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designee of LF Strategic Realty
Investors L.P. (LFSRI), a fund managed by LFREI and from whose affiliates the Company acquired a portfolio
of properties in September 1998. LFSRI has a contractual right to designate a nominee to serve on the Board, and the
Company has agreed to use reasonable efforts
to cause the nominee to be elected to the Board. Mr. Larson has agreed to
resign from the Board upon LFSRIs request.
Charles P. Pizzi, Trustee.
Mr. Pizzi was first elected a Trustee on August 22, 1996. Mr. Pizzi is the President and Chief Executive Officer
of Tasty Baking Company, a position he assumed on October 7, 2002. Mr. Pizzi served as President and Chief
Executive Officer of the Greater Philadelphia Chamber of Commerce from 1989 until October 7, 2002. Mr. Pizzi
is a Director of Vestaur Securities, Inc. and serves on a variety of civic, educational, charitable, and other
Boards of Directors, including Drexel University, Philadelphia Stock Exchange, Independence Blue Cross, the
United Way of Southeastern Pennsylvania and Day & Zimmermann, Inc.
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Committees of the Board of Trustees |
The Board of Trustees has standing Audit, Corporate Governance, Compensation and Executive Committees.
Audit Committee. The Audit Committee currently
consists of Messrs. DAlessio, Pizzi and Axinn, each of whom is independent as the term independent is defined in the
listing standards of the New York Stock Exchange. The Audit Committee assists the Board of Trustees in overseeing:
(i) the integrity of the Companys financial statements; (ii) the Companys compliance with legal
and regulatory requirements; (iii) the independence and qualifications of the Companys independent auditors; and
(iv) the performance of the Companys internal audit function and independent auditors. The Audit Committees
charter was adopted by the full Board in December 1999 and amended in 2002. A copy of the charter, as amended, is attached
to this Proxy Statement as Appendix A. The Audit Committee held eight meetings in 2002. In addition, the Audit Committee
held two meetings in 2003 to discuss the 2002 audit with KPMG LLP, the Companys independent public accountants.
Corporate Governance Committee. The Corporate
Governance Committee currently consists of Messrs. Larson, Aloian and DAlessio. The Corporate Governance Committee:
(i) identifies individuals qualified to become Board members and recommends to the Board the trustee nominees
for each annual meeting of shareholders; (ii) recommends to the Board any changes in the Companys Corporate
Governance Principles; (iii) leads the Board in its annual review of the Boards performance, and makes
recommendations to the Board regarding Board organization, membership, function and effectiveness, as well as
committee structure, membership, function and effectiveness; (iv) recommends to the Board trustee nominees for
each Board committee; (v) reviews the Companys efforts to promote diversity among trustees, officers,
employees and contractors; and (vi) arranges for an orientation for all trustees. In making its recommendations
as to nominees for election to the Board, the Corporate Governance Committee may consider, in its sole judgment,
recommendations of the President and Chief Executive Officer, senior executives and shareholders. Shareholders
desiring to recommend nominees should submit their recommendations in writing to Brad A. Molotsky, Secretary,
Brandywine Realty Trust, 401 Plymouth Road, Plymouth Meeting, PA 19462. Recommendations should include
pertinent information concerning the proposed nominees background and experience.
Three meetings of the Corporate Governance Committee were held in 2002.
Compensation Committee.
The Compensation Committee currently consists of Messrs. DAlessio, Pizzi and Aloian. The
Compensation Committee is authorized to determine compensation for the Companys executives.
Formal action on 2002 executive compensation was taken by the full Board (with interested members
of the Board abstaining) upon the recommendation of the Compensation Committee. One meeting of the
Compensation Committee was held in 2002 and one meeting was held in February 2003 to address 2002
executive compensation.
Executive Committee.
The Executive Committee currently consists of Messrs. Nichols, Sweeney, Aloian, DAlessio and Pizzi.
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); (iii) recommend to shareholders any action that requires
shareholder approval; (iv) amend the Bylaws of the Company; and (v) approve any merger or share
exchange which does not require shareholder approval. Five meetings of the Executive Committee were held in 2002.
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The Trustees held six meetings in 2002.
Each incumbent Trustee attended at least 75% of the meetings of the Board of Trustees and meetings held by all
committees on which such Trustee served.
During 2002, the Company paid its Trustees
who are not officers of the Company fees for their services as Trustees. These Trustees received an annual fee of
$35,000; 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. Non-employee Trustees may elect to receive up to all of their annual
fee in Common Shares. Trustees who are employees of the Company receive no separate compensation for services as a
Trustee or committee member.
Consistent with its ongoing
commitment to corporate governance, the Board, upon the recommendation of the Corporate Governance
Committee, took the following actions during 2002:
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|
Corporate Governance Principles: Adopted Corporate
Governance Principles. The Corporate Governance Principles reflect the Boards commitment to shareholder
interests and address a variety of matters, such as: (i) Board and Board committee responsibilities;
(ii) size, composition and operations of the Board and Board committees; (iii) Trustee independence;
(iv) qualifications for election to the Board; (v) evaluation of Trustees; and (vi) share ownership
requirements for Company executives. |
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Trustee Independence: Confirmed the independence of
each of the non-employee Trustees. In undertaking its annual review of Trustee independence, the Board
considered transactions and relationships during the current and prior year between each Trustee and the
Company and its affiliates, including those reported under Certain Relationships and Related
Transactions below. As a result of its review, the Board affirmatively determined that all
non-employee Trustees are independent of the Company and its management under the standards set
forth in the Corporate Governance Principles and that the Audit Committee, Corporate Governance
Committee and Compensation Committee are comprised exclusively of independent Trustees. |
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Lead Independent Trustee: Appointed Mr. DAlessio
as the lead independent Trustee, with responsibility to preside at executive sessions of non-management Trustees.
Shareholders and other parties interested in communicating directly with the lead Trustee or with the non-management
Trustees as a group may do so by writing to Lead Trustee, Brandywine Realty Trust, 401 Plymouth Road, Plymouth Meeting,
Pennsylvania 19462. |
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Share Ownership Requirements: Adopted minimum share
ownership requirements for Company executives. Officers are required to own, within five years of their election
as an officer but no earlier than May 2007, Common Shares having a market value at least equal to the following
multiples of their base salary: (i) six times for the President and Chief Executive Officer;
(ii) four times for Senior Vice Presidents; and (iii) three times for Vice Presidents and other officers. |
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Code of Conduct: Adopted a Code of Business
Conduct and Ethics applicable to Company executives, employees and Trustees. The Code of Business
Conduct and Ethics reflects and reinforces the Companys commitment to integrity in the conduct
of its business. Any waiver of the Code for executive officers or Trustees may only be made by the
Board or Audit Committee. |
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Audit Committee: Expanded the charter of the Audit Committee,
as reflected in Exhibit A to this Proxy Statement. |
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Corporate Governance Committee: Vested exclusive authority in the Corporate Governance Committee to retain any search firm used to identify Trustee candidates. |
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Compensation Committee: Vested exclusive authority in the Compensation Committee to engage compensation consultants. |
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Website Disclosures:
Directed the posting on the Companys website (www.brandywinerealty.com)
of the charters of each of the Audit, Corporate Governance, Compensation
and Executive Committees, the Corporate Governance Principles and the
Code of Business Conduct and Ethics. A copy of each of these documents
may also be obtained upon request from the Companys Secretary.
|
In furtherance of its
commitment to full and transparent disclosure of the Companys financial
position and operating results, management has formed a disclosure
committee. This committee, which is comprised of Company executives
with extensive knowledge of all aspects of the Company, meets regularly to
ensure the quality and timeliness of the Companys public disclosures.
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EXECUTIVES AND EXECUTIVE COMPENSATION |
The following are biographical summaries of the executive officers of the Company who are not Trustees:
Christopher P. Marr, Senior Vice President and Chief Financial Officer. Mr. Marr, age 38, joined the Company in August 2002. Prior to joining the Company, Mr. Marr was employed by Storage USA, Inc. from 1994 to 2002. In 1998 Mr. Marr became Chief Financial Officer at Storage USA, Inc. Prior to its acquisition in April 2002 by Security Capital Group, Inc., Storage USA was a publicly traded Real Estate Investment Trust with a total market capitalization of approximately $2.0 billion. From 1986 until 1994, Mr. Marr was employed by Coopers & Lybrand.
H. Jeffrey DeVuono, Senior Vice President Leasing. Mr. DeVuono, age 37, 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.
Anthony A. Nichols, Jr.,
Senior Vice President Marketing & Development. Mr. Nichols, age 36, became an officer of the Company on August 22, 1996.
Previously Mr. Nichols was employed at The Nichols Company, a private real estate development company, which he joined in 1989
as a marketing representative. In 1992, Mr. Nichols became an Assistant Vice President Property Management of The Nichols Company and, in 1995, he became Vice President Marketing. Mr. Nichols is a member of the National Board of Directors of NAIOP. Mr. Nichols is the son of Anthony A. Nichols, Sr., the Companys Chairman of the Board.
Anthony S. Rimikis, Senior Vice President Development & Construction. Mr. Rimikis, age 54, became an executive of the Company on October 13, 1997. From January 1994 until October 1997, Mr. Rimikis served as Vice President of Emmes Realty Services, Inc., a New York-based real estate services company, where he managed the companys 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.
George D. Sowa, Senior Vice President Leasing. Mr. Sowa, age 43, became an officer of the Company on April 13, 1998. Prior to joining the Company, Mr. Sowa was employed by Keating Development Company, a real estate development firm, from 1997 to 1998 as a Development Manager. Mr. Sowa was also employed by LCOR, Inc. as Director of Development/Operations from 1989 to 1997.
Barbara L. Yamarick, Senior Vice President Tenant Services & Administration. Ms. Yamarick, age 50, 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, and has over 28 years of experience in property management.
Bradley W. Harris, Vice President and Chief Accounting Officer. Mr. Harris, age 43, became Vice President and Chief Accounting Officer of the Company on September 20, 1999. Mr. Harris was employed by Envirosource, Inc. from September 1996 to May 1999 as Controller. Prior to joining Envirosource, he was employed by Ernst & Young, LLP for over 15 years, most recently as a Senior Manager.
Brad A. Molotsky, General Counsel and Secretary. Mr. Molotsky, age 38, became General Counsel and Secretary of the Company in October 1997. Prior to joining the Company, Mr. Molotsky was an attorney at Pepper Hamilton LLP, Philadelphia, Pennsylvania.
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Cash and Non-Cash Compensation Paid to Executive Officers |
The following table sets forth information concerning the compensation paid by the Company for the years ended December 31, 2002, 2001 and 2000: (i) to the Companys President and Chief Executive Officer, (ii) to each of the four other most highly compensated executive officers in 2002 who were serving as executive officers at December 31, 2002 and (iii) to the Companys Senior Vice President and Chief Financial Officer (the Named Executive Officers).
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Summary Compensation Table |
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Annual Compensation |
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Long-Term Compensation |
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Awards |
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Payouts |
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Name and Principal Position |
|
Year (1) |
|
Salary |
|
Bonus (3) |
|
Other
Annual
Compensation |
|
Restricted
Share
Awards (5) |
|
Securities
Underlying
Options (#) |
|
LTIP
Payouts
($) |
|
All
Other
Compensation
($) (10) |
|
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|
|
|
|
|
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|
|
|
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Anthony A. Nichols, Sr. |
|
2002 |
|
$ |
351,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
378,743 |
(8) |
$ |
24,034 |
|
|
|
2001 |
|
$ |
270,000 |
|
$ |
256,500 |
|
|
|
|
|
|
|
|
|
|
$ |
362,868 |
(8) |
$ |
27,504 |
|
|
|
2000 |
|
$ |
253,000 |
|
$ |
236,429 |
|
|
|
|
$ |
750,000 |
(6) |
|
|
|
|
|
|
$ |
24,230 |
|
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|
Gerard H. Sweeney |
|
2002 |
|
$ |
325,000 |
|
$ |
550,000 |
|
$ |
14,558 |
(4) |
$ |
809,802 |
|
|
100,000 |
(7) |
$ |
568,111 |
(9) |
$ |
30,911 |
|
|
|
2001 |
|
$ |
325,000 |
|
$ |
333,750 |
|
$ |
8,834 |
(4) |
|
|
|
|
|
|
$ |
544,301 |
(9) |
$ |
33,698 |
|
|
|
2000 |
|
$ |
300,000 |
|
$ |
283,714 |
|
$ |
5,956 |
(4) |
$ |
1,500,000 |
(6) |
|
|
|
|
|
|
$ |
28,907 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Christopher P. Marr |
|
2002 |
(2) |
$ |
104,183 |
|
$ |
115,000 |
|
|
|
|
$ |
200,000 |
|
|
|
|
|
|
|
$ |
150,000 |
(11) |
|
|
2001 |
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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& Chief Financial Officer
|
|
2000 |
|
|
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H. Jeffrey DeVuono |
|
2002 |
|
$ |
200,000 |
|
$ |
150,000 |
|
|
|
|
$ |
149,499 |
|
|
|
|
|
|
|
$ |
13,550 |
|
Senior Vice President-Leasing |
|
2001 |
|
$ |
175,000 |
|
$ |
130,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
14,730 |
|
|
|
2000 |
|
$ |
152,917 |
|
$ |
104,000 |
|
|
|
|
|
$ 30,000 |
|
|
|
|
|
|
|
$ |
12,659 |
|
|
|
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|
|
|
|
|
|
|
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|
|
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George D. Sowa |
|
2002 |
|
$ |
200,000 |
|
$ |
150,000 |
|
$ |
3,973 |
(4) |
$ |
149,499 |
|
|
|
|
|
|
|
$ |
13,402 |
|
Senior Vice President |
|
2001 |
|
$ |
175,000 |
|
$ |
130,000 |
|
$ |
3,442 |
(4) |
|
|
|
|
|
|
|
|
|
$ |
14,730 |
|
|
|
2000 |
|
$ |
152,917 |
|
$ |
104,000 |
|
$ |
2,753 |
(4) |
$ |
30,000 |
|
|
|
|
|
|
|
$ |
13,421 |
|
|
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|
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|
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Brad A. Molotsky |
|
2002 |
|
$ |
195,000 |
|
$ |
150,000 |
|
$ |
6,617 |
(4) |
$ |
97,167 |
|
|
|
|
|
|
|
$ |
13,727 |
|
General Counsel
and Secretary |
|
2001 |
|
$ |
190,000 |
|
$ |
130,000 |
|
$ |
5,736 |
(4) |
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|
|
|
|
|
|
|
|
$ |
15,600 |
|
|
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2000 |
|
$ |
175,000 |
|
$ |
110,000 |
|
|
|
|
$ |
30,000 |
|
|
|
|
|
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$ |
13,679 |
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(1) |
Compensation is reportable in the year in which the compensable service was performed even if the compensation was paid in a subsequent year. |
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(2) |
Mr. Marr became an employee of the Company on August 15, 2002. |
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(3) |
Bonus amounts for 2002,
which were approved by the Board of Trustees in accordance with the
Companys executive compensation guidelines, were paid as follows:
(i) 25% either in Common Shares or a Common Share equivalent in an
investment account established under a deferred compensation plan,
with each share or share equivalent valued at $19.90 per share (the
closing price of a Common Share on February 27, 2003) and (ii) 75%,
at the election of the applicable executive officer, in any combination
of cash and Common Shares (or a Common Share equivalent under the deferred
compensation plan), with each share or share equivalent valued at 85%
of the closing price of a Common Share on February 27, 2003. The portion
of the Common Shares (or the Common Share equivalents) received as
a result of the discounted purchase price is subject to transfer restrictions
until December 31, 2004. Bonus amounts for 2001 and 2000 were approved
and paid in a manner comparable to the manner described above for 2002
bonus amounts. |
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(4) |
Represents the difference between the price paid for the Common Shares and the market price of such shares on the date of acquisition. |
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(5) |
The holder of restricted
shares is entitled to vote the shares and to receive distributions
on the shares. Restricted shares awarded in 2002 vest in five equal
annual installments, with the first installment having vested on January
1, 2003. All restricted shares vest upon a change of control of the
Company. The total number of unvested restricted Common Shares held
by each Named Executive Officer at December 31, |
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2002 and the value of
such unvested restricted Common Shares at December 31, 2002 are shown
in the following table: |
Name |
|
Total Number of Unvested Restricted Common Shares |
|
Aggregate Value at December 31, 2002 |
|
|
|
|
|
|
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Anthony A. Nichols, Sr. |
|
|
25,840 |
|
$ |
563,570 |
|
|
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Gerard H. Sweeney |
|
|
209,053 |
|
$ |
4,559,446 |
|
|
Christopher P. Marr |
|
|
8,969 |
|
$ |
195,614 |
|
|
H. Jeffrey DeVuono |
|
|
12,854 |
|
$ |
280,346 |
|
|
George D. Sowa |
|
|
12,458 |
|
$ |
271,709 |
|
|
Brad A. Molotsky |
|
|
9,966 |
|
$ |
217,358 |
|
|
(6) |
As of January 2, 2003: (i) 62.5% of the 1998 restricted share award to Mr. Sweeney had vested, and the remaining 37.5% vests in three equal annual installments commencing on January 2, 2004; (ii) 60.4% of the 2000 restricted share award to Mr. Sweeney had vested, and the balance vests on January 2, 2004; and (iii) 20% of the restricted share award to Mr. Sweeney in 2002 had vested, and the remaining 80% vests in four equal annual installments commencing on January 1, 2004. |
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(7) |
The options are exercisable for Common Shares, and vest in three equal annual installments. The first one-third vested on January 1, 2003. |
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(8) |
In February 2000, the
Company loaned Mr. Nichols, Sr. $1.0 million solely to enable him to
purchase 64,000 Common Shares. The loan bears interest at the lower
of the Companys cost of funds or a rate based on the dividend payable on the Common Shares, but not to exceed 10% per annum. The loan originally had a four-year term and was subject to forgiveness over a three-year period, with the amount of forgiveness tied to the Companys total shareholder return compared to the total shareholder return of a peer group of companies. The loan was also subject to forgiveness in the event of a change of control of the Company. Mr. Nichols may repay the loan at maturity by surrendering Common Shares valued at his initial per share purchase price ($15.625). During 2001, one-third of the principal amount of the loan, together with accrued interest thereon, was forgiven, based on the Companys
total shareholder return compared to the total shareholder return of
the peer group companies. The replacement employment agreement that
Mr. Nichols entered into with the Company, effective December 31, 2001,
provided for the forgiveness of the outstanding balance of the loan
as of December 31, 2001 ($666,667), together with accrued interest,
in equal amounts on April 1, 2002 and April 1, 2003 so long as Mr.
Nichols was not in breach of the replacement agreement as of the applicable
forgiveness date. Accordingly, as of the date of this Proxy Statement,
the loan is no longer outstanding. |
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(9) |
In February 2000, the
Company loaned Mr. Sweeney $1.5 million solely to enable him to purchase
96,000 Common Shares. The loan has a four-year term and bears interest
at the lower of the Companys cost of funds or a rate based on the dividend payable on the Common Shares, but not to exceed 10% per annum. The loan is subject to forgiveness over a three-year period, with the amount of forgiveness tied to the Companys total shareholder return compared to the total shareholder return of a peer group of companies. The loan is also subject to forgiveness in the event of a change of control of the Company. Mr. Sweeney may repay the loan at maturity by surrendering Common Shares valued at his initial per share purchase price ($15.625). During each of 2001 and 2002, one-third of the principal amount of the loan, together with accrued interest thereon, was forgiven in accordance with the terms of the loan, based on the Companys
total shareholder return compared to the total shareholder return of
the peer group companies. |
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(10) |
Includes employer matching
and profit sharing contributions to the Companys 401(k) retirement
and profit sharing plan and deferred compensation plan. |
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(11) |
Represents a relocation allowance. |
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2003 Restricted Share Awards |
On February 27, 2003, the Named Executive Officers were awarded an aggregate of 68,785 restricted Common Shares. 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 February 27, 2003 ($19.90).
Name |
|
Number of Shares |
|
Dollar Value |
|
|
|
|
|
Gerard H. Sweeney |
|
|
40,830 |
|
|
$ |
812,517 |
|
Christopher P. Marr |
|
|
10,365 |
|
|
$ |
206,263 |
|
Henry J. DeVuono |
|
|
5,026 |
|
|
$ |
100,017 |
|
George D. Sowa |
|
|
5,026 |
|
|
$ |
100,017 |
|
Brad A. Molotsky |
|
|
7,538 |
|
|
$ |
150,006 |
|
The restricted Common Shares vest in five equal annual installments commencing on January 1, 2004, based on continued employment with the Company, subject to acceleration of vesting upon a change in control of the Company, death or disability. During the period the restricted Common Shares have not vested, the applicable executive is entitled to vote the shares and to receive distributions paid on Common Shares. Vesting of the restricted Common Shares is not subject to performance-based conditions.
Stock Options Granted to Executive Officers During Last Fiscal Year |
During the year ended December 31, 2002, the Company did not award options or share appreciation rights to any of its employees other than as indicated in the table below.
Name |
|
Number of
Common Shares Underlying Options Granted (#)(1) |
|
% of Total Options/ SARs Granted to Employees in Fiscal Year |
|
Exercise Price ($/sh) |
|
Expiration Date |
|
Grant Date Present Value ($)(2) |
|
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Gerard H. Sweeney President and Chief Executive Officer |
|
|
100,000 |
|
|
100% |
|
|
$19.50 |
|
|
8/22/2005 |
|
|
$251,300 |
|
|
(1) |
Options vest ratably over three years, subject to acceleration of vesting under certain circumstances, such as upon a change in control of the Company. |
|
|
(2) |
The grant date present value for the options was determined using the Black-Scholes option pricing model. The assumptions used in calculating the Black-Scholes present value for the option grant were as follows: (a) a risk-free interest rate of 2.681% (based on the yield on a U.S. Treasury security with a maturity of five years (the life of the option)); (b) a dividend yield of 8.38%; (c) volatility of the Common Shares of 28.0% (based on the daily Common Share price for one year prior to the option grant); and (d) an option term of five years. The Black-Scholes option pricing model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable. The amount realized from an employee stock option ultimately depends on the market value of the Common Shares on the date of exercise. |
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Stock Options Held by Executive Officers at December 31, 2002 |
The following table sets forth certain information regarding options for the purchase of Common Shares that were exercised by Named Executive Officers during the year ended December 31, 2002 and the unexercised options held by Named Executive Officers at December 31, 2002.
Aggregated Options/SAR Exercises in Last Fiscal Year And Fiscal Year End Option/SAR Values |
Name |
|
Shares
Acquired
on
Exercise (#) |
|
Value
Realized
($) |
|
Number
of Securities
Underlying
Unexercised
Options/SAR at FY-
End (#) Exercisable/
Unexercisable (1) |
|
Value
of
Unexercised In-the-
Money Options at
FY End ($)
Exercisable/
Unexercisable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Anthony
A. Nichols, Sr.
Chairman of the Board |
|
|
56,773 |
|
$ |
259,709 |
|
|
339,480 / 339,478 |
|
|
$0 / $0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gerard
H. Sweeney
President and Chief Executive Officer |
|
|
N/A |
|
|
N/A |
|
|
555,912 / 609,244 |
|
|
$457,999 / $231,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Christopher
P. Marr
Senior Vice President & Chief Financial Officer |
|
|
N/A |
|
|
N/A |
|
|
0 / 0 |
|
|
$0 / $0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
H.
Jeffrey DeVuono
Senior Vice President-Leasing |
|
|
N/A |
|
|
N/A |
|
|
26,574 / 7,350 |
|
|
$0 / $0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
George
D. Sowa
Senior Vice President |
|
|
N/A |
|
|
N/A |
|
|
16,974 / 5,657 |
|
|
$0 / $0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brad A. Molotsky
General Counsel and Secretary |
|
|
N/A |
|
|
N/A |
|
|
36,974 / 10,657 |
|
|
$0 / $0 |
|
|
(1) |
Upon a change of control of the Company, unexercised options held by Messrs. DeVuono, Sowa and Molotsky convert into 3,958, 2,640 and 2,640 Common Shares, respectively. Similarly, 678,958 of the options held by Mr. Nichols, Sr. and 1,018,489 of the options held by Mr. Sweeney convert into 79,208 and 118,812 Common Shares, respectively, upon a change of control. The number of Common Shares issuable upon a change of control is subject to a proportional reduction in the event of any prior option exercise. |
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Equity Compensation Plan Information as of December 31, 2002 |
|
|
|
|
|
|
|
|
|
(a) |
|
(b) |
|
(c) |
|
|
|
|
|
|
|
Plan category |
|
Number of securities to be issued upon exercise of outstanding options, warrants and rights |
|
Weighted-average exercise price of outstanding options, warrants and rights |
|
Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) |
|
|
|
|
|
|
|
|
|
|
Equity
compensation
plans approved by
security holders (1) |
|
|
2,876,521 |
|
$ |
26.70 |
(2) |
|
1,391,436 |
|
Equity
compensation
plans not approved by
security holders |
|
|
|
|
|
|
|
|
|
|
Total |
|
|
2,876,521 |
|
$ |
26.70 |
(2) |
|
1,391,436 |
|
|
(1) |
Relates to the Companys
1997 Long-Term Incentive Plan. |
|
|
(2) |
Weighted-average exercise price of outstanding options; excludes restricted Common Shares. |
Mr. Sweeney has entered into an employment
agreement with the Company. In May 2002, the Board approved an extension of the term of the employment agreement
through May 7, 2005. The revised employment agreement provides that if the term of Mr. Sweeneys employment
is not extended upon expiration, the Company will be obligated to provide him with a severance benefit during the
one-year period following expiration of the term equal to the sum of his prior year salary and bonus as well as
health care benefits. The revised employment agreement does not alter the severance benefits to which Mr. Sweeney
would be entitled if his employment is terminated by the Company prior to expiration of the term. Mr. Sweeneys
agreement provides for an annual base salary of $325,000. The agreement entitles Mr. Sweeney to a payment equal to
three times the sum of his annual salary and bonus: (i) upon termination of his employment without cause, (ii) upon
his resignation for
good reason or (iii) upon his death. Resignation by Mr. Sweeney within six months following a reduction in his
salary, an adverse change in his status or responsibilities, certain changes in the location of the Companys
headquarters or a change in control of the Company would each constitute a resignation for good reason.
Effective as of December 31, 2001,
Mr. Nichols, Sr.s then-existing employment agreement was terminated and
replaced with a new agreement. The replacement agreement requires Mr. Nichols
to provide advice on strategic planning, business development
initiatives and special research projects. The agreement has a term that extends
through December 31, 2004 and provides for an annual salary equal to $360,996.
The aggregate annual salary payable during the term of
the replacement agreement represents the total approximate amount that would
have been paid to Mr. Nichols in combined salary and bonus during the term of
his previous agreement. Under the replacement agreement, the Company:
(i) accelerated the vesting restrictions on all restricted Common Shares awarded
to Mr. Nichols in 1998 that remained unvested (99,010 shares at December 31,
2001); (ii) provided that all of the restricted Common Shares
awarded to Mr. Nichols for 2000 will vest by January 1, 2004 if Mr. Nichols is
in compliance with the replacement agreement on the applicable vesting dates;
and (iii) agreed that options awarded to Mr. Nichols in 1998 and
exercisable for an aggregate of 678,958 Common Shares (at exercise prices ranging
from $25.25 to $29.04 per share) would remain outstanding through the original
maximum term (January 2, 2008). The
14
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replacement
agreement preserves the feature in Mr. Nichols existing options
that provides for conversion of the options into 79,208 Common Shares
upon a change of control of the Company. In the event of the death or
disability of Mr. Nichols, or a change
of control of the Company, prior to expiration of the term of the replacement
agreement, Mr. Nichols would be entitled to receive a payment equal to
$1,053,000.
The Company has entered into severance agreements
with Messrs. Marr, DeVuono, Sowa and Molotsky. These agreements provide that, if such executives employment is
terminated (or constructively terminated) within one year following the effective date of a change of control of the Company,
such executive will be entitled to salary continuation for a period of one and a half years, from the effective date of
such executives termination. The Company has entered into similar agreements with nine other officers of the Company.
The Company maintains a Section 401(k) and Profit Sharing Plan (the 401(k) Plan) covering eligible employees. The 401(k) Plan permits eligible employees to defer up to a designated percentage of their annual compensation, subject to certain limitations imposed by the Internal Revenue Code. The employees elective deferrals are immediately vested and non-forfeitable upon contribution to the 401(k) Plan. The Company reserves the right to make matching contributions or discretionary profit sharing contributions. The 401(k) Plan is designed to qualify under Section 401 of the Code so that contributions by employees or the Company 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 Company, if any, will be deductible by the Company when made.
Deferred Compensation Plan |
The Companys Executive Deferred
Compensation Plan (the EDCP) provides senior Company executives with the opportunity to defer a portion
of their base salary and bonus on a tax-deferred basis. The Company reserves the right to make matching contributions
on deferred amounts and to make a discretionary profit sharing contribution on compensation in excess of $200,000.
Participants elect the timing and form of distribution. Distributions are in the form of a lump sum or installments
and can commence in-service, after a required minimum deferral period, or upon retirement. Participants elect the
manner in which their accounts are deemed invested during the deferral period. One of the deemed investment options
is a hypothetical investment fund consisting of Common Shares. Because the EDCP is a nonqualified deferred
compensation plan, the Company is not obligated to invest deferred amounts in the selected manner or to set aside any
deferred amounts in trust. In general, compensation subject to a deferral election, matching contributions and profit
sharing contributions are not includible in a participants taxable income for federal income tax purposes until
the participant receives a distribution from the EDCP. The Company is not entitled to a deduction until such amounts
are distributed.
Compensation Committee Interlocks and Insider Participation |
The Compensation Committee of the Board of Trustees
is currently comprised of Charles P. Pizzi, Walter DAlessio and D. Pike Aloian, none of whom is an executive of the
Company. All actions taken by the Committee relating to 2002 compensation were ratified and approved by the entire Board
(with interested members abstaining).
Certain Relationships and Related Transactions |
Board Designation Rights. As part of the Companys acquisition of a portfolio of office, industrial and mixed-use properties from LFSRI and its affiliates in 1998, LFSRI obtained a contractual right to designate a nominee to serve on the Board, and the Company has agreed to use reasonable efforts to cause the nominee (currently Mr. Larson) to be elected to the Board. As part of the Companys issuance of Series B Preferred Shares to Five Arrows Realty Securities III L.L.C. in 1999, Five Arrows obtained the right to elect a Trustee to the Board. Mr. Aloian has been elected to the Board as the designee of Five Arrows.
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Employee Share Purchase Loans. In 1998, the Board authorized the Company to make loans totaling $5.0 million to enable employees of the Company to purchase Common Shares. In 2001, the Board increased the loan authorization by $2.0 million. The following executive officers participated in the loan program (with the principal balances shown at December 31, 2002): Mr. Sweeney ($1,293,008), Mr. DeVuono ($49,993), Mr. Rimikis ($197,471), Ms. Yamarick ($275,005), Mr. Nichols, Jr. ($199,171), Mr. Sowa ($74,832), Mr. Molotsky ($520,399) and Mr. Harris ($100,005). Proceeds of these loans were used solely to enable these executive officers to purchase Common Shares. The loans have five-year terms, are full recourse and are secured by the Common Shares purchased. Interest accrues on the loans at the lower of the interest rate borne on borrowings under the Companys revolving credit facility or a rate based on the dividend payments on the Common Shares and is payable quarterly. For the quarter ended December 31, 2002, this rate was 2.92% per annum. The principal of the loans is payable at the earlier of the stated maturity date and 90 days following termination of the applicable executives employment with the Company.
Advisory Services. The Company engages various consulting and investment banking firms in the ordinary course of its business to provide it with advice on capital raising, mortgage financings, acquisitions, dispositions and joint ventures. Legg Mason Real Estate Services, Inc., of which Mr. DAlessio is Chairman and Chief Executive Officer, and Lazard Freres & Co. LLC, of which Mr. Larson is a Managing Director, occasionally provide services to the Company. For the year ended December 31, 2002, the amounts paid by the Company to these two firms were less than $100, in the case of Legg Mason, and $31,388 in the case of Lazard.
Redemption of Units. In 1998, Mr. Axinn, a Trustee, acquired Class A units of limited partnership in Brandywine Operating Partnership, L.P. (the Operating Partnership) in exchange for a contribution of a portfolio of properties to the Operating Partnership. The Operating Partnership is obligated to redeem, at the request of Mr. Axinn, each Class A unit for one Common Share or for the cash equivalent, at the option of the Company. As of the date of this Proxy Statement, Mr. Axinn owns 811,984 units. Mr. Axinn redeemed for cash 200,000 units during the second quarter of 2002 in accordance with the terms of the units.
Compensation Committee Report on Executive Compensation |
Compensation Philosophy. The Compensation Committees compensation policies with respect to the Companys 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 Companys financial success. In establishing overall compensation for executive officers, the Committee considers the Companys financial performance and industry position, compensation levels and practices at peer companies, general industry data and the recommendations of third-party consultants. The President and Chief Executive Officer of the Company establishes the base salaries for executives of the Company, other than for himself, and recommends to the Compensation Committee the annual compensation and long-term incentive awards for other Company executives. The Committee exercises judgment and discretion in the information it analyzes and considers.
The Companys compensation program for executives consists of three principal components:
|
|
|
|
|
a performance-based annual bonus, payable in cash and Common Shares (or Common Share equivalents under the deferred compensation plan); and |
|
|
|
|
|
periodic grants of equity-based compensation, such as restricted shares. |
The Compensation Committee believes that this approach links a significant portion of executive compensation to personal performance and to Company performance. In addition, equity-based compensation such as restricted share awards link a significant portion of long-term compensation to share price appreciation realized by all of the Companys shareholders.
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Annual and Short-Term Compensation.
The Compensation Committee adopted guidelines for determining 2002 year-end bonuses for the President and Chief Executive Officer and other senior executives
of the Company. The guidelines established target bonus amounts. The target amounts are expressed as a percentage of an executives base salary. The 2002
targeted bonus amounts were 125% of base salary, in the case of the President and Chief Executive Officer, and 50% to 75% of base salary for other Company
executives. The guidelines provided that the 2002 bonus amounts would be based on a combination of Company performance measures and, in the case of executives
other than the President and Chief Executive Officer, divisional performance measures. For the President and Chief Executive Officer, these measures, and their
unadjusted weightings, were: (i) the Companys total shareholder return relative to a peer group of companies (20%); (ii) growth in the Companys per
share funds from operations relative to a targeted level (30%); and (iii) achievement of the Companys capital recycling objectives (50%). Under the
guidelines, for 2002, the Companys total shareholder return achievement exceeded 200%; the Companys growth in funds from operations relative to a
target was 98.9%; and the Company met its capital recycling objectives. Application of these achievements to the unadjusted weightings for the three measures
resulted in a bonus entitlement for the President and Chief Executive Officer equal to 119.67% of his maximum bonus entitlement (125% of base salary), or $486,000.
In further recognition of Mr. Sweeneys contributions to the Company, the Board authorized an additional $64,000 bonus to Mr. Sweeney.
The guidelines provided that a minimum of 25% of
the year-end bonus for each executive
must be taken in Common Shares (or Common Share equivalents under the Companys deferred compensation plan).
Additionally, executives have the ability to
take all or a portion of the balance of the year-end bonus in Common Shares (or Common Share equivalents under the
Companys deferred compensation plan)
at a 15% discount to the market price of the Common Shares, with the additional shares acquired by virtue of the
discount subject to vesting over a two-year
period.
Long-Term Compensation. The Compensation
Committee did not authorize any long-term compensation awards to Company executives in 2001. In 2002, the Compensation
Committee requested a third party consultant to prepare for the Committee a report evaluating the annual and long-term
incentive program for the Companys President and Chief Executive Officer and other senior executives.
The Committee requested the report so that it could assess whether compensation of the Companys senior
executives was at a level commensurate with their peers and structured to align their interests with the
interests of shareholders generally. Following its receipt and assessment of this report, the Committee, in July 2002,
recommended the award of restricted Common Shares to Company executives, with such shares subject to vesting over five years.
Amounts awarded to the Named Executive Officers in 2002 are shown in the Summary Compensation Table. In March 2003, the
Committee, taking into account a variety of factors, including its evaluation of a report prepared by a third party
consultant, recommended the award of additional restricted Common Shares that would vest over a five-year period.
Amounts awarded to Named Executive Officers in 2003 are shown above under the caption 2003 Restricted
Share Awards.
IRS Limits on Deductibility
of Compensation. Section 162(m) of the Internal Revenue Code limits
the Companys tax deduction each year for compensation to each of
the President and Chief Executive Officer and the four other highest paid
executive officers to $1 million. Section 162(m), however, allows a deduction
without regard to amount for payments of performance based compensation
which includes most share option and other incentive arrangements, the
material terms of which have been approved by shareholders. Awards issued
under the Companys Amended and Restated 1997 Long-Term Incentive
Plan satisfy the requirements of Section 162(m) if the awards qualify as performance-based
compensation. Options under this plan that have an exercise price
equal to grant date fair market value and that vest based solely on continued
employment qualify as performance-based compensation. However, options
exercisable for a total of 1,697,447 Common Shares awarded to Messrs. Nichols,
Sr. and Sweeney do not qualify as performance-based compensation because
the options were awarded subject to shareholder approval. Similarly, except
for an aggregate of 27,360 Common Shares awarded to Messrs. Nichols, Sr.
and Sweeney in 2000 (of which 10,640 are currently unvested) the restricted Common
Shares awarded to the Named Executive Officers do not qualify as performance-based
compensation because the restrictions applicable to the shares lapse
based solely on continued employment. In addition, the outstanding principal
balance of the forgivable loan ($500,000 at December 31, 2002) made by
the Company to Mr. Sweeney in February 2000 does not qualify as performance-based
compensation. The Company believes that because it qualifies as a REIT
under the Code and is not subject to Federal income taxes, the payment
of compensation that does not satisfy the requirements of Section 162(m)
would not have a material adverse financial consequence to the Company
provided it distributes 100% of its taxable income.
17
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This report is made by the undersigned members of
the Compensation Committee:
Walter DAlessio
D. Pike Aloian
Charles P. Pizzi
18
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Security Ownership of Certain Beneficial Owners and Management |
The following table sets forth information as of March 15, 2003 regarding the beneficial ownership of Common Shares (and Common Shares for which Class A Units of Brandywine Operating Partnership, L.P. (Operating Partnership) may be exchanged) by each Trustee, by each Named 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 indicated below, to the Companys knowledge, all of such Common Shares are owned directly, and the indicated person has sole voting and investment power.
Name and Business Address of Beneficial Owner (1) |
|
Number of Common Shares |
|
Percentage of Common Shares (2) |
|
|
|
|
|
|
|
|
|
|
Five Arrows Realty Securities III, L.L.C. (3) |
|
|
4,875,000 |
|
|
12.0 |
% |
|
Cohen & Steers Capital Management, Inc. (4) |
|
|
3,808,500 |
|
|
10.4 |
% |
|
LF Strategic Realty Investors L.P. (5) |
|
|
3,482,703 |
|
|
8.9 |
% |
|
Perkins, Wolf, McDonnell & Company (6) |
|
|
1,880,900 |
|
|
5.1 |
% |
|
Berger Small Cap Value (7) |
|
|
1,800,000 |
|
|
4.9 |
% |
|
Robert C. Larson (8) |
|
|
3,482,703 |
|
|
8.9 |
% |
|
D. Pike Aloian (9) |
|
|
4,878,191 |
|
|
12.0 |
% |
|
Donald E. Axinn (10) |
|
|
911,984 |
|
|
2.5 |
% |
|
Gerard H. Sweeney (11) |
|
|
1,278,655 |
|
|
3.5 |
% |
|
Anthony A. Nichols, Sr. (12) |
|
|
751,503 |
|
|
2.1 |
% |
|
Christopher P. Marr |
|
|
18,644 |
|
|
* |
|
|
H. Jeffrey DeVuono (13) |
|
|
59,432 |
|
|
* |
|
|
George D. Sowa (14) |
|
|
44,497 |
|
|
* |
|
|
Brad A. Molotsky (15) |
|
|
95,666 |
|
|
* |
|
|
Walter DAlessio (16) |
|
|
4,321 |
|
|
* |
|
|
Charles P. Pizzi (17) |
|
|
3,765 |
|
|
* |
|
|
All Trustees and Executive Officers as a Group (15 persons) (18) |
|
|
11,774,820 |
|
|
30.3 |
% |
|
_________________
*Less than one percent.
(1) |
Unless indicated otherwise, the business address of each person listed is 401 Plymouth Road, Plymouth Meeting, Pennsylvania 19462. |
|
|
(2) |
Assumes that all Class A Units eligible for redemption held by each named person or entity are redeemed for Common Shares. The total number of Common Shares outstanding used in calculating the percentage of Common Shares assumes that none of the Class A Units eligible for redemption held by other named persons or entities are redeemed for Common Shares. |
|
|
(3) |
Includes (a) 4,375,000 Common Shares issuable upon conversion of 4,375,000 Series B Preferred Shares and (b) 500,000 Common Shares issuable upon the exercise of warrants that are currently exercisable. The business address of Five Arrows Realty Securities III, L.L.C. is 1251 Avenue of the Americas, 44th Floor, New York, New York 10020. |
|
|
(4) |
Based on Amendment No.
5 to a schedule filed with the Securities and Exchange Commission on
February 14, 2003. Includes 3,808,500 Common Shares beneficially owned
with a voting power of 3,678,500 Common Shares. Cohen & Steers
Capital Management, Inc. has a business address of 757 Third Avenue,
New York, New York 10017. |
19
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(5) |
Based on Amendment No.
5 to a Schedule 13D filed with the Securities and Exchange Commission
on April 25, 2001. Represents (a) 560 Common Shares (the LFSRI Shares) directly owned by LF Strategic Realty Investors L.P. (LFSRI) and (b) 3,482,143 Common Shares (the CAPI Shares) issuable upon redemption of Class A Units that are issuable upon redemption or conversion of Series B Preferred Units held directly by a subsidiary of Commonwealth Atlantic Properties, Inc. (CAPI). LFSRI owns 84% of the common stock of CAPI and 100% of the common stock of Commonwealth Atlantic Properties Investors Trust, which in turn owns 16% of the common stock of CAPI. Lazard Frères Real Estate Investors L.L.C. (LFREI) is the general partner of LFSRI, and Lazard Frères & Co. LLC (Lazard)
is the managing member of LFREI. As a result of such relationships
LFREI and Lazard may be deemed to indirectly beneficially own the LFSRI
Shares and LFSRI, LFREI and Lazard may be deemed to indirectly beneficially
own the CAPI Shares. LFSRI disclaims ownership of the CAPI Shares and
LFREI and Lazard disclaim beneficial ownership of the LFSRI Shares
and the CAPI Shares. Each of LFSRI, LFREI and Lazard has a business
address at 30 Rockefeller Plaza, New York, New York 10020. CAPI and
its subsidiaries have a business address c/o LFREI at 30 Rockefeller
Plaza, New York, New York 10020. |
|
|
(6) |
Based on Amendment No.
1 to a Schedule 13G filed with the Securities and Exchange Commission
on January 31, 2003. Represents 1,880,900 Common Shares for which Perkins
Wolf McDonnell & Company (Perkins Wolf) has voting
power, including 1,800,000 Common Shares owned by Berger Small Cap
Value Fund for which Perkins Wolf is the sub investment advisor delegated
with investment and voting authority. Perkins Wolf has a business address
of 53 W. Jackson Boulevard, Suite 722, Chicago, Illinois 60604. |
|
|
(7) |
Based on a Schedule 13G
filed with the Securities and Exchange Commission on February 14, 2002.
Berger Small Cap Value Fund (Berger) is a portfolio series established under the Berger Omni Investment Trust, an open-ended management investment company registered under the Investment Company Act of 1940. Perkins Wolf McDonnell & Company
is the sub investment advisor delegated with investment and voting
authority for the 1,800,000 Common Shares. Berger has a business address
of 210 University Boulevard, Suite 800, Denver, Colorado 80206. |
|
|
(8) |
Mr. Larson is a Managing Director of Lazard and Chairman and Managing Principal of LFREI and may be deemed to indirectly beneficially own all of the Common Shares which Lazard and LFREI indirectly beneficially own. See footnote 5. Mr. Larson disclaims beneficial ownership of all such Common Shares except to the extent of any pecuniary interest he may possess by virtue of his positions with Lazard and LFREI. Mr. Larson has a business address at 30 Rockefeller Plaza, New York, New York 10020. |
|
|
(9) |
Mr. Aloian, among others, is a Manager of Five Arrows Realty Securities III, L.L.C., which owns all 4,375,000 outstanding Series B Preferred Shares and 500,000 Common Shares issuable upon the exercise of warrants that are currently exercisable. See footnote 3. Mr. Aloian disclaims beneficial ownership of the Series B Preferred Shares and Common Sharers issuable upon exercise of warrants. Mr. Aloian has a business address at 1251 Avenue of the Americas, 44th Floor, New York, New York 10020. |
|
|
(10) |
Includes (a) 100,000 Common Shares issuable upon the exercise of options that are currently exercisable, and (b) 811,984 Common Shares issuable upon redemption of Class A Units. Mr. Axinn has a business address at 131 Jericho Turnpike, Jericho, NY 11743. |
|
|
(11) |
Includes (a) 562,099 Common Shares and (b) 716,556 Common Shares issuable upon the exercise of options that are currently exercisable or that become exercisable within 60 days of March 15, 2003. |
|
|
(12) |
Includes (a) 327,153 Common Shares and (b) 424,350 Common Shares issuable upon exercise of options that are currently exercisable or that become exercisable within 60 days of March 15, 2003. |
|
|
(13) |
Includes (a) 28,336 Common Shares and (b) 31,096 Common Shares issuable upon the exercise of options that become exercisable within 60 days of March 15, 2003. |
20
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|
|
(14) |
Includes (a) 27,523 Common Shares and (b) 16,974 Common Shares issuable upon the exercise of options that become exercisable within 60 days of March 15, 2003. |
|
|
(15) |
Includes (a) 53,692 Common Shares and (b) 41,974 Common Shares issuable upon the exercise of options that become exercisable within 60 days of March 15, 2003. |
|
|
(16) |
Mr. DAlessio has
a business address at 1735 Market Street, Philadelphia, Pennsylvania
19103. |
|
|
(17) |
Mr. Pizzi has a business address at 2801 Hunting Park Avenue, Philadelphia, Pennsylvania 19129. |
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(18) |
Includes the LFSRI Shares and CAPI Shares shown in footnote 4 above and 4,875,000 Common Shares beneficially owned by Five Arrows Realty Securities III, L.L.C. |
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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 500 Index and (ii) the NAREIT ALL-REIT Total Return Index as provided by NAREIT for the period beginning December 31, 1997 and ending December 31, 2002.
The Company, S&P 500 Index and NAREIT All-REIT Index |
Company / Index |
Dec. 1997 |
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Dec. 1998 |
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Dec. 1999 |
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Dec. 2000 |
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Dec. 2001 |
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Dec. 2002 |
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BRANDYWINE REALTY TRUST |
100 |
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76.57 |
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76.83 |
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105.33 |
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116.48 |
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130.48 |
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S&P 500 INDEX |
100 |
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128.58 |
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155.63 |
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141.46 |
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124.65 |
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97.10 |
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NAREIT INDEX |
100 |
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81.18 |
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75.92 |
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95.58 |
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110.39 |
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116.15 |
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REPORT OF THE AUDIT COMMITTEE |
The Audit Committee oversees the Companys financial reporting process on behalf of the Board of Trustees. Management has the primary responsibility for the financial statements and the reporting process, including the systems of internal controls. The Companys independent public accountants are responsible for expressing an opinion on the conformity of the Companys audited financial statements with accounting principles generally accepted in the United States.
In fulfilling its oversight responsibilities, the Audit Committee has reviewed the Companys audited financial statements for the year ended December 31, 2002, and discussed them with management and the independent public accountants, including the following aspects of the financial statements: (i) their quality, not just the acceptability of their accounting principles; (ii) the reasonableness of the significant judgments reflected in the financial statements; and (iii) the clarity of their disclosures. The Audit Committee has discussed with the Companys independent public accountants the matters required to be discussed by Statement on Auditing Standards No. 61, Communication with Audit Committees, as amended. The Audit Committee has also received the written disclosures and the letters from the Companys independent public accountants required by Independence Standards Board Standard No. 1, Independence Discussions with Audit Committees. The Audit Committee has discussed with the independent public accountants the independent public accountants independence from the Company and its management. In addition, the Audit Committee has considered whether the independent public accountants provision of non-audit services to the Company is compatible with maintaining the independent public accountants independence.
Based on the reviews and discussions referred to above, the Audit Committee recommended to the Board of Trustees that the audited financial statements be included in the Annual Report on Form 10-K for the year ended December 31, 2002 for filing with the Securities and Exchange Commission. The Audit Committees recommendation was approved by the Board of Trustees.
This report is made by the undersigned members of the Audit Committee.
Charles P. Pizzi
Walter DAlessio
Donald E. Axinn
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Section 16(a) Beneficial Ownership Reporting Compliance |
Section 16(a) of the Securities Exchange Act of 1934 requires the Companys officers, Trustees and persons who own more than 10% of the Common Shares to file reports of ownership and changes in ownership with the Securities and Exchange Commission. Officers, Trustees and greater than 10% shareholders are required by regulation to furnish the Company with copies of all Section 16(a) forms they file. Based solely on review of the copies of such forms furnished to the Company, or written representations that no Annual Statements of Beneficial Ownership of Securities on Form 5 were required to be filed, the Company believes that during the year ended December 31, 2002, its officers, Trustees and greater than 10% shareholders complied with all applicable Section 16(a) filing requirements.
Independent Public Accountants |
KPMG LLP audited the Companys financial statements for the fiscal year ended December 31, 2002. Representatives of KPMG will be present at the Meeting to make any statement they may desire and to respond to questions from shareholders. KPMG has also been engaged to provide audit services to the Company for the quarter ended March 31, 2003. The Audit Committee has not yet determined the independent auditors for the balance of 2003. Arthur Andersen LLP previously served as the Companys independent auditors. Representatives of Arthur Andersen will not be present at the Meeting.
On May 23, 2002, the Company dismissed Arthur Andersen as its independent public accountants and appointed KPMG as its new independent public auditors. The decision to dismiss Arthur Andersen and to retain KPMG was approved by the Audit Committee.
Arthur Andersens reports on the Companys consolidated financial statements as of and for the fiscal years ended December 31, 2001 and 2000 did not contain any adverse opinion or disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope, or accounting principles.
During the Companys two most recent fiscal years ended December 31, 2001, and the subsequent interim period through May 30, 2002, there were no disagreements between the Company and Arthur Andersen on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to Arthur Andersens satisfaction, would have caused them to make reference to the subject matter of the disagreement in connection with their reports.
None of the reportable events described under Item 304(a)(1)(v) of Regulation S-K occurred within the Companys two most recent fiscal years ended December 31, 2001 and the subsequent interim period through May 30, 2002.
The Company provided Arthur Andersen with a copy of the foregoing disclosures. A copy of Arthur Andersens letter, dated May 30, 2002, stating their agreement with these statements is attached as Exhibit 16 to the Companys Form 8-K filed with the Securities and Exchange Commission on May 30, 2002.
During the Companys two most recent fiscal years ended December 31, 2001, and the subsequent interim period through May 30, 2002, neither the Company nor anyone acting on behalf of the Company consulted with KPMG regarding any of the matters or events set forth in Item 304(a)(2) of Regulation S-K.
Aggregate fees billed by KPMG for audit services during the year ended December 31, 2002 were $364,000. Aggregate fees billed by Arthur Andersen for audit services during the years ended December 31, 2002 and December 31, 2001 were $159,000 and $242,500, respectively.
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Financial Information Systems Design and Implementation Fees |
For the years ended December 31, 2002 and December 31, 2001, the Company did not make any payments to KPMG or Andersen for services relating to financial information systems design and implementation.
Aggregate fees billed by KPMG for services during the year ended December 31, 2002 (other than as set forth above under Audit Fees) were as follows:
Recurring and non-recurring tax services |
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$ |
241,700 |
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Executive compensation services |
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$ |
7,350 |
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Other accounting services |
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Aggregate fees billed by Andersen for services during the years ended December 31, 2002 and December 31, 2001 (other than as set forth above under Audit Fees) were as follows:
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2002 |
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2001 |
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Recurring and non-recurring tax services |
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$ |
85,275 |
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$ |
534,725 |
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Executive compensation services |
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$ |
25,275 |
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$ |
20,575 |
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Other accounting services |
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$ |
25,000 |
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All non-audit services were reviewed with the Audit Committee, which concluded that the provision of such services by KPMG and Andersen, as applicable, was compatible with the maintenance of that firms independence in the conduct of its auditing functions.
The Audit Committee reviews and discusses with the independent auditor the proposed scope of services of the independent auditor for each fiscal year and the proposed fees for such services. Commencing in 2003, for additional services proposed to be performed by the independent auditors during the year, management will seek approval of such services by the Audit Committee.
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.
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 D. F. King & Co., Inc. to solicit proxies for the Meeting. The Company has agreed to pay $4,500, plus out-of-pocket expenses of D. F. King & Co., Inc., for these services.
Shareholder Proposals for the 2004 Annual Meeting of Shareholders |
Shareholders are entitled to present proposals for action at a forthcoming meeting if they comply with the requirements of the proxy rules promulgated by the Securities and Exchange Commission. Proposals of shareholders of the Company intended to be presented for consideration at the Companys 2004 Annual Meeting of Shareholders must be received by the Company no later than December 5, 2003 in order to be included in the proxy statement and form of proxy related to that meeting.
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If a shareholder intends to timely submit a proposal at the 2004 Annual Meeting, which is not required to be included by the Company in the proxy statement and form of proxy relating to that meeting, the shareholder must provide
the Company with notice of the proposal no later than February 18, 2004.
If such shareholder fails to do so, or if such shareholder fails to give
timely notice of his intention to solicit proxies, the proxy holders will
be allowed to use their discretionary voting authority when the proposal
is raised at the 2004 Annual Meeting.
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The Audit Committee (the Committee) of Brandywine Realty Trust (the Company) shall assist the Board of Trustees (the Board) of the Company in overseeing (1) the integrity of the Companys financial statements; (2) the Companys compliance with legal and regulatory requirements; (3) the independence and qualifications of the Companys independent auditors; and (4) the performance of the Companys internal audit function and independent auditors. The Committee also prepares the report required by the Securities and Exchange Commission (the SEC) to be included in the Companys annual proxy statement.
The Committee shall be comprised of at least three trustees, each of whom shall be independent, as such term is defined in the Corporate Governance Principles of the Board. Each Committee member shall be financially literate. The term financial literacy shall mean familiarity with the Companys financial statements, including its balance sheet, income statement and cash flow statement, and general knowledge of key business and financial risks and related controls or control processes. At least one member of the Committee shall have accounting or related financial management expertise, which shall mean a background in finance, accounting or auditing, acquired through past employment experience, professional training, or other comparable experience. Additionally, a trustee may not serve simultaneously on the audit committees of more than three (3) public companies.
The members of the Committee shall be appointed for a one year term by the Board annually upon the recommendation of the Corporate Governance Committee of the Board. Should any member of the Committee cease to be independent, such member shall immediately resign his or her membership on the Committee.
Compensation of Committee Members |
Members of the Committee shall not receive any compensation from the Company other than trustees fees (including equity-based awards), which may include amounts paid to trustees for service on committees and as chairs of committees of the Board.
Relationship with Independent Auditor |
The Committee shall have sole authority to select and replace the Companys independent auditor, and to approve all audit and non-audit services (to the extent non-audit services are allowed by law) with the independent auditor, as well as all engagement fees and terms with respect thereto. The Committee may consult with Company management regarding the foregoing, but the Committees sole authority with respect thereto shall not be delegated. The Committee shall be directly responsible for oversight of the work performed by any public accounting firm (including the resolution of disagreements between any such accounting firm and Company management regarding financial reporting) for the purpose of preparing or issuing an audit report or related work, and such accounting firms shall report directly to the Committee.
The Committee shall have the authority, without Board approval, to the extent that it deems appropriate, to obtain advice and assistance from outside legal, accounting or other advisors.
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The Committee shall meet at such times and from time to time as it deems to be appropriate, but not less frequently than quarterly. The Committee shall report to the Board at the first board meeting following each such Committee meeting. A majority of the members of the Committee shall constitute a quorum for the transaction of business. Approval by a majority of the members present at a meeting at which a quorum is present shall constitute approval by the Committee. The Committee may also act by unanimous written consent without a meeting.
The Companys independent auditor and internal auditor, if any, shall attend at least two of the Committees meetings each year. The Committee may request members of management or others (including the Companys investment bankers or financial analysts who follow the Company) to attend meetings and to provide pertinent information as necessary. The Committee shall meet with Company management (including the chief financial officer), the internal auditors (or other personnel responsible for the internal audit function) and with the Companys independent auditors in separate private sessions periodically but not less than two times per year.
Duties and Responsibilities |
The duties of the Committee shall include the following:
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At least annually, obtain and review a report by the Companys
independent auditor describing: (1) the firms internal quality-control procedures; (2) any material issues
raised by the most recent internal quality-control review, or peer review, of the firm, or by any inquiry or
investigation by governmental or professional authorities, within the preceding five years, respecting one or
more independent audits carried out by the firm; (3) any steps taken to deal with such issues; and (4)
(to assess the auditors independence) all relationships between the auditor and the Company. Based
in part on its review of this report, the Committee shall evaluate the qualifications, performance and
independence of the independent auditor, and such evaluation shall include a specific review of the
lead partner of the independent auditor. In making its evaluation, the Committee may take into account
the opinions of Company management and the Companys internal auditor (or other personnel responsible
for the internal audit function). The Committee shall present its conclusions with regard to the
independent auditor to the full Board. |
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Review and discuss with the independent auditor the proposed scope of services of the independent auditor for each fiscal year, including a review of the independent auditors audit procedures and risk assessment process in establishing the scope of the services, proposed fees, and the reports to be rendered. |
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Review and discuss all reports required by law or regulation to be provided to the Committee by the independent auditor and Company management, including a report from the independent auditor of (1) all critical accounting policies and practices used by the Company; (2) all alternative treatments of financial information within generally accepted accounting principles that have been discussed by the independent auditor with Company management, ramifications of the use of such alternative treatments, and the treatment preferred by the independent auditors; and (3) other material written communications between the independent auditors and Company management, such as any management letter or schedule of unadjusted differences. |
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Review and discuss with Company management and the independent auditor such accounting policies (and changes therein) of the Company, including any financial reporting issues which could have a material impact on the Companys financial statements (including but not limited to the use of alternative GAAP methods and off-balance sheet structures), as are deemed appropriate for review by the Committee prior to any interim or year-end filings with the SEC or other regulators. |
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Review and discuss with Company management the effect of accounting and regulatory initiatives on the financial statements of the Company. |
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Review and discuss with Company management and the independent auditor the Companys annual audited financial statements and quarterly financial statements, including the Companys disclosures under Managements Discussion and Analysis of Financial Conditions and Results of Operations, and recommend to the Board whether the audited financial statements shall be included in the Companys Form 10-K. |
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Review and discuss with Company management earnings press releases, including the use of pro-forma or adjusted non-GAAP information, as well as financial information and earnings guidance provided to analysts and rating agencies. |
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Discuss with Company management the Companys major financial risk exposures and steps management has taken to monitor and control such exposures, including the Companys risk assessment and risk management policies. |
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Adopt guidelines for the Companys hiring of employees of the Companys independent auditor who were previously engaged on the Companys account. |
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Make recommendations to the Board as to: |
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Whether, in order to assure continuing auditor independence, there should be regular rotation of the independent auditor. |
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The advisability of having the independent auditor make specified studies and reports as to auditing matters, accounting procedures, tax or other matters. |
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Review and discuss with Company management the appointment and replacement of the senior internal auditing executive. |
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Review and discuss with Company management, the independent auditor and the Companys internal auditor (or other personnel responsible for the internal audit function): |
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The management recommendation letter on accounting procedures and internal controls prepared by the independent auditor, and any other reports and Company managements responses concerning such reports; |
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Any material accounting issues identified by management, the Companys internal auditor, if any, or the independent auditor; |
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Any related party transactions; |
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Other matters required to be communicated by the independent auditor to the Committee under generally accepted auditing standards, as amended; and |
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Establish procedures for (1) the receipt, retention and treatment of complaints received by the Company regarding accounting, internal auditing controls, or auditing matters, and (2) submission by employees of the Company of concerns regarding questionable accounting or auditing matters, with due concerns for confidentiality and anonymity of the source. |
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Meet annually with general counsel, and outside counsel when appropriate, to review legal and regulatory matters, if any, that could have a material impact on the Companys financial statements. |
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Make a periodic, but not less than annual, self-assessment of the Committee, including a review of this charter, using assessment tools available through third parties or developed internally. |
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The Committee shall also
undertake such additional activities within the scope of its primary function
as the Committee from time to time determines.
Limitation of Audit
Committees Role
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The Audit Committee does not plan
or conduct audits, nor does it determine that the Companys financial
statements and disclosures are complete, accurate and in accordance with
generally accepted accounting principles and applicable rules and regulations. These are the responsibility of Company management and the independent auditor.
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VOTE BY INTERNET OR TELEPHONE
Quick & Easy - 24 hours a day, 7 days a week
Brandywine encourages shareholders to take advantage of two cost-effective and convenient alternatives to vote your shares by Internet or telephone.
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Log onto the Internet and type http://www.eproxyvote.com/bdn |
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Have this proxy form ready and follow the simple instructions on the web site. |
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You will be able to elect to access future Annual Meeting proxy materials via the Internet. |
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On a touch-tone phone, call toll-free 1-877-779-8683 and you will hear these instructions: |
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Enter the last four digits of your social security number; and |
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Enter the control number from the box above (just below the perforation on the proxy card). |
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You will then have two options: |
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OPTION 1: to vote as the Board of Trustees recommends for all proposals; or |
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OPTION 2: to vote on each proposal separately. |
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Your vote will be repeated to you and you will be asked to confirm it. |
Internet or telephone voting provides the same authorization to vote your shares as if you marked, signed, dated and returned the proxy/voting instruction card. If you vote by Internet or telephone, please do not mail your proxy card.
THANK YOU FOR VOTING.
DETACH HERE
BRANDYWINE REALTY TRUST
Proxy Solicited On Behalf Of The Board of Trustees
P
R
O
X
Y |
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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 5, 2003, 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. 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. |
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BRANDYWINE REALTY TRUST
C/O EQUISERVE TRUST COMPANY N.A.
P.O. BOX 8657
EDISON, NJ 08818-8657
Voter Control Number
Your vote is important. Please vote immediately.
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Vote-by-Internet |
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Vote-by-Telephone |
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Log on to the Internet and go to |
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Call toll-free |
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http://www.eproxyvote.com/bdn |
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1-877-PRX-VOTE (1-877-779-8683) |
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OR |
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2. |
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Enter your Voter Control Number listed |
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2. |
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Enter your Voter Control Number listed |
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above and follow the easy steps outlined |
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above and follow the easy recorded |
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on the secured website. |
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instructions. |
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If you vote over the Internet or by telephone, please do not mail your card.
DETACH HERE IF YOU ARE RETURNING YOUR PROXY CARD BY MAIL
Please mark votes as in this example.
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BRANDYWINE REALTY TRUST |
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Election of Trustees. |
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(Please see reverse) |
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FOR ALL |
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WITHHOLD |
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NOMINEES |
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ALL NOMINEES |
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Nominees: |
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01. Walter D Alessio, 02. Donald E. Axinn, 03. Robert C. Larson, 04. Anthony A. Nichols, Sr., 05. Charles P. Pizzi, and 06. Gerard H. Sweeney |
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For, except vote withheld from the following nominee(s): |
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DISCONTINUE ANNUAL REPORT |
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Change of Address and/or Comments Mark Here |
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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. |
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Signature: _____________________________
Date: ________ Signature:
_____________________________ Date: ________