option. A Share
Appreciation Right permits the participant to receive, upon exercise of the
Share Appreciation Right, an amount in cash and/or Shares equal in value to
the excess of the fair market value of one Share over the exercise price per
Share specified in the Share Appreciation Right or related Option, multiplied
by the number of Shares in respect of which the Share Appreciation Right will
have been exercised. The Committee will determine the recipients of Share
Appreciation Rights, the number of Shares in respect of which Share
Appreciation Rights are awarded and the time or times within which Share
Appreciation Rights may be awarded. The provisions of Share Appreciation
Rights need not be the same with respect to each participant. The Committee
will have the right to determine the form of payment upon exercise of a Share
Appreciation Right.
Upon exercise of a Share Appreciation Right, the participant will
recognize ordinary income in an amount equal to the cash or the fair market
value of the Shares received on the exercise date. The Company will generally
be entitled to a compensation deduction in the same amount and at the same
time that the participant holding a Share Appreciation Right recognizes
ordinary income, and will comply with applicable withholding requirements with
respect to such compensation.
Restricted Shares. Restricted Shares may be issued either alone or in
addition to other Awards granted under the Incentive Plan. The Committee will
determine the recipients of Restricted Shares, the number of Restricted Shares
to be awarded, the price (if any) to be paid by such recipient, the time or
times within which such Awards
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may be subject to forfeiture, and all other conditions of the Award. The
provisions of Restricted Share Awards need not be the same with respect to
each participant. The Company will issue a certificate to each recipient
representing the Restricted Shares, which will bear a legend marking such
shares as Restricted Shares. Although such certificate(s) may be held in
custody by the Company until the restrictions thereon have elapsed, such
recipient will have, with respect to the Restricted Shares, all rights of a
shareholder of the Company, including the right to vote the Shares, and the
right to receive any cash dividends or distributions. The Committee, at the
time an Award is made, may permit or require the payment of cash dividends or
distributions to be deferred and reinvested in additional Restricted Shares.
During the restriction period set by the Committee, the participant will not
be permitted to transfer or encumber Restricted Shares; provided that the
Committee may provide for the lapse of such restrictions in installments and
may accelerate or waive such restrictions in whole or in part. Upon the
expiration of the restriction period without a prior forfeiture of the
Restricted Shares, the certificates for such Restricted Shares will be
delivered to the participant receiving the Award. In the event of a Change of
Control, the Committee may, in its discretion, cause all forfeiture
limitations on Restricted Shares to lapse and a share certificate or
certificates representing such unrestricted Shares to be issued to the
participant.
Unless the participant elects to recognize income at the time of an
Award of Restricted Shares, a participant will not recognize taxable income
until the Shares are no longer subject to a substantial risk of forfeiture or
become transferable. In either event, the participant's recognized income will
equal the excess of the fair market value of such Shares at grant if an
election is made, or at the time the restrictions lapse or are removed, over
any amount paid for such Shares (the "Bargain Element"). The Company will
generally be entitled to a deduction in the same amount and in the same year
as the recipient of Restricted Shares has income. The Company will comply with
all applicable withholding requirements with respect to such income.
The aforementioned election allows the participant to recognize the
Bargain Element as income in the year of the Award by making an election with
the Internal Revenue Service within 30 days after the Award is made. Dividends
or distributions received by a participant on Restricted Shares during the
restriction period are taxable to the participant as ordinary compensation
income and will be deductible by the Company unless the aforementioned
election is made, rendering dividends or distributions taxable as dividends
and nondeductible.
Long-Term Performance Awards. The Incentive Plan permits the
Committee to grant to any participant Long-Term Performance Awards. The
Committee will determine in advance the nature, length and starting date of
the performance period for each Long-Term Performance Award and will determine
the performance objectives to be used in valuing Long-Term Performance Awards
and the extent to which such Long-Term Performance Awards have been earned.
Performance objectives may vary from participant to participant and between
groups of participants. In the event of special or unusual events or
circumstances affecting the application of one or more performance objectives
to a Long-Term Performance Award, the Committee may revise the performance
objectives and/or underlying factors and criteria applicable to the Long-Term
Performance Awards affected. Performance Awards may be denominated in dollars
or in Shares, and to the extent that the relevant measure of performance is
met, payments may be made in the form of cash or Shares, including Restricted
Shares, either in a lump sum payment or in annual installments commencing as
soon as practicable after the end of the relevant performance period. Unless
otherwise provided in the applicable Award agreement, if a participant
terminates service with the Company during a performance period because of
death, disability or retirement, the participant will be entitled to a payment
with respect to each outstanding Long-Term Performance Award at the end of the
applicable performance period based upon the participant's performance for the
portion of such performance period ending on the date of termination and
pro-rated for the portion of the performance period during which the
participant was employed by the Company or served on the Board, as determined
by the Committee. In the event of a Change of Control, the Committee may, in
its discretion, cause all conditions applicable to a Long-Term Performance
Award to terminate immediately and a Share certificate or cash, as the case
may be, to be issued or paid to the participant.
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A participant receiving a Long-Term Performance Award will recognize
taxable income when an Award is paid at which time the participant will
realize income in an amount equal to the amount of cash received or the fair
market value of Shares received in payment. The Company will generally be
entitled to a corresponding deduction at such time, and will comply with
applicable withholding requirements with respect thereto. If Restricted Shares
are used in payment of a Long-Term Performance Award, the participant's
federal income tax consequences will be as described above under "Restricted
Shares."
Performance Shares. The Committee will determine the persons to whom
Performance Shares will be granted and the times and the number of such
Performance Shares that will be granted. Performance Shares are awards of the
right to receive Shares at the end of a specified period upon the attainment
of performance goals specified by the Committee at the time of grant. The
provisions of the Performance Shares need not be the same with respect to each
participant. Performance Shares generally will be forfeited if the participant
terminates service with the Company during the performance period for any
reason other than death, disability or retirement. In the event of death,
disability or retirement, the participant or the participant's estate, as the
case may be, will be entitled to receive, at the expiration of the performance
period, a percentage of Performance Shares that is equal to the percentage of
the performance period that had elapsed as of the date of death or date on
which such disability or retirement commenced, provided that the Committee
determines that the applicable performance goals have been met. In the event
of a Change of Control, the Committee may, in its discretion, cause all
conditions applicable to the Performance Shares to terminate immediately and
the full number of Shares subject to the Performance Shares Award to be issued
to the participant.
At the end of a performance period, the participant will recognize
ordinary income in an amount equal to the fair market value of the Shares
received. The Company will generally be entitled to a compensation deduction
in the same amount and at the same time as the participant of a Performance
Share Award recognizes ordinary income, and will comply with applicable
withholding requirements with respect thereto.
Performance Units. The Committee will determine the persons to whom
Performance Units will be granted and the times and the number of such
Performance Units that will be granted. Performance Units are awards of the
right to receive a fixed dollar amount, payable in cash, at the end of a
specified period upon the attainment of performance goals specified by the
Committee at the time of the grant. The provisions of Performance Unit Awards
need not be the same with respect to each participant. Performance Units
generally will be forfeited if the participant terminates employment with the
Company during the performance period for any reason other than death,
disability or retirement. In the event of death, disability or retirement, the
participant or his or her estate will be entitled to receive, at the
expiration of the performance period, cash for a percentage of his or her
Performance Units equal to the percentage of the performance period that
elapsed at the time of death or commencement of disability or retirement,
provided that the Committee determines that the applicable performance goals
have been met. In the event of a Change of Control, the Committee may, in its
discretion, cause all conditions applicable to Performance Units to terminate
and a cash payment for the full amount of the Performance Unit to be made to
the participant.
At the end of a performance period, the participant will recognize
ordinary income in an amount equal to the cash received on such date. The
Company will generally be entitled to a compensation deduction in the same
amount and at the same time as the participant of a Performance Unit Award
recognizes ordinary income, and will comply with applicable withholding
requirements with respect thereto.
For purposes of the Incentive Plan, the term "Change of Control"
means: (i) the acquisition in one or more transactions by any person
(including any group acting in concert) of beneficial ownership of 25% or more
of the combined voting power of the Company's then outstanding voting
securities (the "Voting Securities"), excluding Voting Securities acquired
directly from the Company (but such Voting Securities shall be included in the
calculation of the total number of Voting Securities then outstanding); or
(ii) approval by shareholders of the
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Company of (A) a merger, reorganization or consolidation involving the Company
if the shareholders of the Company immediately before such merger,
reorganization or consolidation do not or will not own directly or indirectly
immediately following such merger, reorganization or consolidation more than
fifty percent (50%) of the combined voting power of the outstanding voting
securities of the entity resulting from or surviving such merger,
reorganization or consolidation in substantially the same proportion as their
ownership of the Voting Securities outstanding immediately before such merger,
reorganization or consolidation or (B) a liquidation or dissolution of the
Company or (C) an agreement for the sale or other disposition of all or
substantially all of the assets of the Company; or (iii) acceptance by
shareholders of the Company securities in a share exchange if the shareholders
of the Company immediately before such share exchange do not or will not own
directly or indirectly immediately following such share exchange more than
fifty percent (50%) of the combined voting power of the outstanding voting
securities of the entity resulting from or surviving such share exchange in
substantially the same proportion as their ownership of the Voting Securities
outstanding immediately before such share exchange.
The Board believes that granting the Committee the authority to cause
the acceleration of the exercisability of outstanding Options and Share
Appreciation Rights, the lapse of restrictions applicable to Restricted Shares
and the elimination of conditions applicable to Long Term Performance Awards,
Performance Shares and Performance Units upon the occurrence of an event
constituting a Change in Control will help to preserve the benefits of the
Awards granted under the Incentive Plan in the event of a Change in Control.
Such provisions may increase the cost to a third party of acquiring control of
the Company (whether pursuant to a friendly or hostile transaction) by reason
of the immediate expense it would be obligated to incur upon a Change of
Control.
The Incentive Plan is intended to constitute an "unfunded" plan for
incentive and deferred compensation. The Incentive Plan states that with
respect to any payments not yet made to a participant by the Company, nothing
contained in the Incentive Plan gives any participant any rights that are
greater than those of a general creditor of the Company.
The foregoing discussion, as it relates to certain federal income tax
consequences of the Incentive Plan, does not purport to address all of the tax
consequences that may be applicable to any particular participant or to the
Company. In addition, such discussion does not address foreign, state or local
taxes, nor does it address federal taxes other than federal income tax. Such
discussion is based upon applicable statutes, regulations, case law,
administrative interpretations and judicial decisions in effect as of the date
of this Proxy Statement.
On March 18, 1998, the closing sale price of a Common Share, as
reported on the NYSE, was $23-9/16.
THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS A VOTE FOR THE ADOPTION
OF THE AMENDED AND RESTATED 1997 LONG-TERM INCENTIVE PLAN.
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OTHER INFORMATION
Appraisal Rights
In the event that any of the Proposals covered by this Proxy
Statement are approved by shareholders, dissenting shareholders will not have
appraisal or similar rights under the Maryland statutes applicable to the
Company.
Independent Public Accountants
The Trustees have appointed Arthur Andersen LLP to serve as the
Company's independent public accountants for 1998 and to audit the Company's
financial statements for 1998. The shareholders will not be asked to approve
this appointment at the Meeting. A representative of Arthur Andersen LLP will
be present at the Meeting, will be available to respond to appropriate
questions, and will have an opportunity to make a statement.
Other Business
The Company knows of no business which will be presented at the
Meeting other than as set forth in this Proxy Statement. However, if other
matters should properly come before the Meeting, it is the intention of the
persons named in the enclosed proxy to vote in accordance with their best
judgment on such matters.
Expenses of Solicitation
The expense of solicitation of proxies on behalf of the
Trustees, including printing and postage, will be paid by the Company. Request
will be made of brokerage houses and other custodians, nominees and
fiduciaries to forward the solicitation material, at the expense of the
Company, to the beneficial owners of Common Shares held of record by such
persons. In addition to being solicited through the mails, proxies may also be
solicited personally or by telephone by Trustees and officers of the Company.
In addition, the Company has employed Beacon Hill Partners, Inc. to solicit
proxies for the Meeting. The Company has agreed to pay $3,000, plus
out-of-pocket expenses of Beacon Hill Partners, Inc., for these services.
Shareholder Proposals for the 1999 Annual Meeting of Shareholders
Under the rules and regulations of the Securities and
Exchange Commission, proposals by shareholders intended to be presented at the
next annual meeting of shareholders of the Company must be received by the
Company at its offices at 16 Campus Boulevard, Newtown Square, Pennsylvania
19073 on or before December 14, 1998 to be included in the Company's proxy
statement and form of proxy for the 1999 annual meeting.
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APPENDIX A
BRANDYWINE REALTY TRUST
1997 LONG-TERM INCENTIVE PLAN
(As amended effective May 15, 1998)
SECTION 1. Purpose; Definitions. The purpose of the
Brandywine Realty Trust 1997 Long-Term Incentive Plan (the "Plan") is to offer
to certain employees and trustees of Brandywine Realty Trust (the "Company"),
organized as a Maryland real estate investment trust, and its subsidiaries,
equity interests in the Company, options to acquire equity interests in the
Company, and other performance-based incentive awards, thereby attracting,
retaining and motivating such persons, and strengthening the mutuality of
interests between such persons and the Company's shareholders. The Plan was
originally adopted effective May 12, 1997 and has been amended effective May
15, 1998.
For purposes of the Plan, the following initially
capitalized words and phrases shall be defined as set forth below, unless the
context clearly requires a different meaning:
a. "Affiliate" means, with respect to a person or entity, a
person that directly or indirectly controls, or is controlled by, or is under
common control with such person or entity.
b. "Board" means the Board of Trustees of the Company, as
constituted from time to time.
c. "Cause" occurs when the Participant, as determined by the
Board:
(i) has engaged in any type of disloyalty to
the Company, including without limitation,
fraud, embezzlement, theft, or dishonesty
in the course of his employment or
engagement, or has otherwise breached any
fiduciary duty owed to the Company;
(ii) has been convicted of a felony;
(iii) has disclosed trade secrets or
confidential information of the Company;
or
(iv) has breached any agreement with or duty to
the Company in respect of confidentiality,
non-disclosure, non-competition or
otherwise.
d. "Change of Control" means:
(i) the acquisition in one or more
transactions by any "Person" (as the term
person is used for purposes of Sections
13(d) or 14(d) of the Exchange Act) of
"Beneficial ownership" (within the meaning
of Rule 13d-3 promulgated under the
Exchange Act) of twenty-five percent (25%)
or more of the combined voting power of
the Company's then outstanding voting
securities (the "Voting Securities"),
provided that for purposes of this clause
(i) Voting Securities acquired directly
from the Company by any Person shall be
excluded from the determination of such
Person's Beneficial ownership of Voting
Securities (but such Voting Securities
shall be included in the calculation of
the total number of Voting Securities then
outstanding); or
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(ii) approval by shareholders of the Company of:
(A) a merger, reorganization or
consolidation involving the
Company if the shareholders of
the Company immediately before
such merger, reorganization or
consolidation do not or will not
own directly or indirectly
immediately following such
merger, reorganization or
consolidation, more than fifty
percent (50%) of the combined
voting power of the outstanding
voting securities of the company
resulting from or surviving such
merger, reorganization or
consolidation in substantially
the same proportion as their
ownership of the Voting
Securities outstanding
immediately before such merger,
reorganization or consolidation;
or
(B) a complete liquidation or
dissolution of the Company;
(C) an agreement for the sale or
other disposition of all or
substantially all of the assets
of the Company; or
(iii) acceptance by shareholders of the Company
of shares in a share exchange if the
shareholders of the Company immediately
before such share exchange do not or will
not own directly or indirectly immediately
following such share exchange more than
fifty percent (50%) of the combined voting
power of the outstanding voting securities
of the entity resulting from or surviving
such share exchange in substantially the
same proportion as their ownership of the
Voting Securities outstanding immediately
before such share exchange.
e. "Code" means the Internal Revenue Code of 1986, as
amended from time to time, and any successor thereto.
f. "Committee"shall mean the Committee appointed by the
Board in accordance with Section 2 of the Plan, if one is appointed, in which
event in connection with this Plan, the Committee shall possess all of the
power and authority of, and shall be authorized to take any and all actions
required to be taken hereunder by, and make any and all determinations
required to be taken hereunder by, the Board.
g. "Disability"shall mean a disability of an employee or a
trustee which renders such employee or trustee unable to perform the full
extent of his duties and responsibilities by reason of his illness or
incapacity which would entitle that employee or trustee to receive Social
Security Disability Income under the Social Security Act, as amended, and the
regulations promulgated thereunder. "Disabled" shall mean having a Disability.
The determination of whether a Participant is Disabled shall be made by the
Board, whose determination shall be conclusive; provided that,
(i) if a Participant is bound by the terms of
an employment agreement between the
Participant and the Company, whether the
Participant is "Disabled" for purposes of
the Plan shall be determined in accordance
with the procedures set forth in said
employment agreement, if such procedures
are therein provided; and
(ii) a Participant bound by such an employment
agreement shall not be determined to be
Disabled under the Plan any earlier than
he would be determined to be disabled
under his employment agreement.
h. "Exchange Act" means the Securities Exchange Act of 1934,
as amended.
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i. "Fair Market Value" means, as of any date: (i) the
closing price of the Shares as reported on the principal nationally recognized
stock exchange on which the Shares are traded on such date, or if no Share
prices are reported on such date, the closing price of the Shares on the next
preceding date on which there were reported Share prices; or (ii) if the
Shares are not listed or admitted to unlisted trading privileges on a
nationally recognized stock exchange, the closing price of the Shares as
reported by The NASDAQ Market on such date, or if no Share prices are reported
on such date, the closing price of the Shares on the next preceding date on
which there were reported Share prices; or (3) if the Shares are not listed or
admitted to unlisted trading privileges on a nationally recognized stock
exchange or traded on The NASDAQ Market, then the Fair Market Value shall be
determined by the Board acting in its discretion, which determination shall be
conclusive.
j. "Incentive Stock Option" means any Option intended to be
and designated as an "Incentive Stock Option" within the meaning of Section
422 of the Code.
k. "Long-Term Performance Award" or "Long-Term Award" means
an award made pursuant to Section 8 hereof that is payable in cash and/or
Shares (including Restricted Shares, Performance Shares and Performance Units)
in accordance with the terms of the grant, based on Company, business unit
and/or individual performance, in each case as determined by the Committee and
as set forth in the grant letter.
l. "Non-Employee Trustee" shall have the meaning set forth
in Rule 16b-3(b)(3)promulgated by the Securities and Exchange Commission
under the Exchange Act, or any successor definition adopted by the Securities
and Exchange Commission (substituting the word "trustee" for "director");
provided, however, that the Board or the Committee may, in its sole
discretion, substitute the definition of "outside director" provided in the
regulations under Section 162(m) of the Code in place of the definition of
Non-Employee Director contained in the Exchange Act.
m. "Non-Qualified Stock Option" means any Option that is not
an Incentive Stock Option.
n. "Participant" means an employee or trustee of the Company
or a Subsidiary to whom an award is granted pursuant to the Plan.
o. "Performance Share" means an award made pursuant to
Section 9 hereof of the right to receive Shares at the end of a specified
performance period.
p. "Performance Unit" means an award made pursuant to
Section 10 hereof of the right to receive cash at the end of a specified
performance period.
q. "Restricted Shares" means an award of Shares that is
subject to restrictions pursuant to Section 7 hereof.
r. "Retirement" means termination of the employment of a
Participant with the Company, an Affiliate (including parent) or a Subsidiary
other than (i) a termination effected at the direction of the Company or
parent (whether or not the Company effects such termination for Cause), (ii)
termination on account of Disability, or (iii) termination on account of
death. With respect to a trustee who is not also an employee of the Company,
Retirement shall occur at such time as the individual ceases to be a trustee.
s. "Rules" means Section 16 of the Exchange Act and the
regulations promulgated thereunder.
t. "SAR" means a share appreciation right granted under the
Plan and described in Section 6 hereof.
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u. "Securities Broker" means a registered securities broker
acceptable to the Company who agrees to effect the cashless exercise of an
Option pursuant to Section 5(l) hereof.
v. "Share" means a common share of beneficial interest, $.01
par value per share, of the Company, subject to substitution or adjustment as
provided in Section 3(c) hereof.
w. "Stock Option" or "Option" means any option to purchase
Shares (including Restricted Shares, if the Committee so determines) granted
pursuant to Section 5 hereof.
x. "Subsidiary" means, in respect of the Company or parent,
a subsidiary company, whether now or hereafter existing, as defined in
Sections 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.
y. "Trustee" means a member of the Board.
SECTION 2. Administration. The Plan shall be administered by
the Board. The Board may at any time by a unanimous vote, with each member
voting, appoint a Committee consisting of not less than two Trustees to
administer the Plan on behalf of the Board, subject to such terms and
conditions as the Board may prescribe, provided that each Committee member
shall be a Non-Employee Trustee. Members of the Committee shall serve for such
period of time as the Board may determine. Members of the Board or the
Committee who are eligible for awards or have been granted awards may vote on
any matters affecting the administration of the Plan or any awards pursuant to
the Plan, except that no such member shall act upon an award to himself or
herself, but any such member may be counted in determining the existence of a
quorum at any meeting of the Board or Committee during which action is taken
with respect to an award to himself or herself.
If a Committee is appointed, all references to actions to be
taken by the Board in the administration of the Plan shall be construed as
references to the Committee.
From time to time the Board may increase the size of the
Committee and appoint additional members thereto (provided such new members
are Non-Employee Trustees), remove members (with or without cause) and appoint
new members in substitution therefor, fill vacancies however caused, or remove
all members of the Committee and thereafter directly administer the Plan.
The Board shall have full authority to grant to eligible
persons under Section 4: (i) Options, (ii) SARs, (iii) Restricted Shares, (iv)
Long-Term Performance Awards, (v) Performance Shares and/or (vi) Performance
Units. In particular, the Board shall have the authority:
a. to select the persons to whom Options, SARs, Restricted
Shares, Long-Term Performance Awards, Performance Shares and Performance Units
may from time to time be granted hereunder;
b. to determine whether and to what extent Incentive Stock
Options, Non-Qualified Stock Options, SARs, Restricted Shares, Long-Term
Performance Awards, Performance Shares and Performance Units, or any
combination thereof, are to be granted hereunder;
c. to determine the number of Shares, if any, to be covered
by each such award granted hereunder;
d. to determine the terms and conditions, not inconsistent
with the terms of the Plan, of any award granted hereunder, including, but not
limited to, the Share price and any restriction or limitation, any vesting
provisions, or any vesting acceleration or forfeiture waiver regarding any
Option or other award and/or the Shares relating thereto, or the length of the
period following termination of employment of any Participant during which any
Option or SAR may be exercised (which, in the case of an Incentive Stock
Option, shall be no longer than one year
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in the case of the termination of employment of a Participant by reason of
death or Disability, or three months in the case of the termination of
employment of a Participant for any reason other than death or Disability),
based on such factors as the Board shall determine, in its sole discretion;
e. to determine whether and under what circumstances an
Option may be exercised without a payment of cash under Section 5(l); and
f. to determine whether, to what extent and under what
circumstances Shares and other amounts payable with respect to an award under
the Plan may be deferred either automatically or at the election of the
Participant; and
g. to make such arrangements with a Subsidiary for Awards to
be made to a Participant by such Subsidiary and for the transfer of Shares to
such Subsidiary for the purpose of delivery to such Participant, as the Board
may deem necessary or appropriate to further the purposes of the Plan.
The Board shall have the authority to adopt, alter and
repeal such administrative rules, guidelines and practices governing the Plan
as it shall, from time to time, deem advisable; to interpret the terms and
provisions of the Plan and any award issued under the Plan (and any agreements
relating thereto); to amend the terms of any agreement relating to any award
issued under the Plan, provided that the Participant consents to such
amendment; and to otherwise supervise the administration of the Plan. The
Board may correct any defect, supply any omission or reconcile any
inconsistency in the Plan or in any award granted in the manner and to the
extent it shall deem necessary to carry out the intent of the Plan.
All decisions made by the Board pursuant to the provisions
of the Plan shall be final and binding on all persons, including the Company
and Participants. No member of the Board shall be liable for any good faith
determination, act or failure to act in connection with the Plan or any award
made under the Plan.
SECTION 3. Shares Subject to the Plan.
a. Shares Subject to the Plan. The Shares to be subject or
related to awards under the Plan shall be authorized and unissued Shares of
the Company, whether or not previously issued and subsequently acquired by the
Company. The maximum number of Shares that may be the subject of awards under
the Plan is 5,000,000 and the Company shall reserve for the purposes of the
Plan, out of its authorized and unissued Shares, such number of Shares.
Notwithstanding the foregoing, no individual shall receive, over the term of
the Plan, awards for more than an aggregate of 3,000,000 Shares, or SARs with
respect to such Shares, authorized for grant under the Plan.
b. Effect of the Expiration or Termination of Awards. If and
to the extent that an award made under the Plan expires, terminates or is
canceled or forfeited for any reason without having been exercised in full,
the Shares associated with the expired, terminated, canceled or forfeited
portion of the award shall again become available for award under the Plan.
c. Other Adjustment. In the event of any merger,
reorganization, consolidation, recapitalization, Share distribution or
dividend, Share split or combination, or other change in entity structure
affecting the Shares, such substitution or adjustment shall be made in the
aggregate number, type and issuer of the securities reserved for issuance
under the Plan, in the number and Option price of securities subject to
outstanding Options granted under the Plan and in the number and price of
securities subject to other awards made under the Plan, as may be determined
to be appropriate by the Board in its sole discretion, provided that the
number of securities subject to any award shall always be a whole number. The
Board, in its sole discretion, shall make appropriate equitable anti-dilution
adjustments to the number of then-outstanding SARs, and to the Fair Market
Value upon which the value of such SARs is based.
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SECTION 4. Eligibility. Trustees and other employees of the
Company or its Subsidiaries are eligible to be granted awards under the Plan.
Trustees and other employees who are not employees of the Company or of a
Subsidiary that is a subsidiary as defined in Section 424(f) and (g) of the
Code, are eligible to be granted awards under the Plan, but are not eligible
to be granted Incentive Stock Options.
SECTION 5. Options. Options granted under the Plan may be of
two types: (i) Incentive Stock Options or (ii) Non-Qualified Stock Options.
Options may be granted alone, in addition to or in tandem with other awards
granted under the Plan. Any Option granted under the Plan shall be in such
form as the Board may from time to time approve.
The Board shall have the authority to grant any Participant
eligible under Section 4 Incentive Stock Options, Non-Qualified Stock Options,
or both types of Options (in each case with or without SARs). To the extent
that any Option does not qualify as an Incentive Stock Option, it shall
constitute a separate Non-Qualified Stock Option.
Options granted under the Plan shall be subject to the
following terms and conditions and shall contain such additional terms and
conditions, not inconsistent with the terms of the Plan, as the Board shall
deem appropriate; provided, however, that the provisions of Option awards need
to be the same with respect to each Participant:
a. Option Price. The exercise price per Share purchasable
under a Non-Qualified Stock Option shall be determined by the Board. The
exercise price per Share purchasable under an Incentive Stock Option shall be
100% of the Fair Market Value of the Share on the date of the grant. However,
any Incentive Stock Option granted to any Participant who, at the time the
Option is granted, owns more than 10% of the voting power of all classes of
shares of the Company or of a Subsidiary that is a subsidiary company as
defined in Section 424(f) and (g) of the Code, shall have an exercise price
per Share of not less than 110% of Fair Market Value per Share on the date of
the grant.
b. Option Term. The term of each Option shall be fixed by
the Board, but no Option shall be exercisable more than ten years after the
date the Option is granted. However, any Incentive Stock Option granted to any
Participant who, at the time such Option is granted, owns more than 10% of the
voting power of all classes of shares of the Company or of a Subsidiary that
is a subsidiary company as defined in Section 424(f) and (g) of the Code, may
not have a term of more than five years. No Option may be exercised by any
person after expiration of the term of the Option.
c. Exercisability. Options shall vest and be exercisable at
such time or times and subject to such terms and conditions as shall be
determined by the Board at the time of grant. If the Board provides, in its
discretion, that any Option is exercisable only in installments, the Board may
waive such installment exercise provisions at any time at or after grant, in
whole or in part, based on such factors as the Board shall determine, in its
sole discretion.
d. Method of Exercise. Subject to the exercise provisions
under Section 5(c) and the termination provisions set forth in Sections 5(f)
through (i), Options may be exercised in whole or in part at any time and from
time to time during the term of the Option, by giving written notice of
exercise to the Company specifying the number of Shares to be purchased. Such
notice shall be accompanied by payment in full of the purchase price, either
by certified or bank check, or such other instrument as the Board may accept.
As determined by the Board, in its sole discretion, at or after grant, payment
in full or in part of the exercise price of an Option may be made in the form
of unrestricted Shares based on the Fair Market Value of the Shares on the
date the Option is exercised; provided, however, that, in the case of an
Incentive Stock Option, the right to make a payment in the form of already
owned Shares may be authorized only at the time the Option is granted.
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No Shares shall be issued upon exercise of an Option until
full payment therefor has been made. A Participant shall not have the right to
distributions or dividends or any other rights of a shareholder with respect
to Shares subject to the Option until the Participant has given written notice
of exercise, has paid in full for such Shares, and, if requested, has given
the representation described in Section 13(a) hereof.
e. Non-transferability of Options. No Option shall be
transferable by the Participant otherwise than by will or by the laws of
descent and distribution, and all Options shall be exercisable, during the
Participant's lifetime, only by the Participant or, in the event of his
Disability, by his personal representative.
f. Termination by Reason of Death. Subject to Section 5(i),
if a Participant's service with the Company or any Subsidiary terminates by
reason of death, any Option held by such Participant may thereafter be
exercised, to the extent then exercisable or on such accelerated basis as the
Board may determine at or after grant, by the legal representative of the
estate or by the legatee of the Participant under the will of the Participant,
for a period expiring (i) at such time as may be specified by the Board at or
after the time of grant, or (ii) if not specified by the Board, then one year
from the date of death, or (iii) if sooner than the applicable period
specified under (i) or (ii) above, then upon the expiration of the stated term
of such Option.
g. Termination by Reason of Disability. Subject to Section
5(i), if an Participant's service with the Company or any Subsidiary
terminates by reason of Disability, any Option held by such Participant may
thereafter be exercised by the Participant or his personal representative, to
the extent it was exercisable at the time of termination, or on such
accelerated basis as the Board may determine at or after grant, for a period
expiring (i) at such time as may be specified by the Board at or after the
time of grant, or (ii) if not specified by the Board, then six months from the
date of termination of service, or (iii) if sooner than the applicable period
specified under (i) or (ii) above, then upon the expiration of the stated term
of such Option; provided, however, that if the Participant dies within such
period, any unexercised Option held by such Participant shall, at the sole
discretion of the Board, thereafter be exercisable to the extent to which it
was exercisable at the time of death for a period of one (1) year from the
date of such death (or such other period as may be specified by the Board) or
until the expiration of the stated term of such Option, whichever period is
shorter.
h. Other Termination. Subject to Section 5(i), if a
Participant's service with the Company or any Subsidiary terminates for any
reason other than death or Disability, any Option held by such Participant may
thereafter be exercised by the Participant, to the extent it was exercisable
at the time of such termination or on such accelerated basis as the Board may
determine at or after the time of grant, for a period expiring (i) at such
time as may be specified by the Board at or after the time of grant, or (ii)
if not specified by the Board, then thirty (30) days from the date of
termination of service, or (iii) if sooner than the applicable period
specified under (i) or (ii) above, then upon the expiration of the stated term
of such Option.
i. Change of Control. In the event of a Change of Control,
the Board may, in its sole discretion, cause all outstanding Options to
immediately become fully exercisable.
j. Incentive Stock Option Limitations. To the extent
required for "incentive stock option" status under Section 422 of the Code,
the aggregate Fair Market Value (determined as of the time of grant) of the
Shares with respect to which Incentive Stock Options are exercisable for the
first time by the Participant during any calendar year under the Plan and/or
any other plan of the Company or any Subsidiary shall not exceed $100,000. For
purposes of applying the foregoing limitation, Incentive Stock Options shall
be taken into account in the order granted.
k. Cashless Exercise. The Company may, in the sole
discretion of the Board, cooperate in a "cashless exercise" of an Option. The
cashless exercise shall be effected by the Participant delivering to the
Securities Broker instructions to sell a sufficient number of Shares to cover
the costs and expenses associated therewith.
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SECTION 6. Share Appreciation Rights.
a. Grant. SARs may be granted alone ("Stand-Alone SARs") or
in conjunction with all or part of any Option granted under the Plan ("Tandem
SARs"). In the case of a Non-Qualified Stock Option, a Tandem SAR may be
granted either at or after the time of the grant of such Option. In the case
of an Incentive Stock Option, a Tandem SAR may be granted only at the time of
the grant of such Option.
b. Exercise.
(i) Tandem SARs. A Tandem SAR or applicable portion
thereof shall terminate and no longer be exercisable upon the termination or
exercise of the related Option or portion thereof, except that, unless
otherwise determined by the Board, in its sole discretion at the time of
grant, a Tandem SAR granted with respect to less than the full number of
Shares covered by a related Option shall be reduced only after such related
Option is exercised or otherwise terminated with respect to the number of
Shares not covered by the Tandem SAR.
A Tandem SAR may be exercised by a Participant by
surrendering the applicable portion of the related Option, only at such time
or times and to the extent that the Option to which such Tandem SAR relates
shall be exercisable in accordance with the provisions of Section 5 and this
Section 6. Options which have been so surrendered, in whole or in part, shall
no longer be exercisable to the extent the related Tandem SARs have been
exercised.
Upon the exercise of a Tandem SAR, a Participant shall be
entitled to receive, upon surrender to the Company of all (or a portion) of an
Option in exchange for cash and/or Shares, an amount equal to the excess of
(A) the Fair Market Value, as of the date such Option (or such portion
thereof) is surrendered, of the Shares covered by such Option (or such portion
thereof) over (B) the aggregate exercise price of such Option (or such portion
thereof).
Upon the exercise of a Tandem SAR, the Option or part
thereof to which such Tandem SAR is related, shall be deemed to have been
exercised for the purpose of the limitation set forth in Section 3 of the Plan
on the number of Shares to be issued under the Plan, but only to the extent of
the number of Shares issued under the Tandem SAR at the time of exercise based
on the value of the Tandem SAR at such time.
A Tandem SAR may be exercised only if and when the Fair
Market Value of the Shares subject to the Option exceeds the exercise price of
such Option.
(ii) Stand-Alone SARs. A Stand-Alone SAR may be
exercised by a Participant giving notice of intent to exercise to the Company,
provided that all or a portion of such Stand-Alone SAR shall have become
vested and exercisable as of the date of exercise.
Upon the exercise of a Stand-Alone SAR, a Participant shall
be entitled to receive, in either cash and/or Shares, an amount equal to the
excess, if any, of (A) the Fair Market Value, as of the date such SAR (or
portion of such SAR) is exercised, of the Shares covered by such SAR (or
portion of such SAR) over (B) the Fair Market Value of the Shares covered by
such SAR (or a portion of such SAR ) as of the date such SAR (or a portion of
such SAR) was granted.
c. Terms and Conditions. SARs shall be subject to such terms
and conditions, not inconsistent with the provisions of the Plan, as shall be
determined from time to time by the Board, in its sole discretion; provided,
however, that the provisions of SAR awards need not be the same with respect
to each Participant. Such terms and conditions include the following:
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(i) Non-Transferability. No SAR shall be
transferable by the Participant otherwise than by will or by the laws of
descent and distribution and all SARs shall be exercisable, during the
Participant's lifetime, only by the Participant or, in the event of his
Disability, by his personal representative.
(ii) Term of SAR. The term of each SAR shall be
fixed by the Board, provided that the term of a Tandem SAR shall be determined
by the terms of the applicable Option, and provided further that the term of a
Stand-Alone SAR shall be ten (10) years, unless another term is specified by
the Board.
(iii) Exercisability. SARs shall vest and be
exercisable at such time or times and subject to such terms and conditions as
shall be determined by the Board at the time of grant, provided that the term
of a Tandem SAR shall be determined by the terms of the applicable Option. A
Participant shall not have any rights as a shareholder with respect to any
SAR.
(iv) Termination of Employment. Unless otherwise
specified in the terms of an award, SARs shall be subject to the terms of
Sections 5(f)-(h) with respect to exercise upon termination of employment.
(v) Change of Control. In the event of a Change of
Control, the Board may, in its sole discretion, cause all outstanding SARs to
immediately become fully exercisable.
SECTION 7. Restricted Shares.
a. Administration. Restricted Shares may be issued either
alone or in addition to other awards granted under the Plan. The Board shall
determine the persons to whom, and the time or times at which, grants of
Restricted Shares will be made, the number of Shares to be awarded, the price
(if any) to be paid by the recipient of Restricted Shares, the time or times
within which such awards may be subject to forfeiture, and all other
conditions of the awards.
The Board may condition the vesting of Restricted Shares
upon the attainment of specified performance goals or such other factors as
the Board may determine, in its sole discretion, at the time of the award. The
Board may award Restricted Shares that vest without regard to the attainment
of specified performance goals.
The provisions of Restricted Share awards need not be the
same with respect to each Participant.
b. Awards and Certificates. The prospective recipient of a
Restricted Share award shall not have any rights with respect to such award,
unless and until such recipient has executed an agreement evidencing the award
and has delivered a fully executed copy thereof to the Company, and has
otherwise complied with the applicable terms and conditions of such award. The
purchase price for Restricted Shares may be zero.
Each Participant receiving a Restricted Share award shall be
issued a share certificate in respect of such Restricted Shares. Such
certificate shall be registered in the name of such Participant, and shall
bear an appropriate legend referring to the terms, conditions, and
restrictions applicable to such award, substantially in the following form:
"The transferability of this certificate and the shares
represented hereby are subject to the terms and conditions
(including forfeiture) of the Brandywine Realty Trust 1997
Long-Term Incentive Plan and an Agreement entered into
between the registered owner and Brandywine Realty Trust.
Copies of such Plan and Agreement are on file in the
principal offices of Brandywine Realty Trust and will be
made available to any Shareholder without charge upon
request to the Secretary of the Company."
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The Board shall require that the share certificates
evidencing Restricted Shares be held in custody by the Company until the
restrictions thereon shall have lapsed, and that, as a condition of any
Restricted Share award, the Participant shall have delivered to the Company a
share power, endorsed in blank, relating to the Shares covered by such award.
c. Restrictions and Conditions. The Restricted Shares
awarded pursuant to this Section 7 shall be subject to the following
restrictions and conditions:
(i) During a period set by the Board commencing
with the date of such award (the "Restriction Period"), the Participant shall
not be permitted to sell, transfer, pledge, assign or otherwise encumber
Restricted Shares awarded under the Plan. The Board, in its sole discretion,
may provide for the lapse of such restrictions in installments and may
accelerate or waive such restrictions in whole or in part, based on service,
performance and/or such other factors or criteria as the Board may determine,
in its sole discretion. The Board may, in its sole discretion, issue
Restricted Shares under the Plan for which all restrictions are waived,
including, but not limited to, Restricted Shares issued to Trustees as part or
all of their Trustees' fees for any period.
(ii) Except as provided in this paragraph (ii) and
Section 7(c)(i), once the Participant has been issued a certificate or
certificates for Restricted Shares, the Participant shall have, with respect
to the Restricted Shares, all of the rights of a shareholder of the Company,
including the right to vote the Shares, and the right to receive any cash
distributions or dividends. The Board, in its sole discretion, as determined
at the time of award, may permit or require the payment of cash distributions
or dividends to be deferred and, if the Board so determines, reinvested in
additional Restricted Shares to the extent Shares are available under Section
3 of the Plan.
(iii) Subject to the applicable provisions of the
award agreement and this Section 7, upon termination of a Participant's
service with the Company for reasons other than death or Disability during the
Restriction Period, all Restricted Shares still subject to restriction shall
be forfeited by the Participant. Subject to the provisions of the Plan, the
Board, in its sole discretion, may provide for the lapse of such restrictions
in installments and may waive such restrictions, in whole or in part, at any
time, based on such factors as the Board shall deem appropriate in its sole
discretion. Upon the death or Disability of a Participant during the
Restriction Period, restrictions will lapse with respect to a percentage of
the Restricted Shares award granted to the Participant that is equal to the
percentage of the Restriction Period that has elapsed as of the date of death
or the date on which such Disability commenced (as determined by the Board in
its sole discretion), and a share certificate or share certificates
representing such Shares, without bearing the restrictive legend described in
Section 7(b), shall be delivered by the Company to the Participant or the
Participant's estate, as the case may be, in exchange for the share
certificate or share certificates that contain such restrictive legend.
(iv) In the event of hardship or other special
circumstances of a Participant whose service with the Company is involuntarily
terminated (other than for Cause), the Board may, in its sole discretion,
waive in whole or in part any or all remaining restrictions with respect to
such Participant's Restricted Shares, based on such factors as the Board may
deem appropriate.
(v) If and when the Restriction Period expires
without a prior forfeiture of the Restricted Shares subject to such
Restriction Period, the certificates for such Shares, without bearing the
restrictive legend described in Section 7(b), shall be promptly delivered by
the Company to the Participant, in exchange for the share certificate or share
certificates that contain such restrictive legend.
(vi) In the event of a Change of Control, the
Board, in its sole discretion, may cause all Restricted Shares remaining
subject to forfeiture to immediately cease to be subject to forfeiture and a
share certificate or shares certificates representing such Shares, without
bearing the restrictive legend described in Section 7(b), shall be issued by
the Company and delivered to the Participant, in exchange for the share
certificate or share certificates that contain such restrictive legend.
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SECTION 8. Long-Term Performance Awards.
a. Awards and Administration. Long-Term Performance Awards
may be awarded either alone or in addition to other awards granted under the
Plan. Prior to award of a Long-Term Performance Award, the Board shall
determine the nature, length and starting date of the performance period (the
"performance period") for each Long-Term Performance Award. Performance
periods may overlap and Participants may participate simultaneously with
respect to Long-Term Performance Awards that are subject to different
performance periods and/or different performance factors and criteria. Prior
to award of a Long-Term Performance Award, the Board shall determine the
performance objectives to be used in awarding Long-Term Performance Awards and
determine the extent to which such Long-Term Performance Awards have been
earned. Performance objectives may vary from Participant to Participant and
between groups of Participants and shall be based upon such Company, business
unit and/or individual performance factors and criteria as the Board may deem
appropriate, including, but not limited to, earnings per Share or return on
equity.
At the beginning of each performance period, the Board shall
determine for each Long-Term Performance Award subject to such performance
period the range of dollar values or number of Shares to be awarded to the
Participant at the end of the performance period if and to the extent that the
relevant measure(s) of performance for such Long-Term Performance Award is
(are) met. Such dollar values or number of Shares may be fixed or may vary in
accordance with such performance and/or other criteria as may be specified by
the Board, in its sole discretion.
b. Adjustment of Awards. In the event of special or unusual
events or circumstances affecting the application of one or more performance
objectives to a Long-Term Performance Award, the Board may revise the
performance objectives and/or underlying factors and criteria applicable to
the Long-Term Performance Awards affected, to the extent deemed appropriate by
the Board, in its sole discretion, to avoid unintended windfalls or hardship.
c. Termination of Service. Unless otherwise provided in the
applicable award agreements, if a Participant terminates service with the
Company during a performance period because of death, Disability or
Retirement, such Participant (or his estate) shall be entitled to a payment
with respect to each outstanding Long-Term Performance Award at the end of the
applicable performance period:
(i) based, to the extent relevant under the terms
of the award, upon the Participant's performance for the portion of such
performance period ending on the date of termination and the performance of
the applicable business unit(s) for the entire performance period, and
(ii) pro-rated, where deemed appropriate by the
Board, for the portion of the performance period during which the Participant
was employed by or served on the Board of the Company, all as determined by
the Board, in its sole discretion.
However, the Board may provide for an earlier payment in
settlement of such award in such amount and under such terms and conditions as
the Board deems appropriate, in its sole discretion.
Except as otherwise determined by the Board, if a
Participant terminates service with the Company during a performance period
for any other reason, then such Participant shall not be entitled to any
payment with respect to the Long-Term Performance Awards subject to such
performance period, unless the Board shall otherwise determine, in its sole
discretion.
In the event of a Change of Control, the Board may, in its
sole discretion, cause all conditions applicable to a Long-Term Performance
Award to immediately terminate and a share certificate or share certificates
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representing Shares subject to such award, or cash, as the case may be, to be
issued and/or delivered to the Participant.
d. Form of Payment. The earned portion of a Long-Term
Performance Award may be paid currently or on a deferred basis, together with
such interest or earnings equivalent as may be determined by the Board, in its
sole discretion. Payment shall be made in the form of cash or whole Shares,
including Restricted Shares, either in a lump sum payment or in annual
installments commencing as soon as practicable after the end of the relevant
performance period, all as the Board shall determine at or after grant. If and
to the extent a Long-Term Performance Award is payable in Shares and the full
amount of such value is not paid in Shares, then the Shares representing the
portion of the value of the Long-Term Performance Award not paid in Shares
shall again become available for award under the Plan, subject to Section
3(b). A Participant whose Long-Term Performance Award is payable in Shares or
Restricted Shares shall not have any rights as a shareholder until such share
certificate or share certificates have been issued to such Participant, and,
if requested, the Participant has given the representation described in
Section 13(a) hereof. Prior to any payment, the Board shall certify that all
of the performance goals or other material terms of the award have been met.
SECTION 9. Performance Shares.
a. Awards and Administration. The Board shall determine the
persons to whom and the time or times at which Performance Shares shall be
awarded, the number of Performance Shares to be awarded to any such person,
the duration of the period (the "performance period") during which, and the
conditions under which, receipt of the Shares will be deferred, and the other
terms and conditions of the award in addition to those set forth below.
The Board may condition the receipt of Shares pursuant to a
Performance Share award upon the attainment of specified performance goals or
such other factors or criteria as the Board shall determine, in its sole
discretion.
The provisions of Performance Share awards need not be the
same with respect to each Participant, and such awards to individual
Participants need not be the same in subsequent years.
b. Terms and Conditions. Performance Shares awarded pursuant
to this Section 9 shall be subject to the following terms and conditions and
such other terms and conditions, not inconsistent with the terms of this Plan,
as the Board shall deem desirable:
(i) Conditions. The Board, in its sole discretion,
shall specify the performance period during which, and the conditions under
which, the receipt of Shares covered by the Performance Share award will be
deferred.
(ii) Share Certificate. At the expiration of the
performance period, if the Board, in its sole discretion, determines that the
conditions specified in the Performance Share agreement have been satisfied, a
share certificate or share certificates evidencing the number of Shares
covered by the Performance Share award shall be issued and delivered to the
Participant. A Participant shall not be deemed to be the holder of Shares, or
to have the rights of a holder of Shares, with respect to the Performance
Shares unless and until a share certificate or share certificates evidencing
such Shares are issued to such Participant.
(iii) Death, Disability or Retirement. Subject to
the provisions of the Plan, if a Participant terminates service with the
Company during a performance period because of death, Disability or
Retirement, such Participant (or his estate) shall be entitled to receive, at
the expiration of the performance period, a percentage of Performance Shares
that is equal to the percentage of the performance period that had elapsed as
of the date of termination, provided that the Board, in its sole discretion,
determines that the conditions specified in the
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Performance Share agreement have been satisfied. In such event, a share
certificate or share certificates evidencing such Shares shall be issued and
delivered to the Participant or the Participant's estate, as the case may be.
(iv) Termination of Service. Unless otherwise
determined by the Board at the time of grant, the Performance Shares will be
forfeited upon a termination of service during the performance period for any
reason other than death, Disability or Retirement.
(v) Change of Control. In the event of a Change of
Control, the Board may, in its sole discretion, cause all conditions
applicable to the Performance Shares to immediately terminate and a share
certificate or share certificates evidencing Shares subject to the Share award
to be issued and delivered to the Participant.
SECTION 10. Performance Units.
a. Awards and Administration. The Board shall determine the
persons to whom and the time or times at which Performance Units shall be
awarded, the number of Performance Units to be awarded to any such person, the
duration of the period (the "performance period") during which, and the
conditions under which, a Participant's right to Performance Units will be
vested, the ability of Participants to defer the receipt of payment of such
Performance Units, and the other terms and conditions of the award in addition
to those set forth below.
A Performance Unit shall have a fixed dollar value.
The Board may condition the vesting of Performance Units
upon the attainment of specified performance goals or such other factors or
criteria as the Board shall determine, in its sole discretion.
The provisions of Performance Unit awards need not be the
same with respect to each Participant, and such awards to individual
Participants need not be the same in subsequent years.
b. Terms and Conditions. Performance Units awarded pursuant
to this Section 10 shall be subject to the following terms and conditions and
such other terms and conditions, not inconsistent with the terms of this Plan,
as the Board shall deem desirable:
(i) Conditions. The Board, in its sole discretion,
shall specify the performance period during which, and the conditions under
which, the Participant's right to Performance Units will be vested.
(ii) Vesting. At the expiration of the performance
period, the Board, in its sole discretion, shall determine the extent to which
the performance goals have been achieved, and the percentage of the
Performance Units of each Participant that have vested.
(iii) Death, Disability or Retirement. Subject to
the provisions of this Plan, if a Participant terminates service with the
Company during a performance period because of death, Disability or
Retirement, such Participant (or the Participant's estate) shall be entitled
to receive, at the expiration of the performance period, a percentage of
Performance Units that is equal to the percentage of the performance period
that had elapsed as of the date of termination, provided that the Board, in
its sole discretion, determines that the conditions specified in the
Performance Unit agreement have been satisfied, and payment thereof shall be
made to the Participant or the Participant's estate, as the case may be.
(iv) Termination of Service. Unless otherwise
determined by the Board at the time of grant, the Performance Units will be
forfeited upon a termination of service during the performance period for any
reason other than death, Disability or Retirement.
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<PAGE>
(v) Change of Control. In the event of a Change of
Control, the Board may, in its sole discretion, cause all conditions
applicable to Performance Units to immediately terminate and cash representing
the full amount of such award to be paid to the Participant.
SECTION 11. Amendments and Termination. The Board may amend,
alter or discontinue the Plan at any time, but no amendment, alteration or
discontinuation shall be made which would impair the rights of a Participant
with respect to an Option, SAR, Restricted Share, Long-Term Performance Award,
Performance Share or Performance Unit which has been granted under the Plan,
without the Participant's consent, or which, without the approval of such
amendment within one year (365 days) of its adoption by the Board, by a
majority of the votes cast at a duly held shareholder meeting at which a
quorum representing a majority of the Company's outstanding voting shares is
present (either in person or by proxy), would:
a. except as expressly provided in the Plan, increase the
total number of Shares reserved for the purposes of the Plan;
b. change the persons or class of persons eligible to
participate in the Plan; or
c. extend the maximum Option term under Section 5(b) of the
Plan.
The Board may substitute new Options for previously granted
Options, including previously granted Options having higher exercise prices.
Subject to the above provisions, the Board shall have broad
authority to amend the Plan to take into account changes in applicable tax
laws and accounting rules, as well as other developments.
SECTION 12. Unfunded Status of Plan. The Plan is intended to
constitute an "unfunded" plan for incentive and deferred compensation. With
respect to any payments not yet made to a Participant by the Company, nothing
contained herein shall give any such Participant any rights that are greater
than those of a general creditor of the Company. In its sole discretion, the
Board may authorize the creation of trusts or other arrangements to meet the
obligations created under the Plan to deliver Shares or payments in lieu of
Shares or with respect to awards hereunder.
SECTION 13. General Provisions.
a. The Board may require each person acquiring Shares or a
Share-based award under the Plan to represent to and agree with the Company in
writing that the Participant is acquiring the Shares or Share-based award for
investment purposes and without a view to distribution thereof and as to such
other matters as the Board believes are appropriate to ensure compliance with
applicable Federal and state securities laws. The certificate evidencing such
award and any securities issued pursuant thereto may include any legend which
the Board deems appropriate to reflect any restrictions on transfer and
compliance with securities laws.
All certificates for Shares or other securities delivered
under the Plan shall be subject to such share-transfer orders and other
restrictions as the Board may deem advisable under the rules, regulations, and
other requirements of the Securities Act of 1933, as amended, the Exchange
Act, any stock exchange upon which the Shares are then listed, and any other
applicable Federal or state securities laws, and the Board may cause a legend
or legends to be put on any such certificates to make appropriate reference to
such restrictions.
b. Nothing contained in the Plan shall prevent the Board
from adopting other or additional compensation arrangements, subject to
shareholder approval if such approval is required; and such arrangements may
be either generally applicable or applicable only in specific cases.
A-14
<PAGE>
c. The adoption of the Plan shall not confer upon any
employee of the Company or a Subsidiary any right to continued employment with
the Company or such Subsidiary, nor shall it interfere in any way with the
right of the Company or such Subsidiary to terminate the employment of any of
its employees at any time.
d. No later than the date as of which an amount first
becomes includable in the gross income of the Participant for Federal income
tax purposes with respect to any award under the Plan, the Participant shall
pay to the Company, or make arrangements satisfactory to the Board 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, 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 Participant.
e. At the time of grant of an award under the Plan, the
Board may provide that the Shares received as a result of such grant shall be
subject to a right of first refusal, pursuant to which the Participant shall
be required to offer to the Company any Shares that the Participant wishes to
sell, with the price being the then Fair Market Value of the Shares, subject
to such other terms and conditions as the Board may specify at the time of
grant.
f. The reinvestment of distributions or dividends in
additional Restricted Shares (or in other types of Plan awards) at the time of
any distribution or dividend payment shall only be permissible if sufficient
Shares are available under Section 3 of the Plan for such reinvestment (taking
into account then outstanding Options and other Plan awards).
g. The Board shall establish such procedures as it deems
appropriate for a Participant to designate a beneficiary to whom any amounts
payable in the event of the Participant's death are to be paid.
h. The Plan and all awards made and actions taken thereunder
shall be governed by and construed in accordance with the laws of the State of
Maryland.
SECTION 14. Effective Date of Plan. This Plan shall become
effective on the date that it is adopted by the Board; provided, however, that
it shall not be an Incentive Stock Option Plan if it is not approved, within
one year (365 days) of its adoption by the Board, by a majority of the votes
cast at a duly held shareholder meeting at which a quorum representing a
majority of Company's outstanding voting shares is present, either in person
or by proxy. The Board may make awards hereunder prior to approval of the
Plan; provided, however, that any and all Incentive Stock Options so awarded
automatically shall be converted into Non-Qualified Stock Options if the Plan
is not approved by shareholders within 365 days of its adoption.
SECTION 15. Term of Plan. No Option, SAR, Restricted Share,
Long-Term Performance Award, Performance Share or Performance Unit shall be
granted pursuant to the Plan on or after the tenth (10th) anniversary of the
latest date of shareholder approval of the Plan, but awards granted prior to
such tenth (10th) anniversary may extend beyond that date.
BRANDYWINE REALTY TRUST
By: _______________________________
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<PAGE>
BRANDYWINE REALTY TRUST
Proxy Solicited On Behalf Of The Board of Trustees
The undersigned shareholder of Brandywine Realty Trust, a Maryland
real estate investment trust (the "Company"), hereby appoints Anthony A.
Nichols, Sr. and Gerard H. Sweeney, and each of them acting individually, as
proxies for the undersigned, with full power of substitution in each of them,
to attend the Annual Meeting of the Shareholders of Brandywine Realty Trust to
be held at 10:00 a.m. on May 15, 1998, and at any postponement or adjournment
thereof, to cast on behalf of the undersigned all votes that the undersigned
is entitled to vote at such meeting and otherwise to represent the undersigned
at the meeting with all powers possessed by the undersigned if personally
present at the meeting.
This Proxy is solicited on behalf of the Board of Trustees. When
properly executed, this Proxy will be voted in the manner directed by the
undersigned shareholder. If this Proxy is executed but no direction is made,
this Proxy will be voted "FOR" the election of the nominees for Trustee listed
on the reverse side hereof, and "FOR" each of the other proposals as set forth
in the Proxy Statement. This Proxy also delegates discretionary authority with
respect to any other business which may properly come before the meeting or
any postponement or adjournment thereof.
The undersigned hereby acknowledges receipt of the Notice of Annual
Meeting of Shareholders and of the accompanying Proxy Statement and revokes
any Proxy previously submitted with respect to the meeting.
(Continued and to be dated and signed.)
BRANDYWINE REALTY TRUST
P.O. BOX [ ]
NEW YORK, NY 10203-0354
<PAGE>
<TABLE>
<S> <C> <C> <C>
PROPOSAL 1. FOR all nominees |_| WITHHOLD AUTHORITY |_| EXCEPTIONS |_|
(Election of Trustees): listed below to vote for all nominees listed below
</TABLE>
Nominees: Anthony A. Nichols, Sr., Gerard H. Sweeney, Warren V. Musser, Walter
D'Alessio and Charles P. Pizzi (INSTRUCTIONS: To withhold authority to vote
for any nominee, mark the "Exceptions" box and write that nominee's name in
the space provided below.)
Exceptions _____________________________________________________________________
PROPOSAL 2: (APPROVE THE AMENDMENT TO THE AMENDED AND RESTATED
DECLARATION OF TRUST OF THE COMPANY, as described in the
accompanying Proxy Statement). The Board of Trustees
recommends a vote "FOR" approval of the Amendment to the
Amended and Restated Declaration of Trust.
FOR |_| AGAINST|_| ABSTAIN |_|
PROPOSAL 3: (APPROVE ADOPTION OF THE AMENDED AND RESTATED 1997 LONG-TERM
INCENTIVE PLAN, as described in the accompanying Proxy
Statement). The Board of Trustees recommends a vote "FOR"
approval of the adoption of the Amended and Restated 1997
Long-Term Incentive Plan.
FOR |_| AGAINST|_| ABSTAIN |_|
Change of |_|
Address and or
Comments Mark
Here
Note: Please sign this proxy exactly as name(s)
appear on your stock certificate. When signing
as attorney-in-fact, executor, administrator,
trustee or guardian, please add your title as
such, and if signer is a corporation, please
sign with full corporate name by a duly
authorized officer or officers and affix the
corporate seal. Where stock is issued in the
name of two (2) or more persons, all such
persons should sign.
Date:____________________________________, 1998
---------------------------------------------
Signature of Shareholder
---------------------------------------------
Signature of Shareholder
Votes must be indicated (x) in Black or Blue
ink. |_|
Please date and sign your Proxy on this side and
return it promptly.
